The stock market started off the new year in an ugly fashion on Wednesday with oil briefly touching $100 a barrel. The Dow finished down 220 points and the Nasdaq dropped 42 points. With gold also hitting a record high, the crew at CNBC's "Fast Money" called in Dennis Gartman to talk about commodities and Charlie Gasparino came by to discuss the financial sector.

Dennis Gartman on Commodities

Dennis Gartman, author of The Gartman Letter explained that the move to $100 in oil was fake because it was only a one lot trade that printed the historic price. Having said that, he thinks oil will trade to $100 again in a more liquid market. He continues to like the up trend in oil and he feels the trade is to be on the long side of crude.

Gold soared to a record 28-year high above $850-an-ounce. Seymour says gold and oil are trading at tandem here.

Gold isn't going to stop its uptrend anytime soon, according to Gartman. He called gold the third major currency in the world behind the euro and the US dollar. Guy Adami called gold a dangerous trade because you can wake up one morning it will be down $20. Gartman counters that the way to trade gold is to buy streetTRACKS Gold ( GLD) and hedge it with put options on the mining names like Newmont ( NEM) or Barrick ( ABX).

Jeff Macke agreed with Gartman's hedge trade on gold. Jon Najarian mentioned that he took profits in some of his long options positions in the mining stocks on Wednesday. Tim Seymour thinks with gold trading at such high prices mining stocks like Harmony Gold Mining ( HMY) and Gold Fields ( GFI) are takeover targets. Lastly, Gartman mentioned he is long soybeans, corn and wheat.

(Here's one manager's approach to gold on Gold Stocks.)

Charlie Gasparino on Financials

Brokerage stocks took a beating on Wednesday as investors continue to worry about subprime. Najarian explained that he favors the financials 15 days into the month. Adami advises going best of breed and look to buy Goldman Sachs Group ( GS), which he thinks is attractive at these levels.

CNBC's Charlie Gasparino joined the "Fast Money" crew to discuss his take on the financial stocks. He is hearing that Merrill Lynch ( MER) will announce a round of layoffs as high as 1,600 for workers in the bond department. He is also hearing that Citigroup ( C) will announce more layoffs. Gasparino mentioned that rumors on Wall Street are predicting that Merrill Lynch could take an additional $10 billion write-down next quarter which could take the stock down.

Gasparino warns investors to stay out of Bear Stearns ( BSC) until they figure out if CEO Jimmy Cayne is coming or going. Najarian thinks BSC could see a 15%-20% haircut very soon if they don't come up with succession plan. Macke feels that BSC could rally if they make some changes in the CEO position.

(Take a look at this portfolio of financial stocks on Finest Financials Index.)

Word on the Street

Tim Seymour thinks the poor manufacturing numbers helped to take the market down. Jeff Macke mentioned that Wednesday's action in the markets showed that traders are nervous and he feels the near term direction will continue down for stocks. Najarian advised investors to wait till the middle of January before buying stocks. He also favors the exchange stocks for investors who want to play the wild volatility in the markets.

Bank of America downgraded the chip makers on weak 2008 profit expectations. Macke disagrees with the call, but he noted that the chip stocks are trading like the US is in a recession. Adami says he would jump into Intel ( INTC) here. Najarian recommended getting short KLA-Tencor ( KLAC) and Seymour likes Semiconductor HOLDRs ( SMH) for traders who want to short the chip stocks.

PHH Corporation ( PHH) calls off a $1.8 billion deal to sell itself to GE Capital and the Blackstone Group ( BX) after Blackstone couldn't come up with the financing. Adami feels that Blackstone at the $20 level is an attractive buy. He also likes Lazard ( LAZ) for a play on M&A increasing in 2008. Macke remarked that private equity died the second Blackstone had its IPO.

National City ( NCC) fell 5% after the company announced a 49% dividend cut and the shutting down of its wholesale mortgage division eliminating 900 jobs. Adami cautions there's probably more room on the downside for National City with only 3% of the float short. Macke explained this is why you can't play financials off of the yield and book value, because the book value is garbage and the yields are going lower.

Analysts are expecting non-farm payrolls to add 50,000 jobs in December. How should traders position themselves ahead of the jobs report on Friday? Macke says the trade is to buy the Retail HLDRS ( RTH) at $90 because he feels the jobs report will show more then 50,000 jobs added.

Election Trade

Election 2008 will begin on Thursday with primaries in Iowa. Not since 1928 have we had an election with neither a sitting president or vice president in the running. Dylan Ratigan explained that Intrade, an online betting market has Barack Obama and Mike Huckabee as the favorites. Adami mentioned that traders think defense stocks will be sold-off if a new president pulls the American troops out of Iraq. He doesn't see this scenario unfolding under a Democratic or Republican administration, so he would buy Lockheed Martin ( LMT). He also likes healthcare names like Merck ( MRK) and Pfizer ( PFE).

Seymour advised investors to also look at Boeing ( BA) for a defense play. He favors Fannie Mae ( FNM) and Freddie Mac ( FRE) no matter who wins because he thinks the government will have to bail them out.

Najarian only agrees with Adami if Hillary Clinton wins, but if Obama or Edwards win he would short defense stocks. He thinks healthcare is a buy if Obama wins because he isn't for socialized medicine. Najarian feels that if Edwards wins look for General Motors ( GM) and the automakers to trade up because he is for trade sanctions. He would also short the iShares Emerging Market Index ( EEM) if Edwards gets in due to tax policy.

Macke wants to play the other side of the trade and he would buy defense stocks if they get sold off. He thinks it's way too early to predict who will win the elections.

BRIC Trade

BRIC's are terms used in economics to refer to the combination of Brazil, Russia, India, and China. Emerging markets have been all the rage for investors over the past few years with China, India and Brazil leading the way. Is it time to start looking at newer emerging markets? Seymour explained that there are 3 categories of emerging markets. They are the "anchor markets" which consist of Mexico, China, Russia, Brazil and Korea. Next are the "developing markets" which are the Middle East, Turkey, Vietnam, Ukraine and Argentina. Lastly, there are the "frontier markets" which are made up of Pakistan, Kenya and Nigeria. Seymour's best trade idea for 2008 is to buy the SPDR Emerging Middle East & Africa ETF ( GAF). Adami prefers iShares MSCI Taiwan Index ( EWT) and iShares MSCI South Korea Index Fund ( EWY).

Pops & Drops

Pops - Humana ( HUM) traded up 4% after a CIBC analyst made some bullish comments on the health insurer. Adami advised investors to watch this stock.

Dick's Sporting Goods ( DKS) traded up 3% after D.A. Davidson & Co. listed the company in its "2008 Best Ideas" Top 10 list. Najarian mentioned that DKS is killing its competitors.

LDK Solar ( LDK) traded up 5%. Najarian would buy Canadian Solar ( CSIQ) instead of LDK.

Vimpelcom ( VIP) traded up 5% on no news. Seymour says these guys are now going to start selling the BlackBerry in Russia.

Drops - United States Steel ( X) fell 6%. Seymour advises viewers that it's time to take some profits with steel prices at 7-month highs.

Unibanco ( UBB) fell 5% on no news. Seymour would wait and watch for a spot to buy UBB.

BJ's Wholesale Club ( BJ) fell 12% after JP Morgan downgraded the wholesaler. Macke explained that this is a club you don't want to belong too.

Goodyear Tire ( GT) fell 5% after Goldman Sachs initiated coverage of the stock with a neutral rating. Adami thinks with the high short interest on GT it's worth keeping an eye on.

Final Trade

The team shares what they think are the most profitable trade ideas.
  • Macke cautions investors to get out of Bed Bath & Beyond (BBBY) before earnings on Thursday.
  • Adami likes Intel (INTC) for a trade.
  • Seymour recommends Posco (PKX).
  • Najarian favors shorting KLA-Tencor (KLAC) and he disclosed that he is currently short the name.
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