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Fast Money HomeFast Money Rapid RecapAbout Fast MoneyFast Money BiosFast Money Web ExtraFast Money Disclaimer
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Aug.20
8:58 PM ET
Wednesday, 20 Aug 2008
Can Banks Scale Wall Of Worry?
Posted By:Lee Brodie

MARKET SHAKES OFF CREDIT FEARS

The Dow [.DJIA  Loading...      ()   ]closed slightly higher in choppy trade on Wednesday as strong results from Hewlett-Packard [HPQ  Loading...      ()   ] triggered a rally in the technology sector that offset a slump in shares of Fannie Mae and Freddie Mac.


CAN BANKS SCALE WALL OF WORRY

Financials [XLF  Loading...      ()   ] also rebounded from Tuesday's sell-off as U.S. crude oil prices fell about 50 cents per barrel, supporting hopes inflation will ease and interest rates will remain low, helping the bank sector.

But shares of housing finance giants Fannie Mae [FNM  Loading...      ()   ] and Freddie Mac [FRE  Loading...      ()   ] plunged on growing concerns that a possible government bailout might dilute shareholder value.

There’s fear in the marketplace right now, says Pete Najarian. I have a short position in Lehman [LEH  Loading...      ()   ]because it’s trading in a similar way that Freddie and Fannie traded about a month ago. On the long side I like Morgan Stanley [MS  Loading...      ()   ].

I think it’s hard to go outright short in Lehman, adds Guy Adami, but it feels like the stock wants to move lower. If you want a best of breed trade look at USB [USB  Loading...      ()   ].

I cut my Financial Select Sector SPDR [XLF  Loading...      ()   ] position in half on Wednesday, reveals Joe Terranova. Why? Because on September 30th $230 billion dollars worth of bonds mature and Freddie / Fannie need to roll that debt. If they can not do it the Fed is going to have to come in and bail them out.

I think the financials are a total crap shoot, exclaims Jeff Macke. Equity holders in Freddie and Fannie are going to get flushed.

> Click here to find out what options action in Freddie and Fannie suggests to Jon Najarian.

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OIL FINISHES DAY HIGHER

Oil [US@CL.1  Loading...      ()   ]rose slightly after Russia's angry response to the U.S.-Polish accord raised the threat of a supply disruption from the huge energy producer.

Also Goldman Sachs’s reiterated on Wednesday its year-end price forecast of $149 a barrel for U.S. crude oil, and said strong fundamentals were a more important factor than a strengthening dollar.

I agree with the fundamental theme behind that forecast, says Joe Terranova. I think the play is integrated oil as well as the oil services names.

Schlumberger [SLB  Loading...      ()   ] is holding it’s valuation around $90, adds Guy Adami. It’s probably the best play in the space.

I like the United States Oil Fund [USO  Loading...      ()   ]off $90, says Jeff Macke. But with a very tight stop. If it drops to $89.50 and I’m out.

----------------- (Scroll Down For More Trades) -----------------

What do you think? Answer the Charles Schwab Question of the Day.










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TOPPING THE TAPE: COMMODITY STOCKS

Spooked by financials it appears investors are putting money to work in commodity stocks. From steel to energy the commodities sector performed well on Thursday.

I’ve liked U.S. Steel