GO
Loading...

Is Fed Move a Sign to Buy Defensive Stocks?

Cheap money from the Federal Reserve could spur the economy, but contrarian trader Steve Cortes said Thursday it was time to get defensive.

Veracruz founder and author of “Against the Herd,” Cortes pointed to a drag on stocks despite positive news this week as a sign.

The S&P 500, he noted, was up only 8 points — “not even a percent” — despite stellar earnings from Apple and a Federal Reserve announcement that it would keep interest rates at current historic lows into 2014.

“So far, at least, the response has been very underwhelming, and the reason is because monetary policy is like a narcotic: The more you take it, the less it works. And we’ve seen this with each application from the Fed,” he said on “Fast Money.” “I think what the Fed is telling us, in fact, is that they are seriously worried about a Japan-type scenario.”

Cortes said the Fed was “actually taking us close to that precipice” — and as a result, equities were reacting.

Brian Kelly of Shelter Harbor Capital disagreed.

“The Federal Reserve — the guy who has the printing press — has told me: Assets are going to go up. That’s his whole plan. Asset growth equals economic growth. That’s all he can do. He’s the only one who can do it. So why am I going to fight the Fed? I want to buy assets,” he said. “Commodities are going to rip. Stocks are going to rip. And I even think U.S. Treasury bonds are going to rip.”

Kelly made a bull case for assets following the Fed’s move.

“You print enough money, I guarantee you, asset prices will go up - might have to print a couple of trillion; I don’t know how much it’s going to be,” he said. “But what the Federal Reserve told me yesterday is they are willing to print as much as it takes to make sure asset prices go higher.”

Cortes looked to a narrower field of assets to make his case.

“So far the asset that has gone up since that announcement has been bonds, where I’m long and adding to longs,” he said. “I’m saying that the place to run is going to be into safe yield: Tobacco, utilities and absolutely into bonds.”

Related Stories


______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment, but not have it published on our Web site, send those e-mails to fastmoney@cnbc.com.

Trader disclosure: On Jan 25, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian is long AKS; Najarian is long BAC; Najarian is long PNC; Najarian is long WFC; Najarian is long GDX; Najarian is long NFLX; Najarian is long MSFT; Najarian is long IBM

For Brian Kelly
Shelter Harbor Capital is long GLD

Shelter Harbor Capital is long XLF

For Mike Murphy
Murphy is short CAT

Murphy is long NLY

For Ann Duignan
Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Caterpillar Inc. within the past 12 months.

Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Caterpillar Inc..

Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Caterpillar Inc..

Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: Caterpillar Inc..

Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-securities-related: Caterpillar Inc..

Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking Caterpillar Inc..

Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from Caterpillar Inc.

Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Caterpillar Inc.

For Mark Mahaney
Citigroup Global Markets Inc. or its affiliates beneficially owns 1% or more of any class of common equity securities of Netflix Inc. This position reflects information available as of the prior business day

Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm profitability which includes investment banking revenues.

The Firm is a market maker in the publicly traded equity securities of Netflix Inc.

For Jens Nordvig
No disclosures

For Nicole Miller Regan
I or a household member have a financial interest in the securities of the following companies: none

I or a household member is an officer, director, or advisory board member of the following companies: none

I have received compensation within the past 12 months from the following companies : none

Piper Jaffray or its affiliates beneficially own 1% or more of any class of common equities of the following companies: none

The following companies have been investment banking clients of Piper Jaffray during the past 12 months: BBRG, CCSC, GMCR

Piper Jaffray expects to have the following companies as investment banking clients within the next three months: none

Other material conflicts of interest for Nicole Miller Regan or Piper Jaffray regarding companies in my universe for which I am aware include:

BBRG, GMCR: underwriting

Piper Jaffray received non-investment banking securities-related compensation from the following companies during the past 12 months: SONC

Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: BAGL, BBRG, BJRI, CAKE, CCSC, GMCR, PEET, PFCB, PNRA, RRGB, RUTH, SBUX, SONC

Piper Jaffray usually provides bids and offers for the securities of the following companies and will, from time to time, buy and sell the securities of these companies on a principal basis: CMG, DRI, EAT, MCD, MRT

CNBC.com with wires.

Contact Halftime Report

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET