Beware the Financial Dirty Dozen

The financials are flying -- there are finally bids for most of them underneath. Many, including Lehman (LEH - commentary - Cramer's Take), are running. What a great time to put the negative cards on the table and put the negatives in perspective. That's right, let's look at the financial Achilles' heels. What could go wrong? In other words, here's the companion piece to Doug Kass' positive conversion. Here's what I am worried about even as Doug thinks everyone's too worried and the bottom is being put in.

To get started, let's look at what's not causing the endless declines in the stocks -- don't worry, we will get to the financial dirty dozen when I finish this preamble.

First, it ain't earnings. Earnings aren't going to be that great. But that's why the S&P is at 14 times. It can go to 12 or 11, or most likely stays at 13-14, but the E goes down (earnings).

Second, it ain't oil. The stocks sensitive to the increase in oil have room to go down, but the price of oil is being factored in slowly but surely.

Third, it isn't inflation or recession. Those two are being baked in each day.

No, it's balance sheets and the plight of the common equity. There are simply too many companies in trouble all at once to let us leave this morass behind us.

Specifically, there are 12 companies that are on my watch list as potential disasters that could wreck the market further. These are companies I have NO CONFIDENCE IN WHATSOEVER, and they must be on everyone's screen. They are what could imperil this market.

So, drum roll, please ...

1. Citigroup (C - commentary - Cramer's Take): Here's a company that is in so much trouble that I can't even begin to figure out how to fix it. There was a moment that it could have been unwound, but now your best hope is that it goes to $5 or $6 and we realize it could fail and we let the Saudis bail it out. Don't laugh -- that's the 1990 scenario. Pathetic that history repeats itself, but this is the worst-run major bank in the world. You get what you pay for. A dividend cut is next.

2. General Motors (GM - commentary - Cramer's Take): Merrill says what I thought was obvious when I said it the other day -- this one makes too much sense as a bankruptcy. Wrong cars, wrong balance sheet, one of the worst mortgage writers. Sold to you. Dividend cut needed. (Ford (F - commentary - Cramer's Take) doesn't have the miserable mortgage business so I am not including it in the dirty dozen).

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