Making Up Rules - Fast Money Recap (9/26/08)

Recap of CNBC's Fast Money, Friday September 26.

The Bailout Part 1 - SPDR Trust (SPY)

Fast Money began with a discussion of the proposed bailout of the housing and banking system. Joe Terranova told viewers to forget about the bailout. "I bought the SPDR Trust on Wednesday, because the short-sellers are piling in since they can't short the financial stocks," he said. Terranova says when the short ban comes off on Oct. 2, the S&P 500 will pop. Tim Seymour said he loved how the S&P 500 traded today in the face of bad news. "Technically, we have room to run here, past 1220 or maybe up to 1260," he added. Jeff Macke says he doesn't want to be long this market because the regulators are making up rules as we go along. Karen Finerman said she really didn't do a lot today in the markets.

The Bailout Part 2

Republican Adam Putnam of Florida came to discuss the bailout plan. He said negotiations are ongoing and there is some momentum toward a hybrid of what Paulson proposed and what the Republicans are proposing. He said the goal is to have a completed deal before the markets open on Monday. "The core principles of the deal will be: taxpayers will benefit from the upside of the assets, more accountability and oversight from Congress, no golden parachutes for executives and doing more for Main Street."

Looking for A Home – Wachovia Bank (WB), Spain's Banco Santander (STD), Wells Fargo (WFC), Citigroup (C)

Andrew Ross Sorkin, a reporter for the New York Times discussed breaking news that Wachovia is in merger talks with Spain's Banco Santander, Wells Fargo and Citigroup. "With WaMu going under all eyes were on Wachovia,” reveals NY Times reporter Andrews Ross Sorkin on Fast Money “There’s a nervousness that somehow this bailout might not happen or not happen the way they thought. And if that’s the case they’re really going to have to look for alternatives.” "Wachovia wanted to know who was around this weekend in case things started to look like they weren't going the right way. In an ideal world, Wachovia CEO Bob Steel would love keep the good stuff and hope the bill bails out the bad stuff," he added. Ratigan asked Sorkin if any transaction would result in the loss of Wachovia's equity. “It doesn’t seem that the Feds are involved,” adds Sorkin. “This is a real deal as opposed to a federally imposed deal." Sorkin says he doesn't want to cause a run on the stock and said the firm is well-capitalized at this moment. "The banks will keep falling, so buckle up," Macke added.

Sell the Rally - JPMorgan Chase (JPM)

Ratigan told viewers that he saw a huge crowd around the post for JPMorgan Chase on the NYSE, buying the stock. Finerman says the money is flowing into JPMorgan. Macke advised viewers to sell into the 10% rally in JPMorgan.

The Bailout Part 3

Jon Najarian came on to discuss some market-based solutions for the bailout plan. Najarian says a system exists right now that we can use to get a price discovery system for mortgage-backed securities. "The problem here isn't just leverage, its transparency and the fact that mortgage-based securities weren't marked-to-market until the eleventh hour," he said. If the mortgage-backed securities were brought to an exchange, we would have a continuous marked-to-market process, the Federal Reserve could be a clearing firm, and we could unify the amount of risk we have around the world.

The Bailout Part 4 - Stifel Financial (SF)

Ron Kruszewski, the CEO of Stifel Financial joined the traders to discuss the bailout plan. I think of it as a restructuring not a bailout. Everyone was involved in this from mortgage brokers to people who bought homes with really no credit. "As people deleverage coupled with the fact that financial institutions will now become bank holdings companies, we will be better able to compete," he added. He pointed out that on average Stifel leverages three-to-one and has averaged an 18% return on equity. "Our industry is going to shrink because we will not have the leverage we had before," he said.

The Bailout Part 5

Democrat Chuck Schumer of New York discussed the progress of the bailout. He said right now Congress is at a bit of an impasse. "The Democrats have an offer to the House Republicans that they wouldn't object to putting their insurance provision into the packages as an option," he said. He says the Democrats don't believe the insurance provision will work. "The problem is the government will have a downside and no upside, plus it's very difficult to actually accomplish," he added. However, he says that if it would bring the House Republicans to the table, they are willing to put it into the package.

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Comments

[lniels:]

READ: Who's Afraid of a Big, Bad Bailout? by John Mauldin, September 26, 2008

2008 Sep 27 08:05 AM

[whisperonth...:]

Can't sell JPM since it would still be a loss for me. I inherited it, before the crunch. It will have to sit there for a while before I can sell it. In the meantime, I'll just watch... and wait... and pray for it to hit $50 again. More would be better.

2008 Sep 27 08:07 AM

[dslnbull:]

sell monday premarket asap. everything .I sold out 100 % with nice gain in JPM.OUr politicias are croock just like everywhere..They do not care for you but self oriented..However JPM, BAC, WFC, C, USB are good buy if you are long term investors.

2008 Sep 27 09:26 AM

[WEBISKING:]

All this money on the"sidelines&quo.... that is in either cash or commodities or coal and ag names will EVENTUALLY be deployed into HIGH QUALITY common stocks. Real estate Bubble of 2001-2006 has still not"recovered&quo.... 1982 I locked in a 5 year CD at 17 % ,todaythat same CD will yield less than 4%. FUND managers DO NOT GET PAID to be in CASH ALL YEAR. Find companies like PM XOM and others with a Reasonably priced PE ,have a ROE average of at least 18% annually over the last 5 years and are worth over 100 billion dollars in market cap and can"absorb" large investments by the"big boys"

2008 Sep 27 09:40 AM

[nyka:]

Wasn't Wachovia rated a "buy" by Cramer less than 10 days ago?

2008 Sep 27 10:21 PM

[PeteK:]

Cramer is just like a little poodle, who barks at anything.
if you follow him, he will lead you into the Dark Hole !!

2008 Sep 28 02:12 AM

[Ishortyou:]

in regards to Wachovia they are serveral tactics that it can apply to solve its book of business facing the main problem which is the run of the bank phenomena. Most of those run of the banks are from payrolls from small business and depositors of more than 100,000 dollars that are running like chickens without heads. 1. Wachovia is doing a good tactic on reassuring their depositors to install confidence in its business through phone calls, personal visits-contacts, adequate interest on deposits, etc, etc. 2. Now that the goverment is willing to buy bad assets on warrants, they can sell the trouble assets and delever quickly from them and sell part of their equity without stockholder dilution to the government to boost confidence. 3. Make a deal with FDIC of NO intervention as this is done. 4. Keep working on their good loans to boost capital/liability ratio as well as reducing business expenses. With this strategy is likely to succed.

2008 Sep 28 08:32 AM