'Fast Money' Recap: Bank Bulls Back

Morgan Stanley (MS Quote - Cramer on MS - Stock Picks) reports earnings tomorrow. Adami said that the company issued huge writedowns, and could be due for an upside surprise. He noted that Goldman put the bank on its conviction buy list, and predicted 15% to 20% upside.

Najarian predicted 10% upside for Morgan Stanley. He advised viewers to sell into gains if they get them tomorrow. Seymour said that Morgan Stanley benefits from the Bear Stearns sale. The bank has the No. 1 prime brokerage, and should get some of Bear's former customers. He said this will be big for earnings going forward.

Bear Stearns shares doubled today and then pulled back on speculation about lawsuits for JPMorgan and that Bear shareholders may not approve the take-under. Adami said that short-sellers were covering, but said that if the deal gets tangled in litigation, by the end of the process Bear's book of collateralized debt obligations might actually be worth something.

Macke said the Bear acquisition was not tightly structured and was rushed. If litigation continues for a year or two, that would provide upside surprise for shares of Bear. Adami said that for a "lottery ticket," viewers might try to buy Bear shares.

Najarian noted heavy option activity in Bed Bath & Beyond (BBBY Quote - Cramer on BBBY - Stock Picks). He noticed a great deal of put activity.

The iShares FTSE/Xinhua Index (FXI Quote - Cramer on FXI - Stock Picks) has been pulling back off its high. Tim Seymour said that rhetoric about China's inflation and political situation have brought the stock down. He thinks China is actually interesting at these levels. He also recommended China Mobile (CHL Quote - Cramer on CHL - Stock Picks) as a play on the Chinese consumer.

On the vast reduction in the fed funds rate, which provides a great deal of liquidity for U.S. markets, Adami said investors should look at the best in breed for banks. He suggested US Bancorp (USB Quote - Cramer on USB - Stock Picks) because it has no subprime exposure and has traded at the same level throughout the credit crisis. Najarian agreed.

Seymour said that Fannie Mae (FNM Quote - Cramer on FNM - Stock Picks), Freddie Mac (FRE Quote - Cramer on FRE - Stock Picks) and Sallie Mae (SLM Quote - Cramer on SLM - Stock Picks) are likely to grow from here. He also said to look into regional banks.

Macke said that in the short run the entire market has a bullish outlook. For the longer term, however, he believes that "the sun is going to blow up and we're all going to die." In the meantime, though, he sees a "heck of a long trade." He recommended Wal-Mart (WMT Quote - Cramer on WMT - Stock Picks).

Nike (NKE Quote - Cramer on NKE - Stock Picks) reports earnings this week and is poised as a major player for the Beijing Olympics this summer. Macke recommended buying and holding. He said the stock is a must-own.

Seymour cautioned viewers that manufacturing inflation in China is beginning to become a problem, but that Nike's margins still look good. Adami suggested carefully examining the earnings statement and finding out how much stock the company has bought back. Najarian called Nike best in breed in footwear and clothing and said good sales from Dick's Sporting Goods (DKS Quote - Cramer on DKS - Stock Picks) was a bullish sign.

The traders welcomed Dominic Frederico, CEO of Assured Guaranty (AGO Quote - Cramer on AGO - Stock Picks). The bond insurer stands to benefit greatly from increased liquidity in the market and growing market share as sector rivals MBIA (MBI Quote - Cramer on MBI - Stock Picks) and Ambac (ABK Quote - Cramer on ABK - Stock Picks) struggle with their exposure to collateralized debt obligations.

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