The Market Keeps Refuting the Negativity

Sure, TARP repayment is "in" the market. But I think what's more important is the notion that we have a whole slew of banks that can be buyers of banks or pieces of banks, something that could also get an impetus from the extraordinary rally in the so-called toxic bonds.

When you combine the fact that the bad bonds are rallying -- no doubt because the need to sell is now past, not necessarily because the underlying collateral -- you have another wave of mutual funds that want these stocks.

We did not get much of a comment about the incredible rally in the credit markets that has been occurring. These bonds are not supposed to be rallying. It is supposed to be impossible to figure out what they are worth. They are also supposed to be something that no one can afford to own.

I look at things differently: There's opportunity in these residential mortgage bonds if you can:

1. Isolate the ones that are diverse, meaning not too much Florida or Arizona or California vintage 2006-2007.
2. No home equity loan.
3. No origination by one of the slipshod lenders like Ameriquest or New Century Financial or Fremont General.

Everyone's moaning about Option A and prime loans. If the residential mortgage bonds are rallying, it is hard for me to believe that there will be tremendous problems in the higher end. Everyone's also moaning about credit card defaults, but the biggest credit card play, Capital One (COF - commentary - Trade Now), is paying back TARP. How is that possible if it is bad as everyone says? Why not just say no?

Nobody wants to hear these positives. No one. But the stock market is screaming this stuff. Is the market wrong day after day? Is the market wrong in its way that it is saying that real estate can be refinanced? Is the market a total joke?

I simply can't believe it. We have had $85 billion in equity to de-lever banks. We can handle billions more if we have to. We can always merge the banks that have prime loan defaults with other banks that have a lot of capital. We are taking care of this problem, whether it be on the credit side, the equity side or the bond holdings side. I just don't know how to be as negative as everyone else.

I just can't get there. It is discouraging to me. I gave a talk this morning where I was clearly perceived as ridiculously optimistic. But I just don't know what to do with these stock prices and the success of all of these offerings and now the rally in mortgage bonds and the successful real estate investment trust secondaries. I just can't get it to compute.

I just can't.

At the time of publication, Cramer had no positions in stocks mentioned.

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Know What You Own: In Tuesday's trading, the most active stocks include Bank of America (BAC - commentary - Trade Now), the S&P Depositary Receipts (SPY - commentary - Trade Now), the Financial Bull 3X (FAS - commentary - Trade Now), Citigroup (C - commentary - Trade Now), the Financial Bear 3X (FAZ - commentary - Trade Now), the Financial Select SPDR (XLF - commentary - Trade Now) and the PowerShares QQQ (QQQQ - commentary - Trade Now).

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