'Fast Money' Recap: Gloomy '09 Outlook

The trading panel sees many of the same problems in 2008 showing up next year.
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Despite a rally on the last day of 2008, it was a horrible year for investors with every indication 2009 will bring more of the same.

The

Dow Jones Industrial Average

was up 108, or 1.25%, to 8,776.39, while the

S&P 500

rose 12.61, or 1.42%, to 903.25. The

Nasdaq

rose 26.37, or 1.70%, to 1,577.03.

Melissa Lee, the moderator of the

CNBC

's "Fast Money" TV show, asked the trading panel to look into the crystal ball for their forecasts for next year.

Guy Adami was heartened by the easing of the credit markets, the 30-year mortgage rate going down to 5.1% and the S&P closing above 900. "We should be setting up for a nice rally," he said.

But Quint Tatro said the market still has a lot of work to do before it improves on a technical level, adding 919 is the "big number for the S&P now." "We need to establish a higher-high to establish an up trend. We're still far away from that," he said.

Tatro said he would stay in cash and let others do the heavy lifting until a clear trend develops.

Joe Terranova said he hopes 2009 turns out to be a replay of 1988, when the market slowly recovered and ended up 12%. He said he doesn't want a replay of the period between December 1931 and June 1932 when the market dropped another 46% and ended down 32% for 1932.

Tatro said it was just as bad in 1973-1974 when the Dow was off 45% and traded sideways for the next seven to eight years. "People better start embracing trading and forget this buy-and-hold crap."

But Terranova replied that 1973-1974 was a lot different from where we are now because it was very inflationary then. He also said a "little case" can be made for buy and hold when the Dow is at 7,000 to 8,000.

Lee moved on to the banking sector, which was off 57% for the year but rallied today. Jeff Macke had a dim view of the sector, saying these stocks are extremely difficult to value and there is "nothing good" on the balance sheets of these companies.

Terranova said a premium will be paid for companies with healthy balance sheets. And that very well could be in sectors such as health care, energy and tech, which he sees as potential drivers of the market in 2009.

Lee moved on to the next trade of the day: the 14% surge in the price of crude oil. Terranova attributed the spike to a rally in gasoline. He also said to keep an eye natural gas. The first quarter may be tough for natural gas, but the situation will improve in the second and third quarters. "It may be a more investable theme than oil in the back half of next year," he said.

Tatro said he liked the idea of going long on

United States Oil

(USO) - Get Report

, especially with the on-going Mideast crisis.

Lee asked the panel to comment on the fortunes of

Apple

(AAPL) - Get Report

and

Google

(GOOG) - Get Report

, two tech bellwether stocks that are off 50% for the year.

Adami said investors shouldn't rush to buy Apple. Rather, they should wait and hear what the company has to say in its earnings report and about Steve Jobs, whose health is rumored to be declining.

Tatro said Apple has been trading poorly regardless of the rumors about Jobs' health. "These two stocks are setting up for some serious declines if they don't break their recent lows," said Tatro, who is shorting both stocks.

On the lackluster performance of

General Motors

(GM) - Get Report

despite the government bailout, Adami took a dim view of GM because of its huge financial problems, with $11 billion worth of bills in December and only $9 billion in cash to pay them. That's why they need the money from Treasury, he said.

Lee commented briefly on the VIX, which fell to 39 today. Tatro said it's easy for investors to get complacent and believe the market can't go lower. "That's ridiculous. We could go down another 30% to 35% in 2009," he said.

Lee invited Howard Levine, CEO of

Family Dollar

(FDO)

on to the show to talk about the formula that helped the company become the best S&P stock of the year. Levine told the panel the company has enjoyed success because it is offering consumers the mix of products they most need in this economic downturn.

He said the company has seen its margins down "a little bit" but is "hanging in there nicely." He expects 2009 to be "very difficult," but he said the company intends to continue with the same strategy it pursued this year.

Lee asked Dennis Gartman for his trading tips for 2009. Gartman said he expects "very little to happen" in 2009. He said he is sticking to a "boring" strategy of buying stocks with dividends and infrastructure plays that have been around for years like

Deere

(DE) - Get Report

and

US Steel

(X) - Get Report

.

Gartman said investors shouldn't be deluded into thinking they can make gains of 20% to 30% next year.

Gartman agreed with other panelists that Russia is facing a crisis. Russia's economy is predicated on crude oil priced at $100 a barrel, not $40, he said. Moreover, Putin is "not as adored" as he once was and there are many protests in cities where unemployment is high, he said.

Addison Armstrong, director of market research for Tradition Energy, said he expects oil to trade down to the low $30's, probably in January. For the year, crude will average $55. "There will be long periods of sideways trading between $45 and $60 before there is a little turn-up at the end of the year," he said.

Check out the latest "'Fast Money'Portfolios of the Week" on Stockpickr.