Cramer on Tuesday announced the new rally in banks. Today he told viewers why it’s happening.
Don’t expect similar positive reports from the media, the Mad Money host said. They’re too busy focusing on supposed commercial and residential real estate foreclosures, a Fed they say is bent on raising interest rates and their prediction that the financial are ready for another leg down. But Cramer has 10 reasons why the banks are back:
First, the market has decided that the last of the credit losses are behind us, and it’s the market that sets prices – not the media. Nothing matters more for the banks than a peak in these write-offs, Cramer said, whether it’s JPMorgan Chase , Huntington Bancshares, Wells Fargo or Zions, and that peak has arrived.
Second, Washington has become less of a factor. Hen Senators are willing to turn a blind eye to even the worst payday lendors, as The New York Times reported, then that means financial reform – real financial reform – is all but dead, Cramer said.
Third, Citigroup CEO Vikram Pandit’s congressional testimony last week also helped to eliminate Washington headline risk, Cramer said. Pandit’s gracious “thanks for the help” left investigators with no comeback.
Fourth, Comerica’s common-stock offering yesterday and Citi’s preferred deal today show that there’s demand for bank financings. The banks that need capital can get it, Cramer said, and investors can profit from the deals. This also is important because these institutions can put the cash to work, cleaning up their balance sheets.
Fifth, while reports say that the government is preventing banks from boosting their dividends, Cramer thinks the real story is that they want to. Count Wells Fargo, JPMorgan, and
US Bancorp on this list. That’s huge, he said.
Reason number six is that the predictions of a commercial real estate collapse have been blown out of proportion. In fact, Cramer thinks there’s so much money right now chasing commercial mortgages that a bottom is at hand. Also, remember all the good things that Tanger Factory’s CEO said last night.
Seven, the FDIC isn’t taken over that many banks, not compared to the number of failed institutions during the savings-and-loan crisis. Cramer thinks the failures have peaked as well, and pointed out that a number of foreign outfits want to buy American before the stocks move too much.
Eight, this group has underperformed over the past six months, Cramer said, and money managers are looking for sectors ready to play catch-up.
Nine, retail sales numbers indicate that the consumer is spending again, and that’s good news for credit-card issuers, which are banks. Don’t underestimate the Americans’ spending power right now, Cramer said.
And lastly, money managers have been waiting for the unemployment number to stop climbing, and that happened last week. This means the bank stocks should run because, at least in theory, consumers become more credit worthy. Cramer said that the time to buy the financials is when the Federal Reserve feels it can raise interest rates without hurting the group, and that time is now.
Cramer’s charitable trust owns JPMorgan Chase.
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