tv Fast Money CNBC March 4, 2016 5:00pm-5:31pm EST
trillions of government debt in the world is driving some strange stuff and one of the things is the gold. >> one of the things to look for, ecb is getting together. i i'm hoping ecb gets together and you know what, this negative interest rate thing is crazy and we don't even know what you're doing anymore. >> we'll check in with you next week. thanks so much. mike santolli, that does it for us on "closing bell." thanks for tuninging. have a great weekend. "fast money" begins right now. thanks, kelly. "fast money" does start. live froms nasdaq market site overlooking new york city's times square. i'm melissa lee, traders are tim seymour, steve grasser, brian kelly and guy adami. tonight on "fast" the man wholed can a the fall in valeant, the only analyst with a sell rating for nearly two years on the stock. he tells us how he saw it coming and when he thinks is next for this beaten down stock. plus, one of the most important indicators in the market is flashing a buy sign. we'll explain why it could finally be safe to start buying, and later facebook making the list of the most popular stocks on the street and following the in crowd may not be your best
bet. we've got the four stocks you need to avoid and first start off with the markets closing at two-month highs with the s&p closing just a hair above 2,000, what a week, s&p posting gains of 7.2% and this might be the reason why. oil, its best week since august, a stunning 10% move this week alone. so where do we go from here and as we even look out to the ecb and china's national congress next week, is oil still the key to this market in. >> guy. >> i think it is, it started on february 6th and we talked about the ovx and it's been down ever since and traded 50 today, so is oil the key? absolutely. one of the things we've been saying for a while now, 2025 in the s&p. last night we said on the jobs number, no matter what it comes out, the market should rally, should fade, not really what happened. i think now we're long in the tooth in terms of the move from s&p from 1810 to 2000ish.
that's almost a 200-point real in the s&p in about 15 trading days. >> yeah. and we still have quite a few big news events to come up. you mentioned we have the ecb, the bank of japan and also have the fed. those are all coming up in the next couple of weeks. not only that. we have all the economic news coming out and sentiment clearly has changed. from my view fundamentally i don't see anything that's changed and that's what is markets do. at these levels i don't think you should be buying. if anything, you should be fading. >> and that's the reason why we did rally. it's the ecb and china national congress and saudis told us there was going to be no production cut. they said a freeze possibly and no production cut. there's no reason for all of this to take place except people are covering shorts. >> that's it. i don't agree at all. i think we're in a place where oil is rallying because whether the saudis are cut or not there's been a bunch of the oil producers that have blinked and in a case where there's enough cap "x" cuts and technicals. look, the double bottom at 26.
there's powerful stuff going on. 38 bucks on brent. yeah, you take a pause. no reason to see this go straight to 50 and everyone expecting the world to fall apart is seeing a couple of things. first of all, sentiment got way too bearish, people waiting for a credit event and equities are the ones that typically miss. what's your time line on that? waiting for a credit event. >> it's not two weeks, that's for sure. these are big picture things. china has not improved and haven't de-leveraged or cut their debt. we still have oil at a level where most companies aren't really making any money in the 30s. they are probably losing some money so we still have big things out there. still have the fed who has made a mistake and the bank of japan has made a policy mistake, so we still have all of these big pictures. >> and that's the whole point. can you stay in shorts or can you stay in positions? this last three weeks has been so violent. >> sure. >> i'm not sure. i'm not sure. >> 20% move in oil, emerging
markets, brazil gapped up 6%, are people really staying in the short positions? >> no, they are not. actually covering. i don't know whether there's funds going out of business. i don't know whether someone is pressed to cover these shorts, but it seems really weird the way people jumped in and started covering these shorts. >> not when you consider where sentiment was. sentiment was so, so bad. >> i guess what you are saying. you would use that as a reason why the inventory numbers were extremely bearish and why oil still ran. >> that's why oil rallied. >> ran. so for me i look at it as china, people are so worried rights now that there's going to be something stabilizing their market, the unknown, the fear of that unknown. but in ten days, if nothing changes, the shorts get put right back. >> if you think that's a short covering rally that got us to the two-month highs, what's the next stop then? is it lower or do we grind? >> we'll talk about it more with the chart, but i think right now it's lower. >> okay, and you? >> highest in flows into oil
yield ever. tells you that we have credit issues but not happening in all parts of the credit curve and won't happen overnight and as an equity investor when you're waiting for a credit crisis, look for a move straight up. i sold some jc pen and put more puts out there and ultimately it's a case where markets are eventually sideways and central bank events, no reason to play them and the lack of headlines will continue into the ecb. >> i think that's not inconsistent with this. >> coming tat from a much different place and that's what it comes down that, and that's what's interesting about it. tim has been pretty steadfast on this for a while and he's been right, and i think tim would agree with this. i think this move is a little long on the tooth. i think -- >> i think it goes higher. >> and he thinks it goes higher. we'll see. 2025 when we fail and i think he thinks we blow through. >> i don't know if that number was -- did you see the number today, the jobs number as bullish. index of aggregate?
>> it's worked. >> they were lower. the wages were lower, and it was mostly part-time jobs. so the household survey was 489,000 were part-time jobs. >> comps out exactly to what tim was saying, that sentiment flip, down to 1810, the world was falling apart and then all of a sudden it flips and now we're back at these levels and my point is don't get too caught up in the euphoria. >> high yield is positive for the yield and spoke to had a high yield expert today on "power lunch" and she essentially said the stability we saw in oil is allowing people to get back into the high yield, had to sell what they didn't necessarily want to sell within a high yield and now they want to get back in. are you still short? >> i do not have a short position but it's at a level that i would think about putting short on. after a 7%, 8% rally, let's look at what's going on here. in terms of the fed, they are almost backed into a corner where they may have to raise rates sooner than the market thinks. that will get the dollar going. that will get the whole thing to start turning around again, so i would be very careful buying
high yield here. >> just quickly in the run to 2025 or whatever level, 200-day moving average on the s&p 500, do energy stocks draw up 5% or so this week, what do they do? >> what's interesting as great as a week it was for energy, a name likes exxon didn't perform. probably makes sense because people went to that as a safe haven and probably peeled out and tried to get into more beta names. is that more towards the end of the move or more towards the beginning? more towards the end and, again, that's what makes markets. >> last week as you recall, steve grasso said that was the worst time to buy stocks, so does this week's action change steve's mind? steve? >> yeah. let's look at the charts. talked about a couple of these levels and get a little deeper into the court work and into the numbers that we're looking at right now. so guy had said it's basically a 2% move in pretty short order so why don't we just look at this. here's where we came from, the obvious, and right here we spoke about it last week. it was the bounce levels, the sellable bounce level zone.
1963 to 2,000. where did we close today? 1999 to make everything real, really difficult for the home gamers and for the professionals out there. would you rather be a buyer here or a seller lightening up, and i were say you're better off being a seller lightening up because even if we can get a little momentum above this level, look at the wall of resistance that you are running into. you have 100-week moving average, 2011, 2023, the 200-day. guy spoke about that the last couple of days and then you have the 50-week moving average here, 2034. there's no way you want to be a buyer into this mess. you want to be a several or lightening up. let the market prove itself. if you miss it for a 1% or a 2% and then you catch this, well, here. you catch this, down 10%, you're going to be much happier. >> grasso has very nice
penmanship, by the way. what gets -- in your view, tim, what gets us through those walls? >> i don't know, but i think timing the market is almost impossible, all right, so, i mean, we've seen that over the last six weeks, so sentiment is going up, down, sideways and actually people have been very wrong at the turns, so i think people were lulled into third week -- first week of january, oh, my goodness, what do i do, so ultimately they sell into the crescendo shorts which is the inter day lows and all rallies have marked off, but to say it's one thing or another. this is the bipolarity that i think you have to be very careful about. i think credit is not as bad as people think and credit conditions are tightening globally. i think we can squeeze into the fomc and we agree the fed suddenly has to give you rhetoric that says at least think about the fed, people, because that injects volatility. >> here's the thing that tim and i absolutely agree on. this market is a professional. this is like expert deep end of the pool. when you can have sentiments switch like that without much
fundamental change in either direction, good or bad, that's a very difficult market to trade, so how do you stay in these positions? you either use options as the show coming up i think in a couple of minutes? >> guy's favor show. learn how to use options but you have to be very careful or take smaller positions but don't get caught up in the euphoria up here and don't get caught up in the negativity either, just maintain stability. >> coming up, the only analyst on the street who correctly called the collapse in valeant is here. you won't believe what he has to say about the stock right now and the gold rally that cannot be stopped, the rally closing 20% off the lows right into the bull market. is the move too far too far and "house of card" season debut giving netflix a boost after a rough start to the year and one trader thinks there's more pain to come. he'll explain much later this hour. much more you have money still ahead. with so much confusion in the markets, "fast" is going to the old country to seek the counsel of wall street's
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money." check out stunning rally in gold. it's surging more than 20% off december lows and put it into bull market territory. in fact, we saw the largest four-week inflow into gold in seven years, so we ask is this peak gold, b.k.? >> well, it could be peak in the very short term. i'm long gold and have been for a bit and i put some hedges on in case we get a pullback. what's interesting about today is you saw the blackrock ishares trust and stopped issuing new shares in the etf and what's interesting is about the way they hold the gold. have a serial number for every bar they told as opposed to other places. point being, you could have a short skweeds going on here in gold. there's a lot of gold out there. a lot of gold and derivative contracts that are short the physical and the very fundamental reason for owning gold is no longer is the carrying cost a problem. gold costs you 25 basis points
to hold. buy gold and silver. >> guy used to trade gold once upon a time, way, way, way, way back then. >> remember that? >> rucksacks, great word, a rucksack. you know, gold should have sold off hard over the last couple of weeks. it hasn't done it, but newmont today 52-week high. that's not encouraging so maybe we're in for a breather. i hear what b.k. is saying but the price action in newmont gave me some reason. >> what about the dollar? you have to believe gold is going a lot higher if the dollar is stuck here. >> next up, valeant continuing to fall as company undergoes an s.e.c. investigation but the major fall in the stock comes as a surprise to our next guest who was the only one with a sell rating before the call, a call he reiterated ten different times before the stock took off. the man behind the call joins us
tonight from toronto. great to have you with us. >> great to be here. >> the stock was as $122 and change in july 2014 and the stock is trading about half that at this point. what back then did you see in valeant that caused you to put a sell rating on the stock? >> yeah. well, this is really a continuation of the work that we did back in the day on nortel and biovale when we were concerned with their accounting and closure and cash flow ability and we put a sell rating on them at the time when their valuation was approaching peaks, so in valeant the intention was the massive disconnect between their gap and long-gap earnings. we saw what we believed to be inconsistencies in management disclosure where we believe that the disclosure and reporting didn't really reflect the fundamentals of the business so, for example, when we wrote our salary report in 2015 we were concerned about organic earnings
with iterations at the time that organic were declining at 5% to 6%. we were concerned with company's disclosures about one of their largest acquisitions being medicines, there were some inconsistencies in how that was described in the growth and inconsistent to the disclosures and management discussion analysis. >> right. >> we were concerned with the internal rate of return that management was saying was generated on their acquisitions. >> so a lot of this had to do with their strategy, with their early business model which was by companies. don't spend money on the earned. you acquire companies and actually wrote in november 2015 recent results would look to the future if and when acquisitions stop. we're sort of at that point right now. when you take a look at valeant stock today and a look at the company, what do you think the business mod sell now because that music has stopped? >> well, that's a great point. right now the business is in transition where essentially away from what valeant was doing
in the past, that is, reducing their debt and firing people and relocating assets into offshore jurisdictions to reduce the tax rate and now the company also lost its specialty distribution channel which apparently drove organic growth and valeant was limited in its ability to take price increases which, again, was one of the key factors behind the growth and now it's a whole different game and there's a substantial amount of uncertainty how the company will be able to manage this important transition where they move fundamentally away from the past business model and on top that you have take the security and exchange commission which we predict it's likely in our past reports, as far back as october last year, and -- and management now withdrew its guidance which we were concerned about back in our report in december as well as in february, so there is substantial uncertainty.
>> we do have very little time left, unfortunately, but at this point you're sticking with your sell rating even with the stock's decline and the price target is higher than where the stock is trading. what do you actually see 12 months from now from valeant? >> we all need to have a crystal ball to see what will happen 12 months from now. right now the stock is not investable because there's enormous concerns about valeant's reporting and obviously statements and management in the past and they were standing by their accounting, and disclosure and revenue recognition hand now we know that that's actually not the case, so i think at this time there's too many unknowns. substantial risks. there is price benefit managers who could retaliate at vealeant and they are essentially paying their bills. >> right. >> and what else don't we know about the company. >> so stay away. thanks so much for joining us.
we appreciate it. >> my pleasure, thanks, melissa. that was a great call, still saying stay away. >> interesting. i mean, the guy is obviously doing his work and was looking at changes in the business model. to me this is not about the business model but about the accounting and what you can truly understand and trust in terms of information on the company. on its business model i think the stock is attractive on valuation. i think we've more than priced in philidor and priced in potential price pressures. >> by the way, dmitry is an accountant by training. >> and the business -- the core business, you heard what he said, uninvestable and i agreement think it still goes lower from here. >> one of the most important indicators in the market is saying now is the time to buy. what that is and if you should jump on the bandwagon. that's later this hour. i'm melissa lee, you're watching "fast money" on cnbc. in the meantime, here's whales is coming up on "fast." >> should you be buying the most
popular stocks on the street? >> because i want to fit in. >> or could the most in-crowd stocks be some of the most dangerous trades in is we've got the names and what everyone could be missing. plus, "house of cards" debuts on netflix today. but the stock is still in a bear market, and it could have even further to fall. we'll tell you just how low it could go later this hour.
welcome back to "fast money." facebook cracking the top 20 of the most widely held stocks by institutional investors joining the names of apple, alphabet and johnson & johnson and many others. which of the popular names would you buy and which are a bad bet? tim, kick it off. >> buyer be world dutch shell. this is not tethered only to a & p. standing out from the rest of the guys. oil has absolutely bottomed and we'll see it at 48 before we see it at 30. i think in terms of selling microsoft this is a case -- >> sorry? >> yeah. >> this is a case where a company that's clearly absolutely nine. also pays a nice dividend, but i think valuation actually looks a little expensive if you think that they are transitioning as fast as they are, maybe you buy it. i don't, and i think these guys
have a couple years ahead of them. >> grass? >> i go with verizon as the stock to buy. it's got a great yield on it and it's up 12% year to date and with the recipients that have costco deal american express. my sell would be cisco. every place they want to be is cutting their margin and even if they get to where their strategy is, their margins will be compressed and i'll be a buyer of cisco and buyer of verizon. >> b.k.s? >> i want to go with safety names on the buy side, cvs has done very well in a strong dollar environment because it's confined to the u.s. here. now, on the sell side i want to be -- i want to be selling jpmorgan and i want to be selling the financials as we go into this huge volatility and financials are a sell. >> so pfizer sold off from 30.5 to where it is now. i think a lot of this has to do with the political rhetoric. i think the allergen deal gets
done. i'll take the other side of tim. >> which side of tim? >> royal dutch shell. got to be clear because i'm trying to talk fast. he's a buyer rdsa. if he's right about oil, it will explode and i think oil will fade. look at a chart since the middle of 2014 we've had bounces like this in royal dutch shell. i think that's what it is. >> one of the best balance sheets in the space. >> and if oil is going lower -- >> it can handle lower oil and proven to be defensive. >> gone from 80 down to 36, the bounce to 45. >> time for the final trades. let's go around the horn? >> tim? >> bhp, looking at iron ore, more than a bounce, bhp is clearly tethered to this and moring to in the mining space. >> >> steve? >> first time i don't think i gave one, oh, i did, dupont. i was waiting for that. dupont. you see that competitive bid. i think it goes higher and been long it forever, thank god. >> b.k.? >> so on this rally and going into an ecb that may do more -- even more negativer rates, short
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hey there, we're live at the nasdaq market site and look who is joining us tonight. >> that's right. >> one and only b.k. the guys are getting ready and here's what's coming up on the show. >> and the butchery begins. >> you got that right, frank, because we're looking at some of the most hated stocks on wall street and telling you which ones you should trade or fade. plus, one of the market's leading indicators just did something remarkable. >> high-fiving a million angels. >> but could things be just a little too good to be true? we'll explain why you might want to stay out of the rally. and, well, that pretty much sums up the move in emerging markets lately. why some traders are betting big bucks the space could continue to take off in a