STOCKS RISE AS WALL STREET CEO’S FACE GRILLING
The Dow closed higher as Wall Street bank CEOs squirmed before the U.S. Congress on Wednesday over how they used $176 billion in bailout money without noticeably improving the battered economy.
The eight executives called to Washington were from Bank of America , Citigroup , JP Morgan Chase, Wells Fargo , Morgan Stanley , Goldman Sachs, State Street and the Bank of New York Mellon .
Taxpayers are furious with them for benefitting from the federal bailout while continuing to spend lavishly on executive bonuses, company retreats and office redecorating.
Although many watched the grilling for amusement the Fast Money pros listened for trades.
Fast Money Trades
I bought Morgan Stanley on Wednesday, says Pete Najarian. I listened to what CEO John Mack had to say and I liked what I heard.
I think Morgan Stanley took their medicine 6 months ago, adds Guy Adami. That seems like a buy to me as well.
I bought the KCE , adds Joe Terranova. Goldman is part of that ETF and I think it’s a good way to get exposure to this stock but also spread your risk.
If you’re looking for an international play, I’d keep an eye on Credit Suisse and UBS , adds Tim Seymour. They should have higher margins going forward.
Fast Money Musings
If the government is putting a safety net under most banks, it should be a good time to invest in most of them, right? Not so fast.
According to Gerard Cassidy, a banking analyst with RBC Capital Markets, up to 1,000 of the nation’s 8,400 banks could fail over the next three to five years if the economy worsens. That’s right. 1,000 banks could fail.
We found the projection so intriguing that we invited Mr. Cassidy to join us on Fast Money.
For certain, Cassidy's prediction is a worst case scenario and we're all hoping that the new Financial Stability Plan prevents anything like that.
(Click here to check out the FDIC Failed Bank List.)
In fact, Cassidy tells Fast Money he’s particularly interested in the part of the new bank plan that involves giving a stress test tobanks before giving them funds. “It’s going to be very interesting to see how they do the stress test,” Cassidy says. Depending on the criteria, it could really reveal where the problems are.
And Cassidy thinks we'll soon learn the problems are in commercial real estate. In an investor note published a few days back Cassidy wrote, "we are nowhere near the end of this down leg.”
And on Fast Money he told the traders, “you want to stay away from (banks with exposure to) the commercial real estate market. I think we’re just starting to get into that.”
What’s the trade?
On Fast Money he suggests the trade is short commercial real estate while getting long the capital markets names. And he also says you can get long the real estate market in Southern California. "That market is starting to come back."
What do you think? Tell us now.
After the testimony CNBC’s Erin Burnett had a chance to catch up with JP Morgan CEO Jamie Dimon. When asked about the Q&A he told her “no one is saying mistakes weren’t made but we’re going to fix them.”
Then, when asked about new Treasury provisions to save off foreclosures he told her that JP Morgan has been in the forefront of mortgage modifications. And he'd like to see a national standard.
Also, when asked how long Tim Geithner has to come up with specifics for the bailout plan Dimon said, “I’d rather they (take time) and get it right.”
While talking about the day's hearings, Dylan Ratigan muses that from what he heard maybe the banks don’t need any more money.
Joe Terranova feels that the government is almost becoming an enabler, a reference to the way some people unknowingly enable an alcoholic.
Tim Seymour finds the whole CEO testimony a waste of valuable time.
Pete Najarian remarks that Citigroup CEO Vikrim Pandit doesn’t want to get rid of so-called toxic assets at rock bottom prices and that seems to make sense.
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Trader disclosure: On Feb. 11th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (CAT) Call Spread, (ENER) Call Spread, (EEM) Call Spread, (GDX) Call Spread, (GLD) Call Spread, (STI) Call Spread, (MOS) Call Spread; Najarian Owns (CHK) Put Spread; Najarian Owns (FCX) & (FCX) Calls; Najarian Owns (GS) Calls; Najarian Owns (GE) Puts; Najarian Owns (MSFT) & (MSFT) Short Calls; Najarian Owns (MS) & (MS) Short Calls; Terranova Owns (DIS), (KCE), (XBI), (FXC); Terranova Owns (IBM) Call Spread; Terranova Owns (AMGN) Puts; Seymour Owns (MT), (BAC), (EEM), (FXI); Seymour's Firm Owns (VIP), (TKC); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE)
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