Don't Bank on Financials - Fast Money Recap (6/27/08)

Recap of Fast Money, Friday June 27.

Coal Still Standing: Walter Industry (WLT), Massey (MEE), Alpha Natural (ANR) and Peabody (BTU)

The Dow dropped again, oil rose to a record high, and the market turned more bearish. Jon and Pete Najarian say coal is working in this environment, and noted WLT and MEE options are being bought years out. Jon recommended ANR and BTU. Karen Finerman says valuations for these stocks are a bit rich, but Najarian defended his bullishness. Pete predicts 10%-15% gains in the coal industry.

Don’t Bank on Banks: Merrill Lynch (MER), Lehman Brothers (LEH), Wachovia (WB), Citigroup (C), Regions (RF), HSBC (HBC)

New writedowns of $3 to $5 billion are expected for Merrill Lynch and the bank might be forced either to merge or to sell more stock to raise capital. Guy Adami says he wouldn’t buy LEH until there is a big down day, and Najarian predicts Regions will have to reduce its dividend. Adami thinks Wachovia will be the next for a dividend cut and Finerman thinks Citi can’t sustain its yield. Dylan Ratigan noted banks are “writing each other down left and right” and said there is speculation against HSBC. Najarians says put activity in HSBC indicates the bank will have some write-offs and other issues.

Dollar versus Gold: PowerShares DB US Dollar Index Bullish (UUP)

In spite of gold’s upward move on the weak dollar and tumbling stocks, Joe Terranova is still bullish on the dollar because he believes the government will step in and rescue the struggling currency. He recommends UUP.

General Motors (GM) Running on Empty

Goldman Sachs downgraded GM to sell, and sent the stock to its lowest level since 1955. Guy Adami predicts there will be a catalyst to buy in the next few days.

Pharma Protection: Bristol-Myers Squibb (BMY), Merck (MRK), Pharmaceuticals HLDRS (PPH), Celgene (CELG)

Some investors think pharma might be a safe haven in the bear market, since there is speculation BMY might be a takeover target. Finerman thinks Merck and PPH look cheap. While Celgene’s valuation is a bit rich, Adami thinks it is a buy.

Corn Busting Out: Monsanto (MON), Potash (POT) Agrium (AGU), Bunge BG)

Corn futures rose to record highs and Midwest flooding threatens supply. Joe Terranova is bullish on Monsanto. Adami likes POT and AGU for their pricing power and Najarian likes Bunge.

After the Bell: MBIA (MBI): MBIA, whose financial strength rating was lowered early in June by Moody’s, is issuing more bonds to raise cash. Adami noted this announcement was conveniently made after the bell on Friday.

Uneven Oil

While there are predictions oil will reach $150 by the fourth of July and Goldman Sachs believes it will hit $200 before falling, oil gave an uneven performance last week. Joe Terranova says if oil meets predictions and reaches $150, he would buy refiners, because a drop in oil after such a run would be inevitable.

Tech Pessimism: Research in Motion (RIMM), Google (GOOG), Oracle (ORCL)

Credit Suisse is not hopeful that RIMM will be able to hold onto its market share, and shares of Google and Apple also dipped. Najarian thinks the long-term story for RIMM is good and also likes chip stocks. Adami thinks ORCL is a “screaming buy.”

Playing Chicken: Tyson (TSN)

Tyson CEO Richard Bond discussed record high corn prices which are causing problems for the chicken business. The company can only pass on so much of its costs. One ray of hope is that if corn has topped, Tyson will have time to recover from high feed prices.

Final Trade: Terranova: JP Morgan (JPM), Adami, Celgene (CELG), Finerman: Merck (MRK), Najarian: Short HSBC.

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Comments

[David White]

There was a report out today that said more acreage than expected had been planted with corn this year in the U.S. Then the article went on to say that this information may be completely misleading. The article claimed that the flooding wasn't completely taken into account (due to the timing of the report). It also claimed that somehow the estimate was likely to have been an overestimate in the first place. Grain futures were down today as a result. However, if the author's tone is any indication, the futures will soon make a comeback. Ditto the Ag stocks, which were down for a while today too.