* Will Dell up their bid for 3Com? Hear what the Fast Money traders have to say. Watch the video now!
With stocks trading around break even on Monday the Fast Money traders were closely watching action elsewhere amid chatter of a bubble.
We’re talking about the usually staid bond market.
Despite a relative weak stock market, bond prices Monday morning were also lower – (in other words, yields were higher)
What should you make of the action?
To bulls, the rally is still in its early stages. They say the weak economy will cause stocks to keep falling and people to seek the safety of U.S. government debt.
The bears, however, argue Treasury prices have risen too high, perhaps even to bubble proportions. (The thinking goes that investors could dump Treasurys as quickly as they bought them on even a whiff of inflation. Inflation is bad for bonds because it eats into principal.)
As you may remember, last week The Wall Street Journal published a letter from Wharton professor Jeremy Siegel and Jeremy Schwartz, director of research at Wisdom Tree Investments Inc., that likened Treasurys to dot-com stocks of the late '90s before they crashed.
Instant Insights with the Fast Money gang
I think comparing what’s happening in bonds now to the tech bubble is nonsense, says Steve Cortes on Fast Money. In the tech bubble stocks could go to zero and all principal was lost. If you hold a bond to maturity you get the principal plus interest. With that said, I’m skeptical of the bond market and I’m short.
The TLT is up something like 20% on the year, adds Brian Kelly. Maybe it’s not a bubble but it's probably overdone.
I'm not terribly worried about a bubble; I expect money to continue rotating into the bond market, says Tim Seymour. There's no catalyst to change that trend.
Worries about Hungary are making waves in the market Monday with the traders closely watching the action in that nation’s currency.
What should you make of it?
I’d watch Banco Santander, says Steve Cortes. It’s having a lot of trouble maintaining $12. If it continues to have trouble there then I think there’s not only smoke but fire in Europe.
70% of the mortgages in Hungary are nominated in Swiss francs, adds Brian Kelly. I’d watch Austrian banks and Italian banks; they're heavily exposed to Hungary.
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Trader disclosure: On Aug 23, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Cortes owns (FCX), (SFD), (SPY); Cortes is long Corn; Cortes is short (BAC); Cortes is short (XLF); Cortes is short Japanese Yen; Cortes is short U.S. Treasuries; Seymour is long (POT; Jon Najarian owns (POT) and short call; Jon Najarian owns (VMW) and short call; Jon Najarian is long (DBA) put spreads
For Tim Seymour
Seygem Asset Management is long (RTP)
Accounts managed by Kanundrum Capital own U.S. Dollars
Accounts managed by Kanundrum Capital own Swiss Franc
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (TBT)
Accounts managed by Kanundrum Capital are short the U.K. Pound
Accounts managed by Kanundrum Capital are short the Peso
Accounts managed by Kanundrum Capital are short (XLF)
Accounts managed by Kanundrum Capital are short (AFL)
Accounts managed by Kanundrum Capital are short (MCO)
Accounts managed by Kanundrum Capital are short (IAI)
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