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Tuesday,
May 19, 2009
(Cont'd from
above)...
Jim (cont'd):
I want to help
illuminate... help
you see through the
misdirection... and
find the
opportunities that
the press obscures
on a daily basis.
Somehow, just about
every piece of
coverage of today's
housing starts
number -- a 12.8%
decline in the
starts of homes and
apartments last
month -- treated the
news like something
out of Jason, Friday
the 13th, a
nightmare...
What?... when we
were building the
same number of
houses as we were
when this country
had 40% fewer
people, I need you
to know to ask, how
is that really bad
for what ails this
country right now?
Okay, sure, it's not
good for the
homebuilders... but
why should their
bias be the media's
bias?... When you
think about it,
wasn't it
over-building that
caused the housing
crisis to begin
with? So how can an
"under-build" be a
bad thing?...
When we are building
homes equal to only
half the number of
new households
created every year,
through marriages,
through divorces,
whatever... that's
all we're building
right now... half...
then that's going to
lead to a dramatic
decrease in the
supply of housing...
something that will
ultimately create a
bottom in housing.
Remember, too much
supply creates a
house price
depreciation...
which means
foreclosures...
which means bonds
going bad that are
based on
mortgages... and
means, of course,
bank failures.
Now, not enough
supply, with
overwhelming demand,
means price
stabilization... an
end to
foreclosures... no
more capital
problems at the
banks... and the
resuscitation of all
these bad mortgage
portfolios!...
Lower housing starts
makes house price
stabilization
possible!... And
that's going to be
the key to ending
this severe
recession...
otherwise, it would
be impossible, which
makes this low
housing starts
number a positive
development!... It
is exactly what we
need, but it was
spun negatively all
day... it's read
like a Stephen King
novel... like a darn
Cujo!... It's too
seductively negative
for the writers and
editors to the
intelligence about
what it really means
to the economy or
the stock market...
Or how about the
lead story on the
front page of
today's Wall Street
Journal?... Let's
take a look at this
one... Local Banks
Face Big Losses...
That talked about a
survey... 940 banks
and $140 billion in
commercial real
estate problems...
Hmmm... now that
sounds huge... that
sounds really
scary... But wait...
the way they put
it... you'd think it
was absolutely
catastrophic... but,
in reality, we're a
big economy. The
fact is, that number
is actually really
small... so small I
found it
heartening...
absolutely
heartening... You
would have thought
that the market
would have been down
big today... come
on, it's the lead
story in a major
paper of record...
How would I have
written that
story?... How about
this?...
Despite what you've
heard about the
weakness in
commercial loans
from everybody
imaginable... it
turns out that the
problem is totally
manageable... at
$100 billion, a mere
fraction of the
residential home
loan problem. And I
might also add, and
the subtext, the
most recent weakness
of so many local
banks is an
opportunity, just
like at the end of
the Savings and Loan
crisis in 1990 to
1991... There are
healthy regional
banks just waiting
in the wings to buy
any of these local
banks that fail...
including the
multiple buyers that
have already bought
the banks that have
been seized in the
last few months...
Remember, I'm
describing this
"tragedy" of local
banks' big losses as
a twice in a
lifetime
opportunity... That
should be the
headline.
It's why I have been
recommending the
"FAB five" regional
banks... First
Merit, First
Niagara, Glacier,
New Alliance, and
People's United...
By the way, all of
those... there was a
lot to put buying
today... Bank stocks
are coming down...
you're going to get
your chance.
Those are the five
that benefit the
most from local
banks facing big
losses... Don't
forget BB&T here
either... it will
become the dominant
franchise in the
South... These local
banks that face big
losses will be
gobbled up by
BB&T... with the bad
loans being taken by
the FDIC...
This is also the
best place for Tim
Geightner's
much-mocked
public/private
partnership plan to
go into effect...
the money can buy
out the bad loans,
while banks like the
Fab five can take
the deposits in the
branches.
Why is it that The
Journal is trying to
scare you out of
such a terrific
opportunity?...
Now I don't expect
the press to give
you a "buy" list...
that's our job here
on Mad Money... But
I do expect it to
balance the
incredible
negativity with a
positive now and
then... especially
given that the
stories have been
endlessly grim all
the way up from the
March bottom.
Hey, it's not just
The Journal...
Let's take a look at
the New York Times'
lead story...
Efforts to Repay
Bailouts May
Undercut Benefit for
Taxpayers...hmmm...
wow... ooh, that
could be bad right?
But, wait a
second... first of
all, shouldn't we be
thrilled that we're
going to see most of
this money again?...
Didn't the press
harp endlessly about
giving out all that
TARP money in the
first place?...
Wasn't it supposed
to be a black
hole... a
sinkhole?... And,
beyond that, the
papers think the
warrants are going
to be a ripoff for
the public, that the
banks have to give
to the government
now... I frankly
don't understand how
that is possible...
You loan out money
at high rates to the
banks, then you get
the money back, with
the interest already
paid, and warrants
too?... Hey, I want
to deal!... Warren
Buffett wants that
deal!...since we're
getting better terms
than he is... Warren
Buffett... I mean,
what's the matter
with that?...
And yet, something
that is incredibly
bullish for the
taxpayers is written
about as though it's
a huge money
loser... and as if
it's ripping off the
government, and
us... Hey, remember
when the press said
that the government
would lose every
dime on TARP?... Now
they are grousing
about whether or not
the return is going
to be big enough...
I mean, come on...
Always, here's
another misdirection
play... I love this
one...
Page 3 of today's
Wall Street
Journal... Farms
Start to Feel Credit
Pinch... a start
that has been going
on for a year now...
The hottest stocks
out there, if you'd
been following this,
are the fertilizer
stocks... Why?...
Well, it's certainly
not because they're
feeling the credit
pinch... farmers are
planting like mad...
I want to know, will
this article keep
you from owning
Agco, which has been
red-hot?... How
about Deere?... Hey,
let's use that as a
litmus... Deere
reports tomorrow...
Now, if Deere is
good, you will never
hear about that
again from the
author of this
article... because
there is no
accountability in
the business. Do you
think that Lauren
Eder, or The
Journal, will write,
whoops sorry, wrote
that article, kept
you out of Deere...
no!
Now I want to know
if Lauren Eder is
right to scare you
out of that stock
after the results
come out tomorrow...
Okay, let's find out
tomorrow... I'm
going to go back...
If Deere is bad, hey
listen,
hallelujah... But,
you know what? I
know that that's
spin was totally
negative, and it
kept you out of the
fertilizer stocks,
which have been just
the hottest in the
business...
The most frequent
topic of these
negatively spun
stories is about the
weak dollar... Oh,
we're supposed to be
really frightened by
the weak dollar...
it's treated as
though it's some
kind of awful sign
for the future... a
portent of terrible
creepy things...
It's in every
article that I've
read...
But the weak dollar
is fabulous for the
exporters!... I
mean, why the heck
you think that J&J
and Procter & Gamble
& Coke are breaking
out?... Not to
mention
Ingersoll-Rand,
United Technologies,
Caterpillar... Why
are they running?
It's because of the
weak dollar. If
you're an investor
in stocks and you're
praying for a weak
dollar, as great as
it is for the soft
goods companies,
it's fantastic for
our competitive
manufacturers who
are getting killed
by a stronger
greenback...
Now, not every paper
is contributing to
the sense of
gloom...
The Money Section of
USA Today is almost
always balanced...
hence today's lead
story... Stocks
Poised for Powerful
Rally... Obviously,
you would have liked
this better 2000 Dow
points ago... but
you take it as you
can get it.
You would think that
when Murdoch bought
The Journal, the
procapitalist,
occasionally
optimistic, spin
would creep from the
editorial pages to
the other
sections... no...
it's even more
negative than from
before he owned
it... does he even
read it? How can he
stand it?...
The bottom line...
▼ ▼
▼ ▼
▼
 The Bottom Line!:
Don't buy into the
spin... don't let
the wall of worry,
replete with all the
Claymore mines and
razor ribbon that
the press has built
up, keep you away
from opportunities
to make money. The
papers write what
sounds sensational
to the general
audience... not what
helpfully informs
investors.
[verbatim recap]
[end of segment]
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