Congress Debates Bailout, Buffett Buys Goldman Shares
MARKET DROPS AS CONGRESS DEBATES BAILOUT
The Dow fell in choppy trading Tuesday on growing concern about the bailout.
Democrats and Republicans spent much of Tuesday haggling over the details of the $700 billion bailout before Congress. Dems want to add assistance for homeowners, as well as curb executive pay at companies who participate in the plan.
Conservative Republicans recoiled at the prospect of federal intervention into private capital markets.
Federal Reserve Chairman Ben Bernanke bluntly warned reluctant lawmakers Tuesday they risk a recession with higher unemployment and increased home foreclosures unless they act quickly.
I think they need to come up with something, says Karen Finerman. Even if it’s not quite as good as we might like. And I do expect they will get that done.
They’re not going to get anything done, counters a disgruntled Jeff Macke. I realize now they’re not going to un-seize the credit markets. They’re going to lollygag.
Top to bottom the Dow moved a total of 900 points on Tuesday, adds Pete Najarian. I think average investors should stay away from the market for the next 4 or 5 days. If you want to play in the deep end of the pool keep an eye on the Financial Services Select SPDR but it’s a high volatility trade.
I expect to see a dog and pony show for the next several days, muses Guy Adami. But I think there’s something in place and ultimately it will ease the crisis.
AFTER HOURS: BUFFETT INVESTS IN GOLDMAN
After hours Berkshire Hathaway announced plans to buy $5 billion in perpetually preferred shares of Goldman Sachs and another $2.5 billion in common equity. If billionaire Warren Buffett sees value there, it could bode quite well for the stock
I think it’s great news, says Karen Finerman. Any company would love to see Warren Buffett buy a chunk of their preferred.
I think you have to ask yourself why did Warren Buffett put $5 billion at risk unless he’s optimistic about news out of Washington, says Guy Adami.
But remember, they’re preferred shares, counters Jeff Macke. You can’t trade along side him.
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IF WALL ST. FAILS, SO WILL MAIN ST
Are we starting to see the credit crunch’s impact on Main Street? Bank of America has declined to increase lending to McDonald’s and Mohegan Sun Casino has delayed a massive expansion due to the “ongoing economic recession.”
Meanwhile former Fed Governor Frederic Mishkin said Tuesday on CNBC, “The reality is we’re in a situation where, in fact, if Wall Street falls apart, Main Street’s gonna get killed.”
OIL PARES MONDAY’S RECORD GAIN
Oil prices fell $5 on Tuesday -- reversing direction after Monday's dramatic rally. Also, gold dropped on Tuesday as sharply lower oil prices and a firmer dollar prompted investors to cash in the previous session's solid gains.
I think the huge run was ridiculous, says Pete Najarian. I think the play now is to short the gold miners such as Newmont and Gold Fields . Some of those companies climbed 50% in 2 weeks.
I wouldn’t rush into commodities either, says Guy Adami. I think investors are getting ahead of themselves.
In the space I like some of the names in oilfield services that have locked in longer term contracts, says Karen Finerman. I think those are attractive.
TOPPING THE TAPE: BIOTECH
The biotech sector trounced the market Tuesday and has outperformed over the last 3 months. Meanwhile, Bristol-Myers has raised its bid for ImClone by $2 to $62 a share.
I think it’s a very savvy move by Bristol, says Karen Finerman. They’re trying to flush out that mystery bidder that Carl Icahn said had offered $70.
I think ImClone is very interesting too, says Pete Najarian. But in the space I’d keep an eye on Baxter.
TOPPING THE TAPE: RAILS
The rails traded higher after Union Pacific raised it’s third quarter outlook citing lower fuel costs. And on a related note, Canadian National Railway climbed higher after Goldman upgraded it to a “Buy.”
I think they’ve dropped enough so you can dip your toe, says Guy Adami. I’d look for BurlingtonNorthern to raise their guidance in the next few days.
I like CSX at $50, adds Pete Najarian.
INVESTORS YAWN AT GOOGLE PHONE
Goggle shares closed lower despite the unveiling of the company’s hotly anticipated new Android powered phone.
There is even the potential for a G-pod, explains Pete Najarian. I think in days to come this product could be very important to the company.
If they could use that phone to call the future they’d find out there are lay-offs coming and it’s going to get ugly for the engineers working at Google, exclaims Jeff Macke.
I’m hearing there’s a 14 million share offering coming from Capital One , says Karen Finerman. When they did the no-shorting there was an expectation that the bank shares would pop up. Now, it seems, they can short into the market and capitalize themselves.
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Trader disclosure: On Sept 23, 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 (MSFT), (WMT); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE): Najarian Owns (AAPL) And (AAPL) Collar:Najarian Owns (BBBY) Put Spread:Najarian Owns (MS), Is Long (MS) Puts, Is Short (MS) Calls:Najarian Owns (WB) Put Spread:Najarian Owns (XLF) Call Spread: Finerman Owns (GS); Finerman's Firm Owns (JNJ), (MSFT), (SUN), (TSO), (VLO); Finerman's Firm And Finerman Own (WM); Finerman's Firm Is Short (IYR), (IJR), (SPY), (IWM), (MDY), (COF), (BBT); GE Is The Parent Company Of CNBC
CNBC.com with wires