Monday, January 12, 2009
(Cont'd from above)...

Jim (cont'd):    With this note, that we read today, written by Cramer fave Larry Summers, director designate of the National Economic Council to Congress… on the TARP… we got the TARP ripped right off the bank roof… in the middle of a major selling storm… and the Tsunami broke financial levies… causing flooding in the rest of the market… which is why we were down 125 Dow points today… you know what.. it’s cool… I can get into it… and what Obama is doing has the added advantage of being morally the right thing to do.

But wait a second, this show is about money not morals… and we have to recognize that Obama’s note to Congress is a deadly statement to the banks, just absolutely lethal… if they want more tarp money… the banks will need to forego big executive pay checks until the government is paid back… they have got to slash dividends… they have to limit buy backs… as well as acquisitions of healthy companies… If those are the terms… well you what… we might as well shoot em…. like lame horses… just put them out of their misery… euthanize the whole group… what really slays me about this note, is that it comes right after the government had finally come up with a legitimate plan that helps banks and shareholders thrive… the Citi Group rescue plan… the first genuine bank bailout so far… since it’s the only bailout… uh, the government loses and the entity being bailed out comes out ahead...

But now it looks like the Citigroup bail out, the first good one, is also likely to be the last of them… from now on any bank that takes Tarp money… is going to be in zombie mode… there will be no real incentive to work there, instead of other banks, courtesy of compensation limits… and no incentive to invest in them because they will have to scuttle their dividends… we need to understand that if this is the plan we are going to be living in a nation of living dead banks… they might as well be owned by the government… this plan turns our banks into a bunch of post offices with ATM machines.

Now look, I don’t want to come off as callous… of course, it is a huge moral victory that the Democrats are taking over if you are struggling home owner or a home buyer… just as you are getting the stuffing kicked out of you, so too now will the bankers kicked the stuffing kicked out of them…. they will be completely and utterly panted… But here is the problem, with that Mr. President-elect, you can’t take Sigmund Freud to the bank… revenge just isn’t all that investible… I would rather take the dividends, instead, any day of the week… the banks were wrong not to loan the money out when they got it… but this Draconian future punishment means that the common stocks, for all but the strongest banks, are now sucker bets… I am now going to reduce the number of banks that I am ever going to say anything positive on this show about… to two banks… after this Tarp change… just two banks… two banks out of hundreds.

This market was holding up before it got the TARP ripped off of it… with the exception of the oils, which are in free fall… whenever they are not going up limit like bad trading commodities… you had some soft good plays do well.. you had financials… but normally Morgan Stanley, with it’s pants-ing of the Citigroup, to get the retail business for a fraction of what it would have sold for two years ago… and you had some winners of the lower gas prices… but otherwise this was just one awful, horrible day.. a continuation of yesterday’s action… if you are a Giants fan…. nah, nah, nah, nah… get serious… cut that out in the post production.

We need leadership right now… the market follows leaders… we have been using the oils as leaders… but those generals… you know what they turned out to be… they turned out to be behind the scene French generals from World War I…. and we hoped the banks were stabilized… but they were hit by inflating fire by Obama and Larry Summers… using maximum guns and span Dows to mow down bank stock investors… like bowling pins.. this memo from the two of them pretty much says we obliterate the legacy of dissembling Hank Paulson… which by the way is a legacy of telling Congress will help struggling homeowners, and then giving beefy checks to a lot guys at the… you know who he gave the checks to… he gave them to the banking country club… which I believe had to have been restricted… as I have yet to hear of any Bernie Madoff damage.

Anyway, I say good riddance to the old way, as long as you don’t own a bank stock… but if you do, the whole world just got a whole lot worse for the banks that might have to go back to the governments window a second time… like Citigroup (C) had to… it will surely turn out to be the last great taxpayer give away in common stock giveaway… from now on taxpayers will be the winners… along with homeowners and homebuyers… and anyone that owns a financial stock should be prepared to be hammered beyond all recognition… Bank of America down to $11... Citigroup down to $5... these are big Dow Jones Stocks and they were both crushed by TARP’s new incarnation.

Here is the bottom line…

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The Bottom Line!:     We need leadership, we had hoped to find it in the financials, but thanks to Summers note to Congress… which is eminently just and fair… I will admit… the banks and then the markets tanked. Now we now.. do not expect the new regime to be at all friendly to the financials. But here is what may turn out to be the endearing question, will this administration be hospital to any stock holders at all?

If You Though The Financial Were Going To Lead Us Out Of This Mess, Think Again... Dow… down 125... goodbye government by, of, and for the corporation… hello, the people…

[verbatim recap]

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Jim went on after this segment to take questions from callers, and responded with his comments...

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Q:    What is your take on Citigroup (C)? I own it and I am confused.

Jim:    Well, you know Citi… got… this was not a good move today. Larry Summers not said that hey listen, if you need more money… you are really going to have crunch down… you are not going to have a lot of opportunities for the common stock holders… it might be okay for the common, for the bank bonds… you do not want to own Citigroup… after this, I don’t want to own Citigroup… clearly the administration does not want any bank that has needed the money, to make any money for it’s shareholders… the banking club is over… the restricted, anti made up banking club.

[verbatim recap]

[end of segment]

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