The market's tanking was topic A for the "Fast Money" show on CNBC Friday, with the crew joined by well-known bear Doug Kass.
Kass, president of Seabreeze Management and a RealMoney Silver commentator, believes strong company fundamentals mean little when combined with fundamental problems that are profoundly depressing investor psychology. It's a vicious circle: Fundamentals influence psychology, which influence technicals, which feeds back to further affect fundamentals. Doug is short a bunch of financials but he said he wouldn't press them.
Guy Adami said he likes
here because he feels it's cheap on valuation, but Kass blasted back that we're going to see warnings from every major money center bank and every large regional and every investment bank in the next two weeks. Not only do these firms have a mark to market problem but all the fee income generated in the first half is gone, he said, with credit markets cracking and deals falling apart.
Karen Finerman thinks a risky trade that could be worth taking here is
Accredited Home Lenders
. Jon Najarian is in on this trade and he believes that the financials will bottom soon and you should buy them in the next couple of days. (Real Money Take: Jim Cramer said recently, "Accredited Home sounds like a goner." To read more on what Cramer said,
Shifting to other areas of the market, technology stocks were relatively strong today in a weak tape. Jeff Macke thinks technology stocks are wildly underowned and financials are overowned. He feels money will flow out of financials and into technology. Jeff Macke wants to own
here and Guy Adami and Karen Finerman agreed. (Real Money Take: Alan Farley said recently, "You might not make an overnight fortune trading 300 shares of Hewlett-Packard, but at least you'll get a good night's sleep." To read more on what Farley said,
Jon Najarian wants to buy
ahead of Cisco's earnings. (Real Money Take: Jim Cramer said recently, "Juniper should quit. Won't. There's enough room for both Cisco and Juniper." To read more on what Cramer said,
Will Ben Soothe the Beast?
Wall Street has been in love with Ben Bernanke since he took over the throne of Fed Chairman last year, but now the market is faced with massive credit problems and a housing bubble. What will Ben do about it? Next Tuesday the Federal Reserve will make a key decision on what to do with interest rates.
Najarian thinks that Bernanke has to address the credit risk head on. Jeff Macke thinks there is nothing that financials can say to save themselves right now with everyone shorting them. Macke wants to see a rate cut next week to stop the panic in the stock market, but he says don't short the financials. Karen Finerman doesn't think the Fed will cut rates but she thinks that Bernanke will say something to calm this market storm.
Hovanian On Homebulder ProblemsThis week has been a crazy one for homebulders and mortgage firms with subprime exposure. With bankruptcy rumors flying now even the lenders with less risky loans are taking it on the chin.
has seen its stock fall 65% in the last 6 months. Is it safe for investors to start buying homebuilder stocks here or even a home for that matter?
Ara Hovnanian, the CEO of Hovnanian Enterprises, joined the crew tonight for the discussion. Dylan Ratigan asked, what happened this week? "There's just a lot of nervousness in the market place. Everyone is worried about the credit market." says Hovnanian.
"Psychological distress, I think is really more of the problem," Hovnanian stated. "There's distress on the very bottom end of the credit market for mortgage consumers, but the regular mortgages are really unaffected and that's the majority of the market," said Hovnanian.
Jeff Macke asked, how do you interpret the behavior? "It's the herd mentality," says Hovnanian. "The bizarre thing on the home sale front is fundamentals are good. There's still a positive economy, job growth, and rates, by historical measures, are near historical lows. It's a psychology issue right now." Najarian asked, you've been concentrating on Florida and California. Is that worrisome?
"I'd say it's bothersome but not worrisome," stated Hovnanian. "California and Florida were great on the way up. You could make a lot of money in those markets. But clearly they were oversold and it's really correcting right now and it's painful. But as long as we keep a capital structure that can weather the storm and we have been through it with not as good of a capital structure as we have right now."
Asked if a homebuilder could file for bankruptcy, Hovnanian didn't think so. "I suppose anything is possible," stated Hovnanian. "But the group in general is far better capitalized now, than they were in 1991, which was the last major slowdown, and the debt to capital ratios are dramatically different today." (Real Money Take: Cody Willard said recently, "How long before Centex (CTX) and Hovnanian (HOV) are putting through their own 15-to-1 reverse splits like the Lucents, JDSUs and Nortels of the telecom bubble had to at the bottom?" To read more on what Cody said,
When Cisco Speaks
will report earnings next Tuesday and market players want to see if the giant tech firm can save the market. Jon Najarian thinks technology could lead this market out of trouble. He likes Cisco but he really likes Juniper. Guy Adami thinks Cisco is a long term buy. (Real Money Take: John Reese said recently, "failing to garner approval from my models, the highest guru-strategy-approved firm on the list is 11th-ranked Cisco." To read more on what Reese said,
Guy told market players to check out
Pops & Drops
was up 12% this week after beating earnings estimates. Jeff Macke would sell WFMI, because the said the stock isn't going anywhere.
was up 10% off a strong earnings report. Karen Finerman likes the stock.
popped 25% on a rise in sales. Guy Adami called this stock a "monster."
dropped 8% on rumors of production cuts. Guy Adami says the stock was due for a correction. (Real Money Take: Jim Cramer said recently, "Apple (AAPL) hasn't cut back on its orders to a Taiwan supplier, according to Digitimes. Nice to have some clarity." To read more on what Cramer said,
was down 8% on drug reimbursement problems. Jon Najarian was short this stock and took profits. He thinks it can bounce.
has fallen 11% on credit concerns. Najarian wouldn't touch it.
fell 19% on poor earnings. Najarian is starting to accumulate this stock right here. (Real Money Take: Dan Fitzpatrick said recently,"Why not just stand aside and let others build a base here? But if Jones Soda falls back to test the $12.50 area, it might be worth starting a new position." To read more on what Dan said,
was down 17% on a disapointing forecast. Najarian thinks the retail traders bail with a market like this and this stock is going lower.
On July 13th Guy Adami recommended
. The stock has fallen 12% on credit fears and Guy is now changing course and telling market players to sell it.
On July 9th Karen Finerman picked
. Since her pick the stock has fallen 21%. Karen still likes the stock and says she is buying it.
On July 20 Najarian talked about pick
after he saw unusual options activity. Poor earnings took the stock lower and Jon lost all his money on the options trade.
Karen Finerman is sticking with Kaiser. Guy Adami likes
Tiffany & Co.
for the global wealth story. Jeff Macke likes Financial Select Sector SPDR
. Najarian thinks Ben Bernanke does a surprise rate cut on Monday ahead of next week.
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