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'Fast Money' Recap: M&A Catalyst?

Stocks in this article: POT MOS MSFT

That prompted Kaminsky to suggest that Microsoft (MSFT) should throw off its "bored" image by going after RIM.

Is there a bubble in Treasuries and fixed income? Barry Ritholtz, director of research for Fusion IQ, thinks so. He said the situation has gotten to the point where everyone knows that bonds will trade and end badly.

He wouldn't put gold in the same bubble category. But he did say gold has become a "fear" trade where it has ended up as a hedge against both inflation and deflation.

Shifting to a segment on tomorrow's headlines, Lee noted the big hedge fund names have developed a herd mentality when it comes to owning names like Citigroup (C), Goldman Sachs (GS), Pfizer (PFE) and the SPDR Gold ETF (GLD).

Kaminsky warned that such a concentration doesn't usually bode well in the end. But Anthony Scaramucci defended the moves, saying the funds are choosing names with a lot of liquidity, low P/E and a positive upside bias.

For his hedge fund pick of the week, Scaramucci chose Microsoft (MSFt). He said it's difficult not to like a stock that has $4.25 a share in cash and trades 8.7 times earnings net of cash. Furthermore, Microsoft is coming out with a new product cycle with Microsoft office 2010, raising dividends and buying back stock.

He said Microsoft has two options: staying put or using some of its $37 billion in cash for strategic acquisitions. Finerman agreed with the pick, saying she's never seen megcap stocks at such low valuations.

Lee brought in Colin Gillis, a BGC Financial analyst, to comment on his downgrade of Yahoo! (YHOO) to a hold from a buy. He cited a slowdown in display advertising and lower advertising budgets for the downgrade.

Is the 10-year Treasury note going to sink and follow the direction of the bond markets in Japan? Seymour said that aside from higher energy costs, it's difficult to see where deflation is in this country. He said bond yields in the U.S. are low for fiscal and structural reasons, adding a lot of investors are not comfortable in equities.

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