Investing In The Wake Of Nationalization


Anxiety about the state of our banking system has sent investors scrambling every which way. But this decline in stocks may be different.

"The stock market wants to know what’s going on with the banks and it appears it’s willing to go as low as it has to go to get an answer," explains Dylan Ratigan.

Although the White House says they strongly believe a privately held banking system is the way to go -- investors don't buy it, entirely. It's true the comments helped lift the Dow and S&P off their lows, but investors still clobbered shares of Bank of Americaand Citigroup ; in fact this is the sixth day in a row that investors have pummeled these stocks.

"It's a clear sign that the markets are expecting a high probability of them being nationalized," says Mike Holland, founder of Holland & Co. "The clear expectation is that shareholders would effectively be wiped out."

The current situation is somewhat bleak for both Citi and BofA. Both stocks have lost more than 90 percent of their value in the last year. And each bank has received $45 billion in government aid in recent months; the aid exceeds the banks' current market value.

Although both Dems and the GOP say they hesitate to nationalize, support for the plan seems to be growing. Even Republican Sen. Lindsey Graham, considered one of the more conservative members of the Senate, said nationalization could be an option.

Yves Smith, editor of The Naked Capitalism blog, thinks it's just a matter of semantics and that nationalization is nothing new. "We already do nationalization in this country. It's called the FDIC resolving banks," she says on Fast Money.

And she tells the traders “nationalization could be a good alternative,” once the government clarifies what nationalization really means. But “we must fix the banks to get out of this economic crisis” and nationalization does the trick.

With nationalization looking more like a question of when – and not if – investors poured into Treasuries and gold briefly pushing up prices to $1000 an ounce before settling lower.

But that's a flight to safety. Is there a better way to trade? For insights we turn to United Capital Financial Partners CEO Joe Duran.

“It’s important to observe that the current market decline is different from the decline we had in November,” he explains on Fast Money. “There are winners in this market and that’s a healthy difference.”

And it's those winners, stocks that are up for the year, that he recommends putting on your radar.

”I’d invest in companies that seem certain to pay dividends such as Altria . Also seek out companies that have high growth and very little debt such as Amazon and Apple ," he counsels.

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Trader disclosure: On Feb. 20th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (EEM), (FXI), (PBR); Seymour's Firm Owns (VIP); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Terranova Owns (KCE), (XBI), (AMGN), (FXC), (DIS); Terranova Owns Nymex MACI; Terranova Owns (IBM) Calls; Terranova Owns (AMGN) Puts; Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO), (BAC), (BBT); Finerman's Firm Owns (RIG), (MSFT), (FL); Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Owns (DNA) & (DNA) Call Spreads; Finerman's Firm Owns (WFC) Preferred with wires