Fast Money Recap - AIG Bonuses Just Business as Usual (12/22/08)

Toyota (TM), GM (GM)

The Dow gave back most of its gains from last week on worries about the automakers and a decline in holiday spending. Toyota said it will see its first operating loss in 71 years and the stock dropped 5%. GM fell 20% on concerns the bailout will be bad for shareholders. Oil also declined on worries about consumer spending. Dennis Gartman commented the markets will be very quiet, but Karen Finerman suggested looking for opportunities in rallies and dips. Tim Seymour said only a fundamental change can transform the current environment and Guy Adami commented Toyta’s performance was “atrocious.” He would stay away from GM common stock which he thinks may fall to zero.

Oil Drops 6%

Oil fell to below $40 on indications that global demand might slow. The world’s second largest consumer of oil, China, reported a 3.2% decline in demand for the month of November. Dennis Gartman says the problem is demand is falling faster than production can be slowed. He finds it “incredible” that the consumer wants to spend less on gas even as prices at the pump are declining. Karen Finerman says this is a reaction of fear and retrenchment. Tim Seymour expects oil demand to continue its downward demand until the end of 2009, and emphasizes demand is the issue, not supply. He would be long Petrobras (PBR). Dennis Gartman notes pension funds are as desperate to get out of commodities as they were to get in, and he would not buy oil yet.

Slow Holiday Shopping: Macy’s (M), Kohl’s (KSS), Nordstrom (JWN)

Retail stocks fell on fears the pre-holiday shopping season will be the worst in four decades. Shares of Macy’s, Kohl’s and Nordstrom were down. Karen Finerman said aggressive pre-holiday sales, during which merchandise was reduced as much as 60-70% may have hurt margins, but perhaps they were the right strategy.

Acuity Brands (AYI), Vornado (VNO), Simon Properties (SPG)

Trade Associations representing the U.S. commercial real estate industry have drafted a letter to Henry Paulson that the $200 billion Term Asset-Backed Securities Loan Facility provide financing or purchase asset-backed securities. Karen Finerman says the deterioration is happening in slow motion, since not all leases come up at the same time. She said she refrained from being moreshort on commercial real estate because of government intervention, but added REITS are not a sympathetic group. Guy Adami likes Acuity for a trade and on a 4 million share day when the stock rises 3%, he’d get short. However, Seymour says the shorts are already too crowded in the group, especially in Vornado and Simon Properties.

Global Recession Fears

With China cutting interest rates for the fifth time since mid-September, Japan reporting the lowest exports ever and Europe feeling the pain, worries of a global recession increase. Tim Seymour thinks Asia will be the first to recover, since the region seems to be suffering less than the West. For now the trade is being long the dollar and short FXE (FXE). Gartman, however, cautioned against being long the dollar. However, he would not short it either.

Defending AIG (AIG) Bonuses

Guy Adami defended AIG CEO Edward Liddy who insisted that bonuses were necessary for keeping his top employees. Adami said such bonuses were not a sign of extravagance but were part of doing business.

Did Madoff Act Alone?

The Fast Money group agreed it is impossible that 70 year-old Bernie Madoff could have handled the day-to-day operations of his investment business by himself and some suspicion lies at the feet of Madoff’s right-hand man, Frank DiPascali. Marc Mukasey, DiPascali’s lawyer has declined to comment on his client’s possible knowledge of the scandal prior to the arrest.

Fast Money Predictions

The Fast Money group came up with their predictions for 2009. Dennis Gartman thinks the savings rate may reach up to 5% as baby boomers decide it is time to improve their financial health. Karen Finerman says the stimulus could drive homebuilders to the upside. Emerging markets may outperform, according to Tim Seymour. Guy Adami thinks it is very likely Fast Money may actually still be broadcasted after all the doom and gloom.

Comments

[herbert hoover:]

"Guy Adami defended AIG CEO Edward Liddy who insisted that bonuses were necessary for keeping his top employees. Adami said such bonuses were not a sign of extravagance but were part of doing business."

The problem is that AIG is not doing "business as usual." The screwed up and had to go to the government to save their hides - the bonuses ought to be flushed down the toilet just like they flushed the stockholders equity

2008 Dec 23 09:00 AM

[John D:]

If the North American auto industry was not laying off 100's of 1000's of workers all of that money generated would still be going back into the economy, people would have the money to make the mortgage payments more houses would need to be built, but we as North Americans figured we were invincible and started to buy more & more imports,(has anyone noticed where the electronics industry, the textile industry just to name a few have gone) which as we now know was just shooting ourselves in the foot while we were holding the gun when it went off.
If the economy is to be turned around we must educate the people and this is a hard lesson learned. We need to suck it up, realize we are not as strong in the global market as we all thought and start buying what our neighbors, friends and relatives all build or we will find ourselves in a hole that we will take decades to get out of. Just think of all the jobs and futures of our children that will not happen if we don't. The governments have all signed DEALs with other countries (not enough thought put into them for the long term) that they cannot get out of but we as the people are free to buy as we want so we now know to buy NORTH AMERICAN and help OURSELVES survive the economic crisis. "BUY AN IMPORT AND DRIVE NORTH AMERICA INTO DEPRESSION"

2008 Dec 23 09:43 AM

[BHMTom:]

AIG has our million dollar life insurance, Term, big deal, I can do business with any number of companies. At sub $150 per share is this a good buy. Will the US help prop up this dog a third btime or let Mr Marketb eat its lunch. WAMU took my wifes company for 1.3 Billion, No government bail out. What make anyone sure AIG will get a third feeding at the taxpayer's trough? I want to inves for short term gains, but looks like the life supports are not working.

2008 Dec 23 11:17 AM

[Lee Baldwin:]

I have wrote my congressman and Senator on this
Please do the same.
The so Called executives are thinking they are gods
Let them quit without their bonuses. See where they could go
Write you congressman and senators on this unfair practice

Jan 01 05:51 PM

[BHMTom:]

Yes the CEOs do make some bucks, but they are gonna make that from any number of companies. AIG is lucky to have em. Instead of being a bed wetter, take 3Million dollars and buy some stock, TODAY! $1.50...If this pulls out and the stock gets back up to the $30-$40 range, are you as guilty as the CEO for making a buck. The risk is there for the taking. Orportunty is knocking, stop bitching about such pedestrian issues and wake up or go away.

Jan 02 10:14 PM