TheStreet.com's Jim Cramer says big-caps are now mid-caps, mid-caps are now small-caps. The carnage is widespread and remarkable.
If you want revelations, go over the largest-cap companies right now vs. the ones that were the largest-cap last year at this time. The stocks, the losses, the changes, they are staggering.
First, the aggregate: The largest 100 companies a year ago were worth $8 trillion; they're now worth $5 trillion. That's a lot of missing trillions. In the day-to-day drudgery and decline, they seem largely unaccounted for until you look at each line item.
You lose that much capital in bizarre ways. Consider last year's top five capitalization stocks. ExxonMobil (NYSE: XOM) (Cramer's Take), a stock everyone says is the most stable in the world, goes from $459 billion to $357 billion. Microsoft (NASDAQ: MSFT) (Cramer's Take) -- like Exxon, a company with a fabulous recurring earnings stream -- goes from $264 billion to $160 billion. Dependable AT&T (NYSE: T) (Cramer's Take) sheds about $90 billion from $228 billion to $135 billion. Procter & Gamble (NYSE: PG) (Cramer's Take), which everyone thinks of as having a bad year, dropped about $50 billon from $204 billion to $150 billion.
But then there's General Electric (NYSE: GE) (Cramer's Take). It stood at $347 billion last year this week. It is now barely about $100 billion. Terrible, but not when you consider the other financials -- and there is no doubt with that loss that anyone is thinking GE is anything but a financial. Take Bank of America (NYSE: BAC) (Cramer's Take), which has gone from $197 billion to $24 billion, Citigroup (NYSE: C) (Cramer's Take), which has retreated to $13 billion from $125 billion, and the colossal disappearing act of AIG (NYSE: AIG) (Cramer's Take), going from $116 billion to $7 billion.
The declines are so staggering that you find yourself thinking only one thing: How could we have ever trusted these pieces of paper with our nest eggs? Plus, the "terminal" value of some of these stocks, such as BAC, C, AIG, is catastrophic. They aren't coming back.
Within the carnage, though, it is important to single out a couple of names because, in keeping with last night's "Survivor show," these definitely qualify. First is IBM (NYSE: IBM) (Cramer's Take). This one's barely down and is doing fabulously, well ensconced in the plus-$100 billion market cap world. It is, by the way, universally despised by all my tech friends as an also-ran and a loser. Of course, though, they are short it.
Second is Wal-Mart (NYSE: WMT) (Cramer's Take), another stock that is now hated. It has the same market capitalization as it did last year. In fact, it is now, as of last night, exceeding it. To me the issue here is how can it not go higher? Retailing has to be the most zero-sum game in town right now. You simply can see all of the net worth of people going from Target (NYSE: TGT) (Cramer's Take) and Macy's (NYSE: M) (Cramer's Take) and Nordstrom (NYSE: JWN) (Cramer's Take) and Safeway (NYSE: SWY) (Cramer's Take) to Wal-Mart. Why not? At the same time that they have gotten bad, WMT's gotten better!
McDonald's (NYSE: MCD) (Cramer's Take) hangs in like a champ at roughly the same level as last year, and I would push it hard here if I wasn't worried about the dollar soaring against the depressing euro. Buffett non-fave Johnson & Johnson (NYSE: JNJ) (Cramer's Take) also travels slightly below its level last year, just enough to make it attractive.
Away from those stalwarts, there's not much good news to report, just endless 30% to 50% declines except for the rare staple that lost 10% to 15% or a financial that lost almost all.
There is, however, one bit of joy in this carnage. And that's Visa (NYSE: V) (Cramer's Take). First, in terms of wealth creation, nothing's better than an initial public offering to add capitalization back into a list. Visa didn't exist as a stock last year, and now it is worth slightly less than $50 billion. Why does it matter? Because in a world in which Citigroup and Bank of America and JPMorgan Chase (NYSE: JPM) (Cramer's Take) and Wells Fargo (NYSE: WFC) (Cramer's Take) and AIG are disappearing, the funds who look at the world through the weightings of the S&P must own a financial. Visa counts.
Look for this one to hold its own or go higher solely as a flow of funds out of all of the other financials and into this pseudo-financial that reminds me, alas -- I'm betraying my age here -- of another growth stock in a different time, Deluxe Check, as we gravitated from a cash to a check economy.
Perhaps the most amazing stat from this list is what it takes to get on it. Last year you had to have a market cap of $30 billion to be in the top 100. This year only $17 billion gets you on it. Whole stocks that we thought were big-cap are now mid-cap, with mid-caps now small-caps. All the indices now seem to be misrepresenting themselves.
The changes are so vast and so overwhelming that you really can have only one takeaway: Why did we ever come to trust this paper? Why did we have so much faith in it? Because the actual indictment here isn't of the companies themselves, it is of an asset class that sheds value with a velocity that just didn't seem possible even one year ago. I, for one, find the exercise sobering because the carnage, which we think is contained largely to financials, has really spared nothing, no sector, no group. And it is obvious from this week's action that the crunching has got a way to go before it is done.
At the time of publication, Cramer was long General Electric, Johnson & Johnson, JPMorgan Chase, Wells Fargo and Wal-Mart.
Jim Cramer is co-founder and chairman 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)
2-20-2009 @ 11:04AM
paul s said...
Those trillions you keep talking about were, and are, just digits on a computer screen. If management exceeded prudent borrowing against those fictional numbers they are paying dearly. If management cashed in some of those digital gains and retained the earnings they will be able to buy great assets at "Crazy Eddie" prices. Love hurts, Cramer. Tough love hurts more. Stagger on.
2-20-2009 @ 1:13PM
BHarrison said...
Not all of us "trusted those papers"; but we are still being severely impacted by the economic melt down. There wee a few Congressmen and others who tried to warn about the "derivatives" and other worthless financial schemes. . . . But the vast majority of Congress refused to act on these warnings; and everyone in business were too "busy making money out it" to be concerned with it. In reality, most people realized the potential problems; but it was "politically incorrect" to be the individual to "throw water on the party". No one wanted to be the messenger who was shot for delivering the news that no one wanted to hear. The "TRUTH" was BRANDED as "NEGATIVISM" . . . and as bad as everyone knew it might be, no one REALLY KNEW how unprecedentedly bad it was going to eventually be. These "believers" were in COMPLETE DENIAL of the relaity of the situation.
This is a classic case of societal denial, and a gross lack of ethics and INTEGRITY in both business and government. Meanwhile, 9 out of 10 of the CEOs who led their corporations into these disasters, who orchestrated and voersaw the fraudulent "derivatives", pyramid and Ponzi schemes, and other FRAUDS are STILL running those corporations . . . and they have managed to hold onto the TENS and HUNDREDS of MILLIONS of dollars of ill gotten wealth that they received for their gross, and often CRIMINAL mismanagment of those corporations.
These TRILLIONS of dollars in "lost capital" merely quantify the amount of the FI and corporate FRAUDS that had been committed by these CEOs. Congress "looked the other way" in regard to these matters as their political campaign coffers became bloated with donations from these corrupt corporations.
The "bottom line" is that the CEOs and Congressmen who presided over the development and perpetuation of thesse FRAUDS are STILL running our corporations and Congress.
The latest example is the case of R. Allen Stanford who made rather hefty donations to the political campaign funds of many Congressmen (of both political parties) just shortly BEFORE they voted AGAINST passage of legislation that would have increased the regulations that would have impacted Standford's investment firm. The largest recepient was reported to be Bill Nelson (D-FL) who received $45,900.00. . . . Just another example of how our Congressmen have sold out our nation and the American people. And most, if not all of these obviously "CORRUPT" Congressmen are STILL in office.
In essence, it has all really been a form of a Ponzi scheme . . . the FIs CRIMINALLY inflated the values of the "derivative", and other investments. The "TRILLIONS of missing dollars" really NEVER EXISTED except as bogus accounting entries.
Quite simply: "The King had no clothes on . . ."
2-23-2009 @ 3:23PM
Allen said...
AIG is set to report the largest loss in U.S. Corporate history. I was opposed to dumping tax dollars down that sewer last fall, before TARP (which is actually an anagram for TRAP, which describes the colossal rip-off of the U.S. taxpayers by Paulson, et al - one can only wonder what AIG is giving him in return?) It is time to pull the plug on AIG - NOW! Close it down ASAP before we lose billions more on the biggest fraud ever perpetrated on the American people. And, really, the failure of AIG will have less impact on the economy than allowing it to ocntinue to operate.
2-26-2009 @ 10:33AM
David said...
Any damn fool can pick out stocks that have not been hurt by this recession, soon to be depression. Wall Street's biggest shill just keeps running off at the mouth with nothing to say but the obvious. Pay attention to Cramer and you will lose the rest of your money.