Ahead of the Fed - Fast Money Recap (8/4/08)

Recap of CNBC's Fast Money, Monday August 4.
 

DryShips (DRYS), Freeport-McMoRan (FCX), Mosaic (MOS), United States Steel (X)

Dylan Ratigan said Jeff Macke told him before the show that “you should be happy on how the market reacted today.” Ratigan brought up how companies such as DryShips, Freeport-McMoRan and Mosaic went down sharply today, along with crude oil, which fell $3.95, or 3.37%, to $121.15. Jeff Macke mentioned how he has said quite a few times before that the rally has been broken. He advises care in the markets, since the markets are quite bearish. He commented how fertilizer companies and oil and coal companies “rolled over” as crude oil fell. Guy Adami said United States Steel reported “good earnings” but the stock was down. He said it is a sign for everybody that it is a very difficult environment in the stock market, when good news cannot move a stock higher.

No Need to Raise Capital? Merrill Lynch (MER)

Karen Finerman mentioned how investors should have some sort of protection in the financials. She felt options are good way to position investors from the upside and downside depending which side of the trade you are in -- long or short.Macke commented on what John Thain, CEO of Merrill Lynch, said when interviewed by Maria Bartiromo -- that he would not raise any more capital if the current environment remains the same. As a result, Macke does not feel convinced to buy into financials. Regarding emerging markets, Macke does not find emerging markets attractive right now for investors.

IPOs Anyone? Titan Machinery (TITN)

Dan Fitzpatrick, president of Stockmarketmentor.com, came on the show and recommends investors buy IPO companies trading “under the radar.” One IPO company he suggests is Titan Machinery. Macke and Finerman are not convinced to buy IPO companies considering the markets' unfavorable trading patterns.

Fed Rates

Ratigan predicted the Fed will not raise rates tomorrow. Michael Darda, chief economist of MKM Partners, feels the Fed will be dovish tomorrow simply because they have no other choice. The Federal Reserve cannot raise interest rates due to the distress in the financial markets and lowering rates is not possible as a result of uncomfortable levels of inflation. Darda showed a chart he created demonstrating borrowing in the Fed discount window has been increasing -- he showed that the distress in the financial markets is not being alleviated yet.

Earnings Tomorrow - Procter & Gamble (PG), Cisco Systems (CSCO)

Procter & Gamble and Cisco Systems will be reporting earnings tomorrow. Later in the show, Jon Najarian, cofounder of Optionmonster.com, joined the program. He discussed the options activity with Cisco. He said there was no unusual options activity. He sees the options action for Cisco as "moderately bullish" and believes that the street is betting on longer term upside for shares but feels the stock could trade relatively flat for a few more months. Adami commented on Cisco, stating “the stock is valued relatively nicely and trades at an attractive price.” However, he said he is worried that the company's chief executive officer might mention something that could drop. Jeff Macke followed that by saying “There's no way they are going to be optimistic, they are going to come out and say things are slow again”. Jon Najarian thinks Cisco may be cheap at the current levels, but his trade would be as a covered writer, aggressively, to take advantage of the volatility to sell into, anticipating a sideways direction for the stock going forward.

Auto Loans - Capital One (COF)

Finerman did some research regarding the financing problems regarding Chrysler and feels Capital One could face some trouble from auto finance loans that is not priced into the stock. She advises avoiding this company.

Breaking News - Sirius (SIRI)

Ratigan reported breaking news that the CEO of Sirius, Mel Karmazin, bought 2 million shares.

Undervalued – Microsoft (MSFT)

Finerman finds Microsoft simply too undervalued at its current share price. She mentioned the company's “huge cash flow, impenetrable balance sheet” and low valuation makes this stock worth buying.

CEO Is Bullish - Callaway Golf (ELY)

George Fellows came on the show stating reasons why people should remain bullish on his company, Callaway Golf (ELY). As CEO of the company, he remains positive the company will continue to generate strong profits -- especially from abroad -- that will offset the softness in the US market. The company reported its second quarter on July 31, earning 58 cents compared to 53 cents a share a year earlier. 

Final Trade – Your First Move for Tuesday August 5.

Jeff Macke is sticking with Costco (COST).

Karen Finerman’s reluctantly picks Microsoft (MSFT).

Tim Seymour said I am going to add to my Proshares Ultrashort (EEV).

Guy Adami says Johnson & Johnson (JNJ) works. 

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