Recap of CNBC's Fast Money, Monday July 14.
Freddie Mac (FRE) and Fannie Mae (FNM) and the French Revolution
Fannie and Freddie gave up their hasty gains as investors realized government assistance might dilute rather than raise value in the companies’ shares. Karen Finerman thinks there is widespread skepticism concerning the government’s plan, and Bill Fleckstein of Fleckstein Capital commented; “We have too much leverage in the financial system. We have bad assets in the wake of the housing bubble. That’s a problem.” In honor of Bastille Day, Jeff Macke compared the saga of Freddie and Fannie to the French Revolution; the sell-off seemed like a good idea at first, but in the end, innocent people got their heads lopped off.
Still nervous over the fall of IndyMac on Friday, investors avoided NCC and WM after analyst Bruce Harting warned WM that it needs to substantially increase its loss reserves. Although she doesn’t think too many regional banks will actually fall, Finerman would avoid all of them because it is difficult to predict which ones are in the danger zone. Bill Fleckstein thinks credit card companies are at risk, and revealed he is short COP. Tim Seymour thinks STD, which is taking over British mortgage lender Alliance & Leicester is a financial to watch.
Gold on Panic: Barrick (NYSE:ABX), Anglo American (AAUK)
On fears of rising inflation and instability in the financial sector, gold rose to $970 an ounce, its highest level in four months. Joe Terranova observed the last time gold reach this level was just before the fall of Bear Stearns. Jeff Macke thinks the sentiment will be pro-gold and anti-dollar no matter how the Fannie/Freddie crisis ends. Tim Seymour recommended ABX and AAUK.
In or Out of Ag? Potash (NYSE:POT)
Agriculture stocks rose on Monday, and Finerman thinks Potash, which is at a high level, carries more risk than beaten-down Citi. However, Macke thinks Potash and other ag stocks can still be traded.
KMB’s stock plunged on disappointing results. However, Finerman doesn’t think the miss was that egregious and would buy PG. Tim Seymour said costs brought down KMB and the miss shows inflation is hitting home.
Is Genentech (DNA) Healthy?
DNA’s 5% growth apparently wasn’t good enough for The Street. However, Joe Terranova thinks the numbers were pretty good and would buy the stock long-term.
A Million Phones that Don’t Work: Apple (NASDAQ:AAPL)
Apple sold a million 3G iPhones in just three days, but software problems kept many of these phones from working properly. Tim Seymour confessed he is not too impressed with Apple’s new phone, and Macke thinks of the new product as just another cell phone.
Intel (NASDAQ:INTC) Analysis
Lehman analyst Tim Luke says Intel is one of the most resilient stocks in the market, has successfully taken market share from competitor Advanced Micro Devices and has received praise for its new Atom chips for laptops. He thinks a lot of the negativity has been priced in, says there is support around $18.50 and thinks the stock should reach $23. Luke says the holiday season will be rough for Intel, but the company should prevail.
Trade Micro, Think Micro
Mike Darda MKM Partners chief economist says two numbers to look out for this week, the PPI and the CPI may indicate growing inflation and leave the Fed in a difficult situation, since it can no longer afford to lower rates and will have to make aggressive moves to ensure price stability. Darda added the balance for 2008 looks very weak and this week’s numbers are probably not going to be good.
Finerman bravely bought Citi at the peak of the subprime crisis and believes in picking up stocks from the rubble. While Cisco is at its lowest level in ten years, Finerman commented, “This is exactly the kind of name to own in market like this. These guys are dominant in their market, they have $19 billion of net cash on their balance sheet and their P/E is extremely attractive at 12 times earnings.” For the risk averse, Finerman suggests buying puts.