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Fast Money

No.1 - Stockonomics

Stockonomics: The Trade as New-Home Sales Fall to 7-Year Low, Earnings Growth Plunges

For the second straight month, the roof came off the housing market as a government report today showed the carnage continues. Ontop of that, investors are reeling from word that corporate earnings will slow from 10% last quarter to 4.4% now. What are the trades as the economic picture darkens? When economic events lead to stock events, we call that “Stockonomics.”

CNBC Economics Reporter Steve Liesman joins the guys to help them tackle this one.

Steve says investors are going to have to get used to earnings falling – and profit margins declining.  It’s a no-brainer he says, that things go down from here because the market is at historic highs for how much in profit corporations are extracting from the economy.  He asks how can investors make money in a market where profit margins must come back down to reality?

Eric Bolling says the charts show him resilience, liquidity and buying in the market. He adds in the event that profit growth does slow – put money in iShares Dow Jones Select Dividend (DVY) or Power Shares Intl. Dividend Achievers ETF (PID) which Eric calls absolutely fantastic.

Steve adds that stockonomics loves high dividend paying companies because they’re sending the cash flow back to share holders.

Tim Strazzini adds in an environment of real profit slowdown he likes Kimberly Clarke (KMB) because they just announced a turnaround and the company has a proven business model. He also likes AXA (AXA) because it gives investors global exposure and they pay a nice dividend

Guy Adami says Genentech (DNA) is his play if profits decline.  He expects DNA to grow earnings 27% over the next 4 years and says the stock is trading $83 when it should be more like $98.

Questions? Comments?

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Trader disclosure:
On MAR 26, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders Strazzini Owns (MER) Bolling Owns (BP), (XOM), Gold, Silver, Soybeans, is Short Corn