Fast Money Recap - What's Up With Citi? (1/9/09)

by: Miriam Metzinger

Recap of CNBC's Fast Money program, Friday January 9.

Chevron (NYSE:CVX), Apple (NASDAQ:AAPL), Cisco (NASDAQ:CSCO), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C)

The Dow fell on the poor unemployment number, the highest in 16 years, while Chevron warned and brought energy stocks down. The Nasdaq decline was led by tech stocks Apple and Cisco. Morgan Stanley resumed talks to give a bigger stake of Citi’s Smith Barney unit to Morgan Stanley. Fast Money guest Zack Karabell says the equity market is stabilizing, which is at least some good news. Tim Seymour objects to comparisons between the current unemployment situation to that of the Great Depression, since the labor pool is much larger now and the situation isn’t nearly as bad. Karen Finerman said the Citigroup news was big, but wants to know what lies beneath.

SPDR Barclays Capital High Yield (NYSEARCA:JNK), iShares Barclays TIPS Bond Fund Morgan Stanley Emerging Markets Debt (NYSE:MSD), Western Asset Emerging Mrkts Dbt Fnd (NYSE:ESD), BB&T (NYSE:BBT)

Financials were hit harder than any other sector, but Zach Karabell thinks it is a different world from six months ago, since the government has shown that it will support financials. Karen Finerman is concerned about writedowns, and would short BB&T. Tim Seymour would trade emerging markets with JNK, MSD and ESD.

Roche’s Sweetened Deal for Genentech (Private:DNA)

Genetech shares rose on news that Swiss company Roche plans to purchase the portion of the company it does not already own for $95 per share. Karen Finerman said she noticed DNA rising, so she wasn’t surprised by the news, and Pete Najarian thinks DNA might rise even higher.

Oil Keeps Falling: Haliburton (NYSE:HAL), Schlumberger (NYSE:SLB), Freeport McMoRan (NYSE:FCX), AK Steel (NYSE:AKS)

Oil dropped a total of 12% last week, and Zach Karabell says oil is a good economic indicator and its rise will be the sign of a recovery. Tim Seymour says while the rest of the oil sector is bad, refiners like Haliburton and Schlumberger look good. With shipping rates falling, Pete Najarian would look at Freeport and AK Steel,

Consumer Electronics Flop: Technology SPDR ETF (NYSEARCA:XLK), Palm (PALM)

New devices displayed at the Consumer Electronics Show failed to prevent a 2.7% decline in XLK. Pete Najarian would stay away from Palm and chips because it is a “brutal” place to be right now. Karabell thinks many companies may be ready to release new products but are waiting for a better time.

Wal-Mart (NYSE:WMT), Best Buy (NYSE:BBY), Sony (NYSE:SNY), American Eagle (NYSE:AEO), Abercrombie & Fitch (NYSE:ANF)

Retail declined on lowered forecasts from Wal-Mart and Best Buy. Expectations are already so low that Finerman thinks much of the misery is priced in and is long American Eagle and short Abercrombie& Fitch. Pete Najarian thinks Best Buy would be a buy at $23, and Seymour says the strong yen is not good news for Sony.

What’s going on at Citi? Citigroup (C), Morgan Stanley (MS)

A deal is underway that would allow Morgan Stanley to gradually take of the Smith Barney unit of Citigroup. While the agreement is beginning as a joint-venture, it might entail Citi’s selling Smith Barney, with its 11,000 brokers to Morgan Stanley, which has 8,000 brokers; this move would create the largest brokerage in America. The Fast Money group thinks something is going on at Citi, otherwise why would it sell Smith Barney and choke off Citi’s ability to make money in the future? Guest Charlie Gasparino comments Citi has a balance sheet problem and a business model problem. Jon Najarian is more blunt; “I think there had to be a gun to Citi CEO Vikram Pandit’s head to make him sell Smith Barney or he wouldn’t have done it.” Gasparino predicts things are getting worse for Citi.

JP Morgan Healthcare Conference: SPDR S&P Biotech (NYSEARCA:XBI), iShares NASDAQ Biotechnology Index (NASDAQ:IBB), Genentech (DNA), Genzyme (GENZ), Celgene (NASDAQ:CELG), Amgen (NASDAQ:AMGN)

CNBC’s Mike Huckman discussed how to play Monday’s JP Morgan Healthcare Conference in which 300 companies and 3,500 investors are expected to attend. He would take a look at Roche for its increased offer for Genentech at $95 a share, but Najarian thinks the price might not be high enough. Huckman comments the conference is usually good for small-caps and less-well known companies. Karen Finerman would lookat XBI and IBB. Huckman predicts news from Genzyme, Celgene and Amgen.

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