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Monday,
June 1, 2009
(Cont'd from
above)...
Jim (cont'd):
Sure, you can
dismiss every
shouted stock name
and accompanying
booyah as I walk
down Wall Street
each morning as
simply anecdotal
noise… you can also
surmise that it is a
self selecting
group… who else
would shout stocks
at me except
investors who would
want to buy
something… but the
reality is quite
different… people
are still desperate…
they still have huge
losses in their 401k
plans… they are
worried sick that
they will have to
work forever to make
back the money… they
are in either no
mood to buy…. or
they are stuck…
stuck in pathetic
stocks like
Rite-Aid, or
Sirius (SIRI)…
which I do not even
think should be a
stock… or GM, I kid
you not… they own
the stock of GM… it
is painful, because
there is so much
money being made…
and yet people are
so depressed and
fearful, they simply
do not want to hear
about opportunity.
So in the interest
of reaching more
people than just the
bagel customers, the
lottery buyers, and
the great butcher I
use… let me tell you
why I think their
worries our history…
particularly after
today’s events
resolving GM… I
think their fears…
your fears are
history… because
back over last
summer… before it
seemed like the
world was coming to
an end… I said that
we could not have a
convincing bottom
that would bring in
retail investors
until 7 black holes
had been filled… you
might have heard it,
I used the term over
and over again… the
black holes, the 7
black holes in the
system that could
bring us all down… I
revealed these holes
well before the fall
of Lehman Brothers
and AIG… and I urged
the government to
take action, all the
way back then… in
order to stem the
losses… before all 7
of them went down…
none of the black
holes were filled by
the government in
time to avert huge
disasters... but as
of today, we have
finally put them
behind us… and I
have got to tell
you, even up here in
the 8000’s in the
Dow, that is still
huge.
Let’s go over the
black holes… so you
will now exactly why
I tell people, come
on, get in… it is
not too late… what
were the original
seven… what black
holes did I say must
be addressed to
avoid Armageddon…
First, I said Fannie
Mae and Freddie Mac
needed to be put out
of their misery and
seized by the
government… before
all of the different
securities that they
issued to fund
themselves would be
worthless… black
holes filled for
certain… although,
too late not to kill
all of the preferred
and certainly the
common stock that
trades ridiculously
now… it was a
devastating, stupid,
and inconsistent
decision to wipe out
the preferreds by
Treasury Secretary
Hank Paulson… no
matter… Bernanke has
used these two
stooges wisely to
bring down mortgage
rates… something
that the papers
refuse to recognize…
even today, in a
completely
gratuitous slap at
Bernanke, Len
Rappaport, I know
that she did not
write the headline…
Fed Mortgage Efforts
Prove Costly…
criticized Bernanke
for his incredibly
presion plan to buy
Fannie Mae and
Freddie Mac
mortgages to keep
rates down… the only
reason that they are
rising now is
because of demand,
it is not inflation…
people are buying
homes like mad now
in major parts of
this country… and
there is tremendous
demand for
mortgages.
The next black hole
was Lehman Brothers…
what a disaster… but
it sure was filled
alright… it took
about 6 months to
get this one behind
us… the bank bottom
of March… and the
losses probably came
to the trillions in
the end, worldwide
not just America…
but it got Bernanke
to assert himself
and start pumping
out money… which
saved the system…
avoided the second
Great Depression…
Washington Mutual
had been a gigantic
black hole, solved
by a timely buy by
JPMorgan… which just
tonight filed a 5
million share
secondary, which you
are going to want to
be in for certain…
Washington Mutual,
as discussed with my
interview with
Sheila Bair last
week, had been a
major source of bad
mortgages… a totally
accountable, almost
rogue entity… it was
bought by the most
accountable entity
in the financial
business of all,
JPMorgan… and the
problem has been
turned into an
opportunity… as
Lehman could have
been turned into an
opportunity, if the
government,
particularly Hand
Paulson, hadn’t been
in punishment mode…
more concerned about
moral hazard than
genuine hazard… a
stance that has set
us back terribly…
again, I want you to
buy on the just
announced JPMorgan
secondary… because
as an owner for
my charitable trust,
ActionAlertsPlus.com,
I think that it will
soar after the deal…
I cannot buy it, I
will be frozen, you
should not be.
The next black hole,
AIG… hey three
bailouts and plenty
of yanks later, the
problems are at last
behind us… the loss
has been contained
to about $200B… the
biggest hole in
TARP… but without a
bailout, AIG could
have been a huge
domino knocking down
almost everything in
sight, both here and
more important in
Europe… let’s hope
that the
investigations begin
to flow so that we
can get to the
bottom of this
travesty… we need a
run away grand jury
to keep up with this
specious insurance
disaster.
Citigroup… what can
I say about
Citigroup… zombie
bank that has been
cordoned off from
the rest of the
banks, no more
capital needed it
looks like… that is
the best thing that
I can come up… maybe
it is enough… let’s
call it a $3 call on
financial utopia.
Finally, the last
two black holes…
they were twins…
Ford and GM… the
market took care of
the former with a
gigantic stock
offering, that has
gave you a 30% gain
if you got in on the
deal… why did Ford
make it… outside
Detroit recruitment,
Alan Mullaley, he
borrowed money when
you could… Ford is
out of the woods and
now going for a
market share grab
that should make
this stock a true
winner… maybe the
best play other than
Toyota, which I
really like on the
auto recovery… and
the shrinkage of
money losers GM and
Chrysler… you hear
all of those plants
being closed.. you
should be thinking
Toyota first and
then Ford.
And finally there is
GM… I did not think
that a bottom that
would be attractive
to the risk averse
crowd… as opposed to
the people who were
willing to wade in
with my call at Dow
6500, that the worst
was over… the
downside was
minimal… and the
time was right to
buy… I did not think
that the risk averse
crowd would come in
until GM was dealt
with… it is
important to
recognize that as
with AIG, Fannie
Mae, Freddie Mac,
and Lehman, it did
not matter how, how
they were resolved…
as those black holes
like GM really have
been filled in the
most awful way
possible… and at a
tremendous cost to
the taxpayer… but
what mattered was
not the cost, what
mattered is that
they were solved and
filled in period.
The point of my
black hole schedule
was simply to deal
with every issue
that contained what
was known as
systemic risk…
meaning that it
could derail any
earnings rally…
anything with just
about how companies
were doing… with
something much
bigger than
earnings, profits,
or how a company is
doing vs. analysts
projections.
Here is the bottom
line...
▼ ▼
▼ ▼
▼
 The Bottom Line!:
As I said to the
nice woman at the
bagel place, the
worst is over… as I
said to the butcher
behind the counter,
we have been a new
lease on life… as I
said to the man
purchasing the
lottery ticket at
the newsstand,
ConocoPhillips (COP*)
is a better bet… and
as I shouted back to
the guy parking his
car at the drug
store, we are out of
the woods, stop
moaning, start
buying… judging by
the gigantic rally
today, up 221 on
the Dow…
and 24 on the S&P…
someone must be
listening.
[verbatim recap]
[end of segment]
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