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Jim Cramer credited SEC Chairman Christopher Cox with single-handedly saving the entire financial sector.
Cramer told viewers of his "Mad Money" TV show on Monday that last week's announcement by Cox that short-sellers must borrow stock before being allowed to execute their trade was exactly what the financial stocks needed to be protected from the endless onslaught from short sellers. "These stocks have been held down artificially by shorts and rumors," he said.
By enforcing the rules that were already on the books, the financial stocks were driven up by short covering, and are being kept up by good earnings. "The move levels the playing field between the longs and the short," said Cramer.
He encouraged Cox to extend the enforcement of the rules to all stocks.
Cramer again advocated the reinstatement of the uptick rule, which requires short sellers to wait for a rise in a stock's price before allowing them to sell and take the price lower. By requiring buyers to be present and before a short can occur, short sellers would lose the ability to endlessly take a stock lower, he said.
Those oppose to the uptick rule contend that with bid and ask prices now just pennies apart, the uptick rule is irrelevant. They also contend that the prevalence of Exchange Traded Funds also makes the uptick no longer necessary.
But Cramer argued the contrary, stating that even an uptick of a few pennies can help protect stocks from countless short-sellers.
Cramer: XM Grabs Listeners
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"Commissioner Cox has already shown he can level the playing field for the financials, now he needs to step up and enforce the rules for all stocks," said Cramer.
"We have emerged from one of the darkest times in American banking history," Cramer told viewers. He identified four banks that he said will still be standing after the dust settles from the recent turmoil in the financial sector. These "fortress" banks, he said, will survive to see 2009 and have the incredible opportunity to buy failing banks at bargain prices.
Cramer said that
Bank of America
JP Morgan Chase
all reported quarterly results that showed they will survive.
These banks, he said, have worked through the bad loans and are now successfully raising capital, putting them in a position to capitalize on everyone else's mistakes.
Of the four banks, Cramer said he'd be a buyer of only US Bancorp right now. US Bancorp, he said, is the only one that's fallen far enough to make him comfortable.
Cramer said he would be a buyer of the other three only on weakness. He also cautioned that there will likely be other bank failures and negative news continuing to pressure the sector in the days to come.
Cramer said there are three positives taking the bank stocks higher. First is the fact that all four banks reported better-than-expected earnings. Second, Congress has finally begun moving on a housing bill to offer relief to homeowners and banks alike. Lastly, the federal government is considering lifting antitrust rules, making it easier for larger banks to begin buying up the smaller, failing ones.
The combination of these factors, along with new housing starts finally approaching sustainable levels, should usher in a new era for the bank stocks, he observed.
Two week's ago,
fell to just $75.93 a share after a negative article in the New York Times raised concerns that the company's cancer drug, Avastin, was too expensive. Cramer advised buying Genentech after the news, and the stock is now up 23% since that recommendation.
Cramer said Roche's bid to acquire Genentech confirms his thesis that biotech stocks are right for this market. With the U.S. dollar so weak, he said, it makes sense for European companies and others to acquire U.S.-based companies.
might appear be a tempting way to play the drug stocks, but advised against buying shares.
He also advised against building a position in either
Cramer instead recommended shares of generic drug maker
as the next possible takeover target.
Cramer said he likes the company for its 60 new drug applications pending at the FDA, and recommended buying shares on any weakness in the sector.
More on the Uptick Rule
Cramer talked with Rep. Gary Ackerman, a Democrat from New York, about his support of for the reinstatement of the uptick rule. Ackerman said it's unbelievable that the SEC allows short sellers to sell stock without first waiting for support in the price. He called the practice "highway robbery."
Ackerman said he's not a proponent of over-regulating, but does agree with Cramer that existing market rules should be enforced and not allow short sellers to "beat companies to death."
Cramer was bullish on
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At the time of publication, Cramer was not long on any stock.
Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."
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