Wednesday, January 14, 2009
(Cont'd from above)...

Jim (cont'd):    This measure of Summers, of Obama, is a full on nuclear option.. it will be applied to those companies that dip for a second time into the Federal trough… one look at the devastating closing prices of two of the nations largest banks… Citigroup (C) and Bank of America (BAC)… both presumed rightly or wrongly now to need more capital… shows you that the common stock shareholders now look like they are ground zero for Fatman and Little Boy… Fatman and Little Boy the quaint names for the only two atomic bombs ever to be dropped on humans…. that makes Citibank and Bank of America the financial Hiroshima and Nagasaki of common stocks… and most people can’t stand the heat… not to mention the radiation.

The same hot war now seems to have been declared against the Hartford Financial (HIG), Prudential (PRU), Principal Financial  (PFG), and Lincoln Financial (LNC)… that is the insurance conflicts… all of which had just very recently were presumed were in need of more capital and were out of the woods after some big equity offerings and some help from TARP… but the cold war turned out… and now extends to the creditors… the bond bullies, which I call them in Jim Cramer's Real Money: Sane Investing In An Insane World, just out in paperback… now, you have to understand that the bond bullies are laying claim to the assets of whole companies… including the ones represented by your common stock… they want your common stock… they want it down and out… they want the company.

We see that the common stock shareholders of many real estate investment trusts … jeez, really extensively bought for… for dividends… are simply being obliterated… by the bond bullies. Particularly those real estate investment trusts that need financing in 2009... the pressure from the bond holder… I don’t want to pick on anybody, I just like to give you examples… like Bank of America and Citi… I am trying to give you examples so it is more palpable… General Growth Properties Inc. (GGP) and Developers Diversified Realty (DDR)… these are giant commercial real estate holders, mall owners… these are bearing down on common stock shareholders like you have never seen it… you are probably saying, wait a second… what’s the deal… there is no news… it is the bond holders… same thing goes for the retailers… the common stocks of shareholders of Gottschalks… wow… and Goodies… family clothing… I mean I use to trade these all the time when I was a hedge fund manager… these were once two powerful regional retail chains… they lost their battle against the creditors and declared bankruptcy… yeah it just happened … so did tech giant, Nortel Networks Corp. (NT)… this should have been more of the news today… this is amazing to me… Nortel… Nortel used to be the dominant company in the telecommunications business in the ‘90’s… just a juggernaut… bankrupt.

The common stock lost… the common stock of many of the homebuilders has come under inflating fire too… bond bullies want to protect their loans to the homebuilders… and it increasingly looks like the price to pay for that protection is the wipeout of your common stock… this war is playing out all across the market… you can see it even in the energy merchants… their stocks are getting absolutely annihilated by worries about possible bond grabs… and if you remember what Jim Hackett, the CEO of Anadarko Petroleum (APC), said on Monday… right here on Mad Money… even the oil and gas companies that need to refinance… that need to take on the bond bullies of 2009 get more money… may not be able to get through unscathed… this is incredible.. oil and gas companies don’t they have huge cash flow? Doesn’t matter if they need money in 2009... they are in trouble… collateral bond damage.

In this dark side of the road environment… the only stocks that can be considered traversing to the bright side of the road… the side that doesn’t have the bond equivalence of Abrams tanks and F-16’s pulverizing them… remain the recession resistant names…

...like Pfizer (PFE), Coca-Cola (KO), Colgate-Palmolive Co. (CL), Clorox Co. (CLX), Kimberly-Clark Corp. (KMB)… these companies don’t need stinking TARP money… they're banks all by themselves… why is this important?… because see you can buy them all the way down… right… just buy them cheaper… use the scale… buy them as the yield goes higher and they are not going to get wiped out… but what frightens all these common stock shareholders who are caught in the crossfire of the hot wars… is exactly the opposite… you can’t average down… you can’t throw money on the way down of the common stocks that are under assault by the bond bullies… because at certain points the stocks they are buying… well, they may just turn out to worthless… to disappear. Think of it, put yourselves in the shoes of the people who bought Gottschalks and Goodies all the way down… they have got nothing to show for their pain… since the bond bullies obliterate the common in bankruptcy… as anyone who owned the stock of Lehman Brothers all too well.

In other words, the bond bullies aren’t taking common stock prisoners… and now with the letter from President-elect Obama’s man in finance, Larry Summers, financial common stock shareholders are beginning to wonder if they are no longer protected by the Geneva Convention.

Here is the bottom line…. 

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The Bottom Line!:     The possibility of common stock being shielded by nothing more than the marginal line, have caused the shareholders of any company that has a huge amount of debt, to run to safer pastures. That, not earnings misses… we didn’t really have any today except for the puny Under Armour, Inc. (UA) and ag player, Bunge (BG)… that is the reason for today’s huge rail…

And the real bad news… for those caught in the cross hairs of the bond holders and the government the worst just started… and it is far from over.

Fear among common stock shareholders pushed the market down today, not earnings.

Dow down 248... worst start to a year… yep, common stock shareholders of finance, retail, anybody that needs debt… the war is on.
And I need you to take some shelter.

[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:     Retail sales reports have been horrible. With only Wal-Mart (WMT*) seeming to buck the trend, what is Wal-Mart doing right? And is Wal-Mart a buy for you in these shop stopping times?

Jim:      I bought some Wal-Mart just yesterday for ActionAlertsPlus.com, my charitable trust… I think you could trade to $50... it tends to trade what is known as a round number… when there is options expiration… options expiration later this week, probably goes to $50... why wasn’t I more cherry to waiting to $50... cause you never know if the stock is really going to bottom… here is what Wal-Mart is doing right…. and by the way, I really want to uncomplicate something… Wal-Mart went down 8 points, why?… because they had comparable store sales, the same store did better than the previous year… but not as much people thought… meanwhile we took up a lot of stock of companies whose comparable store sales were awful… but not as awful as we though… wait a second… Wal-Mart is doing well in this environment… and those who sold that stock…. they are going to regret it… I say you buy Wal-Mart because they offer the lowest prices in an atmosphere where people are worried about their jobs… so there is no way that Wal-Mart is a sale here… even though many analysts now dislike it.

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[verbatim recap]

[end of segment]


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