Panic on Wall Street - Fast Money Recap (9/17/08)

Recap of CNBC's Fast Money, Wednesday September 17.

Panic on Wall Street - Goldman Sachs (GS), Barclays (BCS), Lehman Brothers (LEH), Morgan Stanley (MS), Wachovia (WB), U.S. Bancorp (USB), Financial Select Sector SPDR (XLF)

Panic swept Wall Street today. Dylan Ratigan mentioned that gold saw its largest one-day move ever in history, and the Dow closed on its lows of the day. Breaking news that Morgan Stanley is in talks with Wachovia and others for a possible merger was reported Karen Finerman explained that she understands Morgan's need for a low cost deposit franchise. Guy Adami said the deal is interesting, especially since Goldman Sachs came out yesterday and said it wasn't interested in buying a bank. "People are desperate, and the financial system is broken," added Jeff Macke. Adami pointed out that Barclays just became a leader in this game after it moved into Lehman Brothers' clearing business. Najarain mentioned that the volatility in Goldman Sachs and Morgan Stanley is outrageous right now. He explained that the crazy action in the stocks shows that investors are concerned and feel that both investment banks have issues. Najarian said he took off some of his short exposure in the Financial Select Sector SPDR today. Ratigan asked the traders which stocks could be one-of-a-kind investment opportunities right now. Adami said to look at U.S. Bancorp which fell 5% today.

What to Buy? - Lockheed Martin (LMT), Boeing (BA), Apple (AAPL), Johnson & Johnson (JNJ), General Mills (GIS)

Adami said he also likes Lockheed Martin at $105. Finerman said she has Boeing on her radar screen because the company doesn't have a lot of debt. Macke says Apple is a buy at $120. Adami told viewers he would be worried about Johnson & Johnson here, because it seems like everyone is in it for a defense play. Najarian also likes Apple at $120 as long as you buy puts for protection. Macke pointed out that General Mills made a new high today.

Credit Markets

Sean Egan, managing director of Egan-Jones Rating, came to discuss what is happening in the credit markets. He said you have to understand what went wrong with the system. "We changed the format for funding mortgages from what we used to do 10 years ago. We have replaced that whole system where we have everybody wanting to do the deal, which ended up inflating the underlying ratings," Egan said. He said that in order to change the system we must do the following: Re-establish trust, get transparency, clean up the market in the way derivatives trades are processed, match long-term capital with needs and reform the ratings agencies.

Gartman's Trade Today - McDonald's (MCD)

Dennis Gartman, author of The Gartman Letter joined the traders to discuss how he traded today. Gartman said the only trade he has on is long McDonald's and short the stock market. "I think everyone is flat and nervous," he added. Gartman mentioned that he took some of his short positions off at the end of the day in the midst of the panic selling. He said the public should keep small positions right now. "These are the most consequential times I have ever seen," Gartman said. He explained that these are very difficult times, and it's not just in the U.S. It's also bad in Russia, Germany, the U.K. and France. He pointed out that gold skyrocketed after an article appeared in a Chinese newspaper that said China will have to diminish the use of the U.S. dollar as a reserve currency. "On any $20 or $30 break in gold, I will be a buyer," he added.

The Fed is Healthy

Wayne Angell, a former Federal Reserve governor, joined the traders to discuss the balance sheet of the Fed. He told viewers that he is very comfortable with the Fed's actions. "The Fed's balance sheet is infinite and it can expand," he said. Angell pointed out that the Fed is simply acquiring assets during a stressful time, almost like Resolution Trust Co. "In doing that, they're going to make money," he said. He said the Fed doesn't have to turn the assets around quickly, but if it can get a premium for those assets, it will sell.

Fear on Main Street

William Larkin is a fixed-income portfolio manager at Cabot Money Management. Larkin discussed with traders the huge spike in borrowing costs. He said this is the money market going into Main Street. "Mom-and-pops are running with fear into T-bills and government-backed money market accounts," Larkin said. He says the public is making a mistake by getting into stuff that is too short in duration. He recommended viewers look at government-backed home financing securities.

Final Trade – Your First Move for Thursday September 18.

Guy Adami thinks Johnson & Johnson (JNJ) is a buy.
Peter Najarian recommends Palm (PALM) ahead of earnings Thursday.
Karen Finerman thinks investors should lobby for a share of the AIG loan.
Jeff Macke is so annoyed with the rating agencies he can’t voice a trade.

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Comments

[MarvinMBA:]

The markets are in such turmoil the average investor can really get hurt by making a wrong move right now. I'm certain there are opportunities but in my opinion wait a few months and see how this all works out. As the excesses get "marked-to-market" there will be more information as we do not know what is yet to be marked, how much, from who or from where. Waiting a few weeks or months at this junction might be the best idea you can have. Keep your money in short term and medium term CD's for awhile is the best strategy. Frantically trying to second guess where some of the instruments recommended by the above piece could be a mistake...Marvin the Maven

2008 Sep 18 12:21 AM

[Jackson Cash:]

I cannot agree more with the preceding comment. If one looks at "indicators", picture a ROOM full of banks, the fed opens the necronomicon, and every bank says "not a chance in hell". That ought to tell every investor, citizen and unborn that there is an unspeakable monster yet to bust the guts out of the dollar like the first movie Alien. Wait and see, volume is accelerating exponentially -- all we need is someone to pull the trigger and equities worldwide are history! I called DOW at 8500 back in April, but this sucker wouldn't surprise me to end up around 6k in light of acceleration...

2008 Sep 18 02:08 AM

[Jase:]

You must be kidding me. Never, ever bet against Goldman. Half that buying today was probably GS buying back their own shares. Earnings are estimated to be $14 per share this year--if history is anything to go by, they'll probably beat by a landslide; earnings above $20 per share wouldn't surprise me in the least. They thrive in this volatile environment. Anyone that thinks the Investment Bank model is broken has to get their head checked. Leverage (read: derivatives) are a useful instruments when used appropriately--they are excellent tools to protect wealth, for example. If you read GS's earnings report issued two days ago, they actually bought back millions of their shares at $180. GS will be fine. The shorts will get killed in the upcoming days when this thing is back above $175. There's no reason why they can't take out their old highs of $250 within the next six quarters--there are deals out there in the market and Goldman are experts at finding them and unlocking value. Their book value is 99.30; at 10x earnings on a surprise of $20 next year (last year their earnings were $24 per share) they are a $200 stock.

2008 Sep 18 02:27 AM

[fatcat:]

Not only that,Jase,they have less competition now and they are still the Wall St darling.

That said,I think you are too aggressive with your price estimate...

2008 Sep 18 03:52 AM