tv Fast Money CNBC May 29, 2012 5:00pm-6:00pm EDT
closing bell. i hope you will follow me on twitter and google plus. have a fantastic evening. stay with us. fast money begins right now. take it away, melissa. >> i'm melissa and here are the top three trades. blackberry blues are the rim investors are seeking. we are talking to an investor. they erased $25 billion in market cap in seven trading session. should you use the options that started trading today. the european trade on a technical break down. we are tracking the best ways to trade it. live from the market sight, let's get straight to the after hours action. breaking below $10 a share. that's a loss that had been expected to post a profit. the company is hiring jpmorgan and rbc to review strategic
options. when a company announces they are exploring, you have a pop in the stock and not a decline. >> yes, well i am long rim calls. september and think they struck at like 100 or i don't remember. they are so far out of the mon. the reason is i thought they had higher jpmorgan to sell themselves a month or two ago. this was window dressing on the horrific announcement. they are getting worse. >> what are do you make of the action? >> it's a continued problem for rim in terms of the price action itself. you have to point towards the fundamentals and what ails rim exactly. too much spending and the inability to get the blackberry 10 rolled out for the season. we are talking about the latter part of 2012. that is not good enough. you will see significant cuts. when you look at the aps, look at the growth that apple is experiencing. 500 or 600,000. look at rim. barely 80,000. that is not good enough.
>> not to mention the iphone 5 hitting the markets. it's not rim-inflicted problems. >> it is competition, but rim is inflicting it upon themselves. they had the market and it reminds me of the motorola. i think tim still has that. they had the whole market. they own the market. they own the smart phone market and invented it and now they lost it. it is rim-specific. whenever you hire someone and announce it, that's not good news. if you are going to get bought or find an option, you want to keep the secret. you announce it once it happened. this is not good news for rim. >> although we have seen this very announcement we got today, the merits of partnerships have rallied the stock. the market is definitely once diten twice shy: people are assuming the worst for a company that stopped giving financial guidance. therefore we wait for the real numbers. >> let's bring in the senior
tech analyst to break it down. in terms of the price action in the after hours, at some point, what is the rim stock? if you break apart the parts, isn't it worth something? >> we are having a hard time figuring that out. if they lose in a big way, they can drown out any potential value you can get from patents or the infrastructure. it's tough to come up with a floor. it's just an absolute disaster. >> no sum of the parts? >> there is, but they are cross licensed. if you want to buy them and use them as a strategic weapon. you will be unable to do that. you can use it as a weapon again. the nortel patents, bankruptcy ab solved or destroyed the contractural relationships and they can use them as a weapon. >> it's karen. let me ask you something. this is reminiscent of the palm
situation. there were buyers there. what do you think would be a buyer here? it's getting the market cap getting smaller every minute as we speak. who do you think would buy it for the cash flow and the number of users around the world which is not small. >> no, but the average revenue per user is declining. the best buyers really are the ones that had to stomach to stick in the game and top the beat ecosystem player. an amazon or a facebook longer term. if you are catching a falling knife, it's really, really tough to turn it around and stabilize it. you are almost better off starting from scratch. >> what are are the chances of bankruptcy? >> you don't have a lot of debt standing if any. we would expect if that happened, it would happen within the next six months. this could fall had from here and put the chances of it happening as low, around 25%. >> going to leave it there and thanks for your time. we want to go to a shareholder
at this point. activist investor and chairman and ceo of jaguar financial who represents a consortium in research in motion. great to speak with you. >> thanks for having me. >> at what point are you hoping next for the company? >> desperate times call for a sense of urgency. that is to sell or break up the company n. our opinion, the company should be broken up to two parts and the manufacturing business and the services platform and in effect to rerun the motorola. at the time that they announced the strategic review in march of this year at the top of the heat was joint ventures and partnerships and licensing programs. at the bottom was a sale and merger or a break up. you have to reverse that and effectively it has been reversed with the hiring that should have been announced sometime ago.
this is really too slow to move. the bottom line is that to create value for the shareholders, you will have to sell the business if you can. you will have to sell the stock where in the services business to ibm, microsoft and most interested in the handset. >> i'm sure you heard him give anales and i there is no sum of the parts analysis. have you done that calculation yourself being a share holdner rim. you must think there is a reward being along the stock now that it is sub $10 a share. >> we're will go through a tough period, but there is a glimmer of hope associated with the software and services flat form. if they can get rid of their very firm -- they have an integrated platform to break it up and not only have a focus on blackberry users and also a
focus on attracting all other smart phone users and they can open up the platform, that can be valuable and they haven't made that decision yet. it's just a small first step. they have to open it up. >> brian kelly. you have been along the stock for a while and agitated for a while. they have not taken the recommendations and not doing well. what's the next step for you in your group. what will you look for next? >> two things. one what we talked about, a sale or a break up. two, a revamping at the board, at the july agm. they need three new directors. one of corporate governance and two a technology expert probably in the valley would be great and three, probably southeast asian international marketing start. those are the three perfect candidates to put on the sport. it's too much of a corporate toronto club. it has to be broken up.
broken up by bill ikeman. they are too slow to move forward. >> thanks for your time. from the jaguar financial. in terms of options activity, any clues as to what comes after the bell? >> there has been a lot of sentiment for a very long time and to put things in perspective rim options cost about 3.5 times as options on the s&p. another way to think about this is probably 30% of the current stock price. the sthook is 30% in either direction. my biggest question is you will split this business into the software and services and handset business, who wants to buy the sand set business. >> maybe we are thinking too much of the u.s. potential buyers. could there be in europe or
america? >> they have been buying brand recognition and despite the shareholder perspective, there is a lot of brand recognition and global quality in the rim name. would it be in htc? no. possibly even one of the chinese operator who is have a hoard of cash and obviously need to establish credibility and have networks that can't support the 4g and this might be a better opportunity. we haven't heard anything directly. no question this has value from a branding perspective. >> got to get to the buzz kill as options made the trading debut and showing them a floor for where the stock is headed. dr. jay have you been in the trade? >> no, i was not trading this at all today. it never gave a clear sign as i said on halftime. we sort of expected people would
be more comfortable holding shares and the options performed against their shares. instead just the opposite happened. more short pets came in even though as mike and i would agree, there were a significant amount of folks legal to sell shares and put options so in other words they wouldbigate themselves to buy share fist they were to drop further. that was surprising as the fans were not just out of the blue. when you have that 15 folks betting on it and the volatility moving up throughout the day and closing at the highs of the day around 64% for the money options that. is where the rim options priced out@the close. a stock that was circling the drain rim and facebook that was
supposed to be the newest greatest thing both having this volatility implies that people really can't get their hands around what this company is and i think a lot of us are stupified by the fact that facebook will not come out and defend themselves at all. they are just taking it as the stock drops 9 and 11% day after day after day. >> i want to bring in mike quickly. we were talking earlier that you thought that options traders were indicating that there is a sort of a floor for the stock at this point. options go to 50% and you can look to see how far they can go. there was a little bit of activity, but by and large, the lowest strike was about the 25 strike. there might be a fundamental reason for this as well. if you think how much has been shed, they are forecasting $2
billion for the full year of 2013. it is growing and 30 times that number is not unreasonable. it's a $60 billion valuation. i understand that $20 might seem like a big decline, but i don't think anybody thinks that they are going to zero zero. it's not a rim. >> the compression we are seeing based on the reaction to facebook, i agree. people are revaluing what they think that space is worth and if you are in that space, i think you will find yourself on the bad side of the trade. >> last fe kwr you and that is part of the downdraft that could have been a report. at the same time we are also racing for weekly options to start trading on thursday. we saw a lot of volatility. that will be the same with the
weekly options? >> don't be surprised if the pressure continues on that stock, but i think it was a reaction also to the idea that these guys were still toying with the idea of getting in the hardware business. that's a business as we are watching rim circle the drain and you really have to question why zuckerberg and his team would want to be in the business. just because stories are being written, doesn't mean they will be. that was one more reason people said i'm getting out of this thing. >> thanks for joining us. we appreciate it from option monster. in terms of facebook, you still hate it. >> both conversations we just had, rim and facebook are very valuable lessons. in the sense of what not to do, back to rim, we heard from jaguar financial the same story. two times at $20 and $30. the reasons why to be at rim.
what will happen next? they will report earnings ahead of that and lower estimates. you will see the estimates going below $10. face book continues to be a no touch. it goes straight down and the ipo is off 23% right now. it's one of the worst ipos in years. you don't catch the knife until you hear something from the management team. >> the value of facebook is the value and the knock on effect for people who may be acquisition targets. the largest independent browser is up 26% at one point. this is the place where facebook has been a cat sift and not on its own merit. >> the best has been for apple. it was in essence the facebook atm. apple bottom and gone straight up. >> the nice thing on the day for apple. another overhang on facebook is the impending lock up expiration. we saw that with zynga.
they fired up yesterday and increased by about 100%. groupon will expire on june 1st and increase the flow by 100%. 100%, doubling the amount of shares outstanding on the markets. you are poised for this. >> we have june puts and put spreads and i think the air is coming out of these names and groupon is one. even if they have a first advantage, that is an unsustainable valuation for sure. >> on any of these and particularly with zynga, the business model is to sell you digital farming and the problem that they have, as long as people buy them. >> some of my best friends are digital. >> i don't know what to say. the thing with zynga is you have to come up with a new product every year. that's a difficult business model to have. >> again, let's have a trading
lesson on what to do. 47 million shares and what happens? people sell and they are happy for the company? they leave. he happened to leave today. for groupon, friday is your chance to sell. the significance of the selling will be incredible. this is a company that restated earnings and pushed back from 934th to june 1st. these are not good events that you should be buying. >> and groupon, what's interesting is people are talking about the value that we love on the show. nine times, 2013 ebitda is a fair valuation. that's not why you are buying groupon. >> where is the euro bottom. we are tracking the technical break down. the trade of the day lies behind this curtain. it's an off the radar play.
>> convict welcome back to fast money. >> spain's bank troubles and continued euros and woes drag them lower and looking at the technicals to see how low they can go. >> that's a little bit today, but between 124.60 and 80, that's what we had in the middle of last year. the next level is 121.50 that is a level that goes back to november 2008 and the lows we hit were around 12118 and
change. we are down to 118. when you think about what that meant, that meant a spiking dollar. that has been a risk off period. what's interesting today is that equities rallied out of europe is at least that the greek political parties are coming to their senses, whatever that means. more importantly, levels are key here and guys are in this trade. it's a big trade and people are betting and failing that the euro would get anywhere near. we have big figures ahead of us. >> let's bring in mike harris as a director of trading. he is looking to short europe in a variety of ways. good to have you with us. you are the technical analyst and a very good part-time technical analyst in terms of the key levels. what are you watching? >> i liked his levels a lot. you have to look at them over the last five days or so. we have seen big moves to the downside and a key support. we got through that on thursday
of the last week and 125 and the big figure was a good psychological level and we got through that. we were trading up around that level. we have penetrated through for the close. i think there is going to be more systematic traders piling on on the short side. we have been short for about nine months and a great trend for us. i'm sure we will have company as we ride it lower. from a targeting standpoint, you are right. we are looking at 120 or 150 as the next level of support. we have a ways to go until we get there. there is a lot of downside. >> thanks for the pat on the back and why is it working. why are you piling into this now? what are you seeing if it's different? they have been pushing and pushing for a long time. >> i think if you look at it from a systematic standpoint, we have a short-term and downtrend in place in the euro. the models are following that from a macro standpoint things
get worse. the news recently has been around greece and the elections and though we had more positive tones, we will have to wait until we see the results from the second election to clarify what's happening in greece and over the weekend, it has been spain with the third largest lender and 19 billion euros. the stock has been crush and down prison%. that's another market where we had a short position for about three months. you look at spain, the market is down almost 27% and down 10.7%. if you look at the fixed next markets, 6.5% on the 10-year and 4.57% on the two-year. if you compare it to germany, we are looking at 450 basis points on the two-year alone. it's costing spain a lot here.
>> what's your downside target for the short? >> i think we will continue to ride it as it goes lower. we had good support for a number of days. we have broken through that. we are probably going to cruise through the 6,000 level and maybe there will be support at the 5800 level. it's going to continue to fall in our estimation. >> all right, mike. great to speak with you. thanks for your time. mike harris of campbell and company. it is amazing how many people are in the trade. >> it's short the euro and amazing how many people are short the euro thinking it's going to be a bad thing. the lower the euro goes, the better. it helps them rebalance and could be a signal that the ecb is on the way to a proper qe. >> is it bad for us in a stronger dollar? >> it is not. you brought this up on a call and it's a great point. a very important data day on friday.
ism and the labor report. if both of those can come out better than expected, the u.s. dollar will continue to be a source of inflows and that's favorable for the u.s. centric consumption-type names. >> a lot of accolades for tim. >> i will take it, but the dixie has been a wrecking ball for other risk assets. there certain parts of the economy. it is indicative of a fantastic time. >> chesapeake gets the icon bump, but safe to venture back with the flyer. jim o'neal joins us on fast next. [ female announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom.
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what does this plush? >> one of the things that they wanted in an unstandard board, they are all in bed together. if ever there was an example of poor corporate governance, this is it. this is so right for change. they are so ridiculous. they saw a 20% pay cut f. they did a 20% better job? every should be out. we need people like carl to keep them honest and even in the stratus fear of doing anything remotely dedicated to the shareholders, all of them need to go. you can only do four or five. it's enough. even if it's not a majority. that is a tremendous amount of pressure on the board they are seeking a shareman in the midst
that this is. >> i love the way carl writes. it's direct and colorful. he said something to the effect of it's like asking a fox who plundered the hen house and choosing another to help it stand guard. >> it's perfect. this is a fox in a hen house. >> a roostner a hen house. >> the fox eats the hens. i don't know. >> in the options, do people look like they have it on this? pa. >> the options skyrocketing in this name for quite a while. today was the third most active option for most of the day, trailing only apple and facebook. as far as facebook is concerned, not good to follow. it's the put open in particular. it was puts that were most active again today. i can appreciate carl is a good
guy with a good track record. maybe now is the time to get bullish and changing the game with respect to what karen was talking about, it made sense. a lot of the opportunities are taking a look at what kind of trouble it might be in and whether they have liabilities and those sorts of things. they attempt to come in and start playing. you may want to hedge yourself. >> we will move on to the next trade here. nat gas down almost 17% leading many to suspect that it reached a bottom. they are in the same camp. >> along natural gas and the thesis is that it's getting more use. we saw today in the electric power monthly, really drug into it. it's a big day. in there, they showed that power plants are using 40% more gas than they did last month and 20% less cole.
you could see that the switch is on. they are starting to change over and i think that continues. not only that, but you have the vehicles using natural gas and on the right to work, we saw a lawn mower made of natural gas. >> how much more switching can there be? if you haven't switched with gas? >> there will be a limit because a lot of them don't want to stop burping cole because if they do, they may not reburn it. there will be a limit, but the fears of how they will give away natural gas, we evaporate seen the injections at a pace everybody said they were going to. this is a great place to be long. >> they're announced the most profitable quarter ever after being chosen. the controversial project is waiting for permit approval. jim o'neal is the president and
joins us now in a first interview. thanks for coming by. the last time was may 3rd and the day before they reapplied at this point to. your knowledge, what is the status of the pipeline. >> they will be approve and moved to production there after. more a mort of how quickly they want to go on the line. whether it's a year or two years. >> what will that do to you in term terms of earnings. >> for could have an imact on the bottom line. >> when you are giving backlogs and you reported the quarter, that did not include keystone? what would it look like if you did include it? >> it will increase and we are at record backlog. most is being driven by the electric power transmission business. there is literally no pipeline in the backlog.
that business could be as big or not bigger than our electric power business. we anticipate that backlog should continue to grow materially if the pipeline projects come through. >> talking about the electric part you are building out, it has been a get time for you guys. besides the hurdles that are normal, what about the political landscape? does that frighten you at all? >> not at all. we have bipartisan support to build out the country. we are connecting significant renewable generation that mandate renewable generation. we are seeing tlooi three to four times more transmission and construction than we had in the history of our country. >> do you have an interest in it being high sner. >> we think the low price drives demand and will drive infrastructure. when you talked about the amount
of power of natural gas that will be needed, that will be the big driver going forward. consumption. the low prices driving infrastructure, we aree e seeing a lot being built right now. we think dry gas will attractive player and probably two to three years. >> last question in terms of transmission, there have been estimates that investment in this and the united states will be a trillion with most of that being replacements. 65% or so. does it matter to you if it's replacement or brand-new? >> we are the largest infrastructure construction company in north america. we do replacement and regular maintenance. we do large new construction projects. a mix is fine with us. we do anticipate times more
spending over the 2035 compared to what we have seen in the last years. >> jim, thanks for coming by. >> thank you for having me. >> the ceo of quanta services. >> i love the stock. took a look at it and didn't pull the trigger, but looking at it tomorrow i will be a shareholder. >> interesting. next on fast, we are trading with them more at citigroup. stick around to find out what is behind the curtain. that adds what you are about to watch. stay tuned. teachers get the training... ...and support they need? schools flourish and students blossom. that's why programs like... ...the mickelson exxonmobil teachers academy... ...and astronaut sally ride's science academy are helping our educators improve student success in math and science. let's shoot for the stars. let's invest in our teachers and inspire our students. let's solve this.
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>> >> welcome back to fast money from new york city's time scare. the dollar continues to rally. are there head winds ahead? ed morris joins us with the outlook. great to have you with us. where are we going on wti? >> they are living in a world of its own. it is a saturated part of the global market and it responded to the relative value of the u.s. dollar, but we are seeing this relentless increase in
north america and you were talking about the pipeline. until a big pipeline is built, we will have super saturation and pressure in u.s. oil. >> let's talk about gold. we talked a lot about the levels. 1545 is the bottom and if it gets broken, there is real problems for gold. now i hear that the stabilization is being banded and they pledge gold and natural treasure. do you think that the still plus plans that are coming out are going to be this eternal support. >> no eternal support for anything. one issue that could really dampen gold is this pledge of gold that the mediterranean countries may be making and we tend to think of gold as being something that central banks are buying over the last three years and they have been the buyers of gold for the first time in about 40 years. mostly emerging markets for the
european central banks and they have a history of selling it and that is the big danger. >> brian kelly. going back to the oil, you are talking about how there is a lot of pressure on oil. it was not six months or a year ago, people are talking about peak oil again. how sustainable is this additional supply? >> i'm a guy who thinks it's quite sustainable. the u.s. is at the heart of this. u.s. oil production is growing at around 20,000 barrels a day per week. a million barrels a day that doesn't include natural gas liquids that are growing at about half the pace. that doesn't include canada growing at about a third of the pace. you add u.s. oil and liquids and canadian production, about a million and a half barrels of increases and that level lafl year and this level this coming year and global oil demand is
not increasing at that rate of production. >> weigh in on why it is oil is down more this quarter than wti is. >> the main reason for the slight convengeance between the two is we have the pipeline opening and they are trapped in the mid-continent and to some degree the market has gotten a little ahead of itself and seeing pressure on that spread between wti and late or this year. i don't think it will converge much more. >> ed, always a pressure. we want to bring up steven weiss to be contrarian. i don't know what point you want to be contrarian on. >> worry so much waffleing for the both sides, i think that oil goes down purely as an economic play and add the capacity coming on that is going into the 80s. as far as gold goes, demand doesn't come from china. the reserves are not long enough
gold. they have been buying like crazy. you see the pressure and goal goes lower and it's not analyzable. it's emotional trade. stay away from gold. >> i agree you don't buy gold. they are going below 10 on oil. the eu you have the ban that will occur ahead of that. when that happens, oil bottoms. >> shares of jpmorgan down 22%. they got caught in the downswing and they have an options recovery strategy that can help you fix your trade. what's the magic pill here? >> when stocks fall, people can if they like the name be tempted to buy more shares. there is a lot of overhang and danger. that's not the right way to do it. little chance that the stock will recovery all the ground from the higher level wees saw
earlier this year. way you can try to take advantage of the options market if you have stock is to buy a 1 by two call spread and specifically the september 3541 and you pay $2.10 and there is 35 calls and you sell them for 60 cents apiece. a net debit of 90 cents. if the stock rallies above, you will start making money. you could eventual be called up at $40. you don't need the stock to recover all the way to its higher levels to make your money back. of course if the stock does continue to go lower or face pressure after jamie diamond speaks in washington. you only committed another 90 cents hear share. >> i kind of like that trade. you get decent upside. would you do it in a slightly less ratio to be even and not taking the credit? >> you can be flexible with these. the idea here is that when you see bad news come out on the
stock, many times you may still like it, but you may recognize that all the bad news is lift and there is little chance of going back to the higher levels. you will have lower lower levels after $40 or $42. you can't hope for it to get back above $45. putting the types of overlays can capture upside. >> we have more options. also follow on twitter to get concentrated updates. we know you are very, very excited to find out karen's trade of the day. it is behind that red curtain. stick around to find out what it is. more fast straight ahead. #
>> let's check out the sweet that just came in. if you can only buy spanish government bond or rim stock, which would you buy. fascinating question. >> no brainer. you got a good yield and spain as you said will exist at some point in time. not only that, i think that germany will ultimately pay the
bill and the yields will converge and you get a capital gain on them as well. >> tim? >> i agree. there will be enough back stop. they have bazookas they will unveil. it is a big, big problem, but spain is not getting knocked off the map. >> hedge funds. some of the least transparent on the streets and we bring you what you need to know for what naturals won't tell you courtesy of fast money friends. the author of little book of reg funds and we're breaking down mutual funds versus hedge funds. they have been getting a bad wrap. >> mutt null funds were like guy lombardo. this generation of people said who is guy lombardo? i have to switch my jokes. the point i'm making is the
industry, 30, 40, 50 years old got long on the tooth and it's a one-directional investment. you are getting long or getting into cash. in the industry, there is great versatility. you have long or short and capital structure and convertible and equities. it's a much more eclectic mix of investments and in this uncertain world with this macro economic backdrop, the think the hedge funds are less scary than we in the media make them out to be. >> it's karen. everything you say seems brilliant and everyone should invest. there is a growing call for what about etfs versus hedge funds. maybe it's not guy lombardo. >> the etfs are a little bit like indeces as we both know.
there is a huge debate and i address it. buffett believes if you buy those and hold those, they will outperform a collection of hedge funds and i think there is validity to that and i am betting on people like you who have great long-term performance and are in the cockpit at the controls. they are able to make adaptation. what i fear about the etf and strategies in this market environment, you are either in them or out of them. the hedge fund manager has more flexibility than that. what do i write about is etfs make a compelling argument and that's the reason why. >> i'm sorry, go ahead. >> it's tim. another hedge fund manager. while i agree with all of this, people say hedge fund fees are too expensive. you do a fantastic job bringing the hedge fund to an investor who wants to access access.
what do you think? >> the fees are ridiculously high. you asked me 15 years ago i thought they were going to 1 and 10 and they became 2 and 20. if you look at the study over the last 17 years, the fund industry has done exactly what they said they were trying to do and capture alpha relative to the risks they are taking in the market. that means they are outperforming per unit of measured risk and i think that that's working. if you look at the stuff net of fees, hedge funs have given you a better than bond market performance with a less than stock market volatility. simon wrote a book and said they were a value trap. i know you and karen don't believe that and i certainly don't either. this debate will rage on. it's like the evolutionists and the creationists. you and i are on the side of
evolution. >> all day long. >> always good to see you. >> thank you, melissa. >> up next, the author of the little book of hedge funds. coming up next, minutes away from revealing the trade of the day. what lies behind this curtain is one of the best trading ideas on this desk right now. don't go anywhere. find out what it is. what it is.
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>> now for the moment we have all been waiting for. the trade of the day. chair woman reveal what's behind the curtain. >> i trade you probably have never heard of. digital generations. >> during the horns. digital generation. what did they do? they deliver as to tv stations and radio and online as well through the acquisition that they do less than a year ago. they also have done a series of aquisitions that haven't worked out as we show the stock price that has been down, down, down until today. today i believe is the bottom. there was a reuters story that ran on friday night that they have hired goldman sacks to explore a sale and there were a number of interested parties.
i think it will get sold. >> dgit. the first move tomorrow when we come back. stay tuned. it's very important to understand how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies.