All day Tuesday I pondered what the bears had in their arsenal that could really knock this market down from its overbought perch. Now we know. It's Bank of America (NYSE: BAC) (Cramer's Take). The question is, "Can BAC be exploited to take the market down?"
So many hedge funds that aren't up for the year and so many mutual funds that have been left behind will have to ponder that question seriously Wednesday. The hedge funds need to come in with guns blazing and hit the ProShares UltraShort Financials (NYSE: SKF) (Cramer's Take) exchange-traded fund, knowing that can reverberate and no one is going to stand up for individual banks right now, even though Bank of America seems "isolated."
They can now dust off the Nouriel Roubini arguments again and say that Warren Buffett is old news and that this is the beginning of the great "Bear Bank Raid Redux."
But the underinvested mutual funds, and the hedge funds that lean long, have a different agenda. They see this as their chance to get in.
The bears seem stymied at the moment by Europe. When the news of Bank of America's woes first hit, the futures dropped double digits. Then they recovered when the European banks, which have been excellent tells of late -- especially Royal Bank of Scotland (NYSE: RBS) (Cramer's Take) -- rallied!
Perhaps that's because Bank of America is considered isolated, or that if Ken Lewis is fired the government might be forgiving. Or perhaps it's because there is more than enough TARP money to go around and the China stake will raise cash, too.
Still, I think this can do damage.
I have more respect for what the bears can do in this overbought market. I say stick with Doug Kass's plan from Tuesday: Can't buy 'em here.
Let some damage be done. Then consider joining the underperformers and buying some JPMorgan Chase (NYSE: JPM) (Cramer's Take) or Goldman Sachs (NYSE: GS) (Cramer's Take), the two that benefit because they can repay TARP funds because they can raise money without FDIC help.
The others that say they can pay it back? Still "big hat, no cattle" until proven otherwise.
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. At the time of publication, Cramer was long JPMorgan Chase and Goldman Sachs.
Will Rich Ross really have a positive impact on Disney's movie operations?
Consumers sick of recession, may spend extra on holidays
Corrections, seasonality and Santa Claus
Reader Comments (Page 1 of 1)
5-06-2009 @ 10:16AM
Dan Barnett said...
Anyone shorting BAC today has to be feeling it. BAC is up about $1.10 at 10:15 EDT.
5-06-2009 @ 12:16PM
vince demarco said...
Will someone please explain to me why the so called "big Banks" are not allowed to go bankrupt and put an end to this political crap of giving billions (Trillions) of taxpayer cash to these entities.In every case of either chapt 7 or 11 a new and better managed entity rises from the ashes. Taxpayers are being screwed first by the government,and then by the banks who screw them with their (taxpayer) money.
5-06-2009 @ 1:46PM
nickerson said...
Let GE and the New York Times go under, take the Globe with it. Also let FDIC take over Citi and BOA and sell them. Get the Obama slime machine out of business, you got any stones to say that Cramer?
5-06-2009 @ 1:53PM
paul s said...
The manufacturers I talk to, small that they are, say this economy is a disaster. Realtors I know, say nothing is moving, all the action is in foreclosures. The government says things are getting better. The media says the end is in sight. The bulls running up the market say dive in. The bears say the bulls are on painkillers, nothing has fundamentally changed from five weeks ago except the run up. Three times since Nov.'08, the DOW has ran up to 9,000 and then retreated. Two months ago the banks were labeled the walking dead. Now they are the walking wounded. I don't believe anymore.
5-07-2009 @ 2:20AM
vcao said...
In every case of either chapt 7 or 11 a new and better managed entity rises from the ashes government says things are getting better. The media says the end is in sight. The bulls running up the market say dive in.