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Jim Cramer's Best Blogs
Jim Cramer
03/22/08 - 10:29 AM EDT
Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- the lesson from Bear
- post-rally threats; and
- the end of the end.
The Lesson From Bear
Originally published on March 17 at 1:43 p.m. EDT The shorts won so big this weekend that they are totally emboldened. They know the Fed's game plan, or at least they think they know: The equity gets wiped out, the credit operations live. Also they know that the book value isn't worth a warm bucket of spit, so they can lean all over the companies with mortgages on the books -- Lehman (LEH Quote - Cramer on LEH - Stock Picks), Wachovia (WB Quote - Cramer on WB - Stock Picks), National City (NCC Quote - Cramer on NCC - Stock Picks), Washington Mutual (WM Quote - Cramer on WM - Stock Picks) -- because these companies had been holding up solely because of takeover premium. The Bear (BSC Quote - Cramer on BSC - Stock Picks) deal eliminated the notion of takeover premium in the financials. In fact, I would bet that every one of these companies has little chance of getting anything other than a takeunder. Citigroup's (C Quote - Cramer on C - Stock Picks) the one conundrum, by the way. I think its book value is a total joke. But it is too big to fail, again, and I suspect that the company will be propped up by the rich outsiders that have already committed money. Obviously we have learned a lesson from Bear: The feds will finance takeunders and backstop you. That means if your company has an overstated book value, it will be wiped down to a fraction of the book and then get a takeunder from a solvent bank or investment firm with fed financing. JPMorgan (JPM Quote - Cramer on JPM - Stock Picks) played this so well with their 11th-hour "We can't make it work at anything other than $1." Feds made 'em pay $2. What will the next guy pay for Washington Mutual? Random musings: Fed doesn't cut by 100 -- ugh. We can't worry about the dollar right now. We can't worry about inflation. We need to worry about the barter system! At the time of publication, Cramer had no positions in the stocks mentioned.Three of Five Post-Rally Threats Have Lessened
Originally published on March. 19 at 7:01 a.m. EDT After big runs, you immediately hear the following: 1. Earnings are going to be terrible.2. Commodity prices are out of control.
3. Housing prices are still falling.
4. Credit is a real problem and mortgages are hard to come by and at higher prices.
5. Someone else -- a bank, a credit firm, a monoline -- is about to fail. Then we go down again. And we get frightened. I don't have anything to counter the first one. I particularly think that tech earnings are going to be bad, like those out of Sony Ericsson. I think the only big winners in tech will be those who go up against big losers, and the wins won't be that great anyway: Intel(INTC Quote - Cramer on INTC - Stock Picks) over AMD(AMD Quote - Cramer on AMD - Stock Picks), Cisco(CSCO Quote - Cramer on CSCO - Stock Picks) over everybody, Apple(AAPL Quote - Cramer on AAPL - Stock Picks) over everybody. The safe place is real-economy "Rest of World"ers like CSX(CSX Quote - Cramer on CSX - Stock Picks) and U.S. Steel(X Quote - Cramer on X - Stock Picks) and Nucor(NUE Quote - Cramer on NUE - Stock Picks), or the drug stocks with big overseas exposure. Commodity prices? What can I say, oil's going to $125, where hopefully people will drill enough to find more, or we will switch to the much more abundant natural gas, which is why I like that group so much. The other commodity pressures are political. That's ethanol. Maybe a new regime will realize that, but this one's so awful about ethanol I can't bear it. But three, four and five are changing a tad, which means that the rate of rate of change of the declines in housing and brokerage may be slowing. Or in non-calculus: Things aren't getting as bad as fast as they were. In six more months the bulk of the resets of the heinous 2-and-28 mortgages -- encouraged if not pushed by Greenspan and Bernanke -- will have run their course. The maximum bulge of horrible resets starts right now, the second through fourth quarters of 2006, the housing peak. It's the worst part. But then it is over. That matters. Because these resets are either causing people not to spend or they are causing people to abandon their homes. Both add to a recession, and the latter brings down the housing prices around the home, causing deflation. In the last 48 hours though, we have seen a 75-basis-point cut in short rates, a deal reached where Fannie Mae(FNM Quote - Cramer on FNM - Stock Picks) can start lending and buying its own bonds back, and a dramatic decline in housing starts, again. Fewer homes, more abundant credit, at lower rates: That's how you attack the crisis head on, and it is being done. I can't emphasize enough how important it is to get Fannie Mae to help lower rates as its mortgage paper is what's trading so crazily and keeping rates high. When you think that the facility that allows banks to swap bad bonds for cash for 28 days, you can see that the non-Treasury side of the ledger just got a lot better. If you couple those positives with the idea that when, not if, banks fail we just call up a bigger, better bank and tell them they don't have to pay up for the equity and the Fed will practically guarantee the transaction's profits, we know that the systemic risk is now taken off the table for all but a collapse of Citigroup(C Quote - Cramer on C - Stock Picks), which is, unfortunately, still too big to fail. All of these problems are going to linger. All of these problems haven't vanished. But all of them didn't get worse lately, in fact they got a little better. At the time of publication, Cramer had no positions in stocks mentioned.
Behold: The End of the End Is Nigh
Originally published on March 20 at 3:01 p.m. EDT If we can get to the end of March, we will be able to get out of a lot of this credit crunch. The Fed is going to allow you to take your bad stuff and return it for cash. The Fed is just borrowing them, but they can borrow them for a long time. This is the plan to forestall the apocalypse, to take the four ailing horsemen of the pending financial apocalypse -- Citigroup (C Quote - Cramer on C - Stock Picks), Merrill (MER Quote - Cramer on MER - Stock Picks), UBS (UBS Quote - Cramer on UBS - Stock Picks) and Washington Mutual (WM Quote - Cramer on WM - Stock Picks) -- and make it so they don't get sent to the glue factory. This facility will also allow Bank of America (BAC Quote - Cramer on BAC - Stock Picks) and Wachovia (WB Quote - Cramer on WB - Stock Picks), which are swimming in this bad paper -- AAA real estate paper in particular -- to catch their breath. These both need it, as you see the WB dividend yield and you recognize that Bank of America is going to own some real bad paper when the Countrywide (CFC Quote - Cramer on CFC - Stock Picks) deal closes. I want to be very clear, the moment the Treasury Department stopped being laissez-faire, the moment that it was no longer in a "let them eat cake" mode -- which is what happened when Bear (BSC Quote - Cramer on BSC - Stock Picks) failed -- the world changed. We then saw the Treasury end the chokehold it had on Fannie Mae (FNM Quote - Cramer on FNM - Stock Picks). If the Fed wants to ensure a bull market in financials, all it has to do is issue $200 billion in yearlong paper, that's what the Street is desperate for, and bid for Fannie Mae mortgage bonds. Then I would predict we would begin to clean up the housing overhang, as it would be easier to get mortgage money more cheaply. We are getting close to a resolution; we do need to prevent the four horsemen of the financial apocalypse from going lame. That's the all-clear signal for the end of the bear market. At the time of publication, Cramer had no positions in the stocks mentioned. |
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