Run from the Banks?


Morgan Stanley made Citigroup their top short for 2008, citing a dividend cut and deteriorating earnings. Is there still time to trade it?

Jon Merriman, Chief Executive of Merriman, Curhan Ford & Co. joins the panel for this conversation. Following is a synopsis of his main points.

While not as bad as the banking crisis of the early 90s, today's money center banks still have significant downside ( between 20% - 30%) due to their subprime exposure, says Merriman.

Back in the early ‘90s, he adds, there was legitimate concern that Citigroup would go out of business as the stock sank to the single digits. That's probably not likely now, but I recommend investors short the large money center banks whose accounting remains somewhat opaque.

According to Merriman, names with the biggest downside risk could include Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC).

Pete Najarian isn’t sure about Merriman's thesis. He likes US Bancorp (USB) and WFC because Warren Buffett owns these stocks.


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Trader disclosure: On Dec. 12, 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), (YHOO), (INTC); Najarian Owns (CSCO), (ADCT); Najarian Owns (GOOG) Options, (GS) Options, (TSO) Options, (YHOO) Options, (BIIB) Options; Finerman's Firm And Finerman Own (GS), (FTWR); Finerman's Firm Owns (VLO), (SUN), (YHOO), (TSO); Finerman's Firm Owns (MDY) Puts And Is Short (MDY); Finerman's Firm Is Short (SPY), (IJR), (IYR), (IWM), (MBI); Finerman's Firm Is Short (LEH) And Owns (LEH) Puts; Finerman's Firm Owns (BIIB) Options; Finerman's Firm Owns Russell 2000 Puts; Finerman's Firm Owns S&P 500 Puts; CNBC Is A Service Of NBC Universal And Dow Jones; GE Is The Parent Company Of CNBC; NBC Universal Is The Parent Company Of CNBC; Vivendi Owns 20% Of NBC Universal, The Parent Company Of CNBC