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Halftime Pt.1: Goldman Gains, Wins To Fin Reg?

Friday, 25 Jun 2010 | 1:20 PM ET

Goldman Sachs is trading like it's a winner in the wake of fin reg. But new rules suggest the firm will have to divest private equity and hedge fund holdings.

Are investors getting it wrong?

Instant Insights with the Fast Money traders

It’s true Goldman's business model will have to change, says Christopher Whalen of Institutional Analytics. They won’t be able to own an entire private equity fund – but they’ll be able to have stakes in funds. And they will evolve as Goldman has always evolved. That’s why the stock is higher.

In other words the market wanted to know what the rules of the game would be, adds JJ Kinahan of TD Ameritrade. Now that we know them, investors feel comfortable betting Goldman will the play the game very, very well.

I think most financial firms will make out just fine, adds Patty Edwards of Storehouse. All of the smarter operators will find a way to make money -- they always have.

WHO WINS FROM FIN REG


A relief rally pushed bank stocks higher on Friday after lawmakers finally agreed on a financial regulation bill.

But when the euphoria settles; who ultimately comes out on top?

Because financial regulatory reform mandates derivatives be cleared by an exchange all the exchanges win to fin reg, says Sandler O’Neil analyst Rich Repetto. However CME and ICE look best positioned because their current model is most compatible with the new regulations.

I agree that financial regulation is a net positive for the exchanges, says JJ Kinahan of TD Ameritrade.

I’d also look at exchanges, says Jeff Tomasulo of SMB. Products will be available on the exchanges that haven’t been available before.

I wouldn’t assume that the exchanges are going to take the over-the-counter business from the top 3 or 4 banks anytime soon, counters Christopher Whalen of Institutional Analytics, that’s going to be a gradual process.

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CRUDE OIL SPIKE

Crude oil futures rose on Friday as a growing threat of a tropical depression forming in the Gulf of Mexico pushed energy prices up ahead of the weekend.

FinReg Winners & Losers
Finding the winners and losers of financial reform, with Chris Whalen, Institutional Risk Analytics.

"The storm threat is a big story, with odds rising that it will turn into a hurricane," explains Phil Flynn, analyst at PFGBest Research in a Reuters interview.

However not everyone thinks the move is weather related.

To me, the spike in crude looks like it’s all about weakness in the dollar , explains energy trader Addison Armstrong of Tradition Energy. (A weaker dollar makes oil less expensive to buyers using other currencies.)

And looking at nat gas, I think it might be stuck at current levels. $5.20 is a critical level for the energy bulls; if they can’t get nat gas above that level nat gas will probably bounce between 4.50 and 5.20.

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BP BREAKDOWN

BP continued its path lower on Friday with shares of the oil giant now trading at levels not seen since 1993.

Meanwhile a note issued by Nomura said: "Perception of near-term credit risk is highly damaging for BP, likely leading to constraints around counterparty trading, the attractive roll of drawn commercial paper and the ability to dispose of assets at attractive prices."

Five-year BP credit default swaps, an insurance-like instrument against debt default, widened 19 basis points to 555 basis points, CDS monitor Markit said.

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INVESTORS CRUSH RIM

Investors crushed shares of Research In Motion Friday following their earnings release Thursday after the bell. The weakness weighed on the entire smart-phone sector with Verizon, AT&T and even Appletrading lower.

What’s the trade?

I’m concerned about RIM, says Mike Tomasulo. They’re losing market share to Apple and whenever a company starts to lose market share I think it’s a good idea to go tot the sidelines.

BlackBerry needs to come out with a shock-and-awe product, muses Patty Edwards. But until they do I don’t see the stock trading a lot higher.



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Trader disclosure: On June 25, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Kinahan owns (C), (AMTD), (AXP); Kinahan owns (WFC) and short puts; Kinahan is short (SPY) options; Tomasulo owns (VZ); Tomasulo owns (RIG) options; Tomasulo owns Euro; Tomasulo owns Gold futures; Tomasulo owns (GS) puts; Tomasulo owns (CAT) puts; Tomasulo owns (AMZN) puts; Tomasulo owns (VXX)

Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (AMZN) for clients
Edwards owns (BAC) for clients
Edwards owns (BBT) for clients
Edwards owns (BBY) for clients
Edwards owns (C) for clients
Edwards owns (COP) for clients
Edwards owns (CVX) for clients
Edwards owns (DELL) for clients
Edwards owns (DO) for clients
Edwards owns (FITB) for clients
Edwards owns (GE) for clients
Edwards owns (GLD) for clients
Edwards owns (GOOG) for clients
Edwards owns (GLW) for clients
Edwards owns (HAL) for clients
Edwards owns (HPQ) for clients
Edwards owns (INTC) for clients
Edwards owns (JPM) for clients
Edwards owns (JNK) for clients
Edwards owns (MS) for clients
Edwards owns (MSFT) for clients
Edwards owns (NE) for clients
Edwards owns (NSC) for clients
Edwards owns (NVDA) for clients
Edwards owns (PM) for clients
Edwards owns (PM)
Edwards owns (PNC) for clients
Edwards owns (QQQQ) for clients
Edwards owns (RIG) for clients
Edwards owns (SLB) for clients
Edwards owns (SPY) for clients
Edwards owns (STI) for clients
Edwards owns (STM) for clients
Edwards owns (TXN) for clients
Edwards owns (UNP) for clients
Edwards owns (VXX) for clients
Edwards owns (VZ) for clients
Edwards owns (WFC) for clients
Edwards owns (WFT) for clients
Edwards owns (XOM) for clients
Edwards owns gold for clients
Edwards owns platinum for clients
Edwards owns silver for clients
Edwards owns the Russell 2000 for clients
Edwards owns the S&P500 for clients

Chris Whalen
***No Disclosures**

Rich Repetto
Sandler O'Neill Expects To Receive/Seek Investment Banking Compensation From (CME), (ICE), (NDAQ), (NYX) In Next 3 Months
Sandler O'Neill Is A Market Maker In (CME), (NDAQ)
Sandler O'Neill Has Received Investment Banking Compensation From (NDAQ) IN Past 12 Months
A Principal Of Sandler O'Neill Serves As A Director Of (NDAQ)
(NDAQ) Was An Investment Banking Client Of Sandler O'Neill In Past 12 Months


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