Before the bell, JPMorgan (JPM) and Wells Fargo (WFC) will report earnings. While many are optimistic, Cramer says he's nervous, and not just because both banks are holdings in his charitable trust, Action Alerts Plus.
Along with strategic downgrades coming over the last couple of weeks, the financials are up about 20% going into earnings. Because of the substantial position in the Action Alerts Plus portfolio, Cramer said, "I can't tell you that I expect the number that people want."
While investors might point out that interest rates are rising, the effect has likely not been felt by the banks, at least in a significant manner, he pointed out. Rising rates increase the banks' net interest margins and effectively their profit. But it's still too early for them to make an impact, according to Cramer.Federal Reserve Chairman Ben Bernanke recently indicated the Fed would remain supportive, but housing affordability has suddenly dropped due to higher mortgage rates. Cramer's also curious to hear about the regulatory side of things. Some parts of the government want banks to lend more, while other parts want them to raise money. It's not really possible to efficiently do both, so clarification is going to be sought during the conference calls. But over the longer term, these firms should start to do better, especially when net interest margins begin to rise, prompting Cramer to ask: Why buy ahead of the event? The pullbacks have been the best opportunities in these names and he concluded that after the report, these stocks will likely be better portfolio candidates. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV