- the "genius" of academics,
- no-longer-toxic assets, and
- a response to self-aggrandizing critics.
Forget Making Money -- the Academics Say You Can't!
Posted at 1:54 p.m. EDT, March 31, 2009 I love a plan that is dissed right out of the chute by noted hedge fund managers Nouriel Roubini and Paul Krugman. These two big-swinging pros know the value of collateralized debt and stay close to the portfolios of the banks and recognize deterioration like the fabulous investors they are. They have a bead on Tim Geithner and know that neither he nor Larry Summers has a clue, as both of them toiled in academia before this. Hold it! Wait a second! It is Roubini and Krugman that are academics! It is Roubini and Krugman who are making definitive but theoretical short bets against ... well, let's see, today it is Apollo Global Management and Colony Capital, no doubt two no-nothing stupid managers who had better start reading The New York Times more and go back to classes at NYU. How dare they commit billions to a program that the professors and the columnists know is failed from the start? How dare these two hedge funds -- no doubt with unlimited firepower to actually figure out the worth of the assets -- take advantage of the wonderful leverage that the Fed is providing to buy them? Bunch of RUBES! How dare they rely on two decades of vulture investing in distressed fixed-income securities just like what would be for sale by the banks -- precisely the expertise of these two hedge funds? When I was at Harvard Law School I took some classes at the business school about option pricing. They all had the same theme: The options were all priced perfectly that you really couldn't make any money off them -- they were simple mental exercises. Boy, those professors were smart. They even wrote whole books about them! There was only one problem. At a phone booth located right before crossing the Charles River on the way from the Harvard Yard to the business school, every day I would make a little money trading the options in Amoco (now BP ( BP)), Motorola ( MOT), Texas Instruments ( TXN) and Time Inc. Pretty much every day. By the time I got to the classes, I felt guilty. I had clearly stolen the money from someone else. That's what I think of when I think of the nitwits at Colony and Apollo. They have only made billions and billions of dollars trading these distressed debts. I hope they feel guilty and downright foolish because Roubini and Krugman tell them they are wrong. Memo to Apollo and Colony: You silly devils you, give it up, don't participate, you just may make too much money in a way that Roubini and Krugman say you can't, and you will be doomed to have honest but ill-gotten gains that the intelligentsia say just can't happen. Maybe next time you will learn to follow those with no money who preach, instead of using your own killer instincts that have stood you so well after all these years. At the time of publication, Cramer was long BP.
'Toxic' No Longer
Posted at 10:55 a.m. EDT, April 2, 2009 Detox? Get rid of the term "toxic assets"? "Somewhat impaired"? Is that the new term? How about "damaged" assets. How about "bargain-basement" assets, like at Filene's? How about "flexible"? Whatever. I am banning the term on my show. These assets are no longer in A Million Little Pieces. They have gone to Hazelden. A two-year treatment, and it worked -- they are on the wagon. I think that FASB has given banks the latitude they need and the regulators the room they need to ban the term "toxic." And that's a key reason why we can rally. It is, as I said earlier, not as good as I would like. In fact, in some cases it is not as permissive as I would like, with accounting for Bank of New York ( BK) and State Street ( STT), for example. Disappointing, even. Worse, FASB says it has already been permissive for the bargain-basement assets STT and BK have. It doesn't matter, though -- this is permission for the regulators to look the other way. Bad banks will still run out of capital after this. There will still be problems. No doubt, we have a huge number of loans, whole and collateralized, that are miserable and nonperforming. But it is hard to believe that JPMorgan ( JPM) and Bank of America ( BAC) and Wells Fargo ( WFC) and Citi won't win here, as the stigma is lost and we now have assets that are potentially valuable. Will this delay the inevitable like Japan? I think that Japan's problems were a lack of consumption and a lack of population growth. You simply cannot maintain the 400,000 homes built and the 40% decline in prices -- magic number -- and still say housing will go down inevitably. I think this is psychological. But it is very big. I read about hedge funds that don't want to play in the public-private partnership. And then I know my gut. I am on TV and on TheStreet.com, locked into not owning anything. But if I could, right now I would be putting together a group to buy these assets. If someone would sell me bargain-basement assets and I could borrow money to do so from the Fed, I would lock in that rate and go home with some of these assets and hold them, provided they were not second-lien California-issued by outfits like Ameriquest, or Novastar, or Fremont -- we know the bad issuers -- and I believe I would make a fortune. Let's make another thing clear: Unemployment will still go higher, maybe much higher. That lags. The auto companies will still be humbled. Housing starts will stay low. But what matters is the rate of change of decline has stopped, or in some cases halted, and that's why you can have this kind of rally in credit, in commodities, and ultimately, common stocks. At the time of publication, Cramer was long JPMorgan and Wells Fargo.
Critics: Get a Life
Posted at 1:29 p.m. EDT, April 3, 2009 The amount of misinterpretation of what I say is so great that sometimes it can simply be regarded as some sort of Liberty Valance shooting for someone to make a name for himself. Today I read an article in a rival publication that claimed I lied to people and never told them we were in a depression, so who was I to declare that it might be over? So, here we go: I mentioned that we were in a garden-variety depression here and on TV literally dozens of times. I tried repeatedly to distinguish how we were not in the Great Depression II, the sequel. But I was unequivocal in my statements that we entered the garden-variety depression after Lehman Brothers. There are many misconceptions about me: endless flip-flopping, which typically has to do with a changing of the facts; taking credit for things I haven't said or done; and now, lying to the public about my true feelings. I find all of this pretty offensive. First, I am out there making calls, and I do my best and I make some great ones and some bad ones. Given that I am the only person I know who repeatedly calls out his bad ones, I don't know why anyone would think that I am hiding anything. Second, I have no desire to endlessly defend myself. I have so many critics that it simply can't be considered paranoid. Third, there is no flippancy about a call about a garden-variety depression. I debated calling it that for weeks on end with my circle of friends before I did. I also went on national TV and said repeatedly that a Great Depression II could be on the table with the wrong policy actions. The right policy actions were taken, so I don't think that I have flip-flopped. I think matters, statements and policies changed -- and changed meaningfully, particularly the actions of Bernanke's Fed. Finally, some people just lie transparently about my views in order to make a big splash. These are the people I most despise. They refused to even recognize the progression of thought and show no rigor or homework in their analysis of me. So, to reiterate: The recession began in August-September of 2007, turned into a depression with Lehman, and reverted to a recession in March. Is that so hard? Critics: Get a life.