STOCKS FALL ON RESCUE PLAN ABOUT-FACE
The Dow plunged on Wednesday after our government backed away from using its $700 billion bailout to mop up sour mortgages creating uncertainty about how the government plans to revive bank lending.
A dismal forecast from Best Buy added to anxiety about a worsening economy after the largest U.S. electronics chain said consumers were slashing spending, creating the worst climate in the company's 42-year history.
A sell-off in large-cap technology companies took the Nasdaq down to its lowest closing level in more than five years, beating the closing low hit at the end of October. The S&P 500 came close to retesting October's closing low.
Strategy Session with the Fast Money Traders
The financials have yet to participate in any rallies at all, says Pete Najarian. Any show of strength has been in the materials names. It’s an important point.
The way to trade this market is to be hedged and be small, counsels Karen Finerman. I don’t take big bets even though valuations are attractive. I come back to this again and again but only buy best of breed stocks with strong balance sheets.
I’m keeping an eye on CPI coming out next week, adds Tim Seymour. If it shows inflation coming down it could be off to the races for some of the commodity names.
The thing to do if you’re playing at home is protect yourself, counters Jeff Macke. There’s nothing wrong with cash. This isn’t the market to learn in.
OIL SLAUGHTER CONTINUES
The energy sector dove as the price of oil continued to decline as the U.S. government cut its global demand growth forecast.
Oil has been a proxy of fear and this fearful environment isn’t helpful, says Karen Finerman. However, I would continue to ownequity stocks in the oil sector as long as you’re also short oil itself.
I wouldn’t, counters Jeff Macke. It’s really about the entry point.
I expect oil company stocks to perform, adds Tim Seymour. The long slog lower in oil isn’t going to last forever.
VALUE TRADE OR TRAP: GOOGLE
Investors are asking one another if Google is a value trade or a value trap. The Internet giant fell below $300 on Wednesday for the first time since 2005. The stock once traded north of $700.
I think Google is an interesting company but I don’t need to fight the tape, says Karen Finerman.
BEHIND THE SELL-OFF: DELEVERAGING
Clearly investors are very nervous this week, with the 45-day hedge fund redemption window coming up on November 15th.
Large institutional investors, such as pension funds who intend to cash out by year’s end are expected to notify hedge funds of their intentions by November 15th.
And that could triggers another sell-off, or perhaps it already has.
“There is no joy in Mudville these days,” says celebrated investor Doug Kass. “I think the outlook for the next 3 to 5 years have been jarred. And our social, political, and economic futures have materially changed owing to the muddy financial ditch.”
As you know Kass is a noted bear. He also tells the traders, “The scope and duration of the meltdown really has placed our economy well past the tipping point. It’s going to have enduring negative consequences.”
To see our entire interview with Doug Kass please watch the Word on the Street video.
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Trader disclosure: On Nov.12, 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 (SDS), (UUP), (WMT), (MSFT); Najarian Owns (AXP) Put Spread; Najarian Owns (CHK) Call Spread; Najarian Owns (PTIE) Calls; Seymour Owns (AAPL), (BAC), (F), (MER); Seygem Assset Management Is Short (RSX); Finerman's Firm Owns (OIH) Puts; Finerman's Firm Owns (MSFT); Finerman's Firm Is Short (USO), (VNO), (IYR), (IJR), (MDY), (SPY), (IWM), (COF), (BBT,), (GNK); GE Is The Parent Company Of CNBC
CNBC.com with wires