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Banks, Foreign Exposure and Falling Knives


The news came over the tape late Friday: BankBoston (BKB) had only low double-digit exposure to Russia. Wow, I said to my partner, Jeff Berkowitz, that's nothing. Watch this stock fly.

At the moment the news came over the stock was at about 37, which was down a dollar for the day and down a humongous amount for the week. Sure enough, buyers came in and took the stock right to 37 3/8, as they knew that BKB's exposure was minimal and it was safe to get back in.

And then, just as I started kicking myself that I was not long it, my trader,

Mark Kantor

, tells me there is major six-figure size BKB to go.

I stumble and say, "You mean to buy."

No, he said, "to go."

Oh my, I said aloud, "the good news is just another excuse to sell. What a bear market these financials are in. It's mind-boggling."

Soon after, Jeff and I stepped off the desk to discuss the pros and cons of going long BKB. It was incredibly instructive. I made the bull case. I pointed out that BankBoston had already disclosed that Latin America isn't hurting it that badly -- BKB is the bank, other than


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, in Latin America -- and it had quantified Russia. I said these losses were much much less than the losses BKB experienced during the real estate downturn. I mentioned that the stock is down 20 straight points and has a great management. I said the dividend is 3% and seems solid.

To which Jeff said, "How do we know Brazil won't get worse for them?" I said I did not know, but that the stock has already discounted a ton of bad news.

But by this time during the discussion the stock had begun to gather momentum on the downside. "Falling knife," Jeff said after hitting it up.

"Yeah," I said. "Let's bag it and wait until it yields 4 %," and that ended that discussion.

In the end, the falling-knife argument can stop any buyer in his tracks. Including this one.

Random musings

: Remember dividends? Remember how they used to enter the equation of whether to buy something before stocks got so high that they became an afterthought for all but the real estate investment trusts? When this era is over, I predict that we will be yield-hungry again, looking for stocks with high dividends that pay us cash while we wait for something good to happen. Unfortunately, we are not there yet. For some, growth will always be the mantra. But companies that pay good dividends and buy their stock back will have much more appeal than those that simply repurchase shares.

James J. Cramer is manager of a hedge fund and co-chairman of

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 by sending a letter to at