Word On The Street
Dylan Ratigan hosted CNBC’s “Fast Money” Wednesday night. He started the show with a discussion of the panic that swept across Wall Street today. Ratigan mentioned that gold saw its largest one-day move ever in history and the Dow closed on its lows of the day.
Morgan Chat
He moved the talk along to breaking news that Morgan Stanley (MS) is in talks with Wachovia (WB) and others for a possible merger. Karen Finerman explained that she understands Morgan’s need for a low cost deposit franchise. Guy Adami said the deal is interesting especially since Goldman Sachs (GS) came out yesterday and said they weren’t interested in buying a bank. “People are desperate and the financial system is broken,” added Jeff Macke. Adami pointed out that Barclays just became a leader in this game after they stole Lehman Brother’s clearing business. Najarain mentioned that the volatility in Goldman Sachs and Morgan Stanley are outrageous right now. He explained that the crazy action in the stocks shows that investors are concerned and feel both investment banks have issues. Najarian said he took off some of his short exposure in the Financial Select Sector SPDR (XLF) today.
Market Opportunity
Ratigan asked the traders which stocks could be one-of-a-kind investment opportunities right now. Adami said look at U.S. Bancorp (USB) which fell 5% today. He also likes Lockheed Martin (LMT) at $105. Finerman said she has Boeing (BA) on her radar screen because the company doesn’t have a lot of debt. Macke thinks Apple (AAPL) is a buy at $120. Adami told viewers he would be worried about Johnson & Johnson (JNJ) here because it seems like everyone is in it for a defense play. Najarian also likes Apple at $120 as long as you buy puts for protection. Macke pointed out that General Mills (GIS) made a new high today.
Credit Market Discussion
Sean Egan, managing director of Egan-Jones Rating joined the traders to discuss what is happening in the credit markets. He said you have to understand what went wrong with the system. “We changed the format for funding mortgages from what we use to do ten years ago. We have replaced that whole system where we have everybody wanting to do to the deal, which ended up inflating the under lying ratings.” Egan said. He said in order to change the system we must do the following: reestablish trust, get transparency, clean up the market in the way derivatives trades are processed, match long-term capital with needs and reform the ratings agencies.
Gartman’s Take
Dennis Gartman, author of the Gartman Letter joined the traders to discuss how he traded today. Gartman said the only trade he has on is long McDonald’s (MCD) and short the stock market. “I think everyone is flat and nervous,” he added. Gartman mentioned he took some of his short positions off at the end of the day in the midst of the panic selling He thinks the public should have on small positions right now. “These are the most consequentional times I have ever seen,” Gartman said. He explained that these are very difficult times and it’s not just the U.S., it’s also bad in Russia, Germany, U.K. and France. He pointed out that gold skyrocketed after an article appeared in a Chinese newspaper that said China will have to diminish the use of the U.S. dollar as a reserve currency. “On any $20 or $30 break in gold I will be a buyer,” he added.
Fed Health
Wayne Angell, a former Federal Reserve governor joined the traders to discuss the balance sheet of the Fed. He told viewers that he is very comfortable with the Fed’s actions. “The Fed’s balance sheet is infinite and it can expand,” he said. Angell pointed out that the Fed is simply acquiring assets during a stressful time, almost like a resolution trust company. “In doing that they’re going to make money,” he said. He said the Fed doesn’t have to turn the assets around quickly, but if they can get a premium for those assets they will sell.
Main Street Fear
William Larkin, a fixed income portfolio manager at Cabot Money Management joined the traders to discuss the huge spike in borrowing costs. He said this is the money market going into Main Street. “Mom and pops are running with fear into T-bills and government back money market accounts,” Larkin said. He thinks the public is making a mistake by getting into stuff that is too short in duration. He recommended viewers look at government backed home financing securities.
POPS&DROPS
POPS- UltraShort Financials ProShares (SKF) jumped 14% as financial stocks continued to slide lower. Finerman said if you’re in this and not up tremendously you have no business being involved. SanDisk (SNDK) soared 39% after the flash chip maker received a $5.85 billion takeover offer from Samsung. Najarian said, “That’s a pop, but SNDK wants $35 a share.”
DROPS- Exxon Mobil (XOM) fell 2%. Adami thinks the stock is a “screaming” buy at $75. Nortel Networks (NT) plunged 50%. Macke joked that maybe the Fed will buy them. Vornado Realty Trust (VNO) dropped 7%. Finerman explained the drop wasn’t surprising because VNO has a lot of exposure to the Manhattan real estate market.
Final Trade
Adami said buy Johnson & Johnson (JNJ). Najarian picked Palm (PALM) which is set to report earnings on Thursday. 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!