TheStreet.com's Jim Cramer says we need Wilbur Ross to save someone's bacon to make this a healthier market all around.
Wilbur Ross, don't screw it up, we are all counting on you.
Yesterday it wasn't just the Fed cut that made the bank stocks rally. That mattered because it will help one portion of the banks' biggest woes: the lack of margin on their loans. Obviously, it also matters as a way to avoid a severe recession, which is why the retailers rallied.
But I believe what was even bigger than the rate cut for some of these banks was the possibility that we would not have another round of big losses, this time from a lack of insurance, because the grave dancing Wilbur Ross indicated he is choosing a bond insurer -- or bond insurers? -- to save with a big investment or takeover.
These companies just can't raise the capital on their own. Despite their endless protestations, even the limited disclosure they have given us doesn't give you much comfort that they can get their paws on the money themselves.
But someone like Wilbur Ross presumably has the deep pockets necessary and can buy them.
I don't now what Ross is thinking. I do know that he would take a tremendous pressure out of the system if he could just buy one of them, as they are the linchpin keeping the losses to the point where they do not bankrupt a Countrywide (NYSE: CFC) (Cramer's Take) or a Washington Mutual (NYSE: WM) (Cramer's Take). That's why the big rally in those stocks.
This isn't the first time we have had this kind of savior spike. First when Warburg made its investment (I almost wrote ill-fated but in this game no one ever admits that anything is ill-fated), we thought that this industry was saved. Then when some of the longer-term investors like Marty Whitman got involved, we figured they were saved.
Then when Warren Buffett's man said Buffett was about to invest in one we thought we were saved. Then when we thought the New York State Insurance commissioner might have a plan to get new people in the game we thought we were saved.
Now it is Wilbur Ross who makes us think we are saved.
The stakes are huge. The writedowns would be so horrific a failure that I am always amazed that the banks themselves don't get together to save them, but that would be a level of collusion that the government would not tolerate (even this jiminy cricket Justice Department's Antitrust Division).
That's why I have been proposing a government guarantee of their guarantee, except limiting it to 50 cents on the dollar.
Obviously Wilbur Ross would be better than that.
Level of surety? I detected a giddiness on the Ambac (NYSE: ABK) (Cramer's Take) call yesterday about the possibility of an outside investor. Of course, there hasn't been much to be giddy about in that industry so maybe it is just a relief that they may have anyone in the wings.
I am skeptical.
We have had the worst record of "almost saves" I have seen. That I should now trust Ross seems wrong, especially when if you really liked this business, you would be better to start anew and pick off the easy insurance business rather than try to figure out what you may owe in the current businesses.
And believe me, I understand that they are only on the hook now for unpaid interest, not the much larger principal. Those losses, despite company protestations, could be unfathomable.
So, eyes on Ross. You need him plus another cut next week to stop the endless and seemingly inexorable train wreck from happening.
Random musings: If you want to see the crux of the problem, it is all in one package: the conference call yesterday by Nat City (NYSE: NCC) (Cramer's Take), a once-proud bank that has so screwed things up it's pretty frightening. It is all on there -- the bad residential, bad second lien and bad residential construction loans -- in one untidy package.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO.
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Reader Comments (Page 1 of 1)
1-23-2008 @ 1:04PM
StockHunter said...
Saving the day is nice but getting good deal is better for business. So as much as people hope of a knight coming for rescue I would not bet for it. Just yet…
If some one to acquire let’s say Washington Mutual would not he wait for a better deal? Wouldn’t troubled institution with stock price going ever lower sell for less? I would wait if I were a knight.