Jim Cramer's Best Blogs
I am puzzling over all of this, because last night Obama talked endlessly about the need for private investment, but if you seize big banks, why not wait until the government gives away the good parts and keep the bad parts? Without clarity, say, on Citi, why not wait until it is seized and then hoodwink the government with a lowball bid for Banamax or for the clearing business or any number of the well-run execution pieces of the pie of Citigroup?
What the government has done is FROZEN investment in banks, because by waiting for the banks to be shorted down to oblivion and perhaps causing runs, the ostensible reason for the seizure of WM and the attempted seizure of WB, the private sector gets the best of all worlds: It cherry-picks the goodies from the government and it doesn't have any risk.
That's where we are.
Unless Treasury and the Fed and the FDIC get into a room and offer what happens if a bank fails a stress test -- seizure, change of boards, wipe out of the preferreds, cram down of the bonds, a sell and breakup to JPM and Goldman Sachs (GS) and Newco (a fictional bank created by privateering private equity people) -- we are not going to get to the world that Obama outlined last night.Which means, again, the trick is to watch the ProShares UltraShort Financials (SKF) ETF, watch the trading in the PowerShares Financial Preferred (PGF), the bank preferred ETF, and keep shorting, because the lower the banks go, the more likely that Tim Geithner tells his favorite reporters that any capital injection wipes out what's left of the common! Random musings: It doesn't have to end like this. Check out the plan a bunch of old-hand bank regulators who helped save the S&L system in the 1980s say here in an excellent op-ed submission. At the time of publication, Cramer was long Wells Fargo, JPMorgan and Goldman Sachs.
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