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'Fast Money' Recap: The Fear Trade

The trading panel discussed how investors are shifting to gold for protection against inflation.
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NEW YORK (

TheStreet

) -- The markets sank Wednesday on worries about inflation.

The

Dow Jones Industrial Average

fell 21.72, or 0.20%, to 10,739.31. The S&P 500 lost 5.50, or 0.48%, to 1,134.28, while the

Nasdaq

dropped 14.80, or 0.63%, to 2,334.55.

Brian Kelly said on

CNBC

's "Fast Money" show that inflation worries are driving gold, silver and all the soft commodities to new highs.

Guy Adami said gold is working well now and appears to be heading significantly higher, but he said he fears day when it reverses and "everybody tries to get out."

Joe Terranova said he would take some of his allocation in gold and copper and move it into energy and agriculture so that his commodity portfolio is more diversified.

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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Karen Finerman said the bond and gold markets are a conundrum. On one hand, the FOMC is saying it is trying to engineer inflation, fueling a run on commodities, she said. "And yet you have the bond market where it is. I don't think those two things can coexist that way for a long time."

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Kelly agreed, saying the Treasury markets are artificially inflated. As a result, he is long

iShares Barclaystips

(TIP) - Get iShares TIPS Bond ETF Report

and shorting

iShares Boxx High Yield Corporate Bond ETF

(HYG) - Get iShares iBoxx $ High Yield Corporate Bond ETF Report

.

Adami noted that silver has been performing better than gold. He liked

Silver Wheaton

(SLW)

as a trade.

Melissa Lee, the moderator of the show, said the financial stocks were getting whacked today. She said one major reason for the decline is the slowdown in trading activity.

Finerman said

Bank of America

(BAC) - Get Bank of America Corp Report

has been laying off people because of over capacity. Terranova said

Goldman Sach

(GS) - Get Goldman Sachs Group, Inc. Report

did not have a good day as it fell below its 200-day moving average. He said the stock could fall further if it falls below $140 to $141.

Adami sensed a "structural change" in the investment banking industry as the number of hedge funds declines and trading lessens. He said this trend will affect Goldman,

JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. Report

and

Morgan Stanley

(MS) - Get Morgan Stanley Report

.

Stephen Weiss, a senior managing director for Short Hill Capital, said he's shorting

Piper Jaffray

(PJC) - Get Piper Jaffray Companies Report

,

KBW

(KBW)

and

Stifel Financial

(SF) - Get Stifel Financial Corp. Report

. He said the firms are not geared for algo-trading.

He said

Jefferies

(JEF) - Get Jefferies Financial Group Inc. Report

had made big hires in talent on the assumption that the big banks will be taken out of that business, but that didn't happen.

Lee said gold soared higher again and is $10 short of the $1,200 mark. Terranova said the gold miners stocks work as a trade. Kelly said both the

Market Vectors Junior Gold Miners ETF

(GDXJ) - Get VanEck Junior Gold Miners ETF Report

and

SPDR Gold Trust ETF

(GLD) - Get SPDR Gold Shares Report

are working.

Bill Fleckenstein, president of Fleckenstien capital, said gold is the asset to be in with the dollar standard in its dying days.

Shifting to tech, Lee said

Apple

(AAPL) - Get Apple Inc. Report

hit another new high. Finerman said the stock's valuation isn't crazy, while Terranova said he expects the stock to get to $300. Kelly, though, wondered what the next catalyst is going to be.

In other tech news,

Red Hat

(RHT) - Get Red Hat, Inc. Report

moved higher after it beat second quarter expectations. Adami said Red Hat had a fine quarter and could go higher if the broader tape moves higher.

Commenting on

Adobe

(ADBE) - Get Adobe Inc. Report

20% decline today, Robert Breza, an analyst with RBC Capital, said there may be further downside risk. However, he said he does not see it as a takeover candidate and would wait for the stock to fall further before getting back in.

Commenting on Larry Summers' departure from the White House, Barry Ritholtz, CEO for Fusion IQ, said it will be no great loss. He said Summers oversaw the repeal of the Glass-Steagall Act and the Commodities Future Modernization Act that allowed

AIG

(AIG) - Get American International Group, Inc. Report

to write $3 trillion in derivatives.

He said Summers' departure will increase the influence of Austan Goolsbee, head of the White House Council of Economic Advisers. He said Goolsbee is not an ideologue and would offer less anti-Wall Street chatter.

For the pitch of the day, Kelly touted

Green Plains Energy Renewal

(GPRE) - Get Green Plains Inc. Report

. He said the company has ethanol, grain marketing and silos similar to those of

Andersons

(ANDE) - Get Andersons, Inc. Report

going for it. He said that company should benefit from a government ruling that will increase the demand for ethanol.

Lee noted that money management fees are going down as investors shy away from equities. Kelly said brokers will suffer for a while as money will not be coming back soon to the equites from investors who have gone to the bond markets.o

Lee noted that Jefferies had said that its asset management fees were down 96% in the quarter. Finerman said the sharp rise in ETFs is a major reason for it.

In the final trades, Weiss liked

Qualcomm

(QCOM) - Get Qualcomm Inc Report

. Kelly said he shorted

State Street

(STT) - Get State Street Corporation Report

. Terranova said he liked Silver Wheaton. Finerman said she would purchase Russell 2,000 puts, while Terranova said the liquidation of Adobe isn't over.

--Written by David Tong in San Francisco.

To contact the writer of this article, click here:

David Tong.

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