Fast Money Recap - GM and Ford Go to Washington (11/28/08) 12 comments
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Fast Money Recap, Friday November 28
The last five days has seen the biggest gain in the Dow and the S&P 500 since 1933; the S&P 500 closed over 12% higher on the week, and the Dow climbed 10%. Joe Terranova and Dennis Gartman felt hopeful that things were looking up, but Jeff Macke chimed in sarcastically that being a Socialist is good for a trade. He might buy GM and Citi on the short-term news of a bailout, although he expects the companies to eventually go bankrupt. Terranova warned that the beginning of December tends to be brutal, but Fast Money guest JJ Kinahan remarked that since expectations were so low, there might be a rally in store.
Oil dropped nearly 6% to $52 on worries about demand and news that OPEC will delay production cuts. Dennis Gartman said commodities probably wouldn’t go lower, but he would wait for a move to buy. Terranova cautioned viewers that they weren’t going to see a climb to $144 for perhaps another decade. He would buy XOM as an energy play and forget about the commodity. Terranova predicted a natural gas short squeeze for December.
While Yahoo is in search of a new CEO to replace the infamous Jerry Yang, Carl Icahn bought 7 million shares of the internet company. Macke said he think Icahn should walk away because he isn’t going to win the Yahoo battle. Gartman said the whole company is absurd and it is silly to try to beat Google.
Macy’s jumped 6% on CEO Terry Lundgren’s announcement Black Friday was better than expected. Macy’s is planning to close 10 stores next year and use the cash to pay off its debt. Gartman said this news surprised him.
GM (GM) and Ford (F) Go to Washington with Fuel Systems Solutions (SYS), Nucor (NUE)
Shares of GM and F rose on the automakers’ second trip to Washington planned for next week. Although they left empty handed the first time, Deutsche Bank is confident the Big 3 will receive a bailout package if they submit an aggressive turnaround plan to Congress. Jon Najarian said Ford’s trading volume was way up on the news and would consider F and GM as a short-term trade as well as SYS and Nucor. However, he would sell after the meeting next week.
Game Over: Interview with Stephen Roach, Chairman of Morgan Stanley Asia.
When asked about the health of the American consumer, Stephen Roach said, “Game over.” He gave a reason for this blunt thesis; “There are only four other instances since 1950 when real consumer demand has fallen two quarters in a row. And this is the first occasion when declines in both quarters have exceeded 3%.” However, there is good news; “Consumers are now abandoning asset-dependent spending… and moving back to more prudent income-based lifestyles.” He thinks more people will save and invest, which will be the best strategy for recovery.
On news the government will add an additional $20 billion onto Citi’s aid and the The Treasury and FDIC will guarantee potential losses on up to $306 billion of risky loans and securities backed by mortgages held by Citigroup, the stock has been performing well the past week. JJ Kinahan says he likes the banks, particularly Citigroup more than the automakers because banks have a deposit base. With the new trend in saving money, regional banks may be the way to go, said Dennis Gartman. “The government deciding what’s too big too fail is a statement that our grandchildren will find laughable,” snickers Jeff Macke.
The group wondered if the cinema will experience a boom the way it did during the Depression of the 1930s. The holiday movie lineup looks promising and sales are expected to be strong. Macke says he owns and likes Disney and adds it is a best-of-breed trade. Terranova agrees.
Celebrated investor Dennis Gartman discussed ways to make money in a shaky market, and gave the following rules:
- Never ever add to a losing position
- Think like a fundamentalist; trade like a technician
- There is never just one cockroach- pay attention to bad news.
- Do more of what is working and less of what is not.
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This article has 12 comments:
much like "where there's smoke there's fire"
The Japanese automakers are having problems here and in Japan. This is in spite of the fact that they apparently pay much less in wages than US automakers do. The economy is getting worse, especially with regard to durable goods orders (down 6+% in the last report). The automakers situation is likely to get significantly worse over the next 6 months. This means they will be bleeding cash at a rate they probably do not even fully comprehend at this time. The US automakers would have to make major changes in order to present a plan to be profitable in the near term to Congress. Knowing how bureaucracies work (both the automakers management and the UAW) it is extremely unlikely that the US automakers will present a viable plan to Congress. It is much more likely that Congress will again tell them to go back to the drawing board, especially since Congress also wants more fuel efficient vehicles as part of the plan.
The play on automakers is over tomorrow morning at the open. Waiting any longer is simply a risk that is not a percentage play. There is likely less than a 50% chance that Congress will want to approve the automakers suggestions. The automakers' stocks will crash when they are told to go back to the drawing board for a better plan. When this happens, it will be unclear that Congress will be able to act on the automakers second attempt at a plan before the new year. This may mean one or more of them may go into bankruptcy at least temporarily.
I am disappointed that the Fast Money people are being so cavalier with their advice. Good luck to all of those who follow them into Tuesday!
People have also been ignoring the India terrorist problems. The current theory seem to be that the terrorists are Pakistani. They apparently are trying to attack Westerners (U.S. citizens and Western Europeans) to again show us we are not safe. This is another significant act of war against the U.S. and the Western European countries. Perhaps more significantly Obama has stated several times that the situation in Afghanistan needs more attention (i.e. more troops). He regards that situation as much more important to US interests than the situation in Iraq. Since the Al Quaeda terrorists have often been said to be sheltering in Pakistan, this would seem to lead soon to be President Obama in the direction of pursuing yet another war. In my mind the markets should find this extremely upsetting. It does seem to be. If Obama follows his election rhetoric, he may just end up pursuing this course. Personally I think he meant what he said about his concern in this area. It remains to be seen what he will do. It is almost a certainty that President Bush will not start another military action before he leaves office. If President Obama does, this may destroy much of the good will he has built up in many areas. Still as commander in chief, he may come to the conclusion he has to.
Just the thought of all of this is bad news for the markets and for the US economy. The fact that US citizens are now being targeted in other major commerce centers around the world is upsetting in itself.
Add the fact that Pakistan has nuclear capability.
Add suspicious circumstances that could have implicated the Musharaff government attended the 1st assasination attempt, but Musharaff rejected repeated requests for
independent investigation.
This picture is very worrisome indeed.
If the US is following a similar pattern, we can expect Q4 to be very bad indeed.
You're certainly up on your current events.
May I suggest you don't take it all quite so seriously. There are always problems around the world.
It also appears we've weathered the worst of the U.S. inspired worldwide financial meltdown.
Take heart!