Fast Money Recap - Has Ben Gone Nuts? (12/17/08) 3 comments
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The Dow fell on Wednesday on worries that Fed Chairman Ben Bernanke’s “by any means necessary” approach to solving the economic crisis might lead to heavy debt and inflation. The dollar fell to its lowest level in 13 years against the euro and the yen. “Ben’s gone a little nuts” said Jeff Macke, who thinks the Fed Chairman is going to get out the dollar printing presses. A panic reaction might be to buy gold, said Guy Adami, but he added he doesn’t think the dollar is headed lower. Karen Finerman is certain that Europe will cut rates, and Pete Najarian says the volatility index indicates the market likes Bernanke’s radical move. Macke says the Fed cannot improve fundamentals just by throwing money at the problem and Finerman sees trouble on the horizon.
Morgan Stanley’s shares rose on an analysts note that poor results were not going to be repeated. “Morgan's debt was trading higher and I think that’s what led the equity higher,” explains Karen Finerman. Najarian thinks Morgan might do better than Goldman, which saw its estimates lowered by Meredith Whitney, but he wouldn’t go after either name. Adami said the fact that Goldman Sach’s shares rose after Whitney’s downgrade was a “tell.” Jeff Macke doesn’t think either Morgan Stanley or Goldman Sachs know what is on their balance sheets.
Apple’s shares fell 6% on news that CEO Steve Jobs will not be present at the MacWorld Conference, and rumors about the CEO’s health have resurfaced. Karen Finerman admitted she was surprised at this move and said the stock will recover once people see Steve Jobs in the public and healthy. Macke said in any case he would avoid Apple, since it is too tied to the consumer.
Nike increased 3% after hours after reported a 9% profit gain on international sales and higher-priced goods. Macke was not excited about the move, but Guy Adami would buy Nike o its valuations.
IShares NASDAQ Biotechnology ETF (IBB), Teva (TEVA), Novartis (NVS), Celgene (CELG), Gilead (GILD)
Ishares NASDAQ Biotechnology ETF has risen 5% while the S&P 500 has hardly moved. Finerman says a lot of companies in the sector have good data and she expects to see takeovers. Najarian would keep an eye out for Teva and Novartis while Adami likes Celgene and Gilead.
The dollar fell on news of the deep interest rate cut leading many to fear for the future of the greenback. But Dennis Gartman thinks the government is doing the right thing, and doesn’t believe the dollar is in danger of collapsing. Europe will also follow suit and cut, said Gartman. He would be long Australia’s, Canada’s or New Zealand’s dollar and own a bit of gold while avoiding long speculative positions.
With the interest rate down to zero and the Fed’s pledge to solve the economic crisis by any means possible, many wonder what effects these aggressive measures will have. Fast Money interviewed Alice Rivlin, former Federal Reserve vice chair, who said she is not worried about inflation right now, “I don’t think there are too many near-term risks,” she says. “If the economy starts picking up then we need to worry about over-heating but I don’t think we’re anywhere near that, at all.” Rivlin adds, “I think it’s going to make things better than they would have otherwise been. But we don't know how bad it otherwise would have been."
In spite of OPEC’s deepest cut in output ever, oil continues to fall. Joe Terranova explained the economy, not OPEC, is driving oil. He would not be long oil early in the year, which is the toughest time for the commodity, but for the stubborn, he would recommend Exxon or EOG and avoid refiners.
While McDonald’s has stolen a lot of the coffee giant’s thunder, there are still plenty of coffee snobs who will only drink the Seattle brand, said Pete Najarian. He noted numbers went up in November, and Starbucks may be back on track by mid-2009. Cost-cutting measures and customer loyalty may bring the stock back to life, but for now, sales are down 9% this quarter. Jeff Macke commented, “the trend is down until they come up with a better business model than letting hippies run the place.”
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This article has 3 comments:
When Ben is trying to say, "Investors, take risks, you'll be paid nothing if you hide in money market funds." In addition, low interest rates will spur housing activities to help counteract the tightening lending requirements.
It will help banks to replenish capital quickly, and eventually will help banks to relax their lending standards.
Ben still needs the securitization of car, credit card, student loans and private-label mortgages.
The SEC also needs to take away the tools that short sellers can kill any stock at will by re-instating the uptick rule, banning naked short-sales completely (no two-day grace period.)
The FASB accounts also need to modify the FAS 157 and other accounting rules to help the preparers to manage their assets effectively and at the same time requiring them to disclose more exit prices about their assets without endangering their own companies. The financial institutions then would be more aggressive in making loans.
That is simply not a factual statement. The dollar's lowest vale to the euro was $1.61, just a few months ago. The highest the euro traded today was $1.47.