#1 – WALL OF WORRY
Write-downs have been a drag on the financials for the entire first half of ‘08. Just last Thursday Goldman Sachs urged investors to sell banks on renewed concerns about profits. How should you play in the second half?
According to Sandler O'Neil Securities Analyst Jeff Harte more write-downs will come, but after this quarter they should begin to slow. As a result the pounding in the financials should ease but rebound prospects are bleak.
#1 – WALL OF WORRY
“I’m still pretty cautious in the near term,” Harte tells the Fast Money traders. Harte also says consolidation is likely but not with brokers. Instead he expects to see M&A in the regional bank space.
“The companies that are going to come out of this the best are those that are managed the best. In broker-land I think Goldman will come out stronger with Morganclose behind. And on the bank side I think JP Morganwill come out strong.”
“But money center banks and investment banks move before things get better. So the trick here is to be pretty vigilant and watch.”
Traders what do you think?
I like JP Morgan, says Joe Terranova
I own Citibank, adds Karen Finerman
It wouldn’t surprise me to see M&A in the space, adds Guy Adami.
Not going to do it, exclaims Pete Najarian.
#2 – $200 OIL
With crude rising climbing to $143 and nat gas surging 76% due to emerging markets demand, how should you play energy in the second half?
I like coal and natural gas in the energy space, says Joe Terranova. Natural gas has a tendency to weaken in July. If it dips, I think it’s a buy in August.
I agree, adds Pete Najarian. Every pull back in nat gas and coal is a buying opportunity. I’m a big believer in global demand.
I like Golar, adds Karen Finerman, as a liquid nat gas play.
Or look at oil services stocks, adds Guy Adami.
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Trader disclosure: On June 30, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;Adami Owns (AGU), (C), (GS), (INTC), (BTU), (MSFT), (NUE); Najarian Owns (AAPL), (AMLN), (ANR), (NOK), (NUE), (TSO), (XLF), (YHOO), (HD); Najarian Owns (MER) Puts, (WFMI) Puts, (HBC) Puts; Najarian Owns (MYGN) Calls, (SLB) Calls, (WM) Calls, (WLT) Calls; Finerman Owns (GS); Finerman's Firm And Finerman Own (FLS), (GLNG); Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm And Finerman Own (GE) And (GE) Puts; Finerman's Firm Owns (MSFT), (SUN), (TSO), (TWX), (VLO); Finerman's Firm Owns SPX Index Puts; Finerman's Firm Owns (HUN) Calls; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Terranova Owns (BNI), (YHOO), (LUV), (CME), (GOOG), (SU), (INTC), (FXC), (IYT), (XLF), (FCX); Terranova Owns Dollar Index Futures
Terranova is chief alternatives strategist at Phoenix Investment Partners;; Phoenix Investment Partners Ltd. Owns (RWX), (DBC), (DBV), (IGE), (AAI), (ALK), (AMR,) (APA), BP plc, British Airways plc, (CHK), (CVX), (COP), (CAL), (DAL), ENI SPA, (XOM), Gazprom, (HA), (HES), (HOC), (HSE), (JBLU), Lukoil, (MRO), (MUR), (OXY), Petrobras Intl Fin, Petro-Canada, (PBR), Petroleos De Venezuela, (QAN), (RJET), Royal Dutch Shell plc A Shares, (SKYW), (LUV,) (SU), (TSO), Texaco Capital, Total SA, (UAUA), (LCC), (VLO)
Sandler O'Neill Advised clients in deals involving (BAC) and (JPM); Sandler O'Neill Recvd. Inv. Bank. Comp. From (BAC), (C), (MER), (MS) In Past 12 Mos.; Sandler O'Neill Expects To Receive or SeekInv. Bank. Comp. From (BAC), (JPM), (C) In Next 3 Mos.; (BAC), (C), (JPM), (MER), (MS) Are Clients Of Sandler O'Neill; Sandler O'Neill Was A Manager Or Co-Manager of A Public Offering for (C), (JPM) In Past 12 Mos.; Sandler O'Neill Has Received Non-Inv. Bank. Comp. from (C), (JPM), (MER), (LEH); (GS) Is A Non-Inv. Bank. Client Of Sandler O'Neill; (BSC) Was A Client Of Sandler O'Neill