Dee-fense! Dee-fense!! Dee-fense!
Sometimes, you have to stand up and defend what you believe in when it is attacked by others. The greatness of
RealMoney.com and our parent,
TheStreet.com Inc. (TSCM Quote - Cramer on TSCM - Stock Picks), is that they let me. We publish disparate voices on
TheStreet.com, as well we should, when you consider that people buy and sell the same stocks every day. There is always a right side and a wrong side, in my opinion, and I believe passionately that I am right about the stocks I talk about, as do others here.
Yesterday, we published two very thoughtful pieces about two very different matters: one on
loan losses and
one on
Kohl's (KSS Quote - Cramer on KSS - Stock Picks), both of which were extremely well-argued and would make you want to sell all of the banks mentioned and short Kohl's.
I don't want you to do either. I think both will cost you money. Because we are not monolithic here and because the Web allows you to click back and forth with ease (these things aren't very fair in a hard-copy world because you would only have my version to look at) I want to argue my case on both right here.
First,
Peter Eavis is dead right about the problem loans. And if history is any guide, this first quarter will be even worse than the last quarter. Get ready to read a host of articles about bad loans. Now, understand that the
Fed has a good handle on this kind of issue and is most likely easing
in response to this kind of development. I know it is a leap of faith, but I am asking you to look into the bad loan situation and respect it, but don't let it dissuade you from owning banks.
I say that based on my track record of betting with banks into Fed easings. In 1990, I stayed short some of the banks into a worse downturn and got walloped, even though the loan situation was
far worse then than it is now. Far worse. Banks were dropping like flies. But the major banks did so well off the series of eases that you made a fortune overlooking those bad loans.
Same in 1995 and 1998. At the time there were tons of incredibly informative articles like Eavis' and I read them and believed them and they killed my performance. You have to synthesize the facts with the investment, and my synthesis says: We have seen all of this before and you must put your trust in the Fed. Overlook these credit problems and stay long financials.
Kohl's is tougher.
Last summer I shorted Kohl's off of an argument similar to
Arne Aslin's (whose stuff I like very much) and I had the added advantage of my wife's not liking the store. But I got in the way of a gigantic store expansion. And I covered and went long and made real good money. Even if you don't like Kohl's, I would urge you not to short it because when retailers are still in their national expansion mode, they garner adherents (portfolio-manager buyers) every time they open new stores in new areas. You can't use traditional P/E analysis (as Aslin's doing) until the build-out is complete, because America's portfolio managers love growth in retail and they all like to have one growth retailer in their portfolio.
Right now that choice is Kohl's and it will temporarily (for as long as the build-out takes) trade much higher than the group. It is extremely well run and, while you may view it as an accident waiting to happen, believe me, you will be roadkill on the short side before you ever see the actual collision. I saw this with
Wal-Mart(WMT Quote - Cramer on WMT - Stock Picks) in the '80s, and with the big
Gap (GPS Quote - Cramer on GPS - Stock Picks) rollouts in the '90s. Just a fact of life. Don't buck it.
Random musings: Don't forget the monster chat on
Microsoft tonight for
RealMoney.com subscribers. Be there.
Jim Cramer
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