'Fast Money' Recap: Reflation Trades

The trading panel discussed what trades to make after the Fed's announcement of another round of quantitative easing.

Author:: David Tong
Publish date:: Nov 3, 2010 7:44 PM EDT

NEW YORK (

TheStreet

) -- The markets nudged ahead Wednesday as the

Fed

moved ahead as expected on a second round of quantitative easing.

The

Dow Jones Industrial Average

was up 26.41, or 0.24%, to 11, 215.13 and the

S&P 500

rose 4.39, or 0.37%, to 1,197.96. The

Nasdaq

moved ahead 6.75, or 0.27%, to 2,540.27.

Joe Terranova said on

CNBC

's "Fast Money" TV show that the market has navigated a lot of headwinds and could move higher on some positive news on unemployment and the potential for the Bush tax cuts to be extended to everyone.

Guy Adami said he was looking for a bigger bounce given the election results and the Fed's action. Steve Cortes agreed, calling today's market boring. He said he would take profits if he were long and short if he were trading.

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 on TV
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Pete Najarian noted the volatility index is still below its 200-day moving action and that there was no panic before the election results and the Fed's move today

Melissa Lee noted that

Qualcomm

(QCOM) - Get Report

was up 9% after an earnings beat and on being a supplier to iPhone 4.

Terranoval said Qualcomm erased its downward trend earlier in the year by taking a 80% market share in the Android platform and providing the chip for the Windows 7 phone.

Najarian added that investors are excited about growth potential of CDMA smartphones.

Richard Volpe, head of USD interest rates for RBS, said the Fed has unleased a lot of buying move with its quantitative easing move, about $850 billion worth over the next six to seven months. He said 70% of the purchases will be between maturities of four to 10 years. "The intermediates will lead the way."

Another QE trade that has been mentioned is oil. Terranova said he expects oil will reach $90 a barrel before the end of the year. He said he liked the oil service names and

Hess

(HES) - Get Report

. Adami said he liked

Baker Hughes

(BHI)

while Najarian said he jumped into

Marathon

(MRO) - Get Report

Anthony Scaramucci said the thinking in the hedge fund community is that Fed expects a 3x multiplier effect from QE2 that will generate $1.8 trillion in liquidity that hopefully will lead to more lending.

He said

(BP) - Get Report

is his pick for a reflation trade. He said BP is attractively priced at 6.7 times forward earnings, with a lot of its headwinds removed.

Lee brought in Herb Greenberg, senior stocks commentator for

CNBC

, to comment on

Open Table

(OPEN)

which was up 11% today on a big earnings beat.

Greenberg said the earnings beat upon closer inspection looked like a "meager" beat. He said what was disconcerting was the company reaching for growth with a free reservation system that is attracting less customers.

Brian Kelly discussed several ways to profit from the reflation trade. He said he would go into the

Homebuilders ETF

(XHB) - Get Report

for a broad exposure to homebuilders. He also liked

Plum Creek Timber

(PCL)

, which has a 5% dividend and is looking to break out. He also liked

Home Depot

(HD) - Get Report

, which he said is on a nice uptrend.

Peter Boockvar, a Miller Tabak equity strategist, argued the Fed "has it backwards." He said the Fed is trying to "goose assets to make us feel wealthier and get us to spend."

However he said the use of cheap money is reaching the point of diminishing returns. He said the Fed should be doing everything possible to deleverage assets. Instead, he said Fed is risking losing control of the bond market and a toxic scenario of a higher interest rate environment when assets are still highly leveraged.

In the current environment, Boockvar favors investing in gold, energy and agriculture.

Cortes favored cutting taxes as a better move to fix the economy because the private sector, and not the government, to be in charge of allocating capital.

With sugar prices climbing, Kelly said he would short

Hershey

(HSY) - Get Report

In the final trades, Terranova liked

Devon

(DVN) - Get Report

. Adami said to take a look at

Cooper Industries

(CBE)

. Cortes said he was buying Treasuries. Najarian said he liked the casino stocks such as

MGM Resorts

(MGM) - Get Report