Fast Money Recap: Coffee Prices Too Hot to Handle (5/20/09)

Fast Money Recap, Wednesday May 20

Hot Coffee, Hot Commodity: Kraft (KFT), McDonald's (MCD), Starbucks (SBUX)

Coffee futures reached a 7 month high on weather problems and rising costs for fertilizer and labor. Kraft increased prices on its Maxwell House coffee by 19% and other coffee producers are expected to follow suit. While both Starbucks and McDonald's will be affected by rising coffee prices, Pete Najarian thinks Starbucks will suffer some serious pain while McDonald's, which uses coffee just to get customers in the door, may not be so adversely affected.

More Mortgage Misery: Pulte (PHM), Centex (CTX), Regions (RF), MBIA (MBI)

Whitney Tilson, found of the hedge fund T2 Partners, predicted the coming credit crisis and sees" a headwind of continued losses for the better part of five years." Tilson thinks the crisis is only halfway over and predicts $1 Trillion worth of real estate losses on the horizon. Commercial real estate been so badly hit yet because "they’re dealing with interest only loans with 5 and 10 year re-sets. Borrowers have been able to make interest payments. It’s upon re-set that they probably won’t be able to refinance." However, loan losses for the next 8 years should be around $700 billion. Whitney Tilson would short Pulte and Centex because there will be no need for their products. Other good shorts include Regions and MBIA which is “under-reserved for losses that it could be seized this year.”

Bulls Run (for the Hills): Agrium (AGU)

With the Dow closing lower on Wednesday and the Federal Reserves predictions of rising unemployment and a declining GDP, Guy Adami thinks the next move is lower, evidenced by the fact that the Dow gave back its morning gains. Joe Terranova said, "This is what a consolidating market looks like." Pete Najarian commented on the volatility of the market and Jeff Macke said he took advantage of the rip by selling Agrium.

Commodities on the Rise: Agrium, Potash (POT), Barrick (ABX), Newmont (NEM)

Oil and gas supplies are falling and problems in Nigeria are getting the attention of oil bulls. Other commodities prices are on the way up. Pete Najarian said $50 is a good price for oil, but $60 will start to hurt the consumer. His ag picks are Agrium and Potash. Tim Seymour notes gold companies Barrick and Newmont held their gains on Wednesday.

Bank of America (BAC), Goldman Sachs (GS), Bank of America (BAC), JP Morgan (JPM)

After a secondary offering created a feeling of optimism, financials got slammed as investors took profits. JP Morgan and Goldman Sachs fell hard. Jeff Macke says those who invested in Bank of America should have taken gains already.

Target (TGT), Retail HLDRs (RTH)

In spite of Target's better-than-expected quarter, the RTH ended lower. Jeff Macke said Target has run already, and praised the company. Guy Adami doesn't think the company will break out above $45 and Najarian expects a pullback.

Hewlett Packard (HPQ), Microsoft (MSFT), Red Hat, Apple (AAPL), NTAP (NTAP)

The tech sector suffered on Hewlett Packard's lackluster outlook for 2009. Microsoft closed higher on news of its new search engine. Pete Najarian likes NTAP because it is doing an acquisition. Guy Adami is interested in Red Hat and Jeff Macke sold Apple shares because he thinks the stock is rolling over.

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Comments

[Econ 101:]

test

May 22 11:31 AM

[discov:]

I am thinking that if one gets long the coffee trade via MCD, then a nice pair might be to short DDRX ( more details on that short here tinyurl.com/qp6mzb )

Jun 03 12:17 PM