Wednesday, May 6, 2009
(Cont'd from above)...

Jim (cont'd):   

Ladies and gentlemen... the rocket fuel is back... the liquid oxygen is in the engine...

More important, with today's action, we know which animal we're betting on... it's this guy (the bull), not this guy (bear)...

That's right! This rally's pedigree... it can no longer be argued... I'm stipulating it! We are now up 36% from the bottom, and that's a cold, hard bull run... not simply a bearish rally in bear's clothing... We're dealing with facts now... not opinions, not prognostications... about what's going to happen... And yet, this huge gain has been fought tooth and nail by almost everyone you read, hear and see...

The huge gain has happened! To me, it needs to be celebrated, not endlessly greeted with skepticism and cynicism, as if it hasn't happened... And, because so many people refuse to admit it, or poo-poo it, or say, wait for the big pullback... it's not done... far from it. There are still loads of bears who will not let up. They will not stop telling us how bad it's going to get... just you wait and see...

You see them all over television, they're on the web, they're in the newspaper... guys who have been negative ever since the rally started in early March... No matter what seems to happen, they stay negative... no matter how the facts change, they stay negative... repeating all the same things that they were saying two months ago...

Sympathetic as I am, because I am a statesman... I am sympathetic to the plight of these bears... You see, they've stepped into the bear trap, and they can't get out... but that doesn't excuse them from trying to scare people, and giving ordinary investors the wrong idea about where the market is right now... They may have gotten it wrong... That doesn't give them permission to endlessly cost you money by refusing to admit they are wrong. And I think they've done just that... I think they've kept you out of a great run... I think they've cost you a ton of money...

It's always hard to pinpoint exactly when a turn happens... not when the market bottoms, but the moment when all the old arguments and worries cease to matter... when they no longer have rational basis, because the issues have been dealt with... the problems solved...

You can only fight about whether we're in a bull market or a bear market for so long...

At some point, the facts - meaning the 2000-point gains - come in... I felt like we've been out of the woods for a while but, today, I know it as surely as anyone can know anything about the market...

What happened today? What happened to put the bank obituaries on permahold?... To end this silly professorial and columnist chatter and generalization?... The Treasury Department's grades got whispered about and, despite the outrageous leak of these results to favorite reporters all day, you saw what a fix looks like... And let me tell you what a fix looks like... It looks glorious!...

You're seeing the results of the forbearance plan that I proposed and pushed for so often on this show, and in private, including behind-the-scenes to those in government... You're seeing what happens when the Feds decide to bend the rules, and to look the other way... not actively try to put the banks out of business... And, make no mistake... the leaks prove to me that they've embraced forbearance... which means the debate is over!... Bulls, 1... Bears, nothing... Shut out!...

With all these great grades, and the not so onerous needs for capital from Bank of America (BAC) and Wells Fargo (WFC), I think we've taken the systemic risk off the table... and you know that the systemic risk argument was the staple of the bears...

With the worst of the results in, we can now evaluate stocks solely on the basis of earnings... without having to factor in the potential "they know nothing" Armageddon factor...

Now, I've been saying that since early March, but the evidence from today's leak should convince even the most hardened Kodiak (bear) to throw in the towel...

It seems to me that (Treasury Secretary) Geithner is really sandbagging the bears here...

See, when the news was leaked last night that Bank of America needs to raise $34 billion... a totally outlandish figure... it showed that the test was real, that it's strong and not a sham... Wow, I was scared... Where's the forbearance in that?... Well, $34 billion turns out to be pretty close to what BAC can get from converting its preferred, and selling its stake in the Chinese bank... So, even if the number looks frighteningly large, things should be just fine for Bank of America.

We got another "no" vote on WFC... It looks like they need $15 billion... More credibility for the stress test, but no problem for Wells... I mean, Warren Buffett can pretty much write them a check for that if he wants to... And, because the Feds showed that they were serious about two of the biggest banks out there, because it gave out two tough grades, we're willing to accept that some leaks were a little more "iffy," telling us that American Express (AXP) and MetLife (MET) need no new capital... and Morgan Stanley (MS), just a smidgeon... even though they should have been some of the more troubled institutions...

Now the remaining banks can literally be absorbed by anyone without a problem... Regis Corp. (RGS) needs a little cash?... Not an issue. They didn't take the TARP money, and Goldman Sachs (GS*) is about to give back... SunTrust Banks Inc. (STI) needs more?... Hey, I say... "all aboard"... Capital One (COF)? Hey, I say, give it to me... not a problem... Heck, you know what?... I even, right here, right now... and this is quite a change from when I was at Ohio State... I am here right now saying that the much-derided Huntington Bancshares (HBAN) shares... and I've been doing the deriding... might be out of the woods! That's right...

You see that, the moment that Geithner recognized that nationalization was wrong... the moment he recognized that the '89-'91 Resolution Trust method, called forbearance, was right... you didn't have to worry anymore. We can't see inside Geithner's brain, but we can see that method in practice... It's working.

This bull market began when Wells Fargo said that things had improved... and the company was profitable. That was back when the stock was at $8. And, at the same time, noted bear... I call him a permabear... Nouriel Roubini... said that Wells might not be all that truthful, and that the Dow was on its way to the low 5,000s...

Since then, you can argue about whether or not Wells Fargo was right but, as of today, that's not anything to be concerned about. That case is also closed.

But yet, the bears that were negative all the way up since then, are still holding out. What gives with these guys? I mean, they're boxed (in)... The risk/reward for changing your mind in this country isn't very good. If they never admit they were wrong... they will be praised for being... praised and respected... for being consistent. But, if they change their minds, and say it's okay to buy, they will be derided and viewed as jokers by the vast majority of people.

Flexibility happens to be the only way to make money in the market... But, if you're a commentator, then it's much more important to be consistent. Once you change your mind, you acknowledge the mistake. As long as you keep repeating the same old lines... someday, you might eventually be proven right. No one wants to close that door. I've been there for heaven's sake!

I was bullish all the way to the bottom in the great bear market of 1998. I capitulated at the exact moment when things turned... I had to eat crow... I mean, I had to eat more crows than were in the movie, "The Birds"... and, I've got to tell you something... it was ugly. Still, it enabled me to finish up for the year, and I had been down huge, and that's what matters... I could not hide behind tenure. I was running other people's money. They would have taken it away if I had stayed negative... I couldn't care that it's humiliating... and I totally know what it's like to experience the mass hatred that appears when you publicly change your mind.

In February of 2000, I was all in for the Nasdaq... I had made a fortune... it was still ramping... I wanted to capture the last bit... so I wrote a speech that has forever been held against me... I recommended a group of stocks that had soared, and continued to soar... and then I switched three weeks later to being bearish... I told people everyday to take money off the table at TheStreet.com, where I'm chairman... Do you know that, ever since then, I've been hated... for making that sell call... hated... never mind that it was right. And, if you listened, you managed to avoid the dot-com collapse... I was hated... People didn't even care that I was actually right both ways. They saw me as a clown, a buffoon - often the word of choice against me - for recommending it, and for changing my mind... I was a buffoon for changing my mind, even though I was right...

I mean, the facts changed... I changed my mind!...

What do the bears do?... They dig in... so as not to look like fools...

People are still massively "underweight"... which is Wall Street jibberish for not owning a lot of banks... because they didn't recognize that the fix was in... They didn't believe us... they thought it was like, too corrupt... they went with the PermaPandas... The mutual funds own many banks at all... They're still waiting for the big equity deals that now will probably never even have to happen, because the government's forbearing... That makes for a lot of people who run money... not just professors... to come out... and panning this market to switch directions.

But, at this point, the only thing that they have on their side is hope... the bears only have hope... and that's never part of the equation.

Here's the bottom line, and you must believe me on this...

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The Bottom Line!:     I thought that the banks were out of the woods... the systemic risk had been taken off the table... and that the government was going to do the right thing... since the beginning of March. Now, it's a fact... it's now a matter of history. It's no longer an opinion. So, when you hear the bears panning the financials, or the whole market, know that they have every incentive to be consistent, but no incentive to be right. And, fortunately, being right in my book means making money... which is, never forget, what this game is all about.

[verbatim recap]

[end of segment]

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