No. 3 - What's Wrong?

Tomorrow, the government releases its first reading of economic growth for the first quarter. The consensus is that growth will come in at just 1.8%, down from 2.5% in the fourth quarter of 2006. Yet the bulls are clearly in command on Wall Street, with the Dow steadily marching toward 14,000.

CNBC senior economics reporter Steve Liesman joins the guys to explain the disconnect - and how you can profit from a weakening economy and strengthening stock market.

Steve thinks there’s going to be four straight quarters of sub-par growth. The consumer looks OK, he says, housing is showing double-digit declines, and we know we have an inventory correction underway.

The big story in reconciling strong earnings with a weak economy is the foreign influence, Steve says. There have been $21.5 billion in revenue gains from the Dow members that have reported so far. $3.6 billion of that is just from currency gains, he says. That means 17% of all revenue gains for these 19 Dow components explains 40% of the upside surprise we’re seeing.

If there’s a 2.5% or better increase in the GDP, Tim wants to know if the market would go down out of fears of it overheating.

Steve doesn’t think so. He says to keep an eye out for the GDP inflator number, which should give the market its inflation signal. "[The GDP] has been talked down so much, to me, any number above 1% is OK with the market," Steve says. GDP growth of 2.73% is the number he thinks would create inflation fears with a 3.5% deflator inside.

Questions? Comments?

Trader disclosure:
On APR 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; Macke Owns (SWY);Strazzini Owns (WMT), (YHOO); Bolling Owns (XOM), (AMZN) Options, Gold, Silver, Corn; Bolling Is Short Soybeans