Word On The Street
Dylan Ratigan hosted CNBC’s “Fast Money” Thursday night. He kicked the show with a discussion about how the most economically sensitive stocks were sold off today. He pointed out that whether we get a bailout or not on Friday it might not matter. Ratigan mentioned that borrowing at the Federal Reserve’s discount window was up 50% from last week at $400 billion. Pete Najarian said it’s terrible when you have companies like General Electric (GE) and Goldman Sachs Group (GS) that are forced to do “sweetheart deals” with Warren Buffett. Tim Seymour says short-term borrowing is dead. “I don’t think GE has huge liquidity issues, but I do think it’s a backstop at an amazing cost,” he added. Seymour also mentioned that China had some numbers out this morning that showed the commodity sector has more room to fall. Jeff Macke says cash and the fetal position are the only two things you can get away with right now.
Health Care Outlook
Ratigan said the health care names were strong today. Guy Adami said Church & Dwight (CHD) and Johnson & Johnson (JNJ) are the names that will get you through it if you need to be in the market right now. He told viewers to look at Novartis (NVS) which was down for a play on valuation. Najarian says health care names like Biogen (BIIB) and Amgen (AMGN) continue to work because of the “need basis” and exposure level. “You don’t suddenly stop needing your mediation,” he said.
Commodity Talk
Ratigan brought up the major declines in commodity names that were the global growth proxy. Seymour pointed out that Merrill Lynch started the fall by downgrading oil and saying crude could fall to $50 by next year. Macke says if you’re looking for a bottom on these things you will be waiting for a long time. “These stocks were ahead of themselves and the funds are getting liquidated,” he said. Adami pointed that gold was down big Wednesday and today and if you’re piling into it for a short-term “safe haven” trade you’re wrong. The “Chart of the Day” was the iShares Dow Jones Transport Avg (IYT) Macke said shorting the IYT is high risk. “The snap back rallies are tougher because you’re dealing with fear and enormous volatility,” he said. Najarian said shorting the commodity complex doesn’t make sense because it’s all about people getting redemptions. “I was getting pinged all day long about coal stocks and oil stocks, but the problem is that everything is getting rolled out of these hedge funds,” he added. Seymour says the hedge fund community is “pissed off” because the rules of the game are changing. “A lot of very smart guys are saying, I am out,” he said.
Bailout Plan Chat
Ratigan asked the traders if the bailout plan gets passed on Friday will it change their sentiment on the markets for more than a day or two. Najarian said we will get a couple of days out of this thing before realty returns. “It won’t change anything about the jobs number or home sales numbers,” he added. Seymour says the market has totally looked passed this. Adami said he would buy Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and U.S. Bancorp (USB) if you can stomach a 5% move like you saw today. Macke says we will get a snap back rally and he would use that strength to sell down positions.
Fed Window
Tony Crecenzi, a market strategist at Miller Tabak joined the traders to discuss the 50% jump in borrowing from the Federal Reserve’s discount window this week. Tony says typically the market would see $60 billion accessed at the window, but this week we saw $409 billion. “People say the credit markets are frozen but it’s not an express it’s the real deal,” he said. However, Crecenzi said the government is planning to buyback a large amount of Treasuries and pump more money into the system. “First we have to get through another few months of anxiety,” he added.
Trader Radar
Shares of eBay (EBAY) were among the most actively traded stocks on the Nasdaq today.
Finerman Take
Karen Finerman joined the traders to discuss her views on the day. She said the day was painful and panic set in. She said it was interesting to see how hard hit the commodity names were. “I think we are likely to get a bailout bill passed but I don’t know if that makes things better. But it should stop things from getting worse,” she added. Finerman said she is looking for companies with the best balance sheet and large cash flows. She likes Microsoft (MSFT) and Philip Morris International (PM). Adami said the banking industry will be the big winner out of all of this. Najarian told viewers to take a look at Apple (AAPL) for its large cash position. He also likes McDonald’s (MCD) which trades at P/E ratio of 16. Macke said Wal-Mart (WMT) is a good place to hide in this tough market.
POPS&DROPS
POPS- National City (NCC) jumped 8%. Najarian said take a look at the regional banks because they will prosper.
DROPS- Honda Motors (HMC) dropped 6%. Najarian said September sales for Honda were down 24%. Apple (AAPL) fell 8%. Macke said all good cults come to an end. Marriott International (MAR) slipped 5%. Adami mentioned they lowered full-year guidance and said they weren’t going to buy back meaningful stock for the next year. “If they don’t think the stock is cheap, than neither should you,” he said. traded down 6%. Seymour pointed out that Merrill Lynch downgraded the oil service sector. “Less money is going to be spent on E&P if oil goes down,” he added. Schlumberger (SLB). eBay (EBAY) plunged 8% after Morgan Stanley downgraded the stock from overweight to equal-weight. Macke questioned why anyone would be long this stock. Burlington Northern Santa Fe (BNI) lost 7%. Adami said get back in BNI around $80 per share. iShares FTSE/Xinhua China 25 Index (FCX) dropped 4%. Seymour said you’re better off in China than other places. “China has controlled inflation and their policy is easing,” he said. MEMC Electronic Materials (MMC) plunged 13%. Najarian says he can’t figure this stock out.
Final Trade
Adami picked Oracle (ORCL). Najarian went with Burger King Holdings (BKC). Seymour says buy Embraer (ERJ) because its cash flow positive. Join the fastest growing community of small cap investors at Stockhideout.com