Cramer: "As Feds Snoop Around (...)"
Enviado: 2/11/2007 17:54"As Feds Snoop Around, the Real Selling Starts"
By Jim Cramer
RealMoney.com Columnist
11/2/2007 12:27 PM EDT
"It was fine when the shenanigans were confined to New Century and Novastar (NFI - commentary - Cramer's Take - Rating) and American Home. It didn't even matter if it were unregulated hedge funds at Bear.
Today's different. The news at Merrill (MER - commentary - Cramer's Take - Rating) is regulatory. The news at Citigroup (C - commentary - Cramer's Take - Rating), with diminishing capital (can you believe that chowderhead bought a brokerage in Japan, wasting away billions that are needed now) is regulatory. The Feds are going to be all over these guys now. Bank examiners into banks, SEC and Justice into Merrill.
That's when the real selling begins. That's what happened in 1990. You thought you had bottomed then you would hear that the regulators had been in to see such-and-such bank or that the Thrift supervisors had been in to see such-and-such thrift.
That's why Washington Mutual's (WM - commentary - Cramer's Take - Rating) down so much. I'm sure the regulators are coming there.
Citigroup? How can the regulators not worry about capital at the largest bank?
Merrill Lynch hides billions? If I were a prosecutor I would start the subpoenas today.
That's why there can be no bottom. The next level to go, the mortgage insurers, are pretty unregulated. But when they go, the assets on the books are going to be very low and the agencies are going to downgrade every insurer to make sure they can't get funding.
All of this will happen swiftly, probably by year-end.
In 1990 the whole unraveling took six months! That's all. You had dividend cuts right after dividend raises! That's what the market is telling you. The companies didn't want to cut the dividends. The regulators made them.
The headlines in two weeks will be "Regulators were seen at Citi, going to Washington Mutual next."
I can't believe history could repeat itself so fast. But then again, that was 1990 and the people who came up with most of these structured products were in middle school.
Too bad they weren't older. Many more jobs and institutions would have been saved.
A friend of mine asked me this morning how they could be so stupid at Merrill Lynch.
I had to remind him why I always had an outside auditor give my performance figures to my investors. When the numbers are so bad, you can't resist the attempt to fib.
It's about integrity and the human condition. There's not enough of the former when things go bad and the latter kicks in: It's much better to lie and risk getting caught than it is to come clean.
Of course, if they are rewarding you with $150 million, it's a fabulous strategy. Until the Justice Department calls.
Then it just might not be worth it. "
(in www.realmoney.com)
By Jim Cramer
RealMoney.com Columnist
11/2/2007 12:27 PM EDT
"It was fine when the shenanigans were confined to New Century and Novastar (NFI - commentary - Cramer's Take - Rating) and American Home. It didn't even matter if it were unregulated hedge funds at Bear.
Today's different. The news at Merrill (MER - commentary - Cramer's Take - Rating) is regulatory. The news at Citigroup (C - commentary - Cramer's Take - Rating), with diminishing capital (can you believe that chowderhead bought a brokerage in Japan, wasting away billions that are needed now) is regulatory. The Feds are going to be all over these guys now. Bank examiners into banks, SEC and Justice into Merrill.
That's when the real selling begins. That's what happened in 1990. You thought you had bottomed then you would hear that the regulators had been in to see such-and-such bank or that the Thrift supervisors had been in to see such-and-such thrift.
That's why Washington Mutual's (WM - commentary - Cramer's Take - Rating) down so much. I'm sure the regulators are coming there.
Citigroup? How can the regulators not worry about capital at the largest bank?
Merrill Lynch hides billions? If I were a prosecutor I would start the subpoenas today.
That's why there can be no bottom. The next level to go, the mortgage insurers, are pretty unregulated. But when they go, the assets on the books are going to be very low and the agencies are going to downgrade every insurer to make sure they can't get funding.
All of this will happen swiftly, probably by year-end.
In 1990 the whole unraveling took six months! That's all. You had dividend cuts right after dividend raises! That's what the market is telling you. The companies didn't want to cut the dividends. The regulators made them.
The headlines in two weeks will be "Regulators were seen at Citi, going to Washington Mutual next."
I can't believe history could repeat itself so fast. But then again, that was 1990 and the people who came up with most of these structured products were in middle school.
Too bad they weren't older. Many more jobs and institutions would have been saved.
A friend of mine asked me this morning how they could be so stupid at Merrill Lynch.
I had to remind him why I always had an outside auditor give my performance figures to my investors. When the numbers are so bad, you can't resist the attempt to fib.
It's about integrity and the human condition. There's not enough of the former when things go bad and the latter kicks in: It's much better to lie and risk getting caught than it is to come clean.
Of course, if they are rewarding you with $150 million, it's a fabulous strategy. Until the Justice Department calls.
Then it just might not be worth it. "
(in www.realmoney.com)