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tv   Fast Money  CNBC  May 31, 2012 5:00pm-6:00pm EDT

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i'm melissa lee. here are tonight's top three trades. sold in may. the dow closes out its worst month in a year. should you keep selling in june or go shopping for bargains? facebook, the stock gaining a late-day gain. the analyst who called the drop and blockbuster bounceback for lionsgate. the latest quarter's disappointing results and what's ahead for the biggest summer blockbuster season. >> reporter:? live from the nasdaq market site, this is "fast money." a lot was sold in may so you buy the dip, or are you selling some more at this point? grasso the first thing you go to are technicals.
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what do the technicals tell you? >> well, we closed right in the middle of today's range. if you had a fight for something positive, we've seen a lot of support around this level. so if you had to stuggle the for that. plus, we've heard that pension funds are underweight equities going into june, so what did that make you think, make you think we'll run going into june at end of the month, boom, and we'll sell right back off. for me i've got to seat market prove itself before i start investing at these levels. >> keith, what do you make of this action? >> sell every rip until the market proves itself. growth is slowing and unemployment is coming up next. take the data as it comes to you. you have to embrace the uncertainty of the market. the market is breaking down. if you break down through 1280 you could have a very, very bad june. >> joe, you're readying a shopping list. when do you pull the tryinger? >> it's interesting that you open with enter sand man who is a yankee fan because when the bull pen swings open rivera is not coming on the field. there is an analogy on the marketplace right now and that is this.
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when you break down the sectors on a technical basis and you look at who is going to be mariano rivera stepping on to the hill for the win here for the markets, i don't think it's going to be energy. i don't think it's going to be the builders. i don't think it's going to be the industrials that technically have all broken down. energy is well below all its moving averages. defensive-minded markets, that's what we are in right now. the xlu is all the above the moving averages. who is going to be mariano rivera? i think it comes down to financials, and it comes down to technology. and if you look at the xlf and look at the xlk, they are right now trading between the 100 and 200-day moving average. i am placing my bets on regional banks, like pnc, usb bought those today, texas capital bank, which i've mentioned, tcbi, a name i bought today, and then i went back in the old favorites, the mariano riveras of technology, ibn, emc, back in those again today. >> would you also abandon energy here, mike, especially with crude down about 16% for the month? >> yes. i think energy has been broken,
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and, you know, we've talked about it on the show before. stay away from energy, but i'll take the other side on the builders from joe. i think toll and lenar, a lot of people have been short the names. we've been long the names and they have performed really well. are they going to turn the markets are? is it reversal and the buildlers turn the market around? what leads the overall market higher and away from this 200-day moving average that steve talks about? >> when i'm long toll brothers i'm long to make money in the trades. the builders you can invest and make money. will they spin the entire market around? no, but that's to the question. i think in this market right now have you to look at what's working and that's getting in, getting out, looking at pullbacks and buying them and selling rips. you buy dips and sell rips and that's what's been working. >> why can't you stick with the high dividend payers? had this chat on the phone, everyone feels like you're late if you bought the dividend payers. put a lot of money into a lehr
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tra group and diminutive resources. i'm okay. i sleep better at night knowing that it's there because i know when the market gets hit, these will get hit a little bit less. >> does it help you sleep despite being in coal, for instance? >> well, put it this way. i didn't see anyone explaining in april when i said buy coal names and they rallied 20%, 25%. you have to know this is your lesson in the marketplace. these are high beta names. if you're in the names and the market turns around, they are outperforming the market by over two times. >> want to go to josh brown, the contrarian tonight. being the contrarian, does that mean you're buying the market? >> i've been the most bearish on this show. i was on the first week of may i told you we went pretty much 100% risk off in tactical accounts. if you run down the same check list of why we've done that. really nothing's gotten better but i will highlight one area that's working. energy being broken, prices coming down at the pumps, et cetera, there is a beneficiary here, and it's walmart and it's target.
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it's lower-end retailers. these names were very much out of favor in the first quarter when it was all about, you know, the luxury and the banks were coming back, et cetera. now that we're getting back into this deflationary misery mindset, look at what's working, so target is right on the verge of a huge breakout. 59.5, 60. i think you put a stop in at 55. it's a great risk reward. and walmart has already made a historic breakout. i wish this thing would pull back, but it really doesn't show any indications that it wants to, so that might be an interesting place that you could go when you talk about shopping lists. >> it's interesting because we saw microsoft do that same sort of price action at the beginning of the year where it was a decade sleeper basically. broke out to the upside above 30, although it's been rattling around that level lately. walmart is the next one. do you think target is actually the next huge breakout in the market? >> target's benefiting from a couple of things. number one, you can't really own jc penny with a straight face until they get their act together. you see the types of people who put the money into that's stocks
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and make that change. the other thing happening with target it is down market, but it doesn't have the appearance to consumers of being down market, so when people are out shopping for bargains, they go to a target, and you're seeing it in the chart. i'm not an expert on every single corner of the store, who is selling what. >> you sound like it. >> i'm looking at the supply demand, and i know -- >> by the way, that shirt looks much better on you than it did on the rack at target, so kudos to you. >> let's talk about financials here, under fire lately, but are they getting ready for a rebound. >> reporter:? mike, you're seeing clues in the options market that gives signals that maybe the beleaguered market is beginning to turn. >> what you see is there's a lot of trouble and what's here to stay and now actually what you saw is people making bets the other way. we saw some huge risk reversals going up in jan 13 and jpmorgan, people selling the 28 puts and buying the calls. that's a bullish bet people expecting here that maybe there's more of a coiled spring
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to the upside than the downside. a lot of bad news baked into that stock. bank of america is also seeing sellers. people were selling the seven-strike straddle and aig is also busy, and at a certain point when basically all the risk has been taken off the table, have you to consider whether or not you're starting to see some of these names get cheap and if they are going to move sharply in one direction than the other they might be more up than down. >> one trade does not a trend make and for this cheap to not get cheaper and that's what you'll see in the financials, you have to see cat lifts. the earnings season for q2, definitely not a catalyst. net interest margin is getting crunched and the spread is getting crunched with that and do you see anything differently when you look at the term structure of the options as you move a little further out? >> well, i think it's a combination of two things, right. it's a combination of the price that you see for the options and also the price that you see for the stocks. really what we've seen in both cases is that a lot of bad news
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has been baked in both ways, right, so you have a number of cat lifts for jpmorgan specifically. dimon hasn't gone to washington, we don't have resolution and the regulatory issues that you're talking about. but the stocks are trading at historically cheap levels. i mean, in jpmorgan's case, as cheap as you've had an opportunity to look at for quite some time. >> jeep gets cheaper. jpmorgan at 28 bucks. >> cheap has gone cheaper, that's the problem. >> on the 28 strike, basically saying that's where we draw the line in the sand and that's considerably lower than it is right now. >> let's talk about another huge move in the month of may and that's the vix, seeing its biggest monthly increase since last year on economic worries and european fears. >> this is the key to june. have you to watch volatility. when volatility is in this position, between the rock and the hard place, breaking out on an intermediate breakout basis, 20 spot 14. above that, s&p is going lower.
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the long-term tail risk line, if you saw a breakout above 24 spot 73 on the vix, that puts 30. 35 vix in play. if you have 30, 35 vix in play, you don't have to go back too, too far. go back to september, october. you don't want to be wearing that exposure. joe and others have talked about what makes you sleep better at night, and in that environment cash does. cash makes me sleep bert at night so with volatility elevated, be careful. >> yeah, the vix approached the 200-day moving average today at 25.19 and snuck before a 25.46. the very first time it's done that since the middle of december. peter najarian pointed out the level of concern you should have approaching 2,900-day average. the next number of days is very important and the vix is one of the leading indicators you should watch as we set the table for the month of june and that's what we're doing. if it consistently closes over the next couple of days which, again, pete has pointed out,
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that's when the concerns really get raised significantly, and you really do have to go out and reach for the protection. >> this is the protection point. my question usually to money managers and clients, are you allowed not to protect against the 30 to 35 vix, and what part of that, you know, plays into this, the behavioral side of the game? >> it depends if f you're answering the question, i'm answering the question or warren buffett is answering the question. >> depends on your duration, exactly. >> may payrolls and unemployment numbers due out in the morning on the heels of today's lackluster private sector reports. concerns about europe seem to lurk in every corner. economy. what are the implications for employers and job-secret serv e servicers around the world? joining us is the ceo of manpower group, a firm with staffing offices in 80 countries and territories. jeff, always great to speak with you. we have just been talking about all the worries in the market at this point, and i was earlier today reading a survey that you guys recently released that 34% of employers around the world are having trouble filling jobs, but only 56% say that those jobs have little or no impact to
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customers or to investors. are we in a period where hiring has changed fundamentally, that companies can actually see that they can do more with less, and they can get by with having fewer heads and so they are just not going to replace those heads? >> i think so, and i think companies have been rewarded in some ways that have been very conservative, and if you look at -- it wasn't that long ago, the end of 2010 and the beginning of 2011, it felt like oh, here we go again. we're ready to go, and companies were actually looking more at their backlog, their products, their demand and basing hiring on that. and then as things started to slide down, they realized, wow, am i glad i didn't get so far out in anticipatory hiring where i anticipated and it never happened what. i'm seeing companies do is be selective, a bit more uncomfortable because there's a bit more uncertainty and they have gotten used to this new normal and that's how they are operating the businesses. >> the other trend we've been
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seeing is an increase in temporary hiring, saw that in the last payrolls number where we had an increase of 21,000 in the month of april. is that also a structural change? are we in for -- i guess the bottom line question. are we in for structurally higher unemployment? should we get used to a higher rate of unemployment in this economy? >> well, i mean no, doubt we've seen a higher rate of unemployment and probably will for some time. the real question is it structural, or is this cycle so deep and so long that it's actually cyclical and demand isn't strong enough? clearly our industry has gone up a bit, but compared to other up turns we are still only 1.9% of the work force in the u.s. i think it's exaggerated many times, so, yes, it's clicking up, but we would normally be in this kind of a recovery closer to 2.2, 2.3, so -- so really it's -- it's been stalled because of the uncertainty, and the uncertainty seems to be stacking up, so companies are going to hold back a little bit more than normal. >> jeffrey, if we look more surgically inside the industry
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experiencing employment growth and a deceleration, you look at construction and manufacturing as a trader, it terrence me that we've seen softness in the last couple of months. today's adp report was evidence to that. is it cyclical, or are companies basically shelving larger products for the remainder of the year? >> well, what i would say it's cyclical, and the cycle is a little bit tougher and deeper than we thought. the structural part says i can do more with less, so what i actually need to have now, which is different than before, is i need more growth to generate the same level of employment because companies are being much more efficient in the way they are managing their work force, and that's the primary issue right now is we're not getting enough of that demand, and when you don't get enough that have demand, the companies hold off for a very long period of time. >> all right, jeff. great to speak with you. thanks for your time. >> thanks, melissa. >> the chairman and ceo of manpower group. the key here, as jeff mentioned, more growth. can you have the same sort of head count and get by, so what are the sectors in, your view, that will see more growth in the
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coming year? >> you saw the pop-up that we just, the certificate advice providers. here's the problem. manpower on a specific stock name has such exposure to france that he might be, you know, a little bit clouded. they double what they do here, so he's having a tough time there, and that's much worse than we have it here so i think you can see growth in a lot of different areas here before you can see it in eurozone. >> also watch the stock tomorrow because historically what we've seen is we get a softer than expected jobs report and all these stacking companies go down and that's what we saw the last couple of weeks jobs reports. one of the analysts who was one of the earliest to slap a sell rating on facebook. how low he thinks the stock can go after this. and later it is the trade of the day. it is one that our very own mike murphy thinks can deliver big. got to stay tuned to find out what lies behind this curtain. much more "fast" straight ahead.
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there was more hype going into this than i thought any security ever traded. however, the hype in the last few days has exceeded, that so let's -- we just all need to settle town a little bit and find the right base and get back to the fundamentals of what is this great company doing and capable of doing with its $900 million -- $900 million active users that they have out there and give this a little bit of time. let's have this discussion again in 12 months. >> 12 months. a lot of investors saying what news? today facebook turned around and closed at the high of the session, good price action. the weekly options also started to trade today after the options and generals started trading earlier. you were noticing a huge block trade that came into the market
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and the stock spiked higher. >> absolutely. just with two hours to trade, that's when it made the miraculous turn because it really was miraculous. stock was on its back side trading just under $27 a share, a big block of stock goes off in there. maybe it's zuckerberg himself deciding finally to do something. >> two hours until the end of the trading session, two hours until maria interviews james gorman. >> exactly right, and the stock makes a dramatic turn from that point. runs from that level all the way up to close almost at the highs of 29.67, closes at 29.60. a big day for that. the weekly options traded an awful lot, but the most active were the regular june options which have been on the board since -- since tuesday of this week. they traded about 19,000 contracts, and it was calls instead of puts for a change. so there were a lot of good signs there, but i don't think people will be as patient as mr. gorman would like. >> well, that's an interesting one. i mean, he sounds like he's a
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long-term investor. jeff gunlack's got my favorite line in the book, what's a long-term investors, a trader who is underwater? in this case morgan stanley is obviously under water. >> and there's a whole bunch of people under water. the stock has done that 1 for 5, the split that they did, basically last year as they were anticipating going public with this ipo, so the pain that regular joes and janes have felt has been felt five times more by those who had held up at 38 and were hoping, you know, that -- so we've seen a lot of block option trading, a lot of combinations where they are buying puts and selling calls over the last few days. >> we will quick, would you buy it here for a trade? >> i did and i would. i'm long call spreads. i disclosed that on halftime. >> long call spreads on -- >> long on facebook at the 27 call strike and short the 0s. >> bought it before the rip, too? >> luckily. >> awesome. >> let's bring in an analyst who says despite today's pop it's still a sell. actually also took down
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estimates. scott kesler is a capital analyst. joins us now with more. in terms of the estimates, on what did you base taking the estimates down? we haven't gotten anything from the company since the revised s-1. >> thanks a lot, melissa. we took down the estimates really reflecting our kind of increasing concern about the company's ability to monetize not only its traditional inventory but as we see the acceleration to mobile continue, so, i mean, these weren't dramatic reductions, but they were noteworthy, we thought, and they caused us to revisit our valuation constructs as well. >> scott, when we finally hear from management on the first earnings call at the end of july, groth itself begins to slow, the growth trajectory reached its peak in previous months, are they going to be serial spenders? are they going to be serial acquirers? how are they going to get the growth? are they going to buy it? >> yeah. i think that's a really important question, and it's one of the risks that we highlighted
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in a report that we put out on the company dated may 10th where we talked about a number of the investment risks, one of which is how the company is going to allocate capital. it's pretty obvious that there are fundamental weaknesses to the facebook story when you think about areas like mobile and hardware and obviously a lot of the speculation earlier this week was about how they could possibly buy their way into those areas. we see that as a concern as people think about the organic growth story as well as margins. >> scott, a lot of people out there are comparing facebook right now to apple and to goingle, and i see that you have a price target on the stock of 27 which was basically at today and maintaining your sell rating. is there a point where facebook can separate itself from apple, from google and just trade on its own multiple? >> i think it would be great for facebook if that were the case, but, unfortunately, people like me, we need to think about this
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stock sometimes in the context of comparisons and sometimes those comparisons aren't fair, but the reality is that there isn't much of a public company trading history, and so we're looking at multiples related to earnings, related to pe to growth, price to sales this. stock is still trading at significant premiums to a group that we constructed consisting of 15 companies going, from you know, apple and amazon all the way down to yand and zynga so the reality is maybe at some point it will stand on its own when they are kind of continuing to generate free cash flows and people think about it on an intrinsic basis. >> scott, thanks for your time. >> thanks a lot. >> the price target scott has is 30 bucks in 12 months and makes the point that the consensus on the street is for 35 cents in earnings, and in the first quarter of 2012 they have earned 9 cents, so it's only 16% reported in the first quarter so that could be a problem. >> what is amazing that we're all witnessing here, we sit on
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this desk, and there was so much hype behind this stock and so much upward momentum thinking that the stock was just going to take off. we all basically got fooled. you could say we got fooled at this point, but now there's such a blanket negativity on the name, i'm itching to buy the stock. >> oh, really. >> wanted to wait until the smoke cleared and, unfortunately, that smoke is taking an awful long time. i'd be a buyer. >> we were all here with our hoodies, our joking hoodies. >> that was a metaphor for the hype. at the end of the day -- >> we were poking fun at the hype, and you in your hoodie said you would buy the thing. >> i did, and the way i dealt with it is very simple. i bought it on the first pullback to 40 and absolutely got absolutely smoked when it broke deal price. sold out at 32.5 after buying it at 31. this is a problem stock. to steve's point, this is going to be a problem stock until they get on a conference call. the question joe was asking earlier i don't know if zuckerberg will be on the
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conference call. >> perception is reality. >> and they had the greek headlines out, the nasdaq debacle and a lot of different stuff going on so at this point a lot of different stuff to get out of the way and technically just for a trade -- >> i think you'll see this thing bounce. >> and gary kaminsky pointed this out to me, painting the tape, interesting how much times jim gorman mentioned the price action. makes you wonder who the block action was. >> one hour before the close and two hours before maria interviewed mr. gorman. scott kesler's price target is $27 in his new note. "hunger games" was a roaring success but lionsgate earnings ceo will join us to tell us what lies ahead so stay tuned.
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shares of lionsgate bouncing back after dropping more than 6.5% on an unexpected quarterly loss. fiscal quarter revenue jumped 71% helped by "the hunger games." here now to break down the numbers and the company's strategy ahead is michael burns, vice chairman of lionsgate. michael, always great to see you. all of the marketing costs for "hunger games" were in the fiscal fourth quarters which is why you had the unexpected loss.
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do we have audio on him? >> i can't hear him. >> okay. we're going to try to fix the audio problem, and in the meantime, why don't we talk about our next trade because we do have a lot to ask michael. so goes europe, so goes stock. correlation between the euro and s&p is at a staggering 0.9 over the past couple of months. let's get a sense of where the currency is headed with amelia bordeaux of westpack institutional bank. good to see you. >> good to see you, too. >> in terms of the euro in the currency markets, the trend is usually your friend at this point. is it still in terms of going short? >> i think it is. you just have to play it in a way that you can be mindful of any positive headlines which may come through. even though the overall outlook is pretty negative until the greek election and then the eu summit, leader summit at the end of june, so what i would like to do actually is play a short euro position against the canadian dollar, and the reason would i like to do this is in case we
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get a positive headline like we saw today and i'll tell you about that in a minute. euro may rally, but canada accommodity currency will also rally and may rally a bit more and that will at least keep you in the trade, until you get the next bad headline. what we saw today earlier this afternoon, there were rumors or reports that spain had been discussing with the imf a possible rescue loan. spanish government came out and denied this and the imf also said that the meetings were only internal within the imf and not with the spanish government so euro saw an immediate pop, rallied at 30 and once spain came out and said that that wasn't the case it fell again so you're always subject to the up and downs with the euro. so if we walk through the level of the trades, i'd like to enter a euro cad position of 128.50 on the bounce. i look at a move down to the figure and that's a low from about june 2010 which i think is a good level to aim for, and i put a stop up at 1.2950. >> ameal yeah, did you choose
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cad because of the jobs report tomorrow, or is that completely separate of that? >> i chose it for a couple of reasons. i chose it because i think u.s. data will outperform european data and canada being linked with the united states and if you do have a risk off move, canada will suffer less than aussie or qe and that's another reason how you could stay in this trade as well. >> all right. amelia, great to see you. >> good to see you, too. >> money in motion is tomorrow at 5:30 p.m. eastern time. meantime, let's go back to michael burns. hopefully we have fixed -- actually -- we're going to continue working on those and bring him up after this break. coming up, morgan stanley says the best days are gone for one chip stock, but some traders on this desk aren't buying it. we'll hit the call. day and settle the score coming back. >> i'm brian sullivan, cnbc is heading down to atlanta for a town hall event on small business. join us as part of our studio
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audience. for free tickets go to townhall@cnbc.com, and we hope to see you in atlanta.
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welcome back to "fast."
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take a look at sarah lee after hours, the board approving a spinoff of the coffee and tea business. those shareholders will get a special $3 special dividend and the rest will reverse split 1 for 5 so we're seeing the stock up by almost 6% here in the after hours. well, let's go back to the vice chairman of lionsgate michael burns. take two, michael, a as they say in your business for this. when we walk through the quarter and we're trying to understand this, when investors didn't understand in the after hours when the stock was down precipitously that the marketing costs were in the fiscal fourth quarter which is the ones you report and the profits from "the hunger games" will come in the next quarter. can you walk us through the trajectory of profits we'll see from "the hunger games" as we go into the first quarter and the second quarter. >> sure, and by the way, we've all had a few mulligans in our life so don't worry about that. what i'll say is and i think john talked about this a lot today is the vast majority of
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profits for "the hunger games" are still ahead of us, and obviously we have "breaking dawn" from the "twilight" franz coming out in november, but we knew that the fourth quarter last year was going to be a noisy quarter. it was the biggest acquisition in the company's history, and obviously the risk on that deal was that "breaking dawn" didn't work, and it worked beautifully, and we have high hopes for the last one coming out in november so we feel really good about that, so we had a lot of moving parts in q4, and it's all about looking forward, and we talked about -- we gave directional help to the analysts and our shareholders for the next three years and for the first time ever we've got visibility because of these monster franchises that we have as well as other franchises like, for example, tyler perry has "medea" coming out shortly and "expe "expendables" are coming out late they are summer and right on the heels that have we have "breaking down 2" coming out in
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november and obviously we start shooting "catching fire," the second "hunger games" in the fall as well, so we have for the first time in a dozen years pretty good visibility on the most difficult part of our business to forecast. >> "hunger games" obviously was a smash hit and a lot of people already anticipating "catching fire." they are looking forward to the release late they are fall. any guesses, any projections now as to the success of the sequel based on the success of the original? >> you know, we don't like to sort of -- >> jinx it? >> put -- put numbers out there, but we're very excited about our director francis lawrence. we're very excited about the same producers, neal jacobson and john qilliq on the movie. very excited obviously about the cast that's coming back. we feel if you take a look at other franchises, particularly overseas as the books catch on, i wouldn't be surprised to see "catching fire" do more business overseas than it did than the first "hunger games" did, and
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i'll say we feel good about the prospects domestically for "catching fire" because these books are now everywhere so we have susan collins to thank for that. >> michael, it's joe. back to the quarter for a second. i understand this was a significant spend in the quarter. when do you actually realize the profit on "hunger games," and how much that have actually does get realized looking forward? >> i would say no pun intends, joe, the lions eshare over the next few year is going to be realized. we had the marketing costs. obviously the way the accounting costs work in the film business, and you guys know, this you have to expense it in the quarter that it's incurred, and as jon said we've got the vast majority of the profit from the first "hunger games" coming out, for example, we haven't even released the dvd, and -- and, again, not going out on a lum in august, i think that's going to be a monster. >> when we were exchange the e-mails, you said have you read "ender's game? ." >> i think you renamed me.
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you called me john. >> totally guilty. you're saying "ender's game," going the next big young adult franchise after "hunger games." how excited are you about this? can you give us when you read the books, you think it's going to be as big, as resonating as -- as "hunger games?" >> again, you never want to try to pick your -- your hits, but i will say this. it's nice that after four years when the first book came out, it's back on the "new york times" best-seller list. that's a good sign. the book is terrific. i'm not going to put a spoiler out here right now. we have a great cast. our head of production and his team, eric feig and the team underneath him, think that this movie is going to be a great addition to the young adult franchise, so, yeah, i have high hopes for it. >> michael, good to see you. say hi to jon hamm. >> i sure will. >> michael burns, vice chairman of lionsgate. >> we've been fans of the stock
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for some time. it's had quite, quite a run so far, but it is at least helpful to see that they do have a pipeline. >> i was just tweet begun this. this stock looks remarkably good. haven't looked tat in a while. 12 responsibility 82 is a critical line so i'd use that as a stop and you're anticipating an event and in anticipation of the event the stock could go up and sell it in front of the event. if you think it's a great stock, buy and hold it. >> looking at rgc, look at movie theater companies, rgc yields close to 6% and the chart is amazing on this so it did have a recent pullback but look at these two, especially because he's looking at that catalyst. >> josh brown, you like lionsgate? >> i love the movies. i don't think it's a great business, the content business in general, and i can't think of very many success stories that were great long-term holds, but i think keith is right. can you trade this thing ahead of these events, and there seems to be an endless list of them. >> yeah. >> the problem is each time they report earnings it's a mess, and
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so for me to look at this as an investment, i would never want to hold something like this for earnings because i don't think they have done a good job communicating with the street what should be expected, what's the spend on advanced marketing and all these kinds of things. would i trade this into events and have fun with it. for a longer term bet i like imax better. >> 12.5% or so of the box office cut they get, imax, that is. >> big number. let's move on and hit the call of the day. morgan stanley hitting on the call of the day, underweight ratings or minimal growth through 2014, flattening prices, rising costs, have profits peaked at intel, as this analyst says? >> mike, what's your trade? >> what you can do in this situation, i don't think underweight necessarily means sell it so i think probably the best answer here is to go ahead and put a collar on your long stock. the stock is still trading at a discount of the broad market at just over ten times next year's earnings versus 11.5 for the s&p. i was looking at the august 23
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28 collar. if you own the stock, buy the 23 putz and finance that by selling the 28 calls against it. basically this locks, puts a pause, if you will, on the current -- on the price of the stock right here. you're insured below 23. bear in mind that the stock is going to pay a 22-cent difficult send when you do this, and can you put this trade on for even money here, very little additional downside versus how much upside you preserve when you put this trade on. >> joe, you actually agreed with the analyst. >> yeah, listen, after earnings i do think that the fundamental growth story for intel, guy and i talked about it that evening, it is challenged. we were wrong. there was another run-up into early may as intel went ex-dividend, but the stock failed really to sustain above 30. i think the right level for intel is more somewhere around 24.50 to 25 bucks. >> all right. of course, you get more "options action" tomorrow at 5:00 on cnbc and follow the show on twitter and get concentrate updates. whether you're looking to play offense or defense in your portfolio, our next guest has
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got your game plan, so stephen bodurtha is up right after this. y
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money," cramer's got one breakup that could soon win the hearts of investors and a showdown on the strip. find out if you should hold them or fold them and the ceo of dean food. the old hedge fun sell list. some hedge funds may want to sell holdings in june. keith, there are a lot of hedge funds with tremendous difficulty, and they are big hedge funds. >> mm-hmm. >> let's use one. >> yes. >> it's a very obvious example, paulson. paulson's had more issue than "time" magazine since he raised a lot of money, a bad year last year and probably have a bad year now. long german bonds and he's short gold or long gold and short german bonds which is not a good position so what people start to do is they start to smell blood in the water and they start to look at his holdings, and this guy owns 17% of the gld. i mean, we did get into the actual stocks that he's stuck in where he's filed and he can't get out, but gld, 17% of that.
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think about the systemic risk about that. again, there's a lot of performance problems you should pay attention to and keep that certainly in the back of your head. >> a big guy like paulson. this guy has been in presumably -- we don't want to say he is or is doing anything but presumably if one is having problems and they are going to get rid of holdings, they are doing it way in advance. >> the problem of 2008. once you got into the soup in 2008, had you a lot of activist hedge funds, very concentrated positions. 13 defilings. the minute that they sell one share, they have to hit that -- basically put that on the tape and people freak out when that starts to happen so it's a genuine risk you should pay attention, to called liquidity risk and a lot of people have it. >> let's move on. city private bank works with one-third of the billion airs. joining us now for "fast money" portfolio is the head of investments for citi's private backs in north america. steve budurtha joins us.
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i read your report on clients and what stood out is your way of playing offense in this market is to be long defensive stocks like utilities. >> right. >> and telecoms. that doesn't really seem to bode well for all the rest of us. >> one of the most interesting things going back a year when the ten-year treasury rate was at 3% and the we were telling people, which we did, buy bonds, intermediate to long-dated bonds, most of people would have thought of that as a defensive strategy. sometimes the best offense is a good defense and that turned out to be the case over the last ten years. the ten-year treasury has gone from a 3% yield to 1.75%. we still think actually that that's the best defensive place to be, fixed income over equities, and we also think that don't be surprised if intermediate to longer term bonds have more upside from here. >> we're looking at the ten year at 1.56 and the 30 year which is record lows, and you still think that there's some ways to go here. >> it's a good place to be,
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absolutely. >> and -- and a lot of that has to do with a couple of things. one is that we continue to see weakerning economic growth. the story was, of course, that the developed world was sake. the emerging world, led by china, was strong, and that was strisk to have that kind of support coming out of crisis of 2008. now we've got a challenge situation. the developed world is trying to rebound, isn't all the way back yet. the developing world is weakening a lot, so that's -- that's a key focus. i think the other thing is the investor risk appetite has dialed down with the new instability on certainty that we're seeing in europe. that's why we like defensive plays in the bond area and also in select stocks. >> jim, when you look at all these multiple head winds that we have out there. >> yeah. >> kind of be simplistic on there. what would be the one head wind that shifts to a tail wind where you tell a different story to your clients? >> i think it's got to be economic growth, right? i think in terms of investor risk appetite, okay, i think we'll in a risk on, risk off market for some time to come. certainly could be the rest of the year with the election out there, and maybe beyond, that so i think what people should be
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looking to, as we are, is renewed strength in the u.s. economy, so it's -- we've had some fits and starts, but at this point, leadership in terms of economic growth, i think the world has to look to places like the u.s. >> so i see that your allocation to commodities is about 2% and the last time we had a month like that that we just closed out may was back in september of 2011, and we all know what happened in october. the market just exploded to the upside, and commodities really fueled that rally. if you see something like that or back to october of last year, do you look and start? do you stick with the game plan there, or do you start to figure, hey, let me try to catch some of this upside, some of this alpha here? >> yeah in, terms of commodities, we -- we think like with stocks and higher growth stocks, you know, we think risk is going to be off for a little while so we're not looking to put fresh money into commodities any time soon. having said that we do think there are certain long short strategies that we like to put up some private, more
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sophisticated investors into, that can benefit from market neutral strategies in commodities. >> we should talk later. >> it's great of you to come by. >> thanks very much. >> coming up next, after great anticipation we will finally, finally reveal what lies behind this curtain. our trade of the day is one that packs a punch. that's a hint. you'll want to stay tuned to find out what it is. more "fast" straight ahead.
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welcome back to "fast money." we're live at the nasdaq market site in times square. we've been waiting all show for this very moment. let's get to it. it's time to reveal our trade of the day. mike murphy, unveil it. >> the trade of the day, melissa, is fedex. we've been buying fedex here. a lot of times fedex will get beaten up as the price of oil climbs, but if you see here recently oil has come way down, and fedex has kind of been holding its own against a tough tape. it closed the month relatively
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flat. we're in the stock here in the high 80s, and a number of reasons. one fundamentally it's cheap and trading 12.5 times earnings. two, they just made a big acquisition over in brazil that we think is really going to help the company, but another thing, if you look, aside from amazon, everybody knows online sales are exploding, but if you look at a company, another name where long is macy's, if you look at macy's quarter that they just announced, macy's online sales run over 42% quarter over quarter. there's a massive amount of shift going on from walking into stores to ordering online, and that's playing right up into fedex's wheelhouse, so we think fedex takes out 100 here and keeps going. >> they get more volume but the online retailers squeezed them. >> they do, they absolutely squeezed them. if you look at the way fedex has handled this in the past, what would be a bad environment for them is oil rallying up 105, 110 and getting squeezed. that's where their margins could get compressed. they are kind of in a perfect storm with oil coming down, and
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really where it finds support is a tough call here, but it looks like for the next quarter or two quarters fedex should really in a sweet spot. >> this is one of the better ideas i've heard in a while. >> what happened to all of the other ideas? nobody take offense. >> as you were saying. >> i mean, you learn a lot about stocks in the soup. today you're in the soup. you're down 100 points in the morning, and the first stocks to pop their little heads up, fedex, amazon, murphy's got this right, i think. >> all right. got your first move tomorrow when we come right back. stay tuned. >> tonight there's a show dunne on the strip. wall street is picking sides in a las vegas heavyweight and when big money can't make up its mind. you could be the one to win. ready to ante up? "mad money" hits sin city next.
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final trade. josh brown? >> allergen, agn, one of my favorite setups, $100 roll. heading above 90, like it here? >> mike. >> supreme court will rule on health care, united health. >> grasso? >> facebook, use today's low as your bogey. if it breaks through that, get out of the name. >> keith? >> i like

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