'Fast Money' Recap: Big Year for Financials
NEW YORK (
) -- The markets ended mixed Tuesday despite a rally in the commodity and energy markets.
The
Dow Jones Industrial Average
added 20.51, or 0.18%, to 11,575.54, while the
S&P 500
was up 0.97, or 0.08%, to 1,258.51. The
Nasdaq
fell 4.39, or 0.16%, to 2,662.88.
Joe Terranova said on
CNBC
's "Fast Money" TV show that he believes there will be a reallocation of money from safe-haven trades to equities in 2011, despite a jump in bond yields today.
Dennis Gartman agreed, saying risk is back on and investors want to own growth.
Both Todd Gordon, co-head of the research unit in the Aspen Trading Group, and Pete Najarian were worried about the pullback in the Shanghai stock market after China raised rates over the weekend.
But Brian Kelly maintained that China is more dependent on the U.S. for growth than the U.S. is dependent on China. He did express concerns about the risk posed by sharply higher yields on an economic recovery.
Peter Boockvar, an equity strategist for Miller Tabak, said higher interest rates around the globe will cap equity markets. He said better economies don't lead to better stock markets if inflation and interest rates go higher.
Boockvar said the U.S. relies too heavily on cheap money. He said commodity inflation is going to seep higher, leading to consumer price inflation and higher debts and deficits in the U.S. and Europe.
Gartman, taking a more shot-term view, insisted the "trend is up until it's not," although he expressed concerns about the rise in the price of gasoline, especially if it hits $4 a gallon. Gordon said higher unemployment will prevent inflation from going higher.
Najarian said there was a lot of conversation on the Twitter desk on investor exposure to the financials. Terranova reaffirmed his belief that there will be a tremendous flow into equity mutual funds next week, with the financials the beneficiary
Jeffery Harte, a Sandler O'Neill analyst, predicted a lot of money will be made in financials in 2011, especially in large-cap names like
Bank of America
(BAC) - Get Report
,
Citigroup
(C) - Get Report
and
Goldman Sachs
(GS) - Get Report
. He said credit is going the right way in the banking space, adding the consolidation will drive the regional banking space.
He said the safest bet would be in Citigroup on technical and market support reasons. Next was Goldman Sachs, which should get a boost from the capital markets. He said Bank of America had the most potential upside except for its lingering problem with put-back issues.
Simon Hobbs, the moderator of the show, referred to a chart showing the most actively traded commodity trades this year. The chart showed silver, up 80%, copper up 29%, and gold up 28%.
Kelly was most optimistic about the copper trade. He said there are several things going for the trade, including a severe copper shortage for 2011, hoarding, reduced mine production and new copper-tracking ETFs.
For the hedge fund pick of the week, Anthony Scaramucci, of Skybridge Capital, chose
Ingram Micro
(IM)
, an IT wholesale distributor with a $3 billion market cap.
He said the company has about $7.36 a share in cash, has been profitable ever since it went public and is set to deploy $400 million to buy back shares. He sees a 30% to 50% upside in the price target over the next 12 to 18 months.
Molycorp
(MCP)
fell sharply after hitting 52-week highs after a news report indicated there may be a delay of a year in getting rare metals out of its California mine. Gartman said he still likes Molycorp because its mine is in the U.S. and the metal is used in missile defense.
In the options pit, Najarian noted usually strong call activity in
Market Vectors Russia ETF
(RSX) - Get Report
. He said he liked the fund because 40% of the fund is allocated to energy and 20% to energy and industrials.
Joshua Brown, a vice president for Fusion Analytics, offered up three fads he sees for 2011. First, he expects social networking companies that have raised tens of billions in the private markets to go public.
Second, he sees investors looking for ways to play for defaults in the $2.8 trillion dollar muni market. And third, he says commodities will stop trading as a group and added a word of caution to commodity investors who are highly leveraged to a China infrastructure breakout.
In the final trades, Terranova liked
Ultra Petroleum Corp.
(UPL)
. Gartman said he would continue buying wheat, soybeans and corn and sell the euro against them. Gordon said he would be on the sell side on the euro-Swiss franc trade. And Najarian stuck with
Dupont
(DD) - Get Report
.
--Written by David Tong in San Francisco.
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