Behind The Money

Wednesday, Aug. 11, 2010 Fast Money Tonight Tonight on Fast Money: Your full stock market selloff swat team. Stocks are dropping, the economic picture just got cloudier and even traditional safehavens like gold are not even working. We'll Battle the Bear with the plays that can work in this environment. Plus, are fears of a tax increase the real reason behind the market downtrend? And, of course, Cisco earnings after the bell. We'll trade the 2nd Derivative plays off the numbers from the world's largest maker of routers as earnings season comes to a close. » Tonight 5p ET Behind The Money By John Melloy, Executive Producer, Fast Money Investors are no longer paying more for the earnings of so-called growth companies, treating the group the very same as their slower-growing value counterparts as macroeconomic uncertainties cause them to paint the whole market with the same brush. General Electric, the largest holding in the S&P 500 Value Index Fund (IVE), has a forward price-earnings ratio of fourteen. Apple, the quintessential growth stock and largest member in the S&P 500 Growth Index Fund (IVW), sports a P-E based on forward 12-month estimates of just 15.5 right now. "Investors are so depressed that they can’t be bothered to put a higher valuation multiple on growth stocks relative to value stocks,” wrote Ed Yardeni, president of Yardeni Research, in a note to clients today. “The growth indexes generally outperformed value in 2009 in a stunning recovery from the ashes of 2008." Growth stocks are trading at a forward P-E ratio of 13.2, while value stocks are trading at an 11.4 forward multiple, according to Yardeni’s figures. The value index ETF took over the performance lead at the start of 2010 as investors jumped off the hot momentum plays and sought out larger, more stable stocks for a shaky, yet maturing recovery. But since the recent confusion this quarter, perpetuated most recently by the Federal Reserve’s statement Tuesday, both indexes have closed their gap and have started to trade nearly in tandem. "If you can buy growth for the same multiple as value, why wouldn’t you buy growth?" asks Karen Finerman, who follows a 'value investing' philosophy for her hedge fund, Metropolitan Capital Advisors. "But there's also the risk that the whole market is a value trap." While the current earnings reporting season has been deemed a success as the majority of companies blew past second-quarter estimates, the long-term picture continues to be clouded by deflation fears and the chance of a fiscal policy mistake, investors said. Credit Suisse points out that earnings estimates for 2011 have in fact been   by analysts. "It’s all about the 'E' in the price-earnings ratio," said Brian Kelly, founder of Kanundrum Capital and a ‘Fast Money’ trader. It doesn’t matter what kind of company you are if all earnings will suffer equally from a macroeconomic risk, said Kelly. » More from John Melloy Halftime Report Halftime Pt 1: Market Facing Suicide Squeeze? Technical action in the S&P suggests stocks are like a tube of toothpaste caught in a door. It’s going to spurt out one direction or the other. But which way? » Read More Today's Headlines Could the Fed's Move Against Deflation End Up Backfiring? For Shareholders, Dividends More Important Than Ever Why Many Average Investors Continue to Stick to Cash White House to Provide $3 Billion in Housing Aid US Should Stop Propping Up Housing Market: Santelli Median Home Prices Rise in Most US Cities Wall Street Shifts Campaign Donations to GOP Company Job Openings Drop for 2nd Straight Month High-Profile CEO Exit Packages Wall Street's Next Casualty—The Financial Adviser Get a Real-Time Quote Get other CNBC newsletters delivered FREE to your inbox: Morning Brief Evening Brief Options Action Maria Bartiromo's     Investor Brief Breaking News      Alerts » Sign Up Today Follow CNBC:  Find us on Facebook  Follow us on Twitter  Visit us on Digg This Week's Events MONDAY Earnings: BEFORE - Dish Network, King Pharmaceuticals, Isis Pharmaceuticals, Liberty Media Corp., Scripps Networks Interactive, Tyson Foods, ; AFTER - Blackboard, Ctrip.com Int’l, Lions Gate (not confirmed), McDermott, Qiagen, Rackspace Other: 3-month bill auction, SEC vs. Tourre hearing at 11:00 am, McDonald's July Sales Figures TUESDAY Earnings: BEFORE - Applied Industrial, China Mobile (not confirmed), Fossil, InterContinental Hotels, JA Solar Holdings, Sysco Corp. (not confirmed) ; AFTER - A123 Systems, CareFusion Corporation, Walt Disney, Oasis Petroleum (not confirmed), SunPower Corp. Other: ICSC-Goldman Store Sales, Productivity & Costs, 3-Yr. Note Auction, FOMC Meeting Announcement, Unit Labor Costs, Wholesale Inventories, FOMC Rate Decision, Connecticut GOP Primary WEDNESDAY Earnings: BEFORE - BHP Billiton (not confirmed), Computer Sciences Corp., Macy’s (not confirmed), ; AFTER - Advance Auto Parts, Cisco Systems, Thompson Creek Metals (not confirmed) Other: Bank Reserve Settlement, 10-Yr. Note Auction, Treasury budget, Crude Inventories, Treasury Budget, June International Trade THURSDAY Earnings: BEFORE - Anheuser-Busch InBev, Estee Lauder, Kohl’s, Sara Lee, Wendy’s Arby’s Group, ; AFTER - Autodesk, DeVRY, Nordstrom, Millipore (not confirmed), NVIDIA Other: Jobless Claims, Import & Export Prices, EIA Nat. Gas Report, 30-Yr Bond Auction, Fed Balance Sheet, Initial Claims, Continuing Claims, Export Prices, Import Prices FRIDAY Earnings: BEFORE - JC Penney ; AFTER - Berkshire Hathaway (not confirmed), Ivanhoe Mines (not confirmed), Petrobras (not confirmed) Other: Consumer Price Index, Retail Sales, Consumer Sentiment, Business Inventories, CPI, Core CPI, Retail Sales, Mich Sentiment Advertise With Us | Visit Our Member Center | Unsubscribe FIRST IN BUSINESS WORLDWIDE. © 2010 CNBC Inc. All Rights Reserved 900 Sylvan Englewood Cliffs, NJ 07632