I can't believe we are right back to the ailing banks as the focus. The dividends remain the huge red flag that keeps the focus on. Wachovia
(WB)
at 9%, that's just plain ugly. All of these niggling little Ohio banks are rolling over with no bottom: Nat City
(NCC)
(which has a big Visa
(V)
distribution that doesn't seem to matter); Huntington
(HBAN)
; Fifth Third
(FITB)
. Yech.
And of course all of the MBIA
(MBI)
/MGIC
(MTG)
gang. They just limp along and we wonder, "How much can they hurt us? How much damage can they do?"
We have this allegedly huge restructuring of the financial regulatory environment from Hank Paulson at Treasury and all people on Wall Street can think is, "Can it save CIT
(CIT)
? Are we going to lose Lehman
(LEH)
after this huge theft? Will Countrywide
(CFC)
sink Bank of America
(BAC)
?"
The most remarkable thing is that all of these woes trace back to three years of mortgages. How can three years of mortgages take everyone down?
How can there be no financial institutions of any heft save Goldman Sachs
(GS)
and Hudson City Bancorp
(HCBK)
that were spared this mortgage grim reaper?
Of course there are other things going wrong: When will this American Axle
(AXL)
strike end? This is killing the automakers. We can see all of the auto-parts companies rolling over.
What's incredible is how the Dow Jones Industrial Average is not overweighted in financials and instead has companies with good balance sheets and/or good dividends. This is why it's holding up better than almost any other index in the world. It also has the right industrials, such as Caterpillar
(CAT)
, United Technologies
(UTX)
and General Electric
(GE)
, all of which are levered to international economies and of course the oils.
Or, to put it another way, mortgages haven't infected all that many of the Dow 30.
But when you look at the vast panoply of stocks, you know that it is the mortgage issue that has sown a gigantic amount of destruction. There has yet to be a way to contain it, and as housing prices deteriorate we can't get in front of it ... yet. The home equity loans, the first mortgages, anything from 2005-2006 is choking the system still. Incredible.
Rather than have lots of legislation and politicking, we need to have the regulators sit down with the big banks and make some cogent suggestions about merging so the banks don't run afoul of capital rules.
That way, at least, we avoid Bear Stearns
(BSC)
-like mergers and get ones that were more like what we had in 1990: shotgun marriages that didn't involve either-join-or-die situations.
Funny thing, compared to the destruction of capital in the stock market, the actual mortgage losses to date seem small.
Doesn't matter. If you kept mortgages, if you kept home equity loans on your sheets, then you still can't be owned.
Funny, the most hopeful sign of all of this is that the stocks of the homebuilders themselves bottomed months ago. They led us all down; could they be signaling something good now?
I think they can. I just don't know what it is yet! And I don't think any of the buyers do, either.
Random musings: This student loan law change is making Sallie Me
(SLM)
and First Marblehead
(FMD)
look like candidates for disaster. They don't seem big enough to hurt us too much, but their endless declines are worrisome. ... Trying to figure out how Lehman gets money back from Marubeni, the Japanese trading company that Lehman thought had secured about $350 million in loans. (Marubeni says the loan documentation was fraudulent and that it got tricked too.) Sometimes you just get had.
At the time of publication, Cramer owned Goldman Sachs for his Actions Alerts PLUS Charitable Trust. And General Electric owns CNBC, for which Cramer is a featured commentator.Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC.
To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here.
Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here. TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.
