Fast Money Recap - Any Hope for Housing? (12/23/08)

Recap of CNBC's Fast Money, Tuesday December 23.

Any Hope for Housing?

The Dow declined on Tuesday as news of heavy declines in home value and worries about year-end performance of the S&P (down 40%) brought stocks down. The National Association of Realtors reported existing home sales fell a staggering 8.6% and existing home prices declined 13.2%. Jeff Macke said bad housing news is not surprising, but Karen Finerman said she expects housing to achieve some kind of stability in 2009. Pete Najarian would look at XHB, which has been badly beaten down. Macke says the vicious cycle in housing is as prices fall, people wait longer before buying homes. He said the solution for the problem lies with the homeowners and not the banks. Karen Finerman says she would like to know the number of loans that are in trouble. Dylan Ratigan said in commercial real estate, the performance of some REITs has improved. Finerman doesn’t see a bailout for commercial real estate and says she is reluctant to short the sector because companies have been lobbying for fairer tax treatment. “If they rally 20%, I want to short commercial real estate so badly it makes me sick,” said Macke.

Apple (AAPL) Falls from the Tree

Apple shares have declined over the past few days on pessimism about the holidays and the absence of a new product release. Macke sees the opportunity for a disciplined trade with a stop at $80, and he warned if it drops below that level, it could be in a free-fall to $50. Karen likes the fact Apple has $27 in cash per share. Pete Najarian says Apple’s multiple makes it seem cheap, but Macke warned Apple might be like Toyota and seem cheap on Friday but expensive on Tuesday. Joe Terranova says Apple is the kind of stock to buy on the prospect of a turnaround. Pete Najarian says options activity suggests there might be an upside in Apple by the spring.

Retail: American Eagle (AEO)

While last weekend’s consumer activity was low, there are some indications that retail may look better in December than it did in November. How to play this pre-holiday uncertainty in retail? Karen Finerman would buy American Eagle as a value play, while Jeff Macke would short retail in rallies.

Hope for Housing

With home sales at the lowest rate in a generation and the value of homes declining a staggering 13%, it is hard to find hope in the housing market. Deutsche Bank analyst Nishu Sood says homebuilders are the ideal proxy for an economic turnaround, and would watch that sector first. He would look at the new home sales data. “Those numbers are going to be the most leading indicator. So when that number begins to stabilize you can have some confidence that things could turn around.” He thinks a recovery for housing could happen in the latter half of 2009.

Show Us the Money! Citigroup (C), J.P Morgan (JPM), Bank of America (BAC)

The Associated Press located 21 banks receiving government assistance and not even one bank could specifically disclose how the money was used. While JP Morgan mentioned company-specific programs, Citigroup, Bank of America and others could not give a clear accounting. “And this is not even lendable capital,” said Karen Finerman. “This was to rebuild the foundation of the banks.” Najarian says specific information should be demanded and Dylan Ratigan recommended clawbacks (previously given monies withdrawn due to specific circumstances).

Will Black October Return?

The Fast Money group was asked if they predict a return of Black October, when the S&P 500 fell 17%. Karen Finerman says the panic will return, it is just a question of what the source will be. Najarian commented trading volume is light due to the holidays, but he expects volatility to return in January. “There’s skepticism toward the bailout. Time your trades and try not to get your face ripped off,” said Jeff Macke. Joe Terranova says the uncertainty keeps people on the sidelines.

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Comments

[Phat:]

If you look up the guys on wikipedia, it is striking to me that most comentators have been involved in real-estate during the bubble. I'm skeptic to their expertise when it comes to real estate.

2008 Dec 24 02:49 PM

[whisperonth...:]

If the REIT market comes back by 20% and everyone shorts it, we know what that will do. It will scare off all the new investors and appear to be a failure at a turnaround. That's what is happening in everything else right now. Everyone wants their quick dollar and no one is really interested in investing in companies. The only advantage I can see is that the prices will drop again and those of us out there to buy a good product and hang on will again get good prices and a much better return in the end.

2008 Dec 26 09:58 AM