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Why do Goldman Sachs (GS) (Cramer's Take) and JPMorgan (JPM) (Cramer's Take), the good ones, go down all of the time or act terribly? I think because the equity offerings of the bad ones are just too compelling and the universe of buyers of this merchandise is severely limited.
These stocks are limited because they are not worth the headline risk trouble. If they weren't being bashed by the president or taken to the woodshed by Congress or dumped on by Meredith Whitney, the most powerful bank analyst on earth, then maybe they would be worth owning. But the more successful you are, the worse it looks. Is Goldman Sachs supposed to get into the home mortgage business? Is it supposed to write a check for $10 billion to the government as a thank you for AIG (AIG) (Cramer's Take)? Is JPMorgan supposed to start raising its dividend when it would be branded as a fat cat?
Within all of that comes the Wells (WFC) (Cramer's Take) deal and the Citigroup (C) (Cramer's Take) offering. (Can someone tell me why Deutsche and Keefe upgrade today without waiting for the discounted price that you know is coming?) If you want leverage to a big turn, you buy Citigroup and bet that Citi Holdings is liquidated with all due speed. As an aside, Bloomberg is reporting that collateralized loan obligations have soared in value. If that's the case, lots of Citi Holdings' portfolio maybe worth much more than we thought and is much less dangerous than people think.
If you believe, as I do, that housing is turning and all of the naysayers and double-dippers are ignoring the power of job growth to end the foreclosures -- they did peak four months ago -- you want Wells. You want banks that are clear of TARP and you want banks that are being sold at a discount.
So the pressure on the good ones will continue even as they do, in many senses, represent the bargains because you can model them and they do have normalized earnings patterns.
But for now, they are just a source of funds.
Random musings: We have been up for many, many days now and are overbought and it is an options expiration week. One of these days has to produce some selling. I would be cognizant and wait for a bigger dip than the futures are now giving you.
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 Goldman Sachs and JPMorgan.
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Reader Comments (Page 1 of 1)
12-17-2009 @ 9:13AM
JM said...
Citi has enrolled about 100,000 borrowers in the Obama program, but had made only about 270 of those modifications permanent as of the end of last month, according to a Treasury Department report. But Das said the low number resulted from a "reporting error" and said it will rise dramatically by year-end.
Shame on you CITI Inc. You took our tax dollars to help out people who were having tremdous difficulties, and this is all you could manage? Shame on you! You may be on top of the world today, but just remember, in the end we all answer to a higher being. Where will you be on that day?
SHAME ON YOU!