TheStreet.com's Jim Cramer says our problems are so widespread, he sees lots more IndyMacs before we're out.You don't need me to tell you it's awful out there. You don't need me to tell you that there's no quick fix for any of these things. But what might help you understand why it feels so bad this time is that I have never, in my career, seen so many companies go off track at the same time. This is one unbelievable moment, and it is made more horrible by the day as companies' stocks just get pummeled, causing people to then question the very viability of the companies involved.
First, obviously, are Fannie Mae (NYSE: FNM) (Cramer's Take) and Freddie Mac (NYSE: FRE) (Cramer's Take). We don't know what will happen, but we do know that their futures are much darker than their pasts. Their best hope: a Democrat becomes president and shows the usual love to both. But as investments, they are pretty much perma-losers going forward. The losses are that heavy. Yes, it is true that two years from now they will be better, but will the government let them limp through to that? View them as calls on a Democratic win.
We all know that Citigroup (NYSE: C) (Cramer's Take), Wachovia (NYSE: WB) (Cramer's Take), Washington Mutual (NYSE: WM) (Cramer's Take) and National City (NYSE: NCC) (Cramer's Take) are in trouble. Bank of America (NYSE: BAC) (Cramer's Take) says it isn't in trouble, but obviously the market doesn't believe management because the stock failed to rally when it said its dividend was safe. Any short-selling hedge fund could hire 30 actors and have them line up at a Washington Mutual or two and get a bank run going. Then we would have to hear about a "hasty" Treasury department plan to bail out WM. Hasty? How can these guys not see it coming?
No revelation that Lehman (NYSE: LEH) (Cramer's Take) or Merrill's (NYSE: MER) (Cramer's Take) in the soup, although I do marvel that at no price do they seem interesting to anyone -- value guys, takeover guys, or acquirers in general. But how about Comerica (NYSE: CMA) (Cramer's Take), Regions Financial (NYSE: RF) (Cramer's Take), Sovereign (NYSE: SOV) (Cramer's Take), Huntington Bancshares (NASDAQ: HBAN) (Cramer's Take), Suntrust (NYSE: STI) (Cramer's Take), Fifth Third (NASDAQ: FITB) (Cramer's Take), First Horizon (NYSE: FHN) (Cramer's Take), Marshall & Ilsley (NYSE: MI) (Cramer's Take), Zions (NASDAQ: ZION) (Cramer's Take), Key (NYSE: KEY) (Cramer's Take), Colonial (NYSE: CNB) (Cramer's Take) and BB&T (NYSE: BBT) (Cramer's Take)? Their charts are indicating there is much more devastation ahead. Every one of them is small enough to fail, and no one would give a darn. If the FDIC follows the trail blazed by IndyMac (NYSE: IMB) (Cramer's Take) it would be great because IndyMac Federal isn't foreclosing anymore. Get rid of the foreclosures, get rid of some of the overhang. But is that the plan, or do they have no place to put the foreclosed loans?
We know that the Gang of Four -- MBIA (NYSE: MBI) (Cramer's Take), MGIC (NYSE: MTG) (Cramer's Take), PMI (NYSE: PMI) (Cramer's Take) and Ambac (NYSE: ABK) (Cramer's Take) -- has been obliterated, a long-running saga of puffing by management and disastrous numbers. These companies are important, even if everyone seems to think that they have gone down without much repercussion other than the 40th story about how private mortgage insurers are now raising rates. Golly gee, who is paying them anything? They don't have enough money to pay the bank back for heaven's sake!
For example, they are very important to AIG (NYSE: AIG) (Cramer's Take), which seems to have found no bottom. None at all. Remember that funny dividend boost at AIG? What was that about?
There are tons of other financial insurers no one's paying attention to that seem to go down pretty constantly. An outfit like XL (NYSE: XL) (Cramer's Take) seems like it is a wasting asset. Or how about Genworth (NYSE: GNW) (Cramer's Take), which is selling well below book value?
Then there is everything auto, not just Ford (NYSE: F) (Cramer's Take) and GM (NYSE: GM) (Cramer's Take) (although do you really need anything else to go wrong there?) -- outfits like Visteon (NYSE: VC) (Cramer's Take) or Autonation (NYSE: AN) (Cramer's Take) or Carmax (NYSE: KMX) (Cramer's Take) aren't going to get through this one unscathed.
Or how about the homebuilders? Does anyone think that Hovnanian (NYSE: HOV) (Cramer's Take), Lennar (NYSE: LEN) (Cramer's Take), Pulte (NYSE: PHM) (Cramer's Take) and Horton (NYSE: DHI) (Cramer's Take) will all make it? I don't. How about that nifty Lennar upgrade by UBS? Sold to you, UBS (NYSE: UBS) (Cramer's Take), along with all of the toxic mortgages you STILL OWN!
I am not even going to include the airlines, they are all hopeless in my opinion, except for maybe Southwest (NYSE: LUV) (Cramer's Take). They are charities.
Other areas have problems -- retail has some busted stocks, and so do restaurants. Chico's (NYSE: CHS) (Cramer's Take)? Charming Shoppes (NASDAQ: CHRS) (Cramer's Take)? How about Macy's (NYSE: M) (Cramer's Take) -- where's that headed? Sears (NASDAQ: SHLD) (Cramer's Take)? OUCH!
You can see some techs folding, but only a handful. Maybe because only AMD (NYSE: AMD) (Cramer's Take) is on the fiscal ropes do people see "relative strength" in tech, whatever that means.
The problem is that the dire stocks, the ones I have listed, are so numerous and so concentrated with so little hope for rescue that it is hard to imagine anything but more downside for these stocks and therefore more downside for the rest of the market, simply because they are so glaring, are owned by so many mutual funds and have so many roles to play in the real economy.
We know that things have gotten out of control because the IndyMac collapse -- widely predicted -- used a huge amount of the surplus the FDIC has, suddenly making the safety net seem like a flimsy piece of Brawny.
The bottom line here -- there is too much going wrong right now, too much to put us anywhere near sound footing. I suspect that every rally will be met with selling until we see a multitude of collapses like IndyMac.
I am not going to search for positives in any of these groups yet, and if they rally off the decision by the Treasury to make more explicit the Fannie and Freddie guarantees, I would scale out of them once again on any short squeeze like the one we had at yesterday's opening.
Someone asked me yesterday, "When do we bottom?" I said it wouldn't be until all the banks that have to fail do so and GM files bankruptcy along with Ford. I said it matter-of-factly, because I meant it and because it is obvious.
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RELATED LINKS:
IndyMac Insurance Tab Could Hit $8B
Fannie, Freddie Plan Staves Off Housing Disaster
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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 had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
7-15-2008 @ 9:33AM
william lindblad said...
Jim you have pure audacity -"How can these guys not see it coming?"
THAT LINE IS THE POT CALLING THE KETTLE BLACK.
YOU DIDN'T SEE IT EITHER. TWO MONTHS AGO YOU WERE STILL THE ROSIE OPTIMIST.
HINDSIGHT IS 100%, YOU WOULD HAVE BEEN ON THE BEACH WITH THE WATER QUICKLY GOING OUT AND NEVER EXPECTING A TSUNAMI.
The signs that this was going to happen have been around since Oct. 07. I have been called doomsdayer and crazy. This is a DIM - for depression in making and there is a lot more to come. We still have yet to know the status of the notes that are being carried by the commercial banks for speculative multi unit (condo's) that are empty and still being built. I can tell all that it is massive and the banks are doing gymnastics with the books to keep the notes looking good. They are tying to buy time in hope that there will be a turnaround. Don't hold your breath!
This is worldwide and not confined to the U.S., although we are the starting point.
There is a fix - but our great august body of Congress will have to get out of partisan mode and special interest control and start to work for those that elected them. The bill that is in the Senate has to pass both houses quickly. Rein in the oil speculators. After that, the same for those doing shorts. Congress has to intervene in the capitalistic system, which they don't like to do. If they get off their duffs and do this in a week oil will drop to the 120 or less range, the stock market will stabilize
and the rumor mills will stop. The dollar will regain strength, inflation will slow, as well as layoffs and the consumer will feel a lot better. Get this accomplished and the economy can be stabilized.
7-15-2008 @ 9:58AM
Sheldon L said...
Jim, this story rings hollow. This might as well be the "6:00 news". There is nothing informative here. You have gone from vintage hedge fund operator, to the stock markets version of "The Jerry Springer Show"...to the play-by-play announcer on the side lines.
...alas, that seems to be the safest place...Peace brother.
7-15-2008 @ 1:43PM
Gary E. Sattler said...
Mr. Cramer, you might do well to apologize to the tens of thousands of clueless investors who you sucked in over the last two years as you should have known better.
But then, you did get good ratings in your diaper... didn't you.
Booyah yourself.
7-15-2008 @ 3:41PM
coach said...
thois company has no leadership in the financial sector they charge extra rates because the cant charge prepayment penalty they have to get rid of the leadership in the financial end of the business they will never be the company they once were