Are the banks for real? Are they reflecting the pressure the


feels in the face of the consumer-spending boom? Are they going to be punished, needlessly, by the residue of the superheated dot-com economy?


I make no secret of my fondness for this group of stocks -- an affection that is based purely on valuation. These stocks are cheap. But I think that it is not what matters in this market. The banks are caught in a terrible whammy. People sell banks when rates go higher because it hurts the margins of the banks.

It doesn't even matter if banks have figured out ways to insulate themselves from short-rate rises, they all get hurt together anyway. That has always been the case. It is the case this time.

But we also tend to sell financials when inflation is roaring, which is the perception now. So banks can't win. If the Fed doesn't tighten, people will sell because the Fed can't rein in inflation. If the Fed tightens too much, short-term rates go too high and people think the banks will do poorly in earnings.

They just can't win.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund had no positions in any stocks mentioned. 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