Support for Freddie - Fast Money Recap (8/20/08)
Recap of CNBC's Fast Money, Wednesday August 20.
Support for Freddie? Freddie Mac (FRE), Fannie Mae (FNM)
Speculation is swirling on Wall Street that the credit crisis might soon reach the boiling point after published reports revealed that Freddie Mac executives met with Treasury department officials on Wednesday morning. Fears are mounting that the mortgage financiers will soon need government support and any bailout would hang stockholders out to dry. Sources described the meeting as part of a regular series of meetings that have been occurring since last month when the Bush administration announced a plan to aid the two companies. Nonetheless, investors are getting extremely jittery and punished shares of Freddie Mac and Fannie Mae by more than a 25% of their value on Wednesday.
Since Monday, stock in the two companies has plunged more than 45 percent and are now trading at lows not seen in nearly two decades. Meanwhile, Fannie Mae's chief executive sought to reassure investors that no bailout was imminent. The company's financial position “remains very strong,” he said. The options action indicates the outlook is anything but optimistic. “I think for the most part that Freddie and Fannie are toast,” says Jon Najarian on Fast Money. “There’s nothing in the options trading that suggests investors believe in the survival of either of these companies. Both stocks look to me like they’re going to trade around $2. Options investors are buying puts all the way down.” But Najarian doesn’t think there’s a trade. “I think it’s a fool’s folly to buy puts at this point.”
Jobs Report
The market is waiting to hear about jobless claims on Thursday. Will we get a surprise like we did last week when the number fell unexpectedly? According to published reports, economists expect claims to be come in around 438,000, down 12,000 from last week. However, most economists consider a reading above 400,000 for weekly claims as indicating recession-like conditions. New-claim filings have topped 400,000 for each of the past four weeks. “I think the number will be around 450,000 and I think more jobs will be lost because the economy is feeling the aftershocks of the financial tsunami,” says Deutsche Bank chief economist Joe Lavorgna. “But markets are forward looking and if you think the bottom is in the fourth quarter then the market should start to improve,” he says. “If my growth forecast is right with GDP growing a half point, then equities could start to make a move up sometime late fall.” “If this is a nine inning baseball game we’re in the bottom of the fourth,” Lavorgna says.
Trading Olympics - Lehman (LEH), UBS (UBS), MasterCard (MA)
The world of Olympic sport is all about timing. Whether it’s picking the right moment to turn up the speed or staying in sync with teammates, timing is critical. Good trading is about timing too. You can have a the best idea on the Street but if you pick the wrong time to buy, a few seconds can turn that good idea into a bad trade. To find the right time to buy you need to look for signals in the charts and in trading volumes. It's a skill that requires a great deal of training as well as confidence in your own abilities. But mastering this technique is crucial if your goal is a winning trade. Following are a few examples of volume spikes resulting in big moves, compliments of Guy Adami. Lehman experienced a big volume spike on June 12th. The stock jumped 15% in next 3 days. UBS experienced a volume spike on July 15th. The stock jumped 26% in next 6 days. Near its 52-week high of $320, Mastercard received upgrades from two firms, and that was a sign that the top was near. The stock now trades around $245. When you see huge volume, a news catalyst and a 52-week low think about a timing trade. And on the flip side, a stock on a 52-week high that’s getting upgraded could mean the top is near.
Research in Motion (RIMM)
Expect to hear from Research in Motion Thursday on their scheduled launch of the new BlackBerry Bold which will be available first in Canada. Advance buzz is good but not great. Citi Investment Research analyst Jim Suva says its completely new browser is a “big improvement” from the earlier models. Also, the phone's display is noticeably better. However, he said there were a few occasional high-speed signal-dropping problems.
Overall Suva concludes that the new BlackBerry Bold is a “strong product”, but it isn't revolutionary. He added the device will appeal to business users “but less so to consumers given its likely high price between $300 and $400.” No word yet when the device will be launched here in the U.S. I think Research in Motion should trade around $140 heading into the fall, says Joe Terranova. Citi just put a $160 price target on the stock and Merrill has a $170 price target on Research in Motion, adds Guy Adami. When the stock gets momentum it tends to move higher. But the Citi analyst said it was “not” a game changer, counters Pete Najarian. I’m not so sure.
Final Trade – Your First Move for Thursday August 21.
Guy Adami recommends long Schlumberger (SLB).Joe Terranova likes Valero (VLO).Pete Najarian says buy U.S. Bancorp (USB).Jeff Macke has no pick.
Seeking Alpha is not affiliated with CNBC, or Fast Money
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This article has 2 comments:
- monk
- 11 Comments
Aug 21 01:15 PMFRE and FNM have been technically insolvent for years. Gross is now all the sudden piping up? and Greenspan (who now works for PIMCO) also pushing for Nationalization!?!
They are simply Seizing an opportunity to talk PIMCO's book. Gross push's the public opinion to panic, FRE and FNM get nationalized and PIMCO makes BILLIONS on a massive spread tightening.
Anyone out there do an honest days work?
Meanwhile the financials get pummeled and sentiment goes south.
- PhinT
- 22 Comments
Aug 21 04:39 PMMore by SA Editor Joan Wickham