Word On The Street
Dylan Ratigan hosted CNBC’s “Fast Money” Monday night. He kicked the show with a discussion of the markets negative action towards the news of the U.S. government’s bailout plan to inject $700 billion into the financial sector. Karen Finerman said there is a lot of concern on Wall Street because nobody knows how the government is going to implement the plan. She says there is a sneaking fear on the street of what happens if it doesn’t work. “Is there anything else they can do,” she added. Tim Seymour says the dollar move last week wasn’t real because it was just the deleveraging of the “carry trade.”
End Of Investment Banks
Ratigan moved the talk to news that Goldman Sachs (GS) and Morgan Stanley (MS) received approval from the Federal Reserve to changed their status to bank holding companies. Pete Najarian said Goldman and Morgan will now get their growth from gaining deposits. He says Goldman Sachs went down because it hasn’t moved more in the direction of becoming bank like Morgan is. Guy Adami said he is sad about what is happening at Goldman. “I don’t think they can frankly exist as the way we use to know them,” he said. Finerman says Goldman needs to buy a bank like Northern Trust (NTRS) or Wilmington Trust (WL).
What To Expect
Ratigan asked the traders what their expectations are for the rest of the week. Najarian said he expects volatility to remain above 30%. He says the market will go up or down 200 to 300 points a day all week. “You will see over reactions in both directions all week,” he added.
Commodity Talk
Ratigan moved the discussion to commodities with crude oil and gold. Adami said there is a clear flight to hard assets. He says don’t pile into gold here because it will go down as fast as it went up. Seymour says gold will continue to catch a bid.
BuyBacks
Next the traders talked about some large buybacks at Microsoft (MSFT) and Nike (NKE). Finerman explained that the Microsoft buyback will be accretive to earnings. She mentioned that Corning (GLW), Ameriprise (AMP) and Cisco Systems (CSCO) all have enough cash to do stock buybacks. Seymour pointed out that on a total basis buybacks are down 56% from last year.
Drug Talk
Ratigan asked the traders if health care is the place to hide in this tough market. Najarian pointed out that $100 billion in sales for patented drugs are coming off patent protection from 2009-2012. He says this will play right into the generic space for names like Teva Pharmaceutical (TEVA).
Jeffrey Harte, an analyst at Sandler O’Neil joined the traders to discuss the future model of investment banking. He says the good news for the I-banks is that they will now be regulated by the lender of last resort. He thinks the Fed will be much tougher on leverage. “There is still a lot of trouble and problems left to come in the housing market,” he said. Harte says the housing market is not going to bottom in 2008. Harte says the bigger issues for future problems will come from the regional banks and not the investment banks as they “mark-to-market” their holdings.
Short New York
The trades discussed some ways to play the demise of Wall Street and loss of jobs specifically in the New York area. Finerman said she shorted Vornado (VNO) because it has a lot of exposure to New York City real estate. She advised viewers to look at shorting the iShares Dow Jones US Real Estate (IYR) or Boston Properties (BXP).
Short Ban
Jon Najarian joined the traders to discuss the ban on short-selling. He said he disagrees with the ban. He explained that a lot of investors were driven out of the market with the ban. “If you’re going to put in a prohibition for short-selling, than it needs to be everyone,” he said. “Otherwise you pretty much get a rigged game.” He says the SEC should get rid of the ban and bring back the up-tick rule and enforce it. Najarian also highlighted some unusual options activity in AIG (AIG). He said the options volume on AIG was “explosive” today.
Trader Radar
AutoZone (AZO) was among the most actively trades stocks on the NYSE Monday.
What’s In The Charts
Oppenheimer Chief Market technical, Carter Worth joined the traders to talk about technical analysis. He explained that technical analysis measures the emotional state of the market and it’s the most accurate measure. Worth said he likes the chart on Abbott Labs (ABT) because the stock has been trading up while the market has been collapsing. He says the stock has great breakout potential. He says the market will go dead for the next couple of months with no new lows or meaningful rebounds.
POPS- AIG (AIG) jumped 22%. Seymour explained that AIG is going to be selling off some of its assets in the near future. Petroleo Brasileiro SA (PBR) traded up 2%. Seymour said get long PBR and short Brazil.
DROPS- Online brokerage stocks Ameritrade (AMTD), E Trade (ETFC) and Charles Schwab (SCHW) all fell sharply. Najarian said this is just a pullback in the group from all-time highs. American Express (AXP) fell 7%. Finerman said everything on the banned short list is down. Legg Mason (LM) dropped 7% despite the shares being added to the banned short list. Adami says that Bill Miller is having a horrible year. CarMax (KMX) lost 7%. Najarian said the stock fell because KMX missed earnings and it’s a tough economic environment. Sovereign Bancorp (SOV) plunged 23% after Friedman, Billings, Ramsey & Co. downgraded the stock to underperform from market perform. Finerman explained it had more exposure to Fannie Mae (FNM) and Freddie Mac (FRE) than most people realized.
Final Trade
Finerman said play the corporate buybacks with Microsoft. Najarian picked Mylan (MYL). Adami said stay defensive with Johnson & Johnson (JNJ). Chat and share ideas with the best small cap traders LIVE each day free at Stocknetworkonline.com