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Too Little, Too Late For Lehman

Wednesday, 10 Sep 2008 | 5:49 PM ET

The Dow closed in positive territory on Wednesday as OPEC's move to shore up oil prices boosted energy shares and Texas Instruments' strong outlook eased fears about technology spending.

Traders had worried that anxiety about the banking sector would be a drag on stocks.


TOO LITTLE, TOO LATE FOR LEHMAN?

Lehman Brothers sought to restore investor confidence with plans to sell a majority stake in its asset management unit and spin off commercial real estate, but investors questioned its future after a record $3.93 billion quarterly loss.

Word on the Street
A look at today's top business stories, with Bill Fleckenstein, Fleckenstein Capital and the Fast Money traders.

Shares of Wall Street's fourth-largest investment bank closed lower Wednesday after bouncing around all day, reflecting investor uncertainty after Lehman did not announce concrete asset sales.

Moody's Investors Service warned that it may downgrade the brokerage firm if it doesn't arrange "a strategic transaction with a stronger financial partner."

Lehman has done little to provide the market with clarity, muses Karen Finerman. That doesn’t give me a lot of faith that they’ve’ solved their problems.

They said a whole lot of nuthin' because they don’t have any idea what’s going on, exclaims Jeff Macke.

I’ve hated Lehman stock for a while, admits Pete Najarian. I own puts.

Meanwhile, Washington Mutual, the biggest U.S. savings and loan, plunged more than 20 percent on fears it would default on its debt.

Washington Mutual’s debt trades 50 cents on the dollar; that reveals a lot about how the market feels about this bank, says Karen Finerman. But whether it’s too big to fail, I couldn’t tell you.

I’d take a look at Goldman Sachs, counsels Pete Najarian. Many analysts seem to be cutting estimates ahead of their earnings.

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FLECKENSTEIN OUTLOOK

With so many negatives now plaguing the bank sector, we can’t help but wonder have beleaguered financials found a bottom, or are we in for more pain?

“Lehman seems to still be in trouble,” says celebrated contrarian investor Bill Fleckenstein on Fast Money. “But the bigger problem might be evidenced by Washington Mutual.”

Fleckenstein goes on to say he thinks there are still a lot of problems to get through and it’s the sum of those problems that worries him.

“Also I think the credit cards will have problems and I’m short Capital One as a result.”

Of course Fleckenstein is well known for his bearish outlook. And that outlook extends well into next year.

“The big problem that doesn’t get talked about is pretending the country is not in recession. I think the recession is going to get worse," he tells the Fast Money traders.

"The feed back mechanism of lower stock prices and lower housing prices feeding back on a weaker economy is going to make for a pretty nasty period. I don’t think you can look forward to things getting better before they get a lot worse first.”

What do you think? We want to know!




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ENERGY STOCKS LEAD MARKET

Energy shares lifted the market higher on Wednesday after OPEC's decision to cut production was seen as an attempt to halt a sharp slide in the price of oil , which has slipped precipitously from its record high above $147 hit in mid-July.

Investors were especially attracted to “beaten-up” stocks from a valuation standpoint.

I like Baker Hughes for valuations, says Guy Adami. And also look at Schlumberger.

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FEDEX BOOSTS FORECAST

FedEx said its fiscal first-quarter earnings will be better than originally forecast, as fuel prices continue to fall off their recent highs, sending its shares higher.

But the company, considered a reliable gauge of the overall health of U.S. business, left its fiscal year profit forecast unchanged, saying it expects a weaker macroeconomic picture to offset its better-than-expected first-quarter results.

I would not get involved with this name, counsels Guy Adami.

If you’re interested in transportation take a look at the rails, adds Pete Najarian. UBS upgraded Burlington Northern and Norfolk Southern.

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WHO'S THE MYSTERY IMCLONE SUITOR?

ImClone Systems said on Wednesday it had received a takeover offer of $70 a share from a large pharmaceutical company, topping an earlier bid of $60 a share from Bristol-Myers Squibb .

Carl Icahn, the billionaire investor and chairman of ImClone's board, said in a statement he has had several conversations with the chief executive officer of a large pharmaceutical company, culminating in the latest proposal but would not reveal the identity of the suitor.

The fact that they’re not telling the Street who the buyer is, says Pete Najarian, is rather odd.

I’m skeptical of any mystery buyer, exclaims Jeff Macke. It stinks of something.

In the sector I’d keep an eye on Genetech , counsels Guy Adami. And Celgene looks cheap.


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TEXAS TWO-STEP LEADS TECH

Technology shares rose Wednesday amid relief that chip maker Texas Instruments did not cut its earnings outlook. A spate of recent warnings from other firms about weaker spending in the cell phone industry has raised investor unease about the outlook for technology companies.

I don’t think this was a great rally, says Guy Adami. Considering the quality of the news the reaction is concerning me.


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WHAT'S WRONG WITH GOOGLE?

The Internet giant hit a new low on Wednesday. What’s going on with this stock?

The Google chart right now is broken, explains Pete Najarian And when a chart’s broken there’s no need to get infront of it.


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OPTIONS ACTION: KROGER


Pete Najarian is seeing unusual options activity in Kroger .

Options volume in the September 30 calls suggests to Pete that this stock could be going higher.



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Trader disclosure: On Sept 10, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WMT), (MSFT), (UUP); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (KR) Calls; Najarian Owns (RIMM) Call Spread, (XLE) Call Spread; Najarian Owns (XLF) Collar; Najarian Owns (LEH) Put Spreads; Najarian Owns (MS) And Is Short (MS) Calls; Finerman Owns (GS); Finerman's Firm Owns (MSFT), (TSO), (VLO), (AEO); Finerman's Firm Is Short (BAC), (WFC), (XLF), (IYR), (IJR), (MDY), (SPY), (IWM), (KSS); Finerman's Firm Owns (DNA) Calls, (IRF) Calls; Finerman's Firm Owns Shares Of SeaDrill Limited

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BHI
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BMY
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CELG
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COF
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FDX
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GS
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KR
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NSC
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SLB
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TXN
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WM
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GOOGL
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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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