tv Fast Money CNBC June 4, 2012 5:00pm-6:00pm EDT
session losing streak as well. finishing up 12 points. that'll do it for us on "closing bell." thank you so much for being with me tonight. hope you'll follow me on twitter and google plus. have a great night. see you tomorrow. bill clinton, join us. it's a market in turmoil. >> this market closing at the lows of the session. down 280 points on the dow jones industrial average. the market getting a real jolt to start the month of june off today. >> today didn't provide the relief we were looking for. >> the s&p is at session lows right now. erasing its initial pop at the open. >> worse yet, unlike last sum r summer, the fed may be powerless. >> the fed may be having a 20, 30, even 40 basis point effect on markets. when you tell the markets we could have a recession, they run scared. that's what drives the yield down. >> but if these two can agree that all might not be lost -- >> you have the 10-year note at less than 1.5%, and you have stocks like johnson & johnson
yielding almost 4%. i believe you're going to make more money in johnson & johnson than in u.s. government bonds. >> it's the first time in 60 years that the dividend yield on the market exceeds long-term interest rates. it's the first time in 60 years when you don't need gains in stocks to have a higher return than gains in bonds. >> karen's got a fine eye for value here. dan's just excited about the diamond jubilee. they're fresh from the trading floor. it's time for "fast money." >> live from the nasdaq market side in new york city's times square, i'm melissa lee. industrials and materials stocks dragging on the s&p 500 for most of the day as concerns about global growth ramp up. have these names gotten cheap enough or are they going to get cheaper? tim, you dug deep. >> well, you know, we call this kicking the cripple. in other words, if you go after some of these names they've actually -- you know, they can get a whole lot worse. yet these have been your best shorts to this point.
the materials sector, you can argue till you're blue in the face, is cheap. but it could get cheaper. a name like freeport i get asked all the time. i do like this company. i do think at these levels it's very interesting. i've put 30 at a stop. if you look at where it is now, it's around 7.2 times b.e. this thing was down 3 1/2 at the trough in the early part of 2009. it can get a whole lot cheaper. now, i will say if you look at it on an ebitda 3.6 versus 3.4 times at its trough. it's very close. the reason it's interesting, they have been deleveraging rapidly over the last couple years. it's a company that generates fantastic free cash flow. that's why i don't think it's 2008. if you look at a bhp, 62 bucks or so, this is a stock that can go to $40 on the chart. take this back to 2009. take the top of the teepee. there's two teepees. two big periods. it took out its high of 2007 which was the commodity kind of
full boom cycle high. it actually was that high back in april. i think actually this stock, if you think all of these stocks fall into the crater that is global growth, bhp is a short here. but, again, look at the material stocks on their own fundamental merit and there are stocks here that are actually as cheap as they were in 2009. >> teepees, ebitda. >> i want to know what he had for lunch today. all fired up. the points he makes are excellent points. the stocks can go a lot lower than you think. i guess the good news is today is that we bounced. i'm still in the camp that we're going to head to 1205. at least if nothing else, today gave you a point of reference on the downside in the form of 1266 in the s&p. now my sense is maybe you get a good headline out of europe. maybe we can bounce back up to 1290. if by some miracle we can hold 1290, then we'll get another 30 s&p points. i still think the long-term move is lower.
i do think we will visit 1205. i think you might have gotten a brief respite in the bounce we saw today. >> you know, one thing i would just add, tim was talking about global growth and where is the reflation of this trade. this is the thing that saved us in '08 and '09. in a lot of ways you had materials and you had -- you had materials weak today. forget about that. look at the financials. let's go to the other problem here. it's the bank stocks, right? morgan stanley closed at the lowest level since december 2008. tim was talking about fcx getting back to 2008 levels. morgan stanley's already there. the bank stocks are really troubling here. i think in a lot of ways, you know, there's two -- there's two ways you have to look at this trade. i think until these things bottom, it's going to be a hard one. >> supposedly according to the canadian finance minister there's a g-7 conference call tomorrow. usually these things are not publicized. so this emergency conference call the markets know about now. also there's increasing talk about qe-3 and whether or not that can do anything. more economists on the street, even with rates at 1.46 or so on
the 10-year yield, they're saying that this is more likely to happen. do you think that's why we're sort of stuck in this range? we're just sort of waiting. >> we are. there seem to be a lot under the surface of what -- on the surface it looked like a very -- pretty calm day. it wasn't gigantic swings. you consider what happened on friday, it looked surprisingly calm. i think there's more upheaval to be had. i'd actually rather -- i don't know if you have thought on this -- have bounced off a bigger selloff than to come in and be up a little bit. >> yeah. karen makes a great point. if it had traded down maybe 30 s&p handles and wind up closing, it would be a more interesting day. it didn't give the bearing much of anything today nor the bulls. again, i think the head winds are such we're definitely going to make a push down toward that 1205 levels. as you've seen over the last few years some of the most wicked rallies take place in markets that are predominantly going lower. we may be on the verge of something like that over the next couple tays.
>> reversal in the gold names speaks to what you're talking about on whispers. intraday, major reversals on a very good day of training. abx, gfi, harmony, all these names worked. as guys said overnight. it was almost as if the s&p when it got cut to 1262 it was manipulated higher. there was a lot of rumors in the market. it felt like there are people, forces, protection teams, people making sure this isn't going to go lower from here. i don't know. if you look at the u.s. yield curve, last year we flattened -- last week, excuse me, we flatteneded 26 basis points. all this is telling you, folks, again, not to get overly wonky on our jargon, it means global growth is really being held in question. if you look at a three-decade chart on the 10-year, it actually tells you we're in a trend that could go lower. this is why people are so off sides here. because we're talking about policy which is a coin flip right now. we're talking about fundament ams which look interesting. but we're talking about a bond market which looks way overbought and yet can go higher. >> with that said, if bernanke does act, will it do anything for the markets? let's bring in dennis gartman of
the world renowned gartman letter. he's on the fast line with his take. dennis, you say it's a fore gone conclusion that the fed steps in. what form would this stimulus be in given where rates are? >> the first question will be when will it occur. that's going to be we have two more fomc meetings. then i think it can be announced at the one this month and the one at the end of july. the fed likes to be apolitical. it likes to picture itself as being outside the realm of politics. so you cannot go to qe-3 any time after july. that would get too close to the election. what will it be? i suspect it'll simply be an extension, first of all, of operation twist. and probably an expansion upon operation twist. i think those are the easiest things to accomplish. they need to do something. that number on friday was truly a disturbing and -- well, for lack of a better term, a very, very disturbing number that i think the fed has to respond to. >> dennis, it's karen let me ask
you something. did you see the larry summers piece in the financial times actually calling for sort of a reversed operation twist, borrowing on the long side? what do you think of that? >> larry's a smarter guy than i am. i have my ft sitting in front of me here. i have not read the article. now that you brought my attention to it, i shall. i think the fed has made -- i think operation twist, to be honest, was an ill-advised decision to reducehe -- to bring down the yield curve to make the yield curve less positively sloped. i think the fed would have done a much better job trying to do something that would have -- that would have expanded the slope of the yield curve to help the banking system. but i'll have to -- i will have to pass at this point. i have not real larry's column. after your endorsement i shall do it in about ten minutes. >> let's put this into context of what it can do to the u.s. equity market. you know, antibiotics for a patient. the first time you give them to the folks, works great just like qe-1 worked great in terms of getting the market higher.
but it tends to wear off over time. your body becomes immune, i guess, for lack of a better phrase. i'm of the belief if they do do this, the market's actually going to go lower. what do you think? >> the fact that they need to do it doesn't -- i think you're right, actually. the fact that they do it is not going to be terribly beneficial to the equity market. it may well be beneficial to the economy. it may well be beneficial to psychology. but is it going to drive share prices higher? probably not. i think we're -- sadly, i think we're in a bear market. sadly, i think we're heading toward a recession. sadly, i think europe is heading past recession into something even far worse than that. and all i'm imagining is, is that the central banks, our fed and the ecb have to be out front and continuing to show that they're there, that they have concern over what's going on. is it going to be -- is it going to have a great and profitable and bullish and e boll yent effect? sadly, probably not. >> quickly, dennis, does this
set up for a bullish case for gold? >> i think that is clearly what the lesson is from friday. when gold went up $60, $70 an ounce when stocks fell. one needs to be long in the gold market. one needs to be short of the stock market. i think that's what it means. i think it clearly is beneficial. especially if we see the ecb buy into it. and especially if we see the japanese -- the central bank of japan buy into the same notion. that will have to be supportive of the gold market. >> all right, dennis. good to speak with you. dennis gartman of the gartman letter. >> worried about that reoccurring affliction guy or infection. the pencicillin that's not working. >> you know what? i'm strong as an ox right now, pal. no antibiotics here. >> i want to get ron insana, our contrarian on the desk tonight. ron, your thoughts on qe-3, whether it will work? >> i think it will work to the extent that the federal reserve and i think almost every other central bank in the world now, melissa, is on the cusp of another round of easing.
japan, people's bank of china, european central bank, brazil, india. everybody's going to come. a kitchen sink moment again. qe-3 i happen to know for a fact was never off the table. the fact it might be coming sooner rather than later if europe continues to implode is a big deal. rates have been coming down partly on economic worries but partly from capital flight out of europe and kmi na. people are literally moving their money into the united states for safekeeping. it's a bit of a mixed message for us. we're still the safest place on the planet. the fed will hint we're getting some indications they might hold off about providing guidance on qe-3. i think it will help the stock market in the near term. i think that's why the market appears to be holing up. i think we're going to start to get a series of palliative announcements from around the world that could be helpful for at least a few days anyway just as a trade. >> continuing on with the patient metaphor. palliative. next trade here. financials among today's biggest market laggards. dan, you pointed out morgan
stanley, bank of america also trading below seven. you also noticed a big trade in shares of jpmorgan. >> there was two. presumedly by the same buyer. somebody bought the september 20 puts on jpmorgan. in the morning 14,000. in the afternoon, they reloaded. 8,400. that's a big trade. it was untied to the stock. it was outright. in a lot of ways that could be a little sign of panic. somebody reaching to protect their stock under a disaster is scenario. one of the things i mentioned, i don't know if we have the chart. stock has traded below 30, closed today around 31, twice in the last five years. late '08 and early '09. then again last year. both times when the stock was below 30, implied volatility 30 days out was above 50. right now the 30-day implied vol is mid-45 or so. this buyer could be thinking implied vol, especially on the downside, is cheap. especially if you think we're going to get a bit of a rocky summer. >> karen, you're still holding.
hoping, holding. >> yes. hoping, crying. i am still long. i was talking to dan earlier about looking at some of the january, 35, 39, one by two call spreads. looking at that you could put on for nothing gives you upside. get called away at just under 43. i don't want to put any more money there. but i wouldn't mind having additional upside. >> another idea there. all right. got to take a break here. seek and return for your portfolio. we are trading the latest news out of starbucks. also we're going to talk to a top rated portfolio manager about investing in commodities, so stay tuned. ttd#: 1-800-345-2550
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acquiring west coast bakery chain bay bread. he herb greenberg has been listening in. >> this may be a 19 unit chain. actually, this is a deal that starbucks founder and ceo howard schultz is talking ambitiously about on the call. look, he's talking about taking this chain, turning it into a national chain, taking the food, putting it in starbucks stores. then he talks about this hybrid concept where he's basically going to push the product into grocery stores and what they call the consumer packaged goods segment. he sees this as a long-term deal. what's interesting here if you look at the menus for the bakery chain, isn't it ultimately going to impact panera? the stock taking a little bit of a hit after the close. >> good question there, herb. thanks so much for bringing us that. nicole miller regan is an analyst at piper jaffray with
her take. nicole, why would starbucks want to be in the bread business? could this impact margins in a negative way? >> they need to be in the food business because a third of the customers have an attach rate and eat food. and two-thirds of them would if it was more authentic. this opens the door and gives them that opportunity with this authenticity. >> is there any estimate at this point as to how this will impact starbucks and when? >> absolutely. for the remainder of this fiscal year, it'll be two cents diluted. that's really just related to the transaction itself. not necessarily the operational side. although they will spend against it probably early on. in the next fiscal year as well. setting that aside, when they took the food attach rate from 30% today which could probably nearly double, over a very long period of time, every 1% comp change, so basically a lift from that attach rate is about 5 cents acretive. >> nicole, it's tim.
what do you think about the earnings here on starbucks at 30 times? it looks pricey. that's really what the stock's biggest impediment here is. the growth strong since 2009 is something that people -- i'm not sure even this bread deal is going to justify 30 times earnings. i love what they're doing internationally. i think they've taken the mantle from people like yum who also had a tough day today. but i think that starbucks still trades at a multiple that people aren't comfortable with. this is new terrain for these guys. they've been trading here for a few months. the stock's starting to break down. in fact, the chart looks broken. >> you know, in fact, i think you're right. valuation is the biggest pushback i get. which is the easiest answer. because the fundament ams are so, so strong. the most important thing that we need to reflect on is take the retail business, you know, put your multiple on at x. the cpg business, that's worth a whole lot more. that's worth a 15 to 20 times ebitda. when you do that math and you back into the pe and the core business, the multiple is well
below 30 times. >> quickly, nicole, do you buy panera on the dip here? >> we do like panera. i think that starbucks is going to really serve us up a continued, positive series of announcements as it relates to their retail and cpg business. that's the one we'd stick with. >> nicole, great to speak with you. thanks for your time. nicole miller regan at piper jaffray. >> i think dunkin brands which we've talked about has had a monster move. a little richer on valuation than starbucks, believe it or not. 7% short interest. they speak at a goldman conference tomorrow. i anticipate a pop into that. if you've been long it i think you sell out of it then. >> i can't imagine $100 million deal is possibly two cents diluted to starbucks. mathematically it seems highly improbable. anyway, whatever. >> starbucks, by the way, trading slightly lower in the after hour session. next trade, next guest is betting on oil, emp stocks.
joining us now, shawn reynolds. five-star fund manager. great to have you with us. obviously with e & p stocks they've just been getting battered with the oil pries. do we need to see oil move higher in order for stocks to respond? >> if you see it stay flat, people start realizing even at these prices they're quite profitable. don't need to see it move up dramatically. hold steady for a while. >> what areas of the world are you most interested in when you look at some of these e & p companies? >> we like the international expiration story. unconventional oil. right now international expiration is really exciting. great exploration playing offshore. west africa. east africa. brazil. gulf of mexico coming back. we like that offshore story a whole lot. >> who of these guys -- there's some names in europe that have gotten pounded. the neighborhood they live in. not necessarily because of their business. is there any real value that, again, is getting thrown out the window because, you know, it's a european share? what's going on in brazil
obviously down in the campos basin and the things that are very complicated offshore drilling, profitable drilling, what do you like in that area. >> seadrill is a great story. it is the highest spec offshore driller there is. as you may know, seadrill didn't exist seven to eight years ago. started from scratch. brand-new kit. brand-new rigs. on top of it it yields about 10% right now. we had a discussion about yielding earlier and all day long been talking about it. 10% for a company that has viz ability out to 2014. looking at record day rates for these guys. a lot of visibility. great yield. >> given that you certainly like the day rates being where they are, would you rather be in the expolice station or services to them? >> in terms of risk reward, you get a little bit more upside in terms of e & p names. a little less risky for the service guys. we love halliburton right here. halliburton has sneakily become
one of the best service companies in the world. number one in north america. catching up on schlumberger internationally. it trades very cheaply relative to schlumberger and the rest of its peers. like an anadarko, fantastic exploration portfolio. can more than double reserves in drilling. >> let's talk about halliburton. it's effectively been cut in half in january. it's been a tremendous s&p tape. if you liked it -- i guess if you liked it all year, it's got to be extraordinarily compelling here. what's been the underlying problem with the stock? >> without getting into too many technical details, it's the largest pressure proper fraking company in north america. the switchover from natural gas drilling to oil drilling, people concerned about the fracturing business. the largest fracturer in the united states. when you're concerned about that, you're going to take the money away from it. all right? we think you're really going to see very strong margins continue through the rest of the year and start to increase maybe back to
record levels in 2013. >> all right, shawn. good to speak with you. shawn reynolds of the vanek global hard assets fund. if you're portfolio took a hit during the month of may, our guest right after this break can relate. coming up next, whitney tilson will reveal how he's managing his positions after his second worst month ever. still to come, our trade of the day. lying behind that curtain is a name our own guy adami thinks could soon be picking up speed. hint, hint. stay tuned to find out what it is. ♪
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i think if you get a flush tomorrow down to 685 which i think it traded at some point right after the release, i think priceline is absolutely worth a look. >> i disagree with guy a little bit. that previous low was like 675. i think you can see especially if we're going to see some air come out of tech some of these high fliers that haven't been hit yet break. >> fireworks are flying that day. it turns out dan was right. the stock was down 14% since. what do you do now, dan? >> you know what they say about a blind squirrel. here's the thing. this is a stock that's been up 1200% in the last four or five years. when you have like a technical level of something that's gone par bollic and it's just starting to break i don't think that's a level you want to lean on. you want to step back here, let it breathe and see what happens. >> does priceline sell penicillin? >> i parentally you're a penicillin connoisseur. take it orally. red bull. >> this is a theme we should just drop.
it's awful, actually. volatile may markets hitting investors across the board. even the portfolio pros are feeling the heat these days. hedge fund manager whitney tilson from t2 funds detailing his firm's second worst month ever. how he's managing the losses aside from a little crying and hand wringing. it's great to see you. we were just commenting on the green room how it's great to see you in bad months and also in good months. since it's really -- >> the last time i was here was the week barnes and noble went up 52% in a day and green mountain, one of our largest shorts fell 50% in a day. how times have changed a few weeks later. >> anybody facing a bad month, a bad year, when do you cut your losses? >> we don't. if we still have conviction in the -- in the stocks we hold, we selectively add to them. that's what we've been doing. last summer as the volatility gauges spiked, everyone was worried about europe falling apart, last august and september we almost made the deliberate
decision to go out into the most volatile, hated sectors. u.s. financials being one of them. and we had a huge run. we had a best first quarter of our 14-year history this year led by the financials. now with the fears about europe again, they've fallen back. but we still think, you know, citigroup at less than half of tangible book, goldman at about 70% of tangible book, are screaming buys here. we've been adding to some of our favorit favorites. >> karen? >> well, so you -- you have to make sure, obviously, that your investors understand the kind of volatility that -- a portfolio that is long biased, for sure. though you had some shorts that work against it. did you get any -- do they give you any kind of pushback on that kind of volatility? >> not as much as you might think. that's in part because we're still having a great year. we had a super strong start to the year. we've given back a lot of those gains. thank goodness we did some selling. we took profits earlier this year. netflix almost doubled in first six months of this year. we sold a lot of our position
there. it's come back. it's fallen more than 50% from its highs in february. we've been adding to it steadily as it's fallen. so we've sort of got a strong stomach for volatility. we've deliberately, we think as other investors flee volatility, that's the time we're willing to wade in to the most out of favor stocks. because that's where the bargains are. >> headlines out of papau new guinea. what do you think about the stock at $64? >> it's one of our favorite shorts. it's one we haven't talked about that much because it's a pretty tight borrow on the short, frankly. i don't want to talk about it too much. i can just say it does remain one of our favorites. >> in terms of pushback from investors, are you getting any pushback on concentration of positions? yes, things may be cheap. you were heavily exposed in financials between citi, goldman sachs, aig, berkshire hathaway. >> sure. i put berkshire hathaway in a completely different category from the other financials, by the way. we have always invested in a concentrated fashion. you know, i think most of the
money in this world is sort of kos closet indexed. we've usually got 50% or #0% of our long book in our top ten positions. fairly well diversified top ten positions. not just the financials. and so i think it's important. however you invest, you need to communicate to your investors what you're doing. as long as there's communication up front and people go in with their eyes open, you know, we've built our business in a way that's consistent with how we invest. which is we're not at all worried about month to month volatility of our fund. and we're focusing on, you know, a bumpy ride in the short term is fine for us as long as we make very nice money in the long term. >> ron insana, got a question for whitney? >> yeah, whitney. as karen alluded, you have an ultrahigh beta portfolio. volatility of the markets can affect you in a disproportionate manner. goldman sachs came out with a call today raising the possibility of a bear market in stocks. 20% decline at least. which would be another 10% down from here. given the type of beta you have
in your portfolio, first of all, would you agree with their proposition? two, do you take any defensive actions like hedging out beta risk or market risk when you're facing a potential for further decline? >> right. well, first of all, we are a hedge fund. our long book is about twice the size of our short book. that means we still have a fairly substantial sized short book. in the event of a market decline, i would expect us to -- our short book to help offset some of that on the long side. this past month was just sort of uniquely terrible on the long side for us. it's funny you say that. i didn't read that goldman piece. it was only a few weeks ago that goldman was out with another piece saying that it was a great time to be in long term in equities. >> that said why buy bonds? buy stocks. >> exactly. it must be a different division of goldman with that prediction. we think stocks in general, particularly in the u.s., are pretty cheap right now. so i'd be surprised to see any kind of major market correction. >> whitney, thanks for stopping by. >> my pleasure. >> whitney tilson of t2. tim? >> he's making some great points. ultimately as a fundamental
investor you hang in your positions. you should be buying weakness. the challenge for all portfolio managers and whitney, you have to decide where the market is just a place it's impossible to invest in. at tend of the day these guys do their work. they feel they own companies that can withstand that. the market forces are very challenging. >> because of such uncertainty in the markets, it's certainly been getting a lot of tweets out there. we want to answer some of them we've gotten so far. the tape guy tweets to us, when are you buying coal miners? >> goldman put out a note, i think they went from negative to neutral on the coal stocks. but they've been awful. look at cleveland cliffs. look at anf. the stocks have just been horrible. with that said, walter energy to me is still the most interesting one in the lot. why? because i think at some point something's going to give. you're going to see an acquisition maybe from an anglo
or vhb. >> cam asks aside from u.s. dividend stocks is it time to nibble on peabody, walter, vale, or a little bit longer? >> sounds a little coaly. i think it gets back to the conversation we opened the show with. look at valuations on a lot of these names. they're unbelievably cheap. having said that, i'm not sure walter energy is a stock that i need to own because i'm not even sure what it's valuation is. so we who often invest in resource companies because we are emerging markets guys and this is 60% of our index have been staying away from resource companies. we've been going to names in the consumer space where we can get a lot more confidence on cash flow streams and on the underlying prices. copper at 340 is much farther below where analysts probably have it in their models. which means cheap copper stocks could get cheaper because, in fact, copper's not fairly priced. >> trader jive tweets to us, has jpm bottomed? it's down almost 3% today alone.
karen, what do you say? >> this is where i was talking about earlier in the trade, i think it's attractive here. i don't want to have more at risk money. to me that gives me additional upside. then i get called away if the stock goes above 43. >> scott? your thoughts on jpm or any of the financials? >> i actually continue to love them still. i love jpmorgan. i love bank of america. bank of america i think is interesting. i think we should have known when it rejected that $10 level based on the specious rumor they were going to have to do a secondary, when it rejected that level so convincingly, i think that really told you that the financials had had their day. >> all right. big events in june could make for another volatile month. but we've got you covered. stay tuned to find out exactly what you should be watching for both here and around the world. much more "fast" coming up. sometimes investing opportunities are hard to spot. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look
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welcome back o "fast money." we are live at the nasdaq market site in times square. may certainly a tough month around the world. the all world index is down more than 8%. 9% actually in the month of may. it was a particularly tough month for europe. here's one staggering stat. the market cap of the entire portuguese stock market is about $30 billion.
and that is less than the market cap of tj maxx. >> come on. >> seriously. >> maxxanistas. >> all shopping there. >> the hits keep oncoming in the month of june. ecb meeting. greek elections on the 17th. g-20 meeting and bank capitalization deadline at the end of the month. certainly a lot of potential head winds. >> what could go wrong? really. >> what could possibly go wrong. >> this is where, you know, i'd sit and ask whitney, do you even want to bother picking stocks in the month of june? really, take out your day book in june and you have to understand what's going on on a policy level every day you walk in. this week the big -- certainly the biggies are ecb on wednesday. you got boj. you've got bank of australia. as we get into the middle part of the month, though, you have greek elections on the 17th. the french legislative elections on the 16th. these are the things that really started this landslides. more importantly, i think, the end of the month really crescendos into, first of all,
this tier 1 -- tier 1 capital 9% limit on the european banks is something that has to be finalized by the end of the month which to me means there's still substantial selling to go. these waves of delevering which make, i think, fundamental investing truly untradeable, these are the things you have to watch out. you have this eu summit at the end of june which is where they're going to consider this recapitalization of the spanish banks by using esm. possibly a combined euro bond market which the germans right now are pushing back on. to me june is the ultimate month of policy decisions. it's really not going to be about picking stocks. to me, therefore, i think volumes remain very, very light. if you look at what's been going on over the past couple of weeks, i think a lot of people are not playing this market. quite honestly if you've got a policy coin flip, i'm not sure why you want to be picking over really cheap stocks. >> you think there's a shot, though, you get some -- the markets are going to force policymakers' hands in a lot of ways and you just kind of get
some of the stuff leaked out? last night futures were down ten handles when merkel was against euro bonds. "the wall street journal" runs a story maybe they're about to blink. sooner or later, sentiment's going to get so brown, so banged up, we're going to see things kind of like a coil spring and get a big snap back. the question is from where. >> this is a dangerous market to trade, though. i totally agree. you get these whip saws in here. remember last august where you had 5% moves five days in a row in the s&p. in an index. this is where i think people really -- i agree. sentiment is shot. i think if anything, if you get anything positive on the policy side i wouldn't necessarily try to be short here into any of this stuff. >> ron, how would you set up here seeing that potentially the markets could be a coiled spring but you just don't know what the catalyst could be? >> i still think tatalyst, i agree with dan, i'm not sure central bankers can afford this year to wait till august, september, october to take some steps when the risks for the markets to decline further are relatively large. so, you know, again you have to
look at ben bernanke on thursday. that's another big deal. fomc meeting on june 19th and 20th. another big deal. it's not just what's happening in europe. it's what's happening here at home. it's interesting the president's numbers on intrade, which is the kind of online betting service for those who are into that type of thing, have come down recently. i know maria was talking earlier in the day about the potential for a romney rally. that's something you also have to consider here as maybe being a positive for stocks. don't forget, june is also the month the supreme court makes a decision potentially on obamacare. if they turn it down, would that give businesses the type of certainty that they want to see with respect to the cost of insuring their employees? that would be a positive for the stock market. it's by no means just europe. certainly what's going on in the rest of the world is important. what's happening here at home is going to equally i think capture everybody's attention. back to one of those events on the june calendar. key policy decision expected from australia's central bank later on tonight. let's bring on amelia bordeaux.
>> basically, a lot of the economists believe there'll be a 25 basis point rate cut this evening. interest rate futures for australia are pricing in a little more. about 44 basis points of easing. not quite a 50 basis point cut. but almost. it looks like the rba is going to make a move tonight. basically the rba has been concerned as you guys were discussing about the deterioration in global confidence. that's stemming from the eurozone crisis. and its persistence. there's a lot of risk events as you just talked about coming up in june. most notably the greece election on june 17th. the rba wants to get out in front of that and cut rates now in case there's an external shock, basically. so tonight i think the policy action that they take is going to weigh on the aussie. if they cut 25 a dovish statement. if they cut to 50 basis points it's a little more than the market has priced in now. either scenario is going to weigh on the aussie. look at some of the levels now for the trade.
i'd like to be short aussie/dollar. .9730. maybe lower right now. looking a move down to .95 p figure. a stop up to .9830. >> a trade you want want to put on now obviously before the decision is made. there's a window of time here. >> yes. the decision isn't until about midnight tonight. you do have until then to put this trade on. i'd put it on prior to if decision. >> amelia, great to see you. tim? >> i think she's right. i think the aussie/dollar goes weaker. ultimately it's a combination of they don't mind it weaker. i don't think it's as much they're saying the global economy is bad. they were in an uncompetitive place, too. it's a combination of china's not as strong. i do think they'll continue to take a lot of pressure on their currency. is one of 2012's high flying restaurant stocks losing its allure? call of the day coming up next. if you are one of the millions of men
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stick around. find out. all coming up 6:00 eastern time. our call of the day. raymond james downgrading yum brands. shares fell sharply after a friday's low u.s. jobs number. that's actually one of the major reasons behind this downgrade. they cited the tremendous volume in shares of yum on friday. do downdraft in the stock. they're concerned about china. >> it's a multiple. their margins in china have come down a little bit. i had an opportunity to speak with dave novak probably three weeks ago. he said he's not seeing any major slowing down. for everyone trying to grow in china they want to be like yum brands. these guys have gone on the ground and culturally inculcated not only the people that work for them but customers and buyers. weakness in china is an opportunity to buy the stock. it's not cheap. you need to trade around some of these levels here. but there's nothing broken about this company. their margins are coming back. >> ron, you buy into kfc sales
slowing in china? >> you know, there may be a little bit. but i would take tim at his word. david novak has been an extraordinarily straight ceo for quite a long time. he's been a great one for execution. i happen to think, you know, coming down here as a long-term core holding, it's a good buy. they've executed quite well. they're like starbucks. they're like mcdonald's in that respect. even if you're worried about a slowdown here in the united states, it's all the more reason to buy yum. obviously companies that sell food like theirs are coming under pressure from, you know, those in the diet world who think it may not be the healthiest food. i think it's still a pretty good bet here. >> scott, how you trading yum? >> i think anything that had anything to do with china today has had a tough day. i mean, cater piller off a bunch. las vegas sands had a tough morning but bounced back in the afternoon. yum is front and center here. had a really tough couple of days. as you would expect from a company that gets 44% of its revenue last year from china. and given that the pe is 21
versus 16 for the mcdonald's that ron mentions, it's about a third more expensive. i am bearish on yum. it's a great company. it's going to face tough sledding. i want to buy a put spread in yum. i want to go out to october. i want the alternative of capturing the next earnings announcement. the put spread i would buy is the october. 62.5. $52 put spread. buying that 62.5 put for $4.70 and reducing the cost of the whole thing by a third by selling that 50 put for 1.40 paying 3:30 for the whole trade. max risk. potentially make 9.20 in a name that really is facing head winds in china. >> catch more options action every friday 5:00. follow us on twitter at cnbc options to get trade updates. coming up next on "fast," it is one of the best trading ideas on this desk tonight. >> nice. >> it lies behind this velvety red curtain.
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welcome back to "fast money." we are live at the nasdaq market site in times square. time now for what is quickly becoming a "fast money" fan favorite. it is time to unveil our trade of the day. so, guy, please reveal what is under this curtain. >> right. to borrow a phrase from david edmond, sometimes you got to go crawls through the wreckage. auto nation was a monster stock 2008-2009, into 2010. stock basically tripled. it's fallen on hard times. but if you look today and sort of uncover what they said, new vehicle sales were up 45% year over year. why is that interesting? well, because it's a 20% short interest in this name. i think it's sold off enough where you might catch a bounce in this up to 38.5, 39. i think your risk/reward, maybe 34. looking for a 39 handle. i think they said enough today on a decent -- on what was a lousy tape most of the day. the stock was higher.
obviously closed up a percent. autonation is my -- what do we call that? >> trade of the day. get the lingo down. totd, perhaps. last time you took them down on priceline. you were right. >> they'll do it again. >> i'll avoid. i don't have a strong opinion on autonation. >> crawling from the records. good song. >> rock pile. >> dave edmonds and nick lowe. they got together. made one of those -- those super groups. >> thanks. i was the one that brought it up. but thanks for telling me. >> i said nick lowe. you didn't say nick lowe. how many people out there new nick lowe and dave edmonds. >> we'll come right back. stay tuned. [ male announcer ] citi turns 200 this year. in that time there've been some good days.
final trades. scott? >> delta got killed. but on big call volume. i think that's the way to play for a bounce. >> ron insana. >> tim? >> china mobile defensive. chl. >> guy. >> you got mine already. i'm passing my time to dan. >> karen? >> i will go with covering groupon. >> dan? >> yeah. i'm actually going to cover google tomorrow. but i also want to wish a big fan of the show, my mom, her birthday. happy birthday, mom. >> right on. ap