Sunny Days - Fast Money Recap (8/22/08)

Recap of CNBC's Fast Money, Friday August 22.

Oil Sets 16 year Record for One Day Drop

The Dow recorded triple digit gains on Friday. Lehman takeover talk and the record drop in crude oil prices gave investors the catalysts they needed to buy. After a $6 jump earlier this week crude oil dropped a record $6.59, a 16 year record for one day. I got out of the energy market on Friday, Joe Terranova reveals. And I suggest you do the same. It doesn't know which way it wants to go.

Commodities Moderate

Commodities moderated Friday but were still strong performers, up over 4% on the week. The dollar recovered on Friday from the previous session's sharp losses, helped by a pullback in oil prices, stock market gains, and a weak British pound. I don't think the commodities bull is over when you look at the long term, says Guy Adami. But it probably is over through the end of the year. Commodity bull cycles tend to run every 10-15 years, but it can pull back for a 6 month period and I think that's probably where we are now. Iron ore contracts have climbed between 70 and 90 percent for next year, adds Zach Karabell. That's a really strong leading indicator of demand coming out of China. This is a pullback in commodities and you have to ride it. It's a battle zone out there in commodities, says Quint Tatro. If you can't watch your trades tick by tick I'd stay out of this space.

Billion Dollar Question - Lehman (LEH)

Speculation continues of a possible takeover of Lehman Brothers. Analyst Dick Bove fueled that theory when he upgraded Lehman to “Buy” and explained his reasons to you right here on Fast Money. Meanwhile, state-run Korea Development Bank said Lehman was one of its options for acquisitions, reviving expectations that the U.S. investment bank might still bring in a large investor. “We are studying a number of options and are open to all possibilities, which could include (buying) Lehman,” a KDB spokesman said. On the flip side, Sandler O'Neill Securities Analyst Jeff Harte reduced his estimates for many of the brokers including Lehman, citing deteriorating conditions. “The biggest question with Lehman is a lack of confidence in the balance sheet,” he says on Fast Money. “I just think with the size of their commercial and residential mortgage portfolio, investors don’t have confidence in what book value they’re buying.” The billion dollar question on every investor's mind - Should you buy Lehman anticipating of a takeover?
I'm skeptical,” replies Harte. “I think a takeout is unlikely. As much as I look at Lehman at $15 and say there's much more value in the franchise then the stock price represents I don't think they're going to attract buyers until they address their balance sheet issues.” I don't see why anyone would buy Lehman right now, says Guy Adami. I don't know what's on their balance sheets.

The Ongoing Drama – Fannie Mae (FNM), Freddie Mac (FRE)

Shares of Fannie and Freddie took another tumble Friday on fears that shareholders could get left holding the bag should the duo require a government bailout. If the financials can get out of their own way and start to rally that's what will take the market higher, adds Qunit Tatro. The break out that Quint Tatro is talking about will likely be triggered by a resolution to the Freddie and Fannie crisis, says Guy Adami.

Consumer Stocks Rally - The Gap (GPS), Home Depot (HD), Procter & Gamble (PG), Consumer Discretionary ETF (XLY), Children's Place (PLCE)

The move down in oil sent consumer stocks higher on Friday. The Gap, Home Depot and Procter & Gamble all moved higher. The Consumer Discretionary ETF was up more than 2% by the close. The rebate effect has passed through, explains Zach Karabell, so what we're hearing now is fundamental strength. This environment has forced merchants to run their businesses better, adds Guy Adami. I think that's what's behind these moves. I'm not saying run out and buy retail but companies seem to be running better. I agree, adds Joe Terranova. Children's Place is a good example of that. I'm playing retail, adds Quint Tatro. The action is indicative of a market that's trying to go higher, but they're just a trade.

Sunny Days – Suntech (SU), Evergreen Solar (ENER), Microelectronics (CCMP), Applied Materials (AMAT), Intel (INTC)

Solar names have had a good week buoyed by Suntech’s strong earnings report leading some investors to believe that solar energy might be turning the corner in its efforts to become mainstream. I find solar action very interesting, says Qunit Tatro. These stocks went higher even as oil went lower and that's unexpected. At the close I bought Evergreen Solar. They report earnings next week and the stock could be the standout. I own Microelectronics adds Zach Karabell. China is going to spend $160 billion over the next five years and a lot of that is going into solar. It seems to me that Applied Materials is the play, adds Guy Adami. The stock should have room to run. I trade the space through Intel however I sold my position on Friday, counters Joe Terranova.

Bernanke Bump

Federal Reserve Chairman Ben Bernanke gave stocks a transfusuion when he indicated the Fed should be able to keep interest rates low for some time. At a retreat in Jackson Hole, Wyoming Bernanke also suggested the recent drop in commodity prices coupled with reduced demand for resources should reduce the threat of inflation. “Bernnake talked about a broad sort of change in the supervisory framework of banks to stop a crisis before it happens next time,” says CNBC’s Steve Liesman who attended the conference. It appers Bernanke clearly wants to breathe the fear of God into the investment banks. “He also said the next bailout will be more of a receivership, meaning the next time not only will the Fed wipe out equity holders but it will also reduce value to creditors. In other words haircuts for the creditors,” Liesman says. The impression left is that the Fed is not going to raise rates anytime soon.

Final Trade – Your First Move for Monday August 25.

Joe Terranova likes long Nvidia (NVDA).

Guy Adami recommends long McDonald’s (MCD).

Zack Karabell likes long Vale (RIO).

Quint Tatro thinks Evergreen Solar (ESLR).

Seeking Alpha is not affiliated with CNBC, or Fast Money

 

 

 

Comments

[User 222873:]

I believe you mean Energy Conversion Devices (ENER), not Evergreen Solar (ESLR).

ENER announces results on Thursday, Aug 25th before the open. ESLR already announced second quarter results in July.

2008 Aug 25 10:13 AM