The Picture of Volatility - Fast Money Recap (10/8/08)

Recap of CNBC's Fast Money, Wednesday October 8.

The Rules Continue to Change

Dylan Ratigan started off the show with a discussion of the wild day in the stock market. He told viewers that the credit markets saw some willingness to take on risk for a brief period of time. Ratigan explained that new desire for risk might have been spurred by the global rate cut, England's action to buy equity in some banks and because commercial paper is now being purchased by the Federal Reserve. Jeff Macke explained that the rules continue to change, and that makes it impossible to be long. "The delta on the rules makes it impossible to price assets relative to one another," he added. Pete Najarian says the coordinated global rate cut wasn't easy to pull off, but the problem still remains that a lot of factors still haven't changed. Guy Adami said the government is setting up an environment where good banks will do better and bad banks will go by the wayside.

Stocks Mentioned - Burlington Northern Santa Fe (BNI), Oil Service HOLDRs (OIH), Toyota Motors (TM), Target (TGT), Diageo (DEO), iShares Russell 2000 Index (IWM)

Adami pointed out that Burlington Northern Santa Fe was downgraded by Merrill Lynch but ended higher at the close of the day. Karen Finerman said the retail stocks are cheap. She mentioned that crude oil was down today but the Oil Service HOLDRs traded up. Macke says the market continues to have a confidence issues. "It's more of a buyer's strike than anything else," he added. He said he's been short Toyota Motors for ages and still believes the stock is going lower. Adami says that the numbers out of Target were awful. However, he said the stock seems to be making a big volume capitulation bottom. Finerman said she bought a little Diageo for a defensive play. Najarian said he bought put options on the iShares Russell 2000 Index. "There was monster activity in the October 55/50 put spread for the IWM today," he said.

Chart of the Day

The Chart of the Day was the Dow. Ratigan said the Dow chart was the picture of volatility. Adami says the market is setting up for a monster rally over the next two or three days. Macke agreed with Adami, but he said bear markets are hard for everyone, even the professionals.

The Emergency Worldwide Rate Cut

Wayne Angell, a former Federal Reserve governor, joined the traders to discuss the emergency worldwide rate cut. He said the move was unprecedented and very significant. "All of you will remember this for all of your careers," he added. Angell says Ben Bernanke understands that we have a greater deflation risk then we do an inflation risk. He says making money this available and taking the rate of return this low will not cause people to go out and buy houses, but they will buy stocks.

The Battle for Wachovia - Wachovia (WB), Citigroup (C), Wells Fargo (WFC)

CNBC's Charlie Gasparino joined the traders to discuss the battle over Wachovia between Citigroup and Wells Fargo. He said the Fed is pushing the companies to finish the deal tonight and avoid a court case "If this deal does happen as it stands, Citigroup will get roughly $440 billion of Wachovia's deposits, and Wells Fargo will get the rest of the firm," he said.

CME CEO Interview -- CME Group (CME)

Craig Donohue, the CEO of CME Group, joined the traders to discuss the new credit default swap market. He said the CME is working closely with the regulatory community to see what his firm can do to help with these systemic risk issues. "We're going to need to have a higher degree of standardization of contract terms for both the credit default swaps index products as well as for single-name products. If we can standardize it we can clear it, guarantee it and net it so we can reduce the systemic risk in the market," he said.

Trader Radar - Alcoa (AA)

Shares of Alcoa were among the most actively traded stocks on the NYSE today.

Approaching The Bottom? CME Group (GME), Intercontinental Exchange (ICE), Freeport McMoRan (FCX)

Strategic investor Dennis Gartman, author of the Gartman Letter, discussed whether he thinks the bottom is close in the markets. Gartman said the life of a stock trader right now is "unbelievable." "Everything I do is absolutely hedged. I am still buying bank stocks, but I am hedging it by being short the stock market," he said. Gartman says he's buying CME Group and the Intercontinental Exchange, but he's also hedging those buys. He told viewers to take their positions smaller in this market. "When you start to see stability and prices begin to go higher, than you can come back in and be a buyer," he added. He said Freeport McMoRan is on his radar for a buy, and he wants to see copper be the first thing to come off the bottom. Adami says Freeport made a capitulation bottom and will go significantly higher from current levels.

Final Trade – Your First Move for Thursday October 9.

Jeff Macke likes Staples (SPLS), Burlington Northern (BNI), Mc Donald’s (MCD) and Wal-mart (WMT). I’m avoiding car makers such as Toyota (TM) and airlines.

Guy Adami says look at Intel (INTC) which is trading at its lowest levels since October of ’96 and looks like it's making a capitulation bottom here.

Karen Finerman suggests Diageo (DEO) and Phillip Morris (PM) for good cash flow. And I’m watching the food space and the grocery space.

Pete Najarian says that in this volatile market he is going with Charles Schwab (SCHW) which should profit from volume.

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