Time to Take out The Trash
With shares of Fannie Mae up a whopping 150% over the last month, has the dash for trash run its course?
As you may know, the dash for trash is a familiar term that traders use to describe the recent surge in lower quality financials such as Fannie Mae, Freddie Mac, AIG and others.
As Fast Money and so many others have been telling you, the recent run higher in these names stems from money managers chasing returns. But the move higher is probably temporary.
In fact Credit Suisse just downgraded AIG to "underperform" from "neutral," saying near-term sale of businesses would leave little to no value for common equity holders.
Analyst Thomas Gallagher, who halved his price target on the stock to $15, said the insurer has ample liquidity, but near-term debt maturities may increase reliance on Federal government funds.
"As a potential opportunity to delever, improve common equity capitalization, and provide a substantial boost to reported GAAP common shareholders equity, we wouldn't be surprised if AIG pursued a distressed tender offer for its $12 billion of junior sub debt and its $5.9 billion of mandatory converts," he said.
Also shares of Moody’s and McGraw Hill (the parent of S&P) are slipping after a judge allowed a court case to go forward that alleges the companies are responsible for not properly revealing the risk of investing in a fund that purchased bonds backed by subprime mortgages
All things considered, how much longer does the dash for trash have?
I don't know how a trader can put on a position in this environment, muses Guy Adami.
For what it’s worth on Friday’s Fast Money Steve Grasso of Stuart Frankel commented on the issue.
There’s been a lot of money flowing into the ‘junk” financials, Grasso said. I don’t think investors will hold onto that junk indefinitely but I do expect them to hold for another month or so.
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Trader disclosure: On Sept. 8th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Terranova Owns (EOG), (AAPL), (WFT), (SU); Terranova Owns December Gold Futures; Terranova Works For (VRTS); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman Owns (PDE), (RIG); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares
Finerman's Firm Owns (WMT), (RIG), (MSFT), (NOK), (PBR), (PDE), (TGT), (BDX); Finerman's Firm Is Short (USO), (IJR), (IYR), (MDY), (SPY), (IWM); Najarian Owns (ENER) Calls; Najarian Owns (AAPL) & Short (AAPL) Calls; Najarian Owns (BAC) & Short (BAC) Calls; Najarian OWns (C) Calls; Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls; Najarian Owns (JPM) & Is Short (JPM) Calls; Najarian Owns (JOYG) & Short (JOYG) Calls; Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (MOS) Call Spread; Najarian Owns (PALM) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA); Najarian Owns (V) & Short (V) Calls; Najarian Owns (YHOO) Calls
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