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tv   Fast Money  CNBC  March 21, 2012 5:00pm-6:00pm EDT

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twitter and google plus. have a fantastic night and i will see you tomorrow. fast money begins right now. the top three straights. the news is not too bad. more annist lifts are upgrading than downgrading. we will trade that trend. starbucks getting to the energy drink business. is this one area they will struggle to dominate. we have a guest that said the pipeline from getting them will mean higher gas prices in parts of the country. live from the nasdaq, this is fast money. let's start trading. woo we have to get straight to the developing story. the diamond food saga continues. they find itself with the back against the wall, suspended the dividend. they have been on the story from the beginning joins us with the latest. herb? >> this is not the news they were expecting. they were bidding out of the
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"wall street journal" that the company is talking to private equity and considering what is known as a pipe steal that. is known as the lending of last resort for companies like this. they came out after the close and not only said they would suspend, but the credit agreement is suspended for three more months and there were covenants involved including they must so net income for the fiscal quarter april 30th and not less than a negative $13 million. this is the latest in the story that includes coulding regularities and the walnut growers are associated with the company. it may go elsewhere. it's constantly a moving target and now you have the issue with the private equity possibly coming in. what does that mean? new management that is in the restructuring mode. we will see. the stock reopens at 515. we will see what happens after. >> what would you think would be
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the reaction when the stock does open at 515. i'm curious on one side, can you say it could still go higher. there was a private equity interest and perhaps doing something to improve the balance sheet. >> the pipe, you never want to see a pipe number one. think of how many levels of people pass it before they get to that point. the second thing is this is just basic 101 stuff. when there is any accounting irregularity, you do something else. there 8,000 other stocks in the market. >> absolutely with josh. i'm not sure why somebody would trade that. this is a stock that is all over the place. frankly you don't know where it will be. the pipe deal is something you don't want to invest in. >> can i get in on this? one of the key thins, there is an analyst, you think the stock has a value. if and when the company sells off, it's emerald and it's not business.
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then there is the issue of the liabilities, as we know now, not just the liabilities, but there is a lot at stake on the balance sheet of this company. >> herb, earlier this week, diamond foods received a noncompliance notice for failing to file certain filings in a timely fashion. is it at risk of being delisted? >> as that risk and as any company that gets a noncompliance. they have to show they will number compliance. that's why they have so much going on. the ak filed a little bit ago and spells out what they have to do to remain in compliance with the lenders. >> all right, herb. thanks a lot for following the story for us. we will watch the opening and reopening for trading again at 5:15 p.m. in the eastern time. meantime, president obama expected to announce he will fast track the construction of the xl pipeline tomorrow.
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many expect the project to combat high gas prices and could push gas and diesel prices higher in some parts of the country. they join us on the pipeline and that focuses on the oil economy as well as the markets. great to have you with us. >> thank you very much for inviting me. >> certainly it goes in the face of what a lot of people will say. keystone will bring prices down. walk us through the thinking. >> my focus on keystone was on the canadian advance in 2008. the purpose of keystone was to divert crude oil from chicago and thus raid the price in alberta and extracting about $5 billion a year from american consumers. five billion extra.
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the idea was to bring the crude down to the gulf coast where it was converted to products and the products would be exported. valero sees a huge advantage and they are quite correct. circumstances have changed since then. the part of the pipeline that the president is talking about tomorrow is the part that goes from kushing down to texas. that pipeline is in the hands of the regulatory commission. the only part they have any say on is the pipeline from alberta and that's an advance that has been denied. what this is going to do is improve the flow and we we need that bottleneck that will even out prices.
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some will go up and some will go down. >> we have seen a big divergence and we talked about a lot on the show how brent is the world benchmark. if you can get the oil out of kushing and wti is a better great. shouldn't they go higher? >> wti traded higher than brant. they are at a slice discount and the crews are almost insdishable. the yields are good. the middle of the us will face the problems with the natural gas producers. the nap these are paying $15,000 for natural gas and they're getting $2,000. i don't see in the overthe next five to ten years the united states resolving the surplus of crude in the middle of the
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united states to the point where they will come back. that's very difficult to ship. >> you are right about that. we don't have export follows for crude oil. you can't export without permission. there no facilities on the gulf coast to export. they are exported in carriers. there no docks available that can receive or export. the oil that comes in is taken off a loop facility. an offshore facility. louisiana offshore brought in and that facility is designed to receive crude oil and not export. as the surplus built up, the middle of the united states will be energy independent by 2014 and produce as much crude as it needs. the surplus and the crude that
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saudi arabia is bringing in at the refinery that it is just now bringing in. all that will be exported. unless we bring a big terminal, we can't expoerd crude. >> at this point in time, what are the best ways people can use the information and the last thing people should do is take advice from me. >> give us a stock. i never thought i would see the day where we were energy-independent. it builds the cracker in pennsylvania.
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the united states econ me is going to be building a huge foundation on any natural gas. we are going to have this competitive advantage for growth for perhaps 10 to 20 years. anything around the ethlean and the build up and the natural gas, the natural gas vehicles because oil will stay high probably due to the oil exporting companies and actually the united states ought to apply for membership. we benefit from higher energy prices and don't lose. but don't take my advice. >> one of the things that i think pete is getting to is there is an impact from all of this. this is a transformational event. if you lock at baker hughes who made an announcement that the
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guidance is we have a weaker out come in the first quarter. demand for oil rigs is much greater than it is for gas rigs. the drilling has gotten to be so profitable, that's great for the american consumer and great for america. it's happening in a ripple effect. baker hughes that sold off over 5% isot a broken company. there is a new dynamic in place, but this company is trading at ten times earnings. this is a buy on weakness despite the fact that there is a paradigm shift and the hydro fractioning doesn't mean that the drilling doesn't become a major part of the next decade. >> for he's right, you have to go back to the stocks where they will build out this natural gas infrastructure and it's at a 52-week high. hard to say i will pull the trigger, but if that's a correct call and oil will be higher, but it's hard to ignore west port. >> how about the people who make
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the engines? >> it's the commons. >> and the companies that make the components for that stuff. >> if you really want to play everything and go with a little slower money, look at exxon-mob exxon-mobil. they'll benefit and if you get gas prices higher, they have a gas-sensitive area as well. i would look to that. it's not going to make you rich overnight, but not a bad place to be. >> an interesting story that crossed saying that bpx are discussions about a $40 billion project to export. lng from alaska to asia. these are reserves that have been landlocked and sitting there waiting to move. there is no way to move it. with this pipeline that opens the flow from asia. >> exxon is so far ahead of everybody. not only was there a deal ahead of the move and into the gas move, but -- >> they might have overpaid. i agree with you. >> subsequent to the other
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deals, it seems like it was a fair deal. lng exposure, they have been in the arctic shelf in russia for the next ten years. if they are profitable to ship around the world, they are the guys to do it. it hasn't been profitable. >> they had it so early in the game, they caught the downside with the decade lows. some would argue that they were too early and overpaid. everybody wants to be in gas at this point and they are caught in the wrong side. i don't know. >> i think it's a function of how about well they do with hedging. there is something to be said with making an acquisition, that's a 20-year play and not a one, three, or five year. that's decades. would they love to get it cheap sner it's a huge deal and the ramifications are so big. it's about not letting the other guys get it. >> we like the acquisition of land itself. going where the natural gas is.
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that premium along the way. >> the options desk, what are you taking a look at? >> one of the people that people can keep our eyes on can focus on the refiners. they think the margins will be compressed, but the stories we are hearing told us that the margins can be broader for longer. of course the products that were producer were a groebl commodity and local gas is the most local. >> got take a break. coming up next s google getting closer to the dividend. that's on fast money. will starbucks's move to energy drinks give the stock a buzz?
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50 discuss the possibility here monday following apple's decision to see the first dividend. they are up since then. google pointed out they have a lot of cash. $44 billion and 22 of that, about half of it is overseas and half is here in the united states. how much will they have after motorola mobility. about $3.5 million should the deal go through. >> the way they are blowing money to begin to find their place in the mobile space, i don't know that they have a lot to give back. people that are clamoring for google, apple and google are two different stories. you are buying google not as a dividend, but as a value play. that hasn't worked for them for two years.
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>> most of the tech stocks when they pay a dividend, apple is a rarity. microsoft and cisco start very small. it gives them room to raise year after year. if you are buying google because you are getting 2%, i can't imagine it being close to that. >> the options pits, anything to indicate that there is expectation there for a dividend? >> i would probably disagree and think a dividend would be appropriate. what are we talking about? $44 billion and they generate free cash flow. the mobility and everything else we are talking about are not going to absorb all of that, but the options market agree with the guys because we are not seeing a lot implied. you are not seeing much of anything. there is room for a couple of dollars. it will be something more meaningful if they do it. 1% or 2% range.
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>> after the deal they only have $3.5 billion left. i am wondering if you were a shareholder, would you want them to commit to a dividend? with that cash balance at that point. >> you are generating $10 billion a year plus. what are we waiting for? it's not like this is a heavily indebted company. >> at the same time, this is the company that spends money developing cars and solar panels. >> they are making a lot of investments whether they pay business dividends, accident but they generate enough to pay should they choose to do it. >> they have a point that you better be careful what you wish for. if someone is paying, it means that there no other better investments out there. i would rather see them do a buy back. the way that you have this big trend that everybody is paying dividends and buy backs. in the way i have been paying
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that is via the chip sector and something like a text with a dividend and a buy back. maybe not the most exciting name, but if you get a lot of people and the chips held up well, we talked about a little before the show about the chip sector and how well it's done. >> for you are a shareholder and a lot of cash, you would prefer to use them as opposed to creative business investments like a self-driving car. >> i like that. i'm into it. >> the kreaftive investments and something we love to talk about. i still point to it and the reason i point it out is take a look at the 'to date. you look at the performance and explosive to the upside. options are explosive as well. you are not to mikee point, not seeing paper telling us they are excited about the dividend. this is an easy rumor to get started after apple earlier in the week. >> it is in the energy markets and not oil and gas. starbucks announcing at the
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meeting they are making a move to the energy drink arena like red bull and monster energy. our own energetic reporter darren rovell. >> it's called refreshers, that is the name of the drink they will sell at $1.99 and in starbucks for a little bit more. let's look at the overall beverage categories and why energy is so appealing. as you can see here, it's not the biggest, but it is the biggest grower by far. 17.1% over the last year. then let's look at starbucks as well. starbucks has been in the ready to drink business for a couple of years now and it's impressive. they have the top four in coffee and almost adding up to $900 million. they are getting close to a billion. this is energy drink sales. the question is on the ready to drink market, can they crash in? the tough thing is that bread
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bowl monster rock star has not moved. the first movers have done really well. the thing is they are all up through amp which is pepsi's product. they are all up. the question is, can starbucks get on the ready to drink enough of a share to make it worthwhile? that will be the big question as to whether you move on the trade. >> i was sort of thinking when you take a look at nos and monster and those drinks, they are catering towards a demographic. >> like pete. monster! >> to males and probably ones that are younger in the skew of things. >> if you look at the packaging alone, it's not into the taur eastern and guarana, we will keep you up all night. they get you by more of your day than use it to study or stay up at bars. there is definitely a branding decision that is being made by
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starbucks that is we are not playing exactly with these guys. we are saying it's extract from one of the productions that we sell. we are not playing in the same space. the question is if they say it's energy, are they going to win on that differentiator? is there a market they are speaking to based on how they are branding it? you are right. >> i think there is a market. if you look at the other drinks, not a lot of people drink them. there is a huge market of people that perhaps may not want to walk around with a monster drink in their hand. never. you know what? i never had an energy drink in my life and i don't plan on having one. two cups of coffee is all i need. >> they are in starbucks night and day. you can see bankers and traders. i won't, but you can picture trading floors with refreshers across the desk. >> if i can see one more thing, you will know right away whether this works or not.
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that's what we have seen in the business. they have gotten in and out if they sensed that they are not in a good position. if you look at what red bull did, they got into the energy shot business and they noticed that five-hour owned it. they owned 95% of the market place. they got in and got out. it would be interesting to see if starbucks can't make it here how soon they can get out. if you don't believe they will do it. >> she is an analyst and said this could be the beginning of a major growth story. what would be the threshold to consider to make the energy successful? >> i think successful launch would be a one that looks like via did. the single serve instant coffee. they are bagged in the same
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house and now doing via and the k cup. they have a lot of costs already in place and functionality to serve as the cpg and the grocery stores. >> it's tim. i think it's an exciting opportunity if only because of the distribution that they control. they can push this product through and there is a lot of non-coffee drinkers that are caffeine drinkers. my question on the upside is related to the opportunity domestically versus international. one reason people are excite side the international talk. they are 70% u.s. if you have a product to push out in the market, this is the growth you are talking about. >> i think it is the case that the u.s. market is and will continue to be a key driver for starbucks for a while now. as you said, most of the profit is still coming from the retail stores and if you add the cpg business most le in the u.s., that's a bigger share of what they are doing. the starbucks brand resonates
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and we have seen that with their stores. we have seen that with their ready to drink offerings and we have seen it with via. >> i'm curious which of the established energy drink brands do you think has the most risk when something like starbucks shows up and wants to play? >> i think again when we look at the recent launches, starbucks is creative to the market. they revived more than an instant coffee market. that is largely incremental. i think that's right. they attract new people who wouldn't have previously. there plenty of people who would never have considered drinking instant coffee before starbucks entered. that's the dynamic we see with an energy drink. >> thanks a lot for your time. you mentioned the growth story and also the shareholder meeting, china will be the second biggest market outside the united states by 2014.
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1500 locations by 2015. do you think this could help in asia where coffee may not be the emphasis, but teas or non-coffee? >> without question, but the things that starbucks and apple has to figure out is the cultural appeal. appealing to caffeine. it's a great thing. no question that is embedded in their society. 1500 by then and they will be 15,000 store when is they are 1500 in china. this is what it's about. that's why they trade at a multiple and why it stays there. >> story too high? too premium? >> when you see the strategy into the grocery area, i don't think so. they are closing down stores and starting a new product line and a whole new execution. >> that was on the full screen and the push into grocery store aisles. >> right behind the fast money cup there.
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>> that's how we get there. >> how much are they paying you? >> not a penny. not even a free soy. next on fast, this rally and a fixed income adviser. if it's goldman's big call to the test. more fast money up next. >> not too quickly to reverse the policies. history said stay the course. >> we're found that the new ipad was in fact noticeably hotter. >> we will try to get the maker of the cases for ipads and iphone. >> that's going up. >> cnbc, capitalize on it. choose control.
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♪ is moving backward. [ engine turns over, tires squeal ] introducing the lexus enform app suite -- available now on the all-new 2013 lexus gs. there's no going back. see your lexus dealer. senator rod hortman and the chatter on whether he should be the vp nominee. >> spider is up 21% known as the xlf. taking a look at the options,
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what does that say about the run? that peaked at the end of last october. over 6 million open interest in the contracts and that dropped to less than 1.7 million by today. a decline of over 70% saying that and the call interest is highly unusual for the index where most people do so for the exposure. it's clear that a lot was well-timed back in october. the xlf did not bottom out until mid-december. you can tell they were short. short interest actually peaked. they were selling them to hedge. what we are seeing is that with that lower open interest is likely to be a lot less volatility. that can drive it when deal ares are short and they can sell and buy when it rises. it's a lot more bullish in the
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financials and a lot of people think the storm clouds are listening. >> it's far more further down. they are not just looking, but you look at bank of america and they trade 3/4 of a million options contracts today alone. when you started to see financials move, it's fallen off as far as the activity where you are seeing it in bank of america and at city and all of the different financial institutions. it seems to be moving around each day. it has been around bank of america. >> that can be the case. >> let's move on here. goldman is making it a generation to buy. you get out of bonds as goldman advises. cochief investment officer diversified and joins us with
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the fast money portfolio. great to you have. the run in the bonds is over and the bond bull is dead. what do you think? >> they make a good argument long-term for the fundamental factors for equities. a lot of the call is on the last page of the report. if you want ten-year growth from 2010 to throw.5% globally. i struggle with that assumption. >> call into question the call equities? >> you have to. yes, i think equity is kind of the longest duration asset out there. the assumption of 3.4% growth. >> one of the things that seems to be the most difficult part of this call is we have seen the part of the curve or the long-term back up. 30 or 40 basis points in the last week. if bond yield is back up, doesn't that blow a lot of holes
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into the equity ral he? >> . >> if it is driven by a lower risk premium, the u.s. can deal with 3.5 to 4% gdp declines built into january of 2013. if we can get over the things, we go back up to 3 to 3.25% and it's good for equities. >> for those who want to play along with your outlook, you look at the year to date performance within bonds, it's speculative stuff. would you continue? >> there things that lagged. a lot is driven by retail and high yield. you had high yield bond funds and negative $1 billion and loans are very, very cheap.
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>> you would play the other side? >> yes and i think a lot of structured products. bbb structured products with yields right now. a lot of them have much better underlying fundamentals than when they were structured in 2005 and 2006. are you invested? >> we invest in the assets and not in that equity. that's obviously a very leveraged play and on three payments with the government and obviously doing everything he can to improve refinancing. some of that is in and we think a lot of that is priced in and the mortgage derivatives are
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attractive. that's one way to play it. we play it a different way. >> great to have you come by. coming up next, about 30% just over a week with a rally linked to overextended and the traders make the call, next. [ female announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪
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other name like mohawk is up as these foreclosed homes that turned into rentals will have to fix up the walls. you see cher win williams has been huge this year. i still think you can get in. >> that are is bullish and the rally is more than 10%. up 30% since that day let's get a trade update. >> i didn't think it would go up this fast in that short of a president of time. i think all the fundamentals will hold.
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you can look at an eagle materials and have cement to it. i like it here. >> you have been early on this home improvement call as well and val spar and home depot. >> i love the thesis and the earnings are there. it's not a story. it is working. i am not in the stock. congratulations. i noticed the 30% position that will continue to help on the way up. and you can get the big spikes. they are better earnings and able to rise prices. as long as they continues. >> you think of how much it costs to refurbish a foreclosed home to be a represental, it's about $6800. that's a lot of money. >> you don't need prices to go up, but just to do the work.
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that's all year long. >> lots of analysts and visions with positive revisions out doing negative ones. paul hickey has been digging deep into the calls and here to break all the numbers down. paul, this is very unusual for this time of year. what does it mean? >> what you see leading up to earnings season as analysts are taking in their numbers and bringi ining things to reality. in the last eight months in the fall down last year, we saw net revisions fall it about negative 40% of the s&p. we have seen a big improvement. one of the questions is are the analysts too bullish. we were going from minus 40% and got as high as plus 30%. we are right in the middle now. >> certain sectors are seeing
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the phenomenon the most? >> one of the biggest is the financial sector. net 60% of the companies in the fall. net number cuts. that's up to positive territory. the other is a discretionary sector that goes to the way of the economy doing better than the rest of the world. they are more leveraged. >> can you connect the dots in to how the earnings come out after you see the revisions prior? >> this is a surprise because they are coming up into earnings season rather than down. that could be people thinking they are bullish. overall this year, the first day this year is more upgrades than downgrades of stocks. usually the start of the year is bullish. this is one of the best years we had for stocks. only nine days this year we see more upgrades than downgrades. >> we're are coming off the
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first full quarter of exceedingly high gasoline and oil prices. is any of that in the numbers we see come mid-april or analysts making that any the cake? >> high gas prices are one side of the spectrum and unseasonably warm winter we had helped to offset that. that could be a problem. >> okay. >> so in terms of going into earnings season and see this transla translate, what's the bottom line? i don't think it's going to be a real bad thing. the numbers, we will see average to above average beat rates. how do you use it if at all? >> i like to take the other side.
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when analysts are starting and it's an unusual situation and you have a lot of people that are still negative out there, when goldman sachs news came out that they were bullish, everybody said let's fate that. they are top ticking it. when i hear something like this, i think in this environment it creates a lot of fuel for a higher market. >> europe is a great place. you have a place of going into the earnings season. germany is going from strength to strength. people have bad mouthed the austerity going on there. there is opportunity there and you have to be somewhat contrarian going into it and play the stuff that hasn't played. you have to look below the lines and i think in northern europe, people are missing the boat. watching bmw and the names that are really dicking igetting it. what does that tell us? >> to play along, they are
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talking about dispregzary and look at the names. trkts jx goes to the upside. mcdonald's is sitting near the 52-week highs and when you look at the index, it is indicating it is a tight trading range and that continues to sort of slide up the scale. a lot of the nervousness is passing by whether it's the european concerns or the concerns domestically here. everybody seems to be getting more enthusiastic about the fact that there is more upside and there, i will remind everybody, we continue to see on almost every day in the s&p, you will see more puts than calls. you are seeing people get that protection that is helping the market continue to move the upside without the sellers having to come in and press the market lower. >> coming up next, want to make a move and see this options trade? that's next.
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♪ when your chain of supply goes from here to shanghai, that's logistics. ♪ ♪ chips from here, boards from there track it all through the air, that's logistics. ♪ ♪ clearing customs like that hurry up no time flat that's logistics. ♪ ♪ all new technology ups brings to me, that's logistics. ♪
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>> next hour on "mad money," seeing if circuits are wired and new stocks that could have your portfolio looking dapper.
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all coming up at the top of the hour. it's "options action" and you are looking at a trade. which stock? >> abercrombie and fitch. it's interesting because just yesterday there was chatter about this being an lbo candidate and talking about the fact that analysts are forecasting high and growing ebitda over the coming years and trading at a discount. you might want to discount that because they are locked into long-term leases in europe and of course they are seeing euro weakness. i would say don't chase. don't buy calls. fade that. if you own the stock, look at selling the calls. that gives you more than 10% in less than two months and a stand still yield of about 5%. >> catch more options actions on friday. follow us on twitter as well to get constant trade updates. coming up next, the best way to trade may not be what you think. job brown is out of trade school when we come back.
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trading commodities. are you better off buying a stock or etn?
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advice from the new book, back owned a stock over a note whenever possible. explain this. why? >> we have been so overe tfed since january one. 48 in february alone. i think there is a little bewilderment and a lot get sucked into etns. if you like copper, pick up a free port. why would you want to own an etn backed not by a basket of anything, but full faith and credit of the issuer. it's a ubs note. i would always favor the equity. another great example is natural gas. they are uninvestable. if if that turns, i would rather be in a producer.
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i would always look to find the equity play up or down. >> specifically with ung, they don't always track the commodities. >> they have to roll contracts. it's a managed product. it's not like an index of stocks where nothing has to happen and people can gain that all the time. they abuse it. if you think the gas has bottomed and i don't know if it will before i'm dead, but if you think this is the time, skip ung and look for a producer. >> the etn is different from an etf. >> some of them work well. usl works well, but as a generalization, anything with risk like an utn, i think you should get that. >> be careful because you are just taking a credit of the individual who issued the etn. on the commodity, if you get them and they hold the fist,
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it's okay. if you get the etf or etn, you have to roll the futures. that's where you get killed. >> they are loaded and they have to read page 180 of the perspectives. there all types of fees build in. that are are they were knocked down and people used free port. i think the value partially is due to the fact that people are useing it as a copper etf until that came out. buy free port. it's the way to go. >> stay tuned. if you are one of the millions of men who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone.
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