Thinking Positive: What the Market Can Do
When you’re dealing with financial problems, there is always a way out, Cramer said. If the government doesn’t take action, there are still five things that Cramer thinks could occur in the private industry that would alleviate some of our problems.
First, a major bank like Goldman Sachs or JP Morgan or Morgan Stanley could turn out to be in good shape and say, simply: “we have the liquidity, so come trade with us.” The exact opposite happened on Friday, Cramer said, when Bear Stearns basically told investors not to count on them. Cramer would like to think someone is in good shape and is ready to take share, but he hasn’t heard anything yet.
Secondly, the Chinese could come in and take a major stake in one of these firms. This would immediately alleviate some of the problem and allow for bids in the credit markets, Cramer said. Right now, there are no bids, causing a lot of these hedge funds to be unable to raise capital at any price. Many of these bonds actually have some value in them, Cramer said, but no one is there to take advantage of it.
The third thing the private sector could do to turn things around has a name: Warren Buffett. The billionaire could set up a fund to buy some of these bonds and take advantage of the collapse of the market. He could take a stake in one of the major firms like he did with Salomon Brothers years ago, making it clear that there are billions of dollars in liquidity out there – you just need to know how to find it.
Fourth, the Middle Eastern interests that are taking trillions in profits from the run-up in oil could buy a major stake in a major bank. Or they could just buy the whole bank, Cramer said. This happened in 1990 to Citigroup and a major crisis was averted because of it.
Bottom Line: These are five resolutions that Cramer thinks the private sector could accomplish to avert an all-out economic crisis if the government doesn’t take action.
Jim's charitable trust owns Goldman Sachs and Citigroup.
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