KING KONG BEATS HIS CHEST
The headline: Dow Sheds 4% This Week As King Kong (Financial Distress) Edges Out Godzilla (Global Growth); Tightening Credit Sparks Fear That Dealmaking Is Dead For Now
Guy Adami thinks the Dow has another 500 or so points of downside left in it. 12700 is his target before everything is said and done.
Stacey Briere Gilbert, filling in for Eric Bolling, says she wouldn’t be surprised if the market erased its losses for the year in the “next month or so.”
Jeff Macke agrees the market’s going lower – 1,460 on the S&P to start, he says – but it’s the “end of the beginning” for this sell-off. He thinks there needs to be some fear instilled before you can even start to think about getting long stocks.
THE WEEK: FINANCIALS:
The headline:Goldman (GS), Financials Tumble On Subprime Fears, Frosty Credit Market; WSJ: KKP IPO Delay More And More Likely As Credit Market Freezes; Blackstone (BX) Drops 6% For The Week, Continuing Remarkable Slide
In an exclusive interview earlier today, Treasury Secretary Hank Paulson told Dylan that risk is currently being re-priced by the financial markets. And Stacey believes the risk perspective is only going to increase. She says risk levels are indicating that one out of every three days the market will see a 1.5% move and one out of every 20 it will see a 3% move. While that’s a non-directional theory – meaning the move could be to the upside or the downside – it points to eight more times this year there will be 3$ moves. “It’s tough to say there’s no risk,” she says.
Risk is the unknown, Pete Najarian says, so it makes him breathe easier when he hears companies discuss their risks publicly. Today, Citigroup’s (C) CEO talked about the bank’s risk in subprime, saying it’s only around 5% on the high-end. “I liked hearing that,” Pete says. He feels a little more comfortable with Citi and he even bought Goldman Sachs (GS) today. While the volatility and volume has been remarkably high in some of the investment bank and private equity names, the deals aren’t slowing down. He would recommend keeping an eye on Goldman and Morgan Stanley (MS).
Even if the “big deals still get done,” as Pete says, Stacey thinks there are better areas to put your money than the banks. Buy the deals themselves, not the financials, she says.
And any deal that’s still in the pipeline – such as the Hilton (HLT) buyout – is sure to be completed, Jeff says.
THE WEEK: HOUSING:
The headline: No End In Sight For Housing As New Home Sales See Worst Decline Since January; Countrywide Spooks Market With News Of Increasing Prime Loan Defaults; Beazer Homes (BZH), D.R. Horton (DHI) Report Steep Losses
None of the traders see a bottom in housing yet. When people think their house is worth less, coupled with seeing the market tailspin, they’re going to spend less, Guy says.
“There are more defaults coming,” says Stacey.
THE WEEK: OIL SHARES:
The headline: Crude Gains, But Oil Shares Slip On Fears Of Lower Production Capacity
Many energy stocks broke under stress this week, mostly because they are over-owned, Guy says. Because energy names are so overowned, they move more quickly than other sectors, whether its up or down. And because the stocks in the sector move relatively parallel to one another, one bad name can take out names across the board, Stacey says.
THE WEEK: HOPE IN TECH:
The headline:Apple (AAPL), Amazon (AMZN), Baidu.com (BIDU) Buck The Trend
Tech and energy cross paths in a market like this because, as energy is so over-owned, money is floating out of that sector and going into tech names, which are underowned right now. Across the sector, spending is picking up, Pete says.
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Trader disclosure: On July 27th 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;Macke Owns (ATVI), (DIS); Najarian Owns ( C),(GS) SSusquehanna Financial Group Is A Market Maker In (GTRC), (ATVI), (AMZN), (ERTS), (INTC), (KYPH), (VMSI); Susquehanna Financial Group Owns More Than 1% Of (BZH); Gilbert Owns Options In (HOT) Stacey Briere Gilbert Is Chief Options Strategist For Susquehanna Financial Group, LLLP; Gilbert Is Head Of Market Intelligence Research For Susquehanna Financial Group, LLLP; Gilbert Does Not Cover Individual Securities But Does Recommend Trading Strategies