Those Bottomless Banks

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How did we become the United States of Brazil? That's what's going on in these bank stocks. They all have massive exposure to Brazil and today was the day Brazil came on the radar screen in a big way.

No kidding that Brazil could be in trouble. No kidding that Latin America's getting roughed up here. The level-headed voice in me (what is left of it) says this is still one more dramatic overreaction. Yes,

Citi

(CCI) - Get Report

has giant exposure to Brazil. But it has weathered that before. It will weather it again.

However, the market has adopted an oil-service

paradigm for these stocks. In other words, they are going down on every bit of bad news. So if some analyst cuts CCI numbers tomorrow because of Brazil it will go down 5 points. And then if another analyst cuts numbers on Tuesday for Brazil it will go down another 5 points.

The company can't defend itself; it is in merger talks. It can't announce a giant buyback and support the stock. It is at the mercy of the death spiral of number cuts, charges and reserves. I am using an oil service paradigm because at a certain point these stocks begin to lose all their gains for 1997 and then start cutting into 1996. I am neither long nor short Citi, but I see what is coming. I am overlaying

Rowan

(RDC)

on Citi. Look out.

At what point is it overdone? Again, if we use oil service as a road map, the bottom simply doesn't get put in until everybody who has to sell (the

liquidations we keep hearing about) gets sold out and whole new value buyers step in.

Where are the values? Let's take

Bankers Trust

(BT)

. When the dividend was in jeopardy over the derivatives mess a few years back, BT traded down to these levels. I think BT is a fundamentally better bank now, in much less trouble both with its clients and with the government. But it is in

falling-knife mode. When it stops going down, through a combination of insider buying and corporate buybacks (when they can do it) and a good yield, I will step in for more than a trade.

Until then, I am on the sidelines. Waiting. I am neither courageous enough nor foolish enough to step in right now.

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

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 TheStreet.com at

letters@thestreet.com.