Financials Look Like an Insulated Disaster

Can the financials pull everything down? Can, for example, the incredibly horrible number from AIG (AIG - commentary - Cramer's Take), just a nightmare, knock down everything? I mean, when you can have a company that just six months ago assured us that it had almost no exposure to toxic bonds and now tells us there is no bottom to the toxic pit of portfolio, doesn't there have to be a huge impact on the whole market?

Amazingly, I think, no. No, they can't. They obviously haven't yet, and AIG is just another disaster that will cause more money to be thrown at financials, but it won't wreck anything beyond that stinko cohort, that, as Bob Marcin borrows from me, and I take back, "is dead to me." (Of course I was referring to retail, but it is more apt to the financials.)

So by now, post-Bear, they won't. The government won't let the big ones die, the mutual funds won't let them die, the value investors and vultures won't let them die. And so what if a couple of little regional banks fail? No big deal. Maybe they merge, maybe they die. If Downey Financial (DSL - commentary - Cramer's Take) has survived this long, if IndyMac (IMB - commentary - Cramer's Take) can survive, and Rescap -- of course the latter will because John Snow has assured us that everything is great at Cerebrus and they are RESCAP -- then we just have to stay on the sidelines and pounce on the stuff that does get brought down by this obviously awful sector. .

The real issue with the financials is earnings power. After all the paper is issued by AIG, for example, what is its earnings power? Does it have any? Or when you consider the brokers, if the fixed-income market shuts down, as it has, how do you make money in the fixed-income division, which is staffed with highly paid professionals who sit around now and do nothing?

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