'Fast Money' Recap: Goldman Fallout

The trading panel discussed the extent of the damage from the Goldman bombshell to the market.

Author:: David Tong
Publish date:: Apr 19, 2010 7:39 PM EDT

NEW YORK (

TheStreet

) -- The markets were mixed Monday as investors sorted out the fallout of Goldman Sachs' civil fraud charges.

The

Dow Jones Industrial Average

jumped 73.39, or 0.67%, to 11,092.05, while the

S&P 500

gained 5.39, or 0.45%, to 1,197.52. The

Nasdaq

fell 1.15, or 0.05%, to 2,480.11.

Pete Najarian said on

CNBC

's "Fast Money" TV show, that the numbers on

IBM's

(IBM) - Get Report

earnings were good across the board, although there was some concern about its gross margins, which fell below Street expectations.

For a breakout of some stocks from a recent "Fast Money" TV show,check out Dan Fitzpatrick's "3 Stocks I Saw on TV."


3 Stocks I Saw onTV
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Guy Adami said he expects the stock, which pulled back in the previous quarter on a good earnings report, to drop, giving investors a chance to buy Big Blue on a pullback.

Karen Finerman

said the stock's valuation looks fair, while Tim Seymour said IBM's story continues to "get better" as evident in its growth in global services and free cash flow.

Jim Goldman, a

CNBC

reporter who was listening in on the conference call, wondered whether IBM's gross margin miss will continue into the second and third quarters. He said the numbers are neither too hot or cold.

For a derivative trade, Brian Kelly said he would take the uptick in consulting and software services in IBM's earnings and invest in

Rackspace

(RAX)

, which provides consulting and computing software services to small and medium sized companies.

Melissa Lee, the moderator of the show, shifted to another big story for the day, the midday turnaround in Goldman Sachs, after

Bloomberg

reported that SEC vote to sue Goldman was 3-to-2 along party lines.

Finerman said she didn't think the narrow vote will lessen the public outcry and momentum to get something done in financial reform. She also said she didn't know what the fallout will be from Goldman's securities fraud case.

Dennis Gartman said he expects Goldman to report good earnings Tuesday. However, he said Goldman will be damaged for a long time to come from this episode. "The public wants to see this happen," he said. "The implications for the financial instruments arena are material and will last for awhile.

He advised Goldman's CEO to be straightforward, but Lee said it doesn't look like he will appear. Rather Lee said the company indicated in a release that the CFO and general counsel will be taking questions.

Lee noted a breaking news story regarding another volcanic eruption and possibly more volcanic ash coming to Europe. Kelly said his derivative plays off the air traffic snafu is British discount airliner Ryan air and British Airways. Adami said the breakdown in air travel has led to a glut in jet fuel, which "is very expensive to store."

Lee brought in Lawrence McDonald, managing director at Pangea Capital Management, who expects the SEC will call in Lehman Bros executives and question them about mortgage-back securities and hidden assets. He said credit default protection for Goldman has doubled and is now higher than that of

Citigroup

McDonald said

Deutsche Bank

(DB) - Get Report

and

UBS

(UBS) - Get Report

may be next because they were leaders in the CDO space.

All signs were bullish in the quick "360 review" of

Apple

(AAPL) - Get Report

, which reports its earnings this week. Najarian said he'll be watching for the sales of Macs, which he insists are the key driver of the company.

Najarian noted that there was heavy option activity in Citigroup as it approaches $5. Seymour said that although Citigroup turned in a good earnings report, it's not making money from trading.

Lee brought in

Hasbro

(HAS) - Get Report

CEO Brian Goldner, whose company turned in a solid earnings report.

Goldner told the panel that the company's brands are seeing the benefit of consumer trends. He said the company's top eight brands account for 50% of its business and do not rely on movie tie-ins for success.

Adami said Hasbro has become a global company and its valuation is fair. Seymour said the company's margins may come under pressure.

Returning to Goldman saga, Lee brought in Stephen Gandel, a writer for

Time magazine

. He said expects more lawsuits and regulation and believes hedge funds will be the next in line to come under the scrutiny of SEC.

He said there needs to be more regular reporting of trades by hedge funds so that the SEC can be warned ahead of time of a bubble. Both Seymour and Finerman doubted whether hedge funds contributed to the problems that Goldman now face.

In the spirit of Earth Day, Adami came away from riding electronic cars convinced of its future. His trade:

Ford

(F) - Get Report

for its new line of smart cars and

BorgWarner

(BWA) - Get Report

In the final trades, Seymour said he liked

Potash

(POT)

. Adami was long

Eastman Chemical

(EMN) - Get Report