Instant Insights with the Fast Money traders
Brian Kelly interprets these developments as another signal that commodity prices are about to go significantly higher, but fears those higher costs will eat into margins. He uses Hershey as an example. “Hershey is weak because the Street believes they can’t pass along the increased costs.”
Steve Grasso tells the desk he expects that to be a theme. “Going into 2011 – we’re probably looking at gross margins really collapsing," he says. “I’m not sure if it (manifests) in the first quarter or the back half of the year but I expect to see more companies unable to pass along costs to consumers."
Jon Najarian says much the same. He explains that many companies have already raised prices and are probably unable to pass along further increases. “From Starbucks to Hanes I don’t think most companies can pass along more commodity cost increases," he muses.
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COAL FOR CHRISTMAS
FBR is recommending coal for Christmas: they increased their 2011 price targets on Cloud Peak Energy , Consol Energy and Patriot Coal to “outperform” from “market perform.”
Meanwhile Fast Money friend Dennis Gartman tells us, “The case for coal is very compelling... the Chinese story is still there…we have to remember here in the U.S. (up to) 49% of our electricity is generated from coal, if we have any increase in GDP we'll get a pickup in coal.”
How should you trade it?
In the coal space I like to separate those companies that sell to steel and those that sell steam coal for power generation, says Brian Kelly.
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STREET FIGHT – NETFLIX
Again Netflix landed in the spotlight after CEO Reed Hastings responded to Whitney Tilson of T2, who has famously been shorting this stock.
In a post published by the website SeekingAlpha Hastings says, “I think what Whitney may be misunderstanding is that at $7.99 per month, consumers don’t expect to have everything under the sun. A variant of this misunderstanding is when DirecTV (DTV) advertises against Netflix, calling out some Netflix content weaknesses. When an $80 per month service is picking on an $8 per month service, the $8 per month service just gets more attention from consumers and grows even faster."
What’s the takeaway?
I wouldn’t think a CEO responds to one short seller unless they are particularly worried about the valuation, says Zach Karabell of RiverTwice. That bespeaks a degree of concern.
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Trader disclosure: On December 20, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Zachary Karabell Owns (AAPL), (GOOG), (IBM), (GS), (C), (CSCO), (FCX), (RIMM), (FXI), (GE) and (BRCM). Jon Najarian owns (IBM), is short (IBM) calls. Jon Najarian owns (GS), is short (GS) calls. Jon Najarian owns (JPM), is short (JPM) calls. Jon Najarian owns (CME), is short (CME) calls. Jon Najarian owns (CBOE), is short (CBOE) calls. Jon Najarian owns (V), is short (V) calls. Jon Najarian owns (PCX), is short (PCX) calls. Jon Najarian owns (MEE), is short (MEE) calls. Jon Najarian owns (CHK), is short (CHK) calls. Jon Najarian owns (FCX), is short (FCX) calls. Steve Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MHY). (NDAQ), (PFE), (PRST) and (S).
GE is the parent company of CNBC
NBC Universal is the parent company of CNBC
Checking Gartman and Tilson SOT's for disclosures
BRIAN KELLY
Accounts Managed By Kanundrum Capital Own (JPM)
Accounts Managed By Kanundrum Capital Own (WFC)
Accounts Managed By Kanundrum Capital Own (AKAM)
Accounts Managed By Kanundrum Capital Own (JEF)
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (SWC)
Accounts Managed By Kanundrum Capital Own USD
Accounts Managed By Kanundrum Capital Own (CLF)
Accounts Managed By Kanundrum Capital Own (QCOM)
Accounts Managed By Kanundrum Capital Are Short The Yen
Accounts Managed By Kanundrum Capital Are Short The Euro
ZACHARY KARABELL
River Twice Capital Owns (CSCO)
River Twice Capital Owns (GS)
River Twice Capital Owns (MSFT)
River Twice Capital Owns (MA)
River Twice Capital Owns (FDX)
River Twice Capital Is Short (SMH)
River Twice Capital Is Short (SPY)
River Twice Capital Is Short (QQQQ)
River Twice Capital Is Short (XLF)
STEVE GRASSO
Stuart Frankel & Co and its partners own (AAPL)
Stuart Frankel & Co and its partners own (AMGN)
Stuart Frankel & Co and its partners own (BP)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GE)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HPQ)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (NWS.A)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (OPEN)
Stuart Frankel & Co and its partners own (PDE)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (RDC)
Stuart Frankel & Co and its partners own (TLM)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UNM)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)
ALEX HAMILTON
Hamilton has no disclosures.
CHRIS BRENDLER
Stifel, Nicolaus & Co. Is A Market Maker In (ADS), (CBOE), (AXP), (DFS), (NYX), (V), (CME), (CIT), (MA), (ICE), (COF), (NDAQ)
Stifel, Nicolaus & Co. Expects To Recive/Seek Investment Banking Compensation From (ADS), (NDAQ) In Next 3 Months
WHITNEY TILSON SOT
Funds Managed By Whitney Tilson Were Short (NFLX) On 10/29/10
DENNIS GARTMAN SOT
There were no disclosures on 12/1/2010
CNBC.com with wires.