Recap of CNBC's Fast Money, Wednesday October 22.
Continues Market Sell-Off - McDonald's (NYSE:MCD)
Dylan Ratigan began the show with a discussion of the continued market sell-off due to more hedge-fund redemptions. He joked that we will know the stock market has bottomed when they rename the show "Less Money." Karen Finerman said the market seems a bit overdone to the downside. She pointed out that the global growth slowdown story has been out there for a while. Tim Seymour says "emerging markets might be back at the front burner driving things down." He said we're seeing massive liquidations in Brazil, South Africa and Russia. He explained that corporate debt markets around the world are a mess and we're having a "crisis of confidence." Jeff Macke told viewers he had three trades on today. He was long McDonald's for an earnings play, long the dollar and double short the S&P 500. He said the latter two worked. Guy Adami said "the market will continue to trade in a range between 8200 and 9500."
Rating Agencies Failed - Norfolk Southern (NYSE:NSC)
Seymour said the job of ratings agencies is to be the arbiter of credit, and they didn't do their job. Ratigan brought up the controversial emails from the ratings agencies that were made public today. Macke says "the ratings agencies should be annihilated and forced out of business and allow a free-market adjustment." He said their testimony in Congress has raised the suggestion that nothing is what it seems out there. Ratigan asked the traders if global markets are pricing things as if growth in those countries has gone away. Adami said he believes that oil will overshoot on the downside. He told viewers that something fundamentally good is going on when you look at the record earnings out of a railroad like Norfolk Southern.
Volatility Still High - iShares MSCI Germany Index (NYSEARCA:EWG), Microsoft (NASDAQ:MSFT), AT&T (NYSE:T)
Seymour says an interesting trade is to short the iShares MSCI Germany Index because Germany had weak export numbers this week. He explained that Germany is the largest export economy in the world at 41% of its GDP. Ratigan asked the crew if fundamental data are being overlooked in the markets. Finerman said that ultimately we will return to focusing on underlying business cash flow. She says "it's unprecedented to see the volatility index this high for this long." Macke said Microsoft and AT&T are examples of the proverbial babies being thrown out with the bath water.
Ratigan discussed the tremendous amount of wealth destruction for the average investor and the lack of confidence in the financial system. Adami said "the people at home can't do too much unless they are going to become active traders." Macke told viewers that if they can't sleep at night, than use the next rally to lighten up. Adami said when the market turns around, U.S.-based companies will be much better off than last year. Seymour said "this is a deflationary environment in which the U.S. Treasury will pump a lot of cash into the system." He said a silver lining in the market is Microsoft and AT&T or any of the big boys with a lot of cash on their balance sheet. He said supply is starting to get worked out, and eventually commodity prices will bottom.
Protect Your Assets
Strategic investor Dennis Gartman, author of The Gartman Letter, joined the traders to discuss how to protect yourself from a global recession. Gartman said rallies are to be sold, and weakness isn't to be bought. He told viewers to use rallies to sell positions they don't like. He says, "People need to understand that the problem with the ratings agencies is the modeling or the pricing mechanism of products." He said this is the reason we need to take all the derivatives and put them through a clearing house. Gartman says "it will be years before confidence returns to the retail investment community." He advised viewers to watch the yen/euro cross so they can figure out where stock prices are going to go.
Rumors on the Street
CNBC's Steve Liesman joined the traders to talk about some of the reasons for the market sell-off. He said rumors on the street were that a "fund of funds" was redeeming a large percentage of its total net worth. Another rumor on the Street was that a large quant fund blew up. He told viewers to look at the dollar/yen and euro/yen charts. Both show huge falls that correspond with the decline in U.S. and global stock markets. Macke said he's taking some off his long dollar position off. Seymour says, "I would definitely still be long the yen and possibly short some of the emerging market currencies."
Battle the Bear - Apple (NASDAQ:AAPL), Altria Group (NYSE:MO), Philip Morris (NYSE:PM), Reynolds American (NYSE:RAI), Diageo (NYSE:DEO)
The crew talked about ways to battle the bear market. Gartman said don't get long the U.S. dollar right now. He says "the dollar will move back three to five euros, and then you will want to buy it." Adami said if you want to dip your toe into shares of Apple, right now might not be a bad time. Gartman disagreed and said to sell Apple because nothing on the chart is showing the stock is a buy. Finerman mentioned that "sin stocks" like Altria Group, Philip Morris, Reynolds American and Diageo were down today. She pointed out that the group is just a place to hide in weak stock markets.
Trader Radar - Tupperware Brands (NYSE:TUP)
Shares of Tupperware Brands were among the most actively traded stocks on the NYSE today.
Your First Move for Thursday, October 23rd.
Jeff Macke said he's selling of some of his position in the ProShares UltraShort S&P 500 (NYSEARCA:SDS).
Guy Adami recommended Burlington Northern Santa Fe (BNI) around $80 per share.
Tim Seymour told viewers to buy "best of breed" emerging-market exporters in countries where their currencies have been terribly devalued.
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