A Big and Little Look at the Financials

What explains the performance disparity between the big-caps and the smaller players in the financials? The buying patterns of mutual funds, Cramer says.
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The resilience of these financials is pretty astounding, especially when you consider that the strength is only in the big-caps.

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Chase

(CMB)

, for example, is doing exactly what it should be doing -- bouncing right back, making that rogue trader's error strictly a one-day phenomenon, as I said would be the case in yesterday's

column on this fiasco. The major brokers keep going higher, in part reacting to higher trading volumes.

That's what happens, of course, when the big backdrop -- the bonds -- goes your way.

But what's even more interesting to those aficionados of the financials is that the little savings and loans and the off-the-beaten-track financials aren't even budging.

What gives? What makes it so that

Wells

(WFC) - Get Report

and Chase and

J.P. Morgan

(JPM) - Get Report

are ramping, yet the savings and loans, which theoretically should benefit just like the big guys, are stuck in the mud -- or quicksand, if you attempt to retrieve them?

I think the answer lies in mutual fund buy patterns. The big-cap stocks have the liquidity that the big mutuals need to be able to overweight now and still get out. The little guys not only have no liquidity, but in every case, you are probably buying stock from some mutual fund that has underperformed and has massive redemptions.

So what do you do if you are an individual trying to make sense of the world? I think you wait until December to buy the little guys and you wait until a Chase-like pullback to buy the big ones.

In other words, let's say we get a strong employment figure on Friday. I think the mutuals aren't done with their buying of these financials, and if we get a one-day selloff in bonds, that should signal a buy for these big banks. But let the tax-loss selling and redemptions run their course on the little ones. They will have their day.

Random musings:

Be careful. The call buying you see and hear about in

Philip Morris

(MO) - Get Report

is actually call selling. Sure, somebody is buying them, but the initiative came from sellers, not buyers. That's not particularly bullish.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long J.P. Morgan and Wells Fargo. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.