Is the Commodities Bubble Popping?- Fast Money Recap (4/29/08)

Recap of CNBC's Fast Money, Tuesday April 29. Click on a stock ticker for more analysis.

ConcoPhillips (COP), Potash (POT), Wal-Mart (WMT)

Jeff Macke discussed oil’s 2% slide downward and thinks gold is a better short than oil, which hasn’t yet topped. Karen Finerman thinks the dollar has yet to hit bottom, and says the Fed should not cut rates.. Pete Najarian said investors are leaving oil, metals and agriculture behind after they have had amazing runs. He discussed POT’s and COP’s numbers and thinks investors should be willing to take some off the top, but with oil at $110, commodities might have further to go. Karen Finerman thinks agriculture stocks could be hurt by a backlash against ethanol, but Najarian thinks the agriculture bull market is fueled more by the rising demand for food than by ethanol. He thinks POT dipped only because of an analyst’s prediction and is not lowering his $300 target for Potash. Macke said while ethanol might not be the catalyst for the agriculture bull market, the bubble will burst eventually and ethanol may have a role to play. He noted record performance for WMT and thinks the stimulus checks will help the consumer.

U.S. Oil Fund (USO), Baker Hughes (BHI), Schlumberger (SLB), Halliburton (HAL)

Najarian predicts USO will drop given options activity, and Adami is bullish on BHI after a 50% correction. He also likes SLB and HAL.

Citigroup (C), Financial Select Sector SPDR (XLF)

Citigroup backtracked on an earlier statement by the CFO that it would not need to raise capital and raised $3 billion in a stock offering. Shares fell, and Finerman says investors felt deceived by the bank’s earlier statements. Adami noted that Bear Stearns did the same thing and Macke said Citigroup needs to raise more capital. He thinks the heat will be off the financials after a run following the Fed meeting. Najarian said XLF reached resistance level of $27 seven times, and Citi’s selloff contained the ETF.

Merck (MRK)

Merck dropped 9% after the FDA rejected its cholesterol drug. Najarian said the result was surprising and thinks MRK could be a buy at the current price. However, Macke said Merck has had too much bad news and he would look elsewhere.

Take Two (TTWO), Electronic Arts (ERTS)

Michael Pachter, gaming analyst at Wedbush Morgan discussed TTWO’s smash hit game Grand Theft Auto 4, which is expected to be one of the greatest games ever. However, Pachter thinks Grand Theft’s success is already priced into TTWO’s stock and doesn’t think ERTS’ bid for the company will be significantly altered by the game’s success.

Fed Meeting and GDP figures

CNBC correspondent Steve Liesman said the GDP numbers will be lackluster to mildly positive. He said to look out for inventory numbers and thinks the consumer is starting to spend, thanks to the stimulus checks. Liesman predicted Bernanke’s statements will be mild in order to avoid conflict within other Fed members and says he will find other strategies to help the economy besides cutting interest rates. Adami reiterated his prediction that the dollar will be stronger in the second half of the year.

Mastercard (MA), Corning (GLW), Wal-Mart (WMT), Pepsi Co (PEP), Apple (AAPL), Broadcom (BRCM), Qualcomm (QCOM)

On strong earnings from MA and GLW, the group wondered whether the economic crisis was ending. Macke said that the real winners like GLW and WMT were not blaming the economy for problems and he would sell some GLW because he predicts a pullback. Finerman is bullish on PEP and AAPL and Najarian likes QCOM and BRCM.

Trader Radar: Rent-A-Center (RCII) traded on unusual volume on Tuesday.

Berkshire Hathaway (BRK.A), Wells Fargo (WFC), Burlington Northern Santa Fe (BNI), Johnson & Johnson (JNJ), American Express (AXP),

The group discussed Warren Buffett’s success despite the troubled economy and Macke and Finerman suggested buying BRK.A. Adami thinks Buffett is bullish on WFC for its management, BNI for pricing power and JNJ for its consumer products. Najarain says AXP has more upside than BNI or JNJ.

Commodities Bubble Has Popped

Dennis Gartman told the group that he thinks the commodities bubble has popped and would short Deere (DE)

Final Trade: Macke: Sell Citigroup, Adami Short Dow30ProShares (DOG), Finerman: Altria (MO), Najarian Biogen Idec (BIIB)

Seeking Alpha is not affiliated with CNBC, or Fast Money

Comments

[Ames Tiedeman]

USO and OIL are shorts. Buy DUG on the long side.

Oil is going to under 100.

[Commodity Bubble Proponent]

It's not popping yet...Helicopter Ben keeps cutting rates.

We're going to see $150-200 before 90 again. Nothing systemic has changed in this market. But it will crash.

[zoom]

$150-$200 before $90? what are you smoking? You need to understand the trucking industry before you make dumb statments like that. I had a thriving business selling custom parts to the trucking industry, when diesel started climbing extra $ to spend went away immediately, with a gallon of diesel is $4.30, less and less drivers are willing to bust their ass to make less and less money so they just park their truck and look for other work. While speculating on oil should not be allowed as it completely screws our economy, 90% of everything is moved by truckers, those same truckers are organinzing a freeze out, which means NO trucks will be onthe highways for 7 days, no cargo, no frieght, no food, no fuel, NOTHING.... what effect do you think that will have on the economy? I'm guessing the government will have no choice but to get involved and install regulations that demand speculators put up 50-70% of the money to cover the games they are playing with stocks, once that happens the amount of risk goews up and the amount of games being played goes down.

[Commodity Bubble Proponent]

I agree with you zoom that this sucks, but nothing has fundamentally changed to break the party in commodities.

We now have cheaper money (thanks Ben for unnecessarily lowering the interest rate), a really shitty regulatory system (the CFTC is an absolute joke). And to boot President "there's no oil speculation, it's all based on supply and demand. Price rises have nothing to do with the 400 billion that has been pumped into these markets" Bush and Hank "I want a strong dollar, but not really" Paulson are still in power. Even OPEC sees that it's a sham and is fundamentally justified in their approach.

This game is welfare for Wall Street and we all get to pay for it. The worst part: There's nothing we can do until Bush is out of office and the CFTC starts doing it's job again. Sorry man

[John Egan]

Dunno zoom... "Dubya" sat on the sidelines while N'Orleans was drowning. He didn't even know about $4 a gallon gas? He's refusing to stop filling the strategic reserve, or reduce federal gas taxes during this 'crisis'. He happily ran us into two major conflicts with no exit plan, or even a plan on how to win. I doubt that the trucking industry has any more sway over our president than anyone but the oil business. I think you'll have to wait for a new president to be elected before we see any change anywhere. Then George can go play cowboy in Crawford.

Thx jegan ;-/

[Silver-Bullet]

The futures market may seem speculation. However it is a reflection of what people (you and me) are willing to pay for oil. By going to the gas station we are saying we'll suck in $120/barrel oil and $4/gallon gas.

So if we wan to reduce cost of gas/oil, then there needs to be a corresponding reduction in demand.

However, this is unlikely as everything we use is directly or indirectly derived from oil. Not to mention, now that China and India have seen movies from Hollowood, they too want the SUVs, big houses and RVs.

I think &6/gal gas and higher is in the cards. This may lead to another military confrontation - which will drive price of oil even higher.

[Silver-Bullet]

John Egan - by the way, politicians don't solve problems - they create them. Democrates or Republicans are 2 faces to the same coin.

[emario18]

I live in Europe & I pay more than $7 a Gallon for Gasoline here. I grew up in the States & of course remember & enjoyed Gas under $1 a Gallon as recently as in 2001 but the truth is--most of my friends have smaller cars & drive less & we get by just fine. Until the world switches over to another form of energy for cars, OPEC will continue to enjoy huge profits at your & my expense & Gas could very well reach higher levels in the States. Unless there is a real push to get away from Gasoline, OPEC will continue to get richer while we here in Europe & in the States export mountains of cash to the Oil producing nations.