This post appeared earlier today on RealMoney . Click here for a free trial, and enjoy incisive commentary all day, every day.Editor's note: Jim Cramer will present his 2009 stock outlook for the first time at TheStreet.com Investment Conference on Saturday, Oct. 25. Click for details. If you break the cycle of short-and-no-cover, you can win. I know that wasn't the purpose of the Anglo-French plan that we were dragged into, but it will be the effect, and the effect will be electric.
This plan takes away the shorts as the primary allocator of capital in the system and returns it to the longs. Citigroup ( C) had been a major target of the shorts but now it can raise all of the capital it wants. We no longer have to believe that Goldman Sachs ( GS) can be destroyed overnight by hedge funds buying swaps and then pulling their money out and telling the media about a prime brokerage panic. That can't make much money either. Of course this is a radical solution, just gigantic, and it smacks of everything that the federal government under President Bush must have hated doing, as it is radically interventionist. It is the work of European countries that don't have the capitalist affinity we do. Some would say we communized the banks with these stakes. I say what we did was what the government did with Lockheed ( LMT) and Chrysler years ago, successful investments that turned a profit for the U.S. These investments also anoint the banks so that can buy other banks, and they make it clear to the banks that got the money that they'd better lend it. This more than anything is directed on the strong side at JPMorgan ( JPM), which has a lot of capital to lend but hasn't wanted to, and on the weak side at Citigroup, which needs capital to survive, so it can go raise more capital -- and it will. All of our Geithner/Bernanke plans with their dainty "collateral to Fed" nonsense and the troubled-asset plan from Paulson either took too much time or didn't inject any money. This is the new capital, the sovereign fund capital, that the system needs. I think it takes us out of the abyss. No, not a reason to buy Caterpillar ( CAT) or Dow Chemical ( DOW), but a great reason to stop shorting the financials. At the time of publication, Cramer was long Goldman Sachs and JPMorgan.