Unfairly Punished - Fast Money Recap (10/24/08)

by: Joan Wickham

Recap of CNBC's Fast Money, Friday October 24.

Getting More Comfortable - Potash (NYSE:POT), Ingersoll-Rand (NYSE:IR), Microsoft (NASDAQ:MSFT)

Dylan Ratigan started the show with a discussion of the U.S. markets' issues with the largest credit crisis in American finance history. Ratigan mentioned that in the overnight session, the futures were "limit down," and there were expectations that the Dow would open down 1,000 points. Jeff Macke joked, "Life is like a singles bar; between 1 a.m. and dawn, no good decisions are made." Pete Najarian says "there seems to be a level that people are starting to get comfortable with the material, agriculture and energy names." He pointed out that once Potash hit $60 a share, the stock immediately spiked higher. Ratigan asked the traders if they are more optimistic or pessimistic about their investment positions than in recent weeks. Karen Finerman said this is the most optimistic she has been. She says "we haven't seen the end of the redemption, but I have been taking back some of my hedges here." Guy Adami said a company like Ingersoll-Rand trading at four times forward earning is "absurd." He also mentioned that he liked the price action in Microsoft today.

Considering Currency and Finance - Hartford Financial Services (NYSE:HIG), JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), US Bancorp (NYSE:USB), Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), PowerShares DB US Dollar Index (NYSEARCA:UUP)

Ratigan asked the crew if we will now see the insurance companies beg the government for capital. Adami said yes, we will. He pointed out that Hartford Financial Services is interesting from a valuation perspective. Najarian told viewers to be cautious with JPMorgan Chase, Wells Fargo, US Bancorp, Morgan Stanley and Goldman Sachs. He explained that people in the market are wondering where these banks will get their earnings from, now that the market has digested the government bailout capital. Tim Seymour says, "I need to see volatility in emerging-market currencies come down dramatically before I can get comfortable about going into places where I think there is a great long-term story." Macke told viewers he's long the dollar through the PowerShares DB US Dollar Index.

Unfairly Punished - Johnson & Johnson (NYSE:JNJ), Church & Dwight (NYSE:CHD) and Celgene (NASDAQ:CELG), Amgen (NASDAQ:AMGN)

Ratigan asked if we have come to terms with the debt and housing problems. Finerman says "we aren't there yet, but there are some companies out there where you can pay nothing and get the rest of their business for free." Adami said companies like Johnson & Johnson, Church & Dwight and Celgene have "done it right" but been unfairly punished. Najarian mentioned that Amgen rose 15% on the week and reported unbelievable earnings.

Pimco Finds Value - Freeport McMoRan (NYSE:FCX), RTI International (NYSE:RTI)

Mohammed El-Erian, Pimco co-CEO and CIO, gave his view on how we get out of the credit crisis. El-Erian explained that we got to where we are today because there was structural failure at every level, combined with a global deleveraging process that caused major damage. He said to look for high-quality names that were damaged by the overall environment but are likely to recover. He says "we are starting to form a bottom in this market, and there is starting to be some good value here." El-Erian said he feels more "optimistic" than in the past, because we are starting to see the final stages of the deleveraging and we are starting to see policy go from "announcement" to "implementation." Finerman told viewers that Freeport McMoRan is trading at two times cash flow and is overdone on the downside. She also mentioned that RTI International is trading at one times net cash flow.

Crude Nears Bottom

In an emergency meeting the Organization of the Petroleum Exporting Countries agreed to take 1.5 million barrels a day of crude, about 5 percent of its supply, off the world market. Joe Terranova and the traders discussed the energy markets. Terranova said crude oil is trading off the S&P 500 futures and is coming into a near-term bottom. He says "we're running out of sellers, and if you're short oil it might be time to cover." Seymour suggested that crude oil is simply following the dollar. He says "technically, support for oil is good around $62, and fundamentally the argument is decent when you look at demand." According to Joe Terranova the action in oil has everything to do with hedge funds. “They were active participants in the oil market on the way up," he says, "and forced liquidations are behind the selling." He says "there is nobody in there to drive it higher now."

Bear Battle - Gold Fields (NYSE:GFI), Harmony Gold Mining (NYSE:HMY), Apple (NASDAQ:AAPL), Intel (NASDAQ:INTC), Dell (NASDAQ:DELL), Market Vectors Gold Miners ETF (NYSEARCA:GDX), Microsoft (MSFT), Burlington Northern (BNI), Eli Lily (NYSE:LLY)

The gang talked about ways to battle the bear market. Adami explained that gold isn't working, but the infrastructure story will work at some point. But considering at least some U.S. companies including Microsoft, Burlington Northern and Eli Lily beat the Street this week, perhaps you’d do best to stay in the stock market, selectively. Tim Seymour recommended viewers play gold names - Gold Fields and Harmony Gold Mining. Najarian says "some of tech names with large cash positions like Microsoft, Apple, Intel and Dell will work.” He also mentioned the Market Vectors Gold Miners ETF saw huge options activity and could bounce to the upside from current levels.

Your First Move for Monday, October 27th.

Jeff Macke said stay long the dollar with the PowerShares DB US Dollar Index (UUP).
Pete Najarian suggested Market Vectors Gold Miners ETF (GDX).
Guy Adami recommended long Cisco (NASDAQ:CSCO).
Karen Finerman recommended long Phillip Morris (NYSE:PM).

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