NEW YORK (TheStreet) -- 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:
- Bank of America's settlement, and
- Using trains as an indicator.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Bank of America Pays Its Dues
Posted at 11:28 a.m. EST on Thursday, Aug. 21, 2014
What does that mean? As long as this litigation hung over the head of this bank, it was impossible to figure out what it could earn. There were so many lawsuits by so many government entities, so many charges, and so many billions in legal fees, all on top of the $60 billion that had been shelled out, that you were simply guessing about what the company could earn. This decision to pay took the earnings estimates out of the guesswork category and into the pencil and paper world of how much of the net interest margin, fees and investment banking could fall to the bottom line if everything goes right. I think the answer is $2 in 2016, maybe even earlier if rates were to spike to 3% on the 10-year Treasury note. That make the price-to-earnings multiple on this stock the cheapest in the group -- maybe even the cheapest in the entire S&P 500. I think that Bank of America is an earnings machine that has been hobbled forever by the sins of the fathers. Remember, this bank spent $4 billion buying Countrywide Financial, which I now believe to be the worst acquisition in history. Just think about how much time the top dogs at this bank had to spend on these matters. Just think about the horrendous misallocation of resources and drain that this litigation produced. It is now all behind them. Now, let me just say that I think that the Justice Department truly held Bank of America out to dry. There is no rhyme or reason for the $17 billion figure other than it was bigger than what JPMorgan paid, so it gives the Justice Department bragging rights. This money comes out of the shareholders' pockets who did nothing wrong. There were no criminal prosecutions, no perp walks for who ran this bank -- or anybody else for that matter. When I heard Dick Kovacevich, the man who so ably ran Wells Fargo (WFC - Get Report) , talk this morning on "Squawk Box" about this miscarriage of justice my blood was boiling. How could they not have prosecuted the bad guys? How did this happen? How did they pick these numbers? I think this was a witch hunt, plain and simple. I have not been a big fan of what happened with the banks during the Great Recession. They were, indeed, the biggest participants in it. But the notion that these fines are anything but grandstanding at this point is fanciful. If you wanted to change human behavior, you put people in jail. You don't wipe out earnings. I hope this sad chapter of justice is now behind Bank of America. It has more than paid its dues and its stock is now free to run. But the fact that the bankers who did this are still free and not even on the run? That's the real outrage here. That's the travesty that should never be forgotten.
Freight Cars Don't Lie Posted at 2:52 p.m. EST on Wednesday, Aug. 20, 2014