Recap of CNBC's Fast Money, Thursday September 11.
Seeking Government Backing - Lehman Brothers (LEH)
Dylan Ratigan disclosed the breaking news out of the Wall Street Journal that all the potential buyers of Lehman Brothers are seeking government backing. Jeff Macke says Lehman should just end the misery. The bailout won't help anyone.
Pete Najarian said the preferred yields on Merrill Lynch are suggesting that the stock is about to fall big. "If I owned the stock, I would be very nervous and buy puts to protect the position," he added. Joe Terranova said the market doesn't like the leadership changes among financial companies like American International Group, Lehman Brothers, Washington Mutual and Merrill Lynch. He explained that the street doesn't know what strategic direction these mangers plan to take. He also pointed out that Goldman Sachs Group closed higher today, which shows that investors believe it has good leadership.
Ratigan switched the talk to the oil complex. Terranova said the refiners are the one trade in the energy space that you can make money on right now. He recommended investors play the sector with Valero, Frontier Oil, Sunoco and Tesoro. Najairan pointed out that the airlines were ripping today.
Ratigan asked the traders what other stocks will benefit from falling oil prices. Macke mentioned that Wal-Mart is breaking out higher. He also feels that Gap is good enough for a trade here.
Gold Continues Lower
Ratigan moved the discussion to the gold sector. He pointed out that gold has gone down since the S&P 500 hit its lows on July 15. Terranova explained that as long as the dollar is rallying, there is no reason to be long gold. "I would wait for a pullback on the dollar here before buying," added Macke.
Next, Ratigan brought up the strength in the trains, agriculture and coal names today. Adami mentioned CSX, which reported a strong quarter today He advised viewers to buy these names on the dip. Adami said most of the hedge-fund sellers are out of Potash, and the stock was upgraded today by Morgan Stanley. Terranova said to look at Burlington Northern. "Despite the massive liquidation in the commodity stocks, the stock never broke the 200-day moving average," he said. He says the rails will be a great play for the fourth quarter.
Najarian pointed out some unusual options action in the Semiconductors ETF today. He explained that traders bought 45,000 January 25 calls on the SMH. He thinks the action is bullish for Intel, Texas Instruments and Applied Materials.
Ratigan mentioned that Bristol-Myers Squib said it would stick with its $60-a-share bid for ImClone Systems. Najarian said the pharma industry is beginning to consolidate. He said his best trades in the sector are ImClone and Biogen. Adami recommended Celgene.
Investment Banks Have Flawed Model
Douglas Cliggot of Dover Management joined the traders to discuss where stocks go from here, with so many financial companies in turmoil. Cliggot is famous for calling the market crash in 2000. He says the investment banks have a flawed business model. He explained that the investment banks have grown their balance sheets very rapidly, but they didn't grow their capital base in-line with their balance sheets. "As a result, we ended up with tremendous leverage ratios," he said. He feels credit growth will be slow or nonexistent with significant deleveraging. Cliggot says the U.S. is in a recession. He advised viewers to get into non-cyclical sectors such as health care stocks and consumer staples.
River Twice Research President Zach Karabell joined the traders to discuss how news on the financials is obscuring everything else in the market. He explained that the media hype around the financial sector has helped investors miss the news on Vale and Freeport-McMoRan. He said both companies are renegotiating their prices up 20% for 2009. He also said that Tiffany is benefiting from people in the gulf recycling their petro-dollars for high end jewelry. "Don't be a hero in the commodity names," said Macke.
Strategic investor Dennis Gartman joined the traders to discuss the dollar. Gartman said it's a bull market for the dollar and it's going to continue to be one. He explained that in a bull market you can have one of three positions: You can be really bullish, just bullish or neutral. He said he wouldn't be a buyer of the dollar tonight; instead he would wait for a pullback to 142 vs. the euro.
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