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TheStreet.com's Jim Cramer says they won't fail, but they can't be bought yet. What do the words "we have enough capital" mean? It means get ready for an offering. Merrill (NYSE: MER) (Cramer's Take) last week said they had enough capital. So did Citigroup (NYSE: C) (Cramer's Take). Of course they left themselves some sort of out. Merrill said it had enough "equity" capital, so it did a huge preferred deal. Citigroup stressed that it had more than it needed, but they just made you look like a moron if you bought stock the other day at $27.
But if you did buy, I have no sympathy for you, none whatsoever. I have no sympathy for you because I have said over and over again that as bank stocks go up, they must issue equity until housing stops going down. Every uptick must be met by equity if the downcycle is elongated.
Citigroup's the worst offender, raising more than $35 billion. (Did you want to scream when you read how much Bob Rubin thought everything was done well at Citigroup, and that hindsight would produce no different results? Can you imagine if I had said that?) But in that sense, all we should care about Citigroup if we are bullish is that the company doesn't go belly-up. With each financing, that becomes less likely.
Even though you sure are a fool if you bought it yesterday.
The bottom line here is simple: Bank stocks, other than Goldman (NYSE: GS) (Cramer's Take), Hudson City (NASDAQ: HCBK) (Cramer's Take) and JPMorgan (NYSE: JPM) (Cramer's Take) are toxic and can only be bought by masochists looking for pain.
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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. At the time of publication, Cramer was long Goldman Sachs.
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Reader Comments (Page 1 of 1)
4-30-2008 @ 1:24PM
richard oconnor said...
whats going on with the lenny dykstra scandal.call me,brian steel has my number. Thanks Richard
4-30-2008 @ 12:32PM
Michael said...
I hope Citigroup sinks... I think its worth $10.00... Go Short...
4-30-2008 @ 1:01PM
Steve in Denver said...
The holes in all of the "professional" housing forecasts are starting to get exposed. Here in Denver, for example, housing overall has shown its usual steady appreciation based on actual sales with a few exceptions that we still call slums. I think the "crisis" in housing is a totally overblown hysteria of the media; after all, real foreclosure only represent about 1 1/2 % of all the houses out there. That's statistically insignificant. My guess is just as good as this screwball, and I'm guessing that it won't be long before buyers start showing up, again. One caveat, however. This will only occur is cities and communities with good economics. The rustbelt towns and towns with heavy taxes are never going to recover.