FinReg or Not, Buy the Banks?
Some may say it’s downright reckless to own the banks right now. In fact, Cramer has received e-mail after e-mail criticizing him for going bullish on the sector last week. With financial reform being debated in Washington and Goldman Sachs having been charged with fraud, everyone from hedge funders to Tweeters to Facebookers are decrying any investment in these stocks.
But not Cramer.
He thinks the banks today look a lot like health-care companies did last October. At the height of that raging debate, few were willing to recommend a company like WellPoint
. But Cramer thought we’d seen the worst by then, that the reform bill had been baked into the stock, and that’s why he endorsed WLP at $47.50.
He took a lot of heat for that call, but that moment turned out to be health care’s bottom. And WellPoint climbed to $64 before Cramer told viewers to take profits, at least those who were willing to take a chance and jump in at the ugliest moment of the debate.
Well, Cramer thinks we’re at a very similar moment for the banks, both in the intense focus on the sector itself and the spite and vitriol being directed at his call. He said the posturing has gotten out of control and the anger at these institutions is unfathomably deep. And, yes, when people say it’s reckless to recommend buying these stocks, they’re talking about him. But Cramer sees something that apparently few others do: that despite predictions to the contrary, financial reform won’t be damage the banks significantly.
Whether it’s a consensus in Washington around Senator Christopher Dodd’s bill – also endorsed by tough-on-banks FDIC Chairman Sheila Bair and Treasury Secretary Timothy Geithner – or the things Cramer heard this past weekend while he was in DC, he doubts that any new legislation, which should get bipartisan support, will hurt banks’ earnings. In fact, he thinks the law may even boost them.
Sure, Cramer admitted he could be wrong. But viewers can’t wait for total clarity before making a move. Otherwise they’ll miss the move. And the essence of good investing is anticipating these kinds of moments, knowing that the worst isn’t going to happen, even when everyone else thinks it will.
Of course, this doesn’t mean that any number of banks – JPMorgan Chase, Bank of America , Morgan Stanley , Goldman Sachs – couldn’t drop in price in the meantime. But those declines would be opportunities, Cramer said, especially in regards to JPM.
“It’ll be a real gift,” Cramer said.
Cramer's charitable trust owns Bank of America, Goldman Sachs and JPMorgan Chase.
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