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Dash For Trash Pt 2: Short Squeeze or Strong Bet?

Wednesday, 10 Mar 2010 | 5:20 PM ET

The government's trash appears to be investors' treasure with AIG as well as Citigroup leading the markets higher. Is the trade fundamental or froth?

Stop us if you've heard this one before; a whiff of good news comes out of AIG and shares skyrocket.

You remember the story from back in July when AIG shares surged after talk of restructuring captivated investors.

But a long position hasn’t gone so well if you established that position in say – October.

Well, seven months later, that dash for trash is back on, this time triggered by the sale of an overseas unit.

And Citigroup is a similar story. Surging over the summer only to plunge in the fall – then jump again.

Will the ‘dash’ end differently this time?

Strategy Session with the Fast Money traders

It’s a classic short squeeze in AIG, says Guy Adami. If you’re on this stock, get off it on Thursday.

I agree entirely, says Joe Terranova. AIG is a short squeeze.

However, Citigroup is different. Hedge fund mangers are buying Citi. If institutional money mangers also start buying I’d be a buyer in their wake, Terranova adds.

I agree that Citi is very different than AIG, says Brian Kelly. As Citi spins off assets the remaining core company has real value.

I can’t get on board Citi, says Steve Cortes. In fact, I took profits in the financials, he adds. I think the space is frothy. The risk reward doesn’t not look attractive here.

AIG shouldn’t be compared to Citi, says veteran trader Gary Kaminsky. AIG has no fundamental basis.

Citi, however has a game plan, he adds . I'd expect them to deliver a positive earnings surprise which in turn should get institutional investors interested in the stock.

And looking ahead, I wouldn’t be surprised to see a reverse split in Citi. Ultimately I don’t think Citi will be a standalone entity two years from now. I expect they will get taken out.

Word on the Street
The Fast Money traders share their market insight and trading advice.

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2010 TO BE THE YEAR OF THE DEAL?

Given the recent pick-up in activity and the explosion in chatter on the Street, 2010 could turn out to be the year of the deal -- especially in financials. Over just the past few days, speculation has surfaced suggesting British bank Barclays is on the prowl for another major acquisition

How should you game it?

I’m noticing a lot of options activity inHuntington and Regions says Pete Najarian. It seems investors think they may be targets.

I’d play M&A with Lazard or Greenhill, counsels Guy Adami.

I’d play it with Evercore Partners, adds Brian Kelly.

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HINTZ: GOLDMAN WILL STILL THRIVE UNDER NEW REGULATORY REGIME

It seems analyst Brad Hintz is having a love hate relationship with Goldman . Last time he spoke with Fast Money he told us that all the negative publicity would hurt Goldman’s bottom line.

Now he says, even though Goldman has the most to lose under new regulations, it is already priced in.

How so?

Hintz crunched the numbers and tells the desk, “I ended up with a revenue growth rate of 17% and a ROE of 16% if Goldman had been under the Volcker rules from 2002 – 2007.”

Not too shabby.

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BIG MONEY: WELLS FARGO

Call it what you will but one money manger bought a financial stock with conviction today, gobbling up nearly 650,000 shares of Wells Fargo around 12noon.

What’s the trade?

I don’t get the Wells story, says Guy Adami. I can’t get on board.

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WILL BANNING SPECULATORS FROM GOV'T DEBT

The game is up: That’s the message from US regulators who are seeking to reign in the trillion dollar credit default swap business, which some say is destabilizing the global credit markets.

And that has Anthony Scaramucci, managing partner at Skybridge Capital a little upset.

What must you know? Watch the video and find out now!

Financial Regulation
You need speculators for a health market, according to Anthony Scaramucci, of Skybridge Capital.



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Trader disclosure: On March 10th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Is Long Oil Futures; Terranova Owns (XLE); Terranova Is Short (XLY); Terranova Owns (GLD) March Puts; Terranova Owns (GOOG), (AAPL), (DELL), (EMC), (MSFT); Terranova Owns (CAL) April Puts; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (BAC) Call Spread; Najarian Owns (C) Calls; Najarian Owns (INTC) Calls; Najarian Owns (YHOO) Calls; Kelly Owns (AMZN) Calls; Cortes Is Short Treasuries; Cortes Is Long Oil; Karabell Owns (AAPL), (C), (CSCO), (JPM), (GOOG); Kinahan Owns (C); Kinahan Holds A Long Position In (WFC)

For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (GOK)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLI)

For Brian Kelly
Kanundrum Capital Is Long U.S. Dollar
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short Yen
Kanundrum Capital Owns (C)
Kanundrum Capital Owns (JPM)
Kanundrum Capital Owns (SDS)
Kanundrum Capital Owns (GLD)
Kanundrum Capital Owns (GDXJ)
Kanundrum Capital Is Short British Pound
Kanundrum Capital Is Short Treasuries

For Jared Levy
Peak6 Investments Owns And Has An Options Position In (AAPL)
Peak6 Investments Owns And Has An Options Position In (BAC)
Peak6 Investments Owns And Has An Options Position In (BRK.B)
Peak6 Investments Owns And Has An Options Position In (C)
Peak6 Investments Owns And Has An Options Position In (COP)
Peak6 Investments Owns And Has An Options Position In (CSCO)
Peak6 Investments Is Short And Has An Options Position In (CVX)
Peak6 Investments Owns And Has An Options Position In (GLD)
Peak6 Investments Owns And Has An Options Position In (GS)
Peak6 Investments Is Short And Has An Options Position In (GOOG)
Peak6 Investments Owns And Has An Options Position In (INTC)
Peak6 Investments Is Short And Has An Options Position In (JPM)
Peak6 Investments Is Short And Has An Options Position In (MS)
Peak6 Investments Owns And Has An Options Position In (MSFT)
Peak6 Investments Owns And Has An Options Position In (STX)
Peak6 Investments Owns And Has An Options Position In (TXN)
Peak6 Investments Owns And Has An Options Position In (USO)
Peak6 Investments Is Short And Has An Options Position In (VALE)
Peak6 Investments Is Short And Has An Options Position In (WDC)
Peak6 Investments Owns And Has An Options Position In (WFC)
Peak6 Investments Is Short And Has An Options Position In (WMT)
Peak6 Investments Is Short And Has An Options Position In (XLF)
Peak6 Investments Is Short And Has An Options Position In (XOM)
Peak6 Investments Owns And Has An Options Position In (YHOO)
Peak6 Investments Is Short And Has An Options Position In (QQQQ)

For Mike Khouw
Cantor Fitzgerald & Co. Is A Market Maker In (C)

For Anthony Scaramucci
Scaramucci's Fund Has A Long Position In Gold

For Brad Hintz
Hintz Owns Morgan Stanley And Discover
Hintz Owns (CME)
Accounts Over Which Bernstein And/Or Affiliates Exercise Investment Discretion Own More Than 1% Of Barclays PLC, Credit Suisse Group, (C), (GS), (JPM), (MS), (BAC)
Barclays PLC, (C), Credit Suisse Group, (GS), (JPM), (MS), (BAC) UBS AG Are Or In Past 12 Months Were Clients Of Bernstein (Non-Investment Banking-Securities Related Services), Bernstein Received Compensation
An Affiliate Of Bernstein Received Compensation From Barclays PLC, (C), Credit Suisse Group, (JPM), (GS), (MS), UBS AG (Non-Investment Banking-Securities-Related Services)
Bernstein Or Affiliate Received Investment Banking Compensation From (C) In Past 12 Months
Bernstein Or Affiliate Expects To Receive/Seek Investment Banking Compensation From Barclays PLC, (C), Credit Suisse Group, (GS), (JPM), (MS), (BAC) UBS AG In Next 3 Months


CNBC.com with wires

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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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