Cramer: Dark Skies Looming Over Big Banks
(Click for video linked to a searchable transcript of this Mad Money segment)
Cramer is getting nervous about the . "They stopped going up with the rest of the market and that's never a good sign ahead of earnings," he said.
Cramer worries that nasty headwinds are swirling– and they may be strong enough to derail gains in the entire sector.
"One of the headwinds is old and the other is new," Cramer said.
The old one is regulation and Cramer said this headwind is like the proverbial gift that keeps on giving – that is, it just doesn't quit.
"The Feds are changing the rules, again," Cramer said. "This week they suggested that banks need to raise more capital."
That is, regulators have proposed the nation's largest banks increase their ratio of equity to loans and other assets from 3 percent to 5 percent. If adopted, the rule would take effect in 2018 and would apply to U.S. banks considered so big that solvency issues could threaten the global financial system. Banks affected by the proposal include Goldman Sachs, Citigroup, Bank of America, JPMorgan Chase, Wells Fargo, Morgan Stanley, Bank of New York Mellon and State Street Bank.
That alone is enough to spook investors.
However, "There's a second headwind, a new one: rates have gone up so speedily that mortgage sticker shock is the order of the day," Cramer added. "That and the sudden decline in housing affordability have frozen the best part of being a banker right now: mortgage loans and refinances. Any decline in those revenue lines is going to sting profitability," Cramer said.
And to make matters all the more perilous Cramer said corporate formation hasn't picked up so loan demand hasn't expanded as previously hoped.
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All told, Cramer sees dark skies.
"In the near-term I'm looking for big banks to take a hit," Cramer said. "For the moment, they are not the place to be." As mentioned above, "They stopped going up with the rest of the market and that's never a good sign ahead of earnings."
Disclosure: On July 11th Cramer owned JPMorgan and Wells Fargo on behalf of his charitable trust.
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