JJC:    Two days ago, in a different environment, with the bank stocks getting hammered, Goldman Sachs put out what I can only describe as the single greatest hit-list, kind of like billboard magazine, of banks, but not one that's positive...

It's one that lists those that need financing... Meaning banks that will likely have to crush their stocks in order to save them, because they need to raise capital.

The very next day, Fifth Third Bancorp (FITB), which had been on an earlier list of banks that need financing, that Goldman had put out earlier on the 12th, did exactly as predicted... It took action, and destroyed its stock in order to raise money. On Tuesday, FITB closed at $12.73, now it's at $9.75, down 23%. This is not serendipity. I believe the Goldman guys have got it right. Which is why I'm putting every single bank on their most recent hit list, plus a couple others into the sell block. To me, Goldman Sachs' arguments are persuasive, and the example of FITB, is simply too obvious for us not to put these dangerous banks, these destroyers of value, in the deepest, darkest corner of the sell block, and then throw the key away. Why am I doing it tonight?... Okay, because once again, there are a lot of people calling the bottom in the group... My friend, Doug Cass... he's saying that the group has bottomed, so many people are saying that the group has bottomed, I disagree with them obviously... I think that you'll get good prices, higher stock prices, so you can put these stocks in the sell block yourself and you're going to get prices better than they would be otherwise. So take advantage of the stray.

Let me give you a little summary of Goldman's argument before I read you the list of the new Sell Block inmates. I need you to know why they're saying to stay away from these stocks. You can't just say, oh I'm selling them because I heard Cramer say Goldman's good, alright, that's not good enough. The Goldman note, which by the way, is 30 pages... this is what I mean by when I say that their homework can be onerous... It lists four factors that will cause these banks to have to raise capital. I agree with every one of them.

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First of all, Goldman says that credit losses won't peak for these banks until 2009, because they see home prices deteriorating until the end of the year, I am in agreement with that. Home price depreciation is the root cause of all of these losses. Unless the government takes drastic action, which is looking increasingly unlikely... As Ben Bernanke and Hank Paulson continue to quote Herbert Hoover in their public addresses, at least not literally, but certainly, anecdotally, Goldman is dead, right.

Second point, it is becoming harder and harder for these banks to raise money. They think the banks will need to raise another $65 billion on top of the $120 billion they've already raised, and everybody's lost money who's big on them, and almost everyone in these deals. So the next round of deals will be harder, because, who wants to keep pouring money into banks that have already had to raise capital and still kept going lower. The competition for new capital will likely make it harder for the weak banks, that Goldman lists, to raise money, than it would be for the stronger banks.

Third point, the consensus estimates for these banks, what people think they're going to earn, even after repeated cuts, are still too high... And there's nothing like a series of estimate cuts ahead to absolutely wreck a stock.

Fourth point, the yield curve, the one-year, two-year, three-, five-, seven-, ten-... The yield curve is now at risk, thanks to uncle Ben "Hoover" Bernanke, now possibly talking about tightening rates... where do they get this stuff? You know, where do they get this stuff?... I think there are great reasons to stay away from the banks, especially the rally, and doubly especially because the banks, well the ones that most need the financing, are never going to let you out, other than a day like tomorrow. Who's on the hitlist? Who is now going into solitary?

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Here's the Goldman list of weak banks, that have rallied since this note. The ones that could follow in the footsteps of FITB. Not all of them have rallied... yeah, yeah, you're getting a little bit of rally. Not that many.

Bank of America (BAC)... I'm very worried about them... The Countrywide (CFC) deal I think was just a huge mistake... I'm sorry, I really like Kendallis, but it's just bad.

Citigroup (C)... you know that the loan losses there are really going to be really atrocious, even from here.

East West Bancorp Inc. (EWBC)... I take Goldman's word for it, I have not studied that one.

First Horizon National Corp. (FHN), I have studied, FHN... Huntington Bancshares Inc. (HBAN), I have studied, HBAN... on the tape tonight... KeyCorp (KEY), we already saw those guys self-emolate... Marshall & Ilsley Corporation (MI)... holy cow, that used to be such a blue chip when I was first trading... And National City Corporation (NCC)... never blue chip, frankly... And, Popular Inc. (BPOP)... 

Now, I'm going to add Wachovia Corp. (WB) and Washington Mutual (WM), big layoffs today...

Wachovia, still, I think, was issuing the wrong kind of mortgages up until very recently. These were on the earlier list of banks that need financing, along with Fifth Third Bancorp (FITB)... And by the way, Citigroup (C) and Bank of America (BAC) and Cramerica were on that.

We talk about stocks that are twice-blessed on the show, the fertilizer stocks and nat gas stocks, McDermott International Inc. (MDR) and Foster Wheeler (FWLT*)... These stocks, well, they're twice-cursed.

Now, when I was trading in 1990, I shorted all the savings and loans there were, I had a good year. I do not recommend shorting stocks on the show... Because I think it's too risky and too dangerous, unlimited losses. But I want you to know that when I was trading, and I've long since stopped trading, other than for my charitable trust, where I can't profit... When the smoke cleared in 1990, the whole savings and loan industry in this country were wiped out, and there were hundreds of them. Only Washington Mutual (WM) survived. The exact same process seems to be playing out now, and I think you have to sidestep the banks on this list if you want to avoid a repeat of 1990.

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