Financial Take
Jeff Macke thinks Lehman should just end the misery and the Fed bailout won’t help anyone. Pete Najarian said the preferred yields on Merrill Lynch (MER) are suggesting that the stock is about to fall big. “If I owned the stock I would be very nervous and buy puts to protect the position,” he added. Joe Terranova said the market doesn’t like the leadership changes among financial companies like American International Group (AIG), Lehman Brothers, Washington Mutual (WM) and Merrill Lynch. He explained that the street doesn’t know what strategic direction these mangers plan to take these companies in. He also pointed out that Goldman Sachs Group (GS) closed higher today, which demonstrates they have great leadership.
Oil Trade
Ratigan switched the talk to the oil complex. Terranova said the refiners are the one trade in the energy space that you can make right now. He recommended investors play the sector with Valero (VLO), Frontier Oil (FTO), Sunoco (SUN) and Tesoro (TSO). Najairan pointed out that the airlines were ripping today. Ratigan asked the traders what other stocks will benefit from falling oil prices. Macke mentioned that Wal-Mart (WMT) is breaking out higher. He also feels that Gap (GPS) is good enough for a trade here.
Gold Talk
Ratigan moved the discussion to the gold sector. He pointed out that gold has gone down since the S&P 500 hit its lows on July 15. Terranova explained that as long as the dollar is rallying, there is no reason to be long gold. “I would wait for a pullback on the dollar here before buying,” added Macke.
Commodity Complex
Next, Ratigan brought up the strength in the trains, ag and coal names today. Adami mentioned CSX (CSX) which reported a strong quarter today He advised viewers to buy these names on the dip. Adami said most of the hedge fund sellers are out of Potash (POT) and the stock was upgraded today by Morgan Stanley. Terranova said look at Burlington Northern (BNI). “Despite the massive liquidation in the commodity stocks, the stock never broke the 200-day moving average,” he said. He thinks the rails will be a great play for the fourth-quarter.
Options Action
Najarian pointed out some unusual options action in the Semiconductors ETF (SMH) today. He explained that traders bought 45,000 January 25 calls on the SMH. He thinks the action is bullish for Intel (INTC), Texas Instruments (TXN) and Applied Materials (AMAT).
Biotech Chat
Ratigan mentioned that Bristol Myers Squib (BMY) said it would stick with its $60 a share bid for ImClone Systems (IMCL). Najarian said the Pharma industry is beginning to consolidate. He said his best trades in the sector are ImClone and Biogen (BIIB). Adami recommended Celgene (CELG).
Safe To Swim?
Douglas Cliggot of Dover Management joined the traders to discuss where stocks go from here with so many financial companies in turmoil. Cliggot is famous for calling the market crash in 200. He thinks the investment banks have a flawed business model. He explained that the investment banks have grown their balance sheets very rapidly, but they didn’t grow their capital base in-line with their balance sheets. “As a result we ended up with tremendous leverage ratios,” he said. He feels credit growth will be slow or non-existent with significant deleveraging. Cliggot thinks the U.S. is in a recession. He advised viewers to get into non-cyclical sectors like health care stocks and consumer stable.
Lehman Bailout
Before Dylan Ratigan started the “Pops and Drops” segment of CNBC’s “Fast Money,” he mentioned that the Washington Post is reporting that the Federal Reserve and the Treasury are engineering a sale of Lehman Brothers (LEH) to a group of private firms that will be announced before the Asian markets open on Sunday. Macke thinks it’s a bad idea to buy the stock on this news. Adami said the news is interesting but he wants to know the price. “If I was a shareholder, I would be shaking,” he said. Adami also mentioned that theses type of events tend to market bottoms in the stock market. Macke told viewers to sell any pop in the stock on the news. Terrnoava said use this as an opportunity to buy the financial survivors like JPMorgan Chase (JPM), Goldman Sachs Group (GS) and Wells Fargo (WFC).
POPS&DROPS
POPS- Wells Fargo jumped 6%. Macke explained that the bank tightened up their lending standards. Sovereign Bancorp (SOV) popped 6% after Moody’s reaffirmed their rating on the bank. Petroleo Brasileiro SA (PBR) traded up 6%. Terranova recommended traders sell the 35 puts on PBR. Sunoco (SUN) soared 12%. Terranova said you want to own the refiners right now. Joy Global (JOYG) surged 11% after the mining equipment company said it will buy back $1 billion more of its shares. Adami thinks the stock has more room to the upside. Allergan (AGN) moved up 10% after the company said testing showed its Botox treatment works on chronic migraines. Najarian said that’s a pop. Live Nation (LYV) rose 6%. The live music company inked a deal with SMG. Macke joked that he couldn’t see any way how hiring an ancient pop artist like Madonna will end poorly.
DROPS- Legg Mason (LM) dropped 3% after Goldman Sachs downgraded the asset managers. Adami thinks the stock will trade higher.
Ignore The Financials
River Twice Research president Zach Karabell joined the traders to discuss how news on the financials is obscuring everything else in the market. He explained the media hype around the financial sector has helped investors miss the news on Vale (RIO) and Freeport McMoRan (FCX). He said both companies are renegotiating their prices up 20% for 2009. He also said that Tiffany (TIF) is benefiting from people in the gulf recycling their petro-dollars for high end jewelry. “Don’t be a hero in the commodity names,” said Macke.
Dennis Gartman On The Dollar
Strategic investor Dennis Gartman joined the traders to discuss the dollar. Gartman said it’s a bull market for the dollar and it’s going to continue to be a bull market for the dollar. He explained in a bull market you can have one of three positions: You can be really bullish, just bullish or neutral. He said he wouldn’t be a buyer of the dollar tonight; instead he would wait for a pullback to 142 versus the euro. Get the scoop on tomorrow’s hottest trade ideas – TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!