Friday, January 30, 2009
(Cont'd from above)...

Jim (cont'd):    Why do I point all this out?… Because you can’t ever take your cue from the averages… as they obscure potential opportunities that I search for everyday… I make a lot of mistakes but I try… you should be looking too… you can’t write off all stocks because of a bad month… even though I reiterate that we do not like the overall market at all… I repeat, we are not doing the 1000 bull dances… that is not us… okay… so many others are bulls… we are not that… we are more bear… we are cognizant though that the bath water took a lot of pretty cool babies down the drain… which gives you a great chance to pick up some accidental high yielders and recession resistant stocks… which are holding in great… both necessary as part of a diversified portfolio… sure we would love it if it were reversed… if 2 out of every 3 stocks would rally… that would be a nice break from 2008... but I want to emphasize that even if the averages are bad we must stay on the hunt for stocks to fill out a portfolio that works… we are still hunting… we are hunting with machine guns… that means searching for those accidental high yielders… how about this stocks that report next week… BP plc (BP*), an ActionAlertsPlus name… Tupperware Brands Corporation (TUP), where CEO, Rick Goings spoke encouragingly on this show earlier this week… and Kraft, Mac n Cheese selling like hotcakes… we think their quarters will be fine and their dividends are secure… you are being paid to wait… we will be eyeing United Parcel Service, Inc. (UPS), Emerson Electric (EMR) and Clorox Co. (CLX) next week after they report… I do not expect anything good from them except lower prices and then higher yields when the smoke clears… and we love accidentally high yields.

We have a lot wrong for certain in this market… as you know if you caught our homage to Van Morrison’s Dark Side of the Road segments… it is all hidden… hidden in the credit markets… the ultimate house of pain… but even though there is some good news a possible housing bottom in the middle of the year could improve the balance sheets of many banks… we are already seeing bottoms in some housing markets but only where home prices have fallen 40%…. unfortunately there is a lot more locales that need to come down… maybe the Senate adopts Hank Conrad’s plan to give $10,000 tax rebates to all who buys existing homes… we will hear more about that later… that would clean up the inventory in time for our June 30th bottom call… that is 152 days from now… right now though all our hopes are keyed to the good bank bad bank plan… or non plan from the Obama administration… and when our hopes were dashed today that that might be forthcoming… that is when the market took a huge header… we are not giving up though… we are expecting news on that front next week… so I think it is integral to your game plan for next week… to know what we look for if we actually get a bad bank plan.

First, if we even hear a whisper about the nationalization of any large bank…. Citigroup, Bank of America, whatever… then you can bet that we will have tons of bad months to come… I don’t think we can hold 7,000 if that happens… we don’t want Uncle Sam to run these banks… what does Uncle Sam know… we want the managers even if you think they are not that great… the managers who know the business to run them… we also don’t want a government run bad bank to dump assets… what everyone seems to run… we want a bad bank to buy bad banks… clean them up… scrub them… sell the deposits to good banks… for that, just so you know, we don’t really need a new bank… we have it already… it is called the FDIC… the FDIC isn’t just a bad bank… it is a bad asset bank ran by Sheila “Shaft” Bear… she is ready to get some… shut your mouth… alright, anyway what we really need… what you need to hear is the word forbearance… that is what worked during the Savings and Loan crisis at the end of the ‘80’s and that is what has to happen now… I know it sounds really goofy… forbearance, sounds goofy right… but we need the government to look the other way… we don’t want them to crack down on banks… but give them enough capital in return for a note… no money changing hands… so that they can work out the bad loans by cutting principle and interest without running afoul of the regulators… that is the forbearance I am talking about… the cash to the banks and the notes from the banks guaranteeing return, carrying the same interest rate, so there is nothing erroneous… and the government is going to get it’s money back… the government doesn’t lose any money… if banks run through that capital… okay, then that is bad… then they will need to be seized… that is where your bad bank comes in… the FDIC cures the failures… gives the deposits to the good banks…you know that we like Wells Fargo and JPMorgan… I mean, they are the beneficiaries, that is why I own them for my charitable trust, ActionAlertsPlus.com.

So what do we do with all these assets that can’t be written down because they can’t be worked out… these so called toxic CDO’s… simple… take a bunch of retired traders… I got enough of them in Summit to shake a stick at… and you have them make a market in near liquid assets… something that I have proposed on the show before… and have passed on to the White House… right now the sellers are trying to sell at 70... they are afraid to write down the value of the CDO’s because they would have to take the hit to their capital… the buyers are holding fast at 20... a government trading desk would be able to meet in the middle… creating a price that could satisfy both buyers and sellers… I know brokers should play that role… but they are scared to death that they might get stuck with inventory… heaven for bid if the government occasionally gets stuck with inventory…it can handle the loss… this plan of mine costs trillions of dollars less than the ridiculous plans that I have heard about in these last 72 hours… once the government gives the banks the capital they need in exchange for that note… they can come off their high prices and sell to the federal trading desk… while the buyers emboldened by a real market where they come back and sell if they turn out to be wrong… would step up… including those big pools of capital that we keep hearing about want to get in this market… and my plan, again, no real money change hands… get that… no real money changes hand… the banks take the capital… they give a note to the FDIC pledging to return it… when they make the money back over time… the two sides exchange the notes… and the deed is done… no interest… same exact rate… same exact rate… not like the TARP preferred, which is bad.

One more thing...  How badly do I wish they would call me on this plan?… I am convinced that it would work… why… because the forbearance plan is precisely what worked in the late ’80’s to cure the Savings and Loan crisis… and no one talks about it… that is what worked… the trading desk idea… all mine… and I am ready to man it.

Here is the bottom line…

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The Bottom Line!:     A bad January doesn’t mean that you should stop looking for opportunities… especially in recession resistant stocks and high yielders… but for the whole market to come back… we need the Feds to look the other way and give the banks the capital they need in exchange for a note that will be paid back… we need them to be able to write down their bad debts… we need to hear the word forbearance… and my CDO trading desk, it wouldn’t hurt either.

A bad month doesn’t mean you should stop looking for opportunities… and we need the Feds to give the banks the capital they need to write down debt...

So guys bear with me… we need a trading desk… we already got a bad asset bank, and that is run by Sheila “Shaft” Bair, which we like… I don’t want you quitting because of a bad January… we are going to keep looking… on the hunt for great stocks like so many of those that I told you were up double digits.



[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:    Why don’t they just bail out the American consumer? Why don’t they put the money back in the hands of the American consumer? And I am not talking $600 or $1000, a serious injection of cash?

Jim:    First of all I am not against that… but let me just tell you what I think is most effective… we have to get people to work, okay… and we got to get people to buy homes… we give a tax credit to people who buy homes, existing homes only… and we give businesses a big tax credit if they hire people… remember, we don’t want a one shot only… we want people to get jobs and keep them… we want people to stay in their homes… that is the real nirvana here… why not go for that… Jonathan, I like your idea… but it is not thinking big enough.

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Q:    I am wondering, I need your help on this, why some very high income and revenue growth stocks in the healthcare sector, particularly the home health delivery sector, like Almost Family Inc. (AFAM), have a seen a resolute collapse in their stock price over the last month? Almost Family has gone down almost 30% in the last month on no news.

Jim:    Well, I think the news here, frankly, Matt is that we are out of money… so we are thinking that a lot of the agenda that was involved with say healthcare… maybe even solar… I see wind power going down… all these kind of things that were kind of sensual to what we thought we might be getting… have been waylaid because the economy is so bad… so I think that it will come to it… but what people are saying is… uh, uh, there is no more money for that kind of thing… even as we think it would be great if there was that kind of money.

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[verbatim recap]

[end of segment]

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