tv Fast Money CNBC February 16, 2012 5:00pm-6:00pm EST
us. want to thank everybody here at second market for having us on their trading desk today. follow on twitter and google plus, have a great night. i will see you tomorrow. i'm melissa lee, here are tonight's top three trades, stocks turned to a new high. how can you manage the trading range? microsoft climbs to a four-year high stocks often called dead money finally coming alive again? and we will trade all the after hours action from by due to nordstrom. live from the nasdaq market site this is "fast money," let's start trading, quite reversal over stocks today, three charts that told us risk appetite was getting back into the market. take a look at the s & p intraday. steve grasso, what levels you watching? >> 1376 the level to watch from july 7 of 2011. you want to look at that because that's the level that we have had so much trouble breaking out from. having said that, you just said,
we going to break out here, we started the year at 1257. we are up basically 8%. we have broken out. now it is a matter of can we absorb these levels? the way down, look at 1333, on the way up, 1370 but yes, we are poised to break above 1400 if i should get ahead of myself. >> 1370, the importance of that, that is the may 2011 high, correct? >> may 2011 i believe that was just a reference point, that was the osama level. >> heath, would you agree? >> 1362 3 to me is the most important number. the closing high of april 2011 when a lot of people got sucked into thinking that inflation was actually gonna turn into growth. there is a big difference between the two you see oil rise and basic material rising dollar falling to me, can't get above 1363, again the prior closing high, just making lower highs, again why we shorted the s & p at 1357. >> the minute to minute or the
trading ranges that to me are not -- with all due respect to that, keith, that is probably good technical call, too. >> just changed. >> it is really about fundamentals in that the data keeps coming out and giving people reason to buy this thing. we came in, asia trading things very sloppily last night, it looked like this would set up for a bad day after what happened with apple. between the news that ecb maybe exchanging greek bonds and the fact the u.s. data including payroll, jobless claims, back to march of '08 levels, what people are trading on the you get the moves that we saw today, i think the most important moves were in the material stock, not microsoft which i know we will talking about, the reversals in the steels, free port mac, international paper, names people have been waiting to see join back into the rally it is about rotation. >> i want to go through the two other trade, am for one, which tim mentioned, key reversal in apple. considering yesterday's price actions did see that turning higher today above 500. you mentioned the metals,
watching copper as well. intraday reversals, too the market was higher. >> listen to gary kaminsky and cramer, that people were using it as a proxy making a mistake what got people in trouble today, they got short the s & p on the back of that key reversal in am. the apple reversal still in play, the stock wound up closing higher today but you saw pretty mop officer reversal yesterday in apple on what was extraordinarily large volume for the stock that is still in place. i think people shorted the broader market on back of that everybody is camp on this one. the clear fundamentals matter, what the market's trading on but we have said for a while now, months, that the s & p was going to trend up to this 1350, 1370 level. here we are. now i think it's on the bulls now to prove themselves and to ratchet us through that level and we will see what happens if and when we get there. i think it will be much harder to breakthrough that 1370 level
than going from basically 1250 to where we are now. >> mentioned you were short in yesterday's market, covered the session lows, went back in and said it is like playing pac-man, why? because you're playing the ranges? >> exactly. you have to find way or process to dynamically manage the risk of the range. people can make up stories why we are going up and why we are going down, if you can pick off 15 to 20 points in the s & p and be really sober about it really sober, 1341 cover, reshort on the close, i think that this market is setting up to be a lot lower potentially three months from now, people wake up to it not being above greece, about china slowing, the rest of the world really occurring, inclusive of the u.s., partly going to be a consumption story growth slowing as well. >> i would probably ask what timothys about that, we are probably seeing the same camp where we are technically based but if you look at it on fundamental level, everyone i speak with i spoke to a couple of economists today, do feel the same way he had just stated, that in the next couple of
months or so that the market is poised to fall off a cliff basically and test 1257 to the down side and maybe even break 1200. >> based on what? based on fundamentals? >> based on the fact right now why the market is moving up in their mind is that it is the best spot for yield when you look at where the treasuries are, it looks at bonds, looks like equity tryst the safest hotel at this point but they are looking at europe and this is where i differ from keith. look at europe, not only recession but depression and that does spill out to us as far as growth is concerned then after that little bliss of the election. >> i think europe, first of all, europe in recession is a lot different than europe in implosion. and as long as the ecb continues to find a way to back door paper over and this is -- don't kid yourself, this really is qe 1 for the ecb, this is very good news. u.s. exports to europe are not crucial. u.s. exports to the rest of the
world are becoming much more important and again, i look at a thawing inflation environment. i look at earnings in emerging market companies coming out, especially latin america the last couple of days, big searle companies that we were following in latin america came out today with huge numbers, i'm not seeing that fall off in growth. so, show me u.s. data, tell me u.s. economist that is not amazed at the resilience of the u.s. data. these data points, nothing wrong. >> this is really old. everything you said to me from an economist perspective is as plain as the sun rising in the east. you look at growth from 0.36% in q 1 last year to 2.8% and now everyone says that growth is fine. the risk to the story is actually fundamental and quantitative at the same time. if growth were to slow to 1.5s for 1%, you're going to see a marked expectations drop relative to this rosy type picture that everything in europe is fine. >> i'm having trouble understanding though, we continue to get data points,
many of them are backward look bug keep running into a series of things, we have at least improved over some of the dire labor circumstances, some of the house numbers, some of the banks that not only shored up their balance sheet bus direction from financials because, one, we are getting normalized earnings, two, npls have recovered, three, greater claire point some of the legal and the legislative issues. >> i completely agree but the problem is the market agrees, too, as steve just pointed out. the market up 8% year-to-date in the s & p, germany up 15, russia up 20 there are no knowns in this market. what will happen next, inflation will slow growth, if it does shall. >> where is this there inflation? >> let's agree to disagree, guys, we can go on all night probably. >> we should. >> no, actually, we shouldn't. until 6, then jim cramer comes on. moving to our next trade, one stock hire, microsoft surging to a four-year high. morgan stanley saying rebalancing of the s & p 500 could lead to another catalyst
for microsoft to move higher. very interesting call here. >> it is an interesting call. i think it is a little bit late, frankly, since -- i will go back and say, we have talked about microsoft since it was a $24 stock saying rick spoke to you, spoke to jim cramer, carl on that morning as well, stayed is probably the cheapest stock out there we piggybacked that, said it is worthy of a look, nothing else, here we are at 31 1/2. what does that mean? stock traded 100 million shares, up 4%. 4% in microsoft, given the move you have seen the last four moments is huge, market cap quarter of a billion dollars f you are thinking of rush nothing microsoft tomorrow on the back of this i think you are making a monumental mistake, no to the say it can't go higher from here, we have talked about it for a while, today is the day you should be getting out of the trade, not get nothing t. >> talk about that longer term catalyst that may be reason for microsoft shares to move higher later in the year, bring in the analyst who made that initial
call, the note out today, adam holt of morgan stanley join us on the fast line. adam, great to speak with you. >> thanks for having me. >> basically, your people were smiles of course the s & p 500 is market cap weighed and float adjusted. bill gates is selling a tremendous a number of shares, for that reason, if he goes at this pace essentially, microsoft would have to be reweighed on the s & p 500, move to a weighting of 2% from 1.86%. what is the -- in your view, is this really going to happen? it the rebalance isn't until september. >> going back to last fall, we started highlighting our belief that windows 8 was going to be out earlier than most people expected and would be a catalyst not in consensus numbers. that is now starting to work its way i think into expectations for microsoft, but there are a series of other catalysts, we have talked about pc numbers being too low for the back half. we have talked about office 15 being a catalyst that's not
numbers, we have talked about margins being too low, the company is going to give us some more cash back, still trading historically low valuation, despite the move in the stock, below where we have been previous periods going into product cycles. i think a lot of things beyond just the rebalance that are positive here. today, we highlighted the rebalance, bill gates has been selling stock every quarter for many, many years and has finally now moved below that 10% threshold. that has happened. so, this will happen in terms of the rebalance. there isn't a risk that it doesn't happen t will happen later this year, as you suggested in september and you should see about a 12% increase in the weighting for microsoft which will trigger significant buying as we talked about in our note today. >> adam what would you say, i think you wrote about this in your notes, clarify the investor base that you think has to track this -- these passive investors and how powerful that could be and again begin to speculate on literally what this change in percentage might mean if these
guys had to follow their bench mark? >> sure. 16% of the stock is owned by index funds or index-related funds. if you look at the percentage increase in the weighting, trigger 130 to 160 million of incremental buying. it is always difficult to know exactly what that will mean for the stock we get closer to the vehement, we will have more visibility but in general, that's the base that we are talking about and the numbers that we are talking b >> adam no doubt you have done much work on this obviously, sure would you lake to put this note out $4 or $5 ago. would you concede, given the move we have had in this stock, that there is a potential to -- to pull back 10 to 15 sisters in we are trying to focus own sort of the trading aspects of the name and given the run microsoft has had, does it appear is poised to pull back? do you think it continues to grind higher from here? >> i think, as i said at the outset, pretty important to look at this in the context of the body of work that we have done certainly around this name. i mean, the first time that we really started hammering this
stock to the upside with our positive view is back in november, we started talking about windows 8 and published a series of notes on some of the topics that we talked about, including, you know, a couple weeks ago about margins. so, this note in particular and the commentary, obviously the stock was up today, i don't know entirely because of what we published but really a series of things i think put the stock to where it is now. if you think about looking forward, as i said, most of the catalysts still in front of us. number one. number two, from a multiple perspective, a cheap stock at ten times. you have room for the multiple to continue to move higher even if it just gets back to where it normally does in a cycle. there's still another $5, $6 of upside in the stock, it has had a nice run. >> the windows 8 beta launch is some time next week what are you specifically looking for out of this beta version? >> i think you are going to get a couple of things. with microsoft, just going to bring them intoey not just tab let bus touch-based -- a touch-based operating system
help with devices that are tablets but also devices that are hybrid devices, opens up microsoft's operating system for a whole new class of application. additionally, you should see a positive impact on the pc market. microsoft will see its oem partners rebuild inventory, allow them to outpace the market. uptick in retail sales and the corporate upgrade cycle progressing are worry about the xp expiration in 2014. a number of factors will be putting upward pressure, not just the pc mark let the next four quarters as well as microsoft's window business. >> pleasure to speak with you, thanks for your time, adam holt of morgan stanley. talk about an ecosystem. microsoft's window 8 to co-spur upward pressure on this whole ecosystem. >> interesting people talked about dell because of david einhorn this week, so now if you just carry that out a little bit
further, people are coming from $14 up to $18 and change now, so, what's good for this refresh cycle is as adam just said you good for ibm and also good for dell and good for hewlett. >> the question with the new mack operating system due to be launched, the mountain lion being known now, tim, i know you have done -- >> that was his nickname in college, too. >> snow leopard. but i mean, i think that these guys are in a great place. i would just -- what's interesting about microsoft, could be having the same conversation two days ago about am, the conversation we had when apple had the intraday. the valuation is very attractive, a company i think actually, based upon -- easy comps for 2013, a place it could continue to outperform the refresh cycle, the early previews on windows 8, this is a much less bug-filled enterprise than we saw with windows 7. i think a lot of great news,
guy's making a very good point here. some point you saw it wasn't as dramatic as a well to days ago but you saw ostensibly a reversal intraday, sends a message on a very high volume move, might take profits off. >> what do you see here in positioning of microsoft? >> microsoft steady eddie on the revenues and earnings side, you see consistent and fairly optimistic bets on the options side. people aren't excessively concerned. make an important point here, i can appreciate the stock has made a good run off the bottom, a lot of stocks have, so that's not that uncommon what we are looking at though is a stock that is trading cheap relative to the market it is trading cheap on an absolute basis. certainly trading cheap relative to its own historical multiple going back several years. in fact, if you knocked out where it was with the lows in 2008, it would seem even that much cheaper. so on any kind of a pull back, i think the stock is very reasonably valued here. >> coming up, your trade on all the big movers in the after hours session, plus our eye on
welcome back to "fast money." let's get after hours action in nordstrom. shares are trading down just a touch here. the current quarter they just reported looked decent, a guidance that is a problem, 33345, including an additional 53rd selling week came in below analyst expectations. so, stock is at a run. >> at a huge run. now tough ask yourself, operating margins were better than expected, 12.6%. are people going to have trouble with the inventory build? inventories up 17.5% year-over-year. apparently not. i got to till something, talk to an analyst, 15 times forward earnings where nordstrom's is trading now, given the run that it, i would look to a macy's candid date 10 1/2 times seems better positioned for the stock
to go higher than nordstroms here. i'm sure other people take the other side of that but nordstrom's great run, not thrilled about guidance, inventory build, rather look to macy's that given the valuation. >> bring it our analyst, erica mashmeyer from robert w. bared. great tough. i know you are a fan of in order strong, $60 price target on the stock, closed at 52.18. in terms of the year, what was disappointing? >> growth margin news lower than expected, that was higher than expected. the trick is really the reasons for this were all positive. will help them drive extraordinarily strong sales. >> what was the reason for it so positive? >> making investments in their
e-commerce business in ip and people, essentially 2012 is going to be a big investment year for them. there are some technicalities around it, essentially investing in it, a greater amount of pressure on sga than just opening more stores, but has a very nice effect on return on invested capital. >> in comparison to retailers thought, curious where you stand on let's say a macy's, for instance, a lower multiple than a nordstrom at this point, given the big run in nordstrom. >> you know, i don't cover macy's, but nordstrom in particular, 15 times for one of the highest quality retailers in the business. they have got conservative guidance, typically, that tends to move up throughout the year for them. it is a stock that has underperformed year-to-date relative to the s & p on the
group and the sector itself is attractive and nordstrom's is one of the best places where you could play it. >> erica, be a ber crom bill is around that level we often hear about takeout store rained valuation thrown on it, whether it's 60, 80, $100. no one know what is valuation is. should we be looking at it that way or still too much euro exposure? >> with be a ber crom business i think it is absolutely fair to look at where other retailers have been taken out, trading at roughly 6 1/2 times trailing to ebidta. j craw closer to 8 eight times. clearly europe exposure is a factor. improving sales margins as it grows. thank you for your time, erica mash meyer of robert w bared. >> she doesn't cover, don't get into t
>> stock from 34 to 42, on breaking out, levels since '08, maybe up to 50. jc penney had a huge run, sold off a little today that is another name you might want to take a look at. >> way tonight get to the laggard of the session, notable, amazon, saw the shares fall 2%. morgan stanley concerned about slowing sales growth. also about competition from apple. which i thought was interesting, given most of the sales are just general merchandise sales. >> at the core of their argument was a lot of the bricks and mortar amazon top line is coming from or used to come from dvds, from videos, from video games, whatnot and people like apple or at least the online gaming, this is all taking some of this away. i think this gets back to cuts of the core, people have disagreements on this desk tonight is that at 130 times
earnings, i don't need to own amazon in an environment i don't know the u.s. consumer is alive and well. looking for fantastic companies, amazon is that, but is it at a great price here? that is ultimately how i'm investing a lot of value out there why i see a lot of rotation out of amazon into cheaper retailers or other online plays is what's going on here. >> i agree with tim on at a that. that. short amazon, to three reasons, top line slowing, margins compressing and expensive stock. country be an expensive stock if you have the other two things happening the same time. the rest of the world has to worry about a high multiple stock in that type of environment. other big stocks in the nasdaq consumer related look like amazon. bed bath and beyond looks the same and that is the concern for the expensive stocks. can't deliver sequentially accelerating revenues and margin expansi expansion, they are going to have a problem. >> if you val wait it tough val wait it as a bunch of different things, as a cloud play, streaming play, retail play.
luke at it as tech, number two on the tablet side. i know that i have four kids, we bought -- i have all their tablets floating around my house, you smile, why, 'cause i have a farm of kids? >> yeah. they are adorable, but -- >> so you have to look at it as a number of different things. i agree with you, if you carve it out and try to val wait it on one level, yes, but when you look at it, it encompasses the whole field, i think it sells to you. >> quickly i understand whatever be is saying, talking about amazon being ridiculously expensive, crush earnings, they will be penalized for the valuation, look at the stock today, traded down to 175 and change. august low 177.10. traded two times normal volume today. what does that mean? back in august from 175 to 246 by october. i'm not saying that same type of move is going to happen but now you have something to trade against in the form of that 175 low today. so to me, the risk reward sets up better on the long side than the short side. not saying it can't go lower, in terms of a trade, might be worth
risk/reward ratio is what we look at. we believe there is a lot more value if it was sold. that is all we are saying. put it up for sale and let the shareholders decide if you want to take the risk off the table. >> that is carl eye can on fast money a couple days ago urging cvr energy to put itself up for sale and eye can himself is making a tender offer for the entire company. certainly we thought that was within the realm of possibility.
but at this point, mike khouw, i am curious, you were following the options on cvr when we were talking with carl eye can before, i'm wondering what you are seeing today. >> it is interesting because i have a couple quick thoughts about it. if you take a look at the mean ebidta before you started to see the wti brent spread widen out, withcy really how they are capitalizing right now, they were probably at mean ebidta 230 million, times eight, $2 billion in enterprise value, figure 18 months of being able to capitalize on that widespread is another $600 million, he is bidding 2.4. i can sort of see what he is getting at. the problem is he is encouraging some other refiner to step in. right now, trading about four times ebidta. everybody else who might buy it trading at lower multiples, not accretive for them, maybe sonoco, one i could potentially look at. i see this as a fair play for him to get the action going. i don't think that he is in it to make 10% though.
>> right. when it comes to the other refiners, grasso, you talk to analysts, they say not a lot of refine verse the balance sheet right now to make a bid for cvr. >> i'm going to take it a different route because mike just covered it perfectly. i think you could invest in refiners across the whole space right now with the exception of valero, a geographic thing, mpc, hfc, all of them on the back of even this but margins are incredible for them, as if they are printing money again. we have seen this cycle happen over and over again but as to mike's point, i think another couple of months to play out to the upside. >> yeah, i mean, i look at somebody like tesoro, how think has ral very inefficient business but you look at their ebidta, this thing three times ebidta. again, what was once a big issue is not i think even as bad as it had been and evaluation basis, attractive business there. >> did you see today the big spike in shares of ticker cvr? >> chicago river.
can you imagine making traced on the wrong stock and finding out later on that you entered the wrong ticker? >> sophisticated. >> embarrassing right. >> ridiculous. >> if they made money on t. >> i mean, look at that. >> imagine accidentally buying it, figuring it out. there you go. >> weren't watching the show, if they had, they would know what the ticker was. >> check your ticker. within one of our very own will reveal the next big idea that will take the markets from here to china by storm. more "fast money," straight ahead. ♪ [ male announcer ] offering four distinct driving modes and lexus dynamic handling, the next generation of lexus will not be contained.
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welcome back to fastmoney. i want to take a check on by due, a stock up 22% this year, it is up in the after hours session, first quarter adjusted earning, top expectations revenue in line here but again, the pop in the after hours, tim. >> this is a stock both technically, around 145, i think it runs into some headwinds. the numbers here, first of all, 77% great, this seems to be recurring record for these guys with hear this every quarter they beat and their growth
remains north of 70%, down from 80 but came in at 95 versus 90. i would be very careful at these levels, just because, again, we have been bucking around these levels the last four months with by due, they continue to grow, be the dominant pain and paper over the regulatory issues in china. if you believe chinese shares start to make a move, a big if, people very undecided on chinese policy this stock will move. until then, you own a company at 53 times versus 75 times. on a relative to itself basis it is not terribly expensive for the growth it is giving you. >> but relative to a gaggle. granted it is not google, google is not by due, you are investor, you look at them as the same basket and make a relative judgment on a pig picking basis,ed by dbasis, ed the growth trajectory is steeper as well. >> i don't think by due is spending the money in cap x that google is. about how to get a mobile
broadband dom naps it has google at home in terms of a search market no one will penetrate. i think the jury is out where they feel comfortable. >> if you look at baidu in december, the thing's at $114 free fall, china second consecutive year of double-digit losses, growth was slowing, then the world got a lot better, particularly in chinese demand in mid-december. my view, we have been long china since december 29th, sold china today because i think that chinese growth is slowing, as it usually does when oil is running over $110 a barrel. >> would you agree with that, tim? >> look, i think, again, people have no idea what chinese policy is going to be. people have put a lot of vested interest. i think china is in an easing policy which doesn't mean you are getting your 2008 easing and stimulus mode but china will
continue to soft land this thing. there's major, major real' site problems, i would not be shorting china. >> let's move on here, seen it yourself, people buying a coffee if starbucks, instead of pulling out their wallets, they pull out the cell phones, mobile payments more and more popular and zack karabell joins us to tell us why he think us it is the next big thing. zack is this taking off more so around the world or here in the u.s. or are we leading the world on this technology? >> we are certainly leading the world on the technology, neck in neck with the northern europeans and the koreans with their proprietary network a little more advanced in the mobile payment, you take the phone, go to the vending machine and use it as a credit card/communications device. to piggyback on the baidu discussion, you know, this massive untapped market for mobile payments is china, where 700 million mobile subscribers or 900 million mobile subscribers or just call at a lot of mobile subscribers and
only 5, 10% of those, depending on who is counting are using mobile payments. so you know, there you have a growth -- >> what network, zack? the 3 g is almost light years away right now. you are talking to a guy very bummed up on the chinese mobile scene. i'm not sure that this is the growth path. >> no, this is a nascent thing. >> nice use of neigh senascent . >> i used it once, i was getting mugged. >> we expect the use from you, zach. >> you are totally right, tim this is not a current thing, we talk about the fast trade and where it should be, baidu was the fast trade two days ago. this is more if you want to see where a rapid growth trajectory is more closely on the verge of breaking out, there you have a lot of companies making pretty significant investments, american express did a couple
hundred million dollars to put out a mobile network there obviouslon v obviously paypal, master card, and i think you want to look for that next stage of where's that not just accelerated growth but step up. >> to the point of nascent, june per research sayings mobile payments will trip toll $615 billion, a global number by 2015. comes to visa and master card, see the bump, thinking there will be more transactions? this is just taking the place of a swipe and so why should it increase -- why should -- >> if we get to the point and this is where the united states is not a leader, where the phone has a barcode technology, ali baba does this with you aly pay in china, you will have a
massive step up in transactions, more the debit level than the credit card level that plays into both visa and master card and their debits and am ex is playing catchup. that will increase transactions, that starts replacing smaller transactional money for purely transactional daily stuff that you use your phone for. >> such as starbucks. zach uses his phone to buy that naugahide jacket he is wearing. >> where does the naugahide come from? >> the naugas. >> a small native tribe in new england? >> a great look. >> thank you. i appreciate that. >> handsome. >> love zach. >> anyway, zachary, thank you. >> thank you. >> sort of just tentatively. i think thank you for that. anyway, getting back to the trade. ver phone, interesting, karen was bringing this up whole notion, movement toward this chip technology for visa and
master card, encryption chip, ver phone that too, at the crossroads of these new ways of paying. >> finerman has been on that. it still comes took visa or master card. on a good tape today, visa down a percent, gives you a little bit of concern, the stock has been a monster, we have talked about for a while. i think if you can find visa or master card, visa specifically 105, you grab t to me, leonard v and ma are still the best ways to play all the new world spin. >> buy the notion that visa and master card will benefit because it is easier to do the transaction? people will spend more money because they can swipe their phone instead of swipe their credit card? >> the question is are they converting people to give up -- is this move people away from a paperless approach? i think this is a case where an emerging markets, you are going to see a leap frog of this technology, seen this across the cellular space. my good friend mercado lieb bray, guy's good friend, but
mercado page joe a good part of how these guys are taking business. by the way, they report next tuesday and this is a stock that, you know, we talked about amazon, a similar valuation issue but a company again growing much faster. >> the price action, as tim will tell you 101 and change, lower on the day, very similar day as to apple yesterday, although we did not make a key reversal, but very close in melly, keep your eyes out there. >> like two peas in a pochltd. >> george up to university, baby. >> take a break here. up next, morgan stanley and goldman sachs were two of the big bank, moody's issued a review ratings for today. up next, an analyst has an outperform on both stocks. find out if he is rethinking the ratings. stay with us. ? are you still sleeping?
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downgrade, morgan stanley could see it cut by three notches, goldman by two. what does this mean for both firms? bring in brad hands. the market will tell us, given the price action in the stocks, that this is all out there, not new news. is that true or is there anything in the moody's note that you think we should actually, you know, listen to? >> well, we should look at the moody's. moody's remains a powerful name. i think the issue you have in terms of the stocks going up has an awful lot to do with the fact that, you know, we were coming up on a long weekend, a potential greek deal ahead of us, you don't want to be short prior to that situation. so, the financials, i think a lot of covering going on. in terms of the credit spreads, you saw credit spreads open yesterday, came in a little bit today, the issue with these companies is more of a fundamental issue which is you bring the ratings down on the banks, what you're going to do is you're going to affect a number of businesses.
so, goldman and jpm, whose ratings are going to be brought down, likely to be brought down the least, are going to remain somewhere in the range of a weak to middle single a, that is going to be fine in the sense that they are going to be the best derivatives players that exist, powerful derivatives raters are the best ratings. morgan stanley, derivatives book, fixed income, will face the issue of counter parties being less willing to move forward out on the curve with them. um see profitability and derivatives come in, counter party sick. the bid offer spreads on derivative derivatives it will affect them over a period of time. >> morgan stanley is a position
that i'm long and worries me big time every single day. why? because i think that you look forward to japan as a potential of verne debt issue in march is that on your radar at all in terms of how that could affect morgan stanley give the japanese ownership, given their exposure, anything at all given nobody is talking about japan and everybody is still talking about greece? >> well, their exposure to japan, obviously, global bank. i think what we should recognize now, we have learned this from greece and europe, is that all of these banks are tied together. with avenue problem in japan. all the financials that are global financials are going to go down. so i mean, i don't want to pooh-pooh the morgan stanley issue, i think your issue with morgan stanley is more when does it pay off? you know, morgan stanley has not delivered on their retail promise of getting their 20% pretext margin. so the argument on a morgan stanley is when will the market begin to believe their strategy? and their strategy is going to be believable when you actually start seeing the retail numbers
improve. now, they are doing everything right now to try to get them moving but let's face it, morgan stanley's running at a 9% pretax margin in their retail business while bank of america, hard lit paragon of good management is running about a 16% pretax margin. >> hey, brad, it's tim. play maybe "fast money" trader for us, stock jen had fourth quarters out, the spanish regulators lifted the ban on shorting spanish banks. despite the run and your comments is this stale good trade to maintain a long exposure to the u.s. and be short the european banks because of all the uncertainty ahead? >> you know exit's interesting, you asked was there anything in the moody's call that was worth commenting on. moody's emphasized the fact that all the banks are interlinked. so as long as greece doesn't blow up, as long as europeans keep kicking the can down the road, your trade probably works. if we start get nothing what looks like a tail event, then everyone goes down together and
there's the problem with all of the -- the large cap banks, which is, you know, that the u.s. economy will do okay and m and a will come back and equity underwriting will come back that works that works only as long as europe, you know, doesn't self-destruct here. >> brad, going to leave it there, thanks for your time. brad hintz of sanford bernstein. hit "options action" now. mike look ac at trade on hewlett-packard ahead of earnings out next week. >> saw somebody buy 9,000 of the weekly 29 puts that expire next week ahead of earnings. they paid 67 cents for those, risk about 2.2% of the stock price to make a bearish bet. a stock trading cheap, tape relatively strong lately, hard to short a stock like that, but a stock that seems to chronically disappoint on earnings. nine out of the last 12 earnings, five days later, stocks down 2 to 15% and rarely trades up. i think somebody is saying if i'm going to make a bet on an
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let's look beyond what happened today, steve. >> apple is going hire, up upside catalysts, people stay is an upside market there is apple tv, ipads, saw them already, i phone sales, too many catalysts, still an apple market, going back up. >> so be pa. a short squeeze in the fxe. keith what do you think? >> what is going on in the euro, is a total melt down in the endship. a big move this week and the currency market earthquake the japanese yen is getting mercy
crushed, that is awesome. you have to look at what the dollar is doing, the n is doing and it can get pretty cop fusing. >> all these handles are crazy. do you think the gold stocks may bottom today? gold stocks bottom today? >> you want nobody a gold stock, we have talked about auy, a dip rally today, the stock to 18, auy. >> all right. got to take a break. we come right back. [ male announcer ] technology accelerates at a relentless pace. anything not moving forward... is moving backward. [ tires screech ] [ engine turns over, tires squeal ] introducing the 2013 gs, with the lexus enform app suite --
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final trade, mike khouw? >> make tactical bets on low value stocks like hewlett. >> tim see more? >> love free port, do it through march calls. >> guy? >> why are they playing this music? macy's, letter m. >> hammer. >> looking for dividend just in case, m.o. >> keith mccullough. >> short hapes brands, awful quarter today. i'm melissa lee. back at 5:00 for "options action" followed by "money in motion" at 5:30 eastern time. don't go anywhere, jim has a trifecta of