Stop Trading: Financials Fallout

Jim and Erin kicked off Stop Trading with discussion of deterioration in the market at the end of the trading day, and directed much of the blame to banks (yet again).

“I have just been consistently concerned about Bank of America , both its yield and post-Countrywide ,” began Cramer. He pleaded for either of the presidential candidates to come up with a plan of action should a major bank fails, without predicting a failure of course… but BOA should continue to go lower. Americans should be concerned about banks overall.

Freddie Mac & Fannie Mae are “technically insolvent – and everybody knows it”. Cramer recommends staying away from financials.

Shouldn’t one stay away from stocks entirely, then? Doesn’t a shoe dropping affect more than just the financial sector? Not really. The market is unprepared for a failure of a Freddie or Fannie, but pockets of the market remain strong.

Mad Money has been focusing on some of these stocks – Smith & Nephew (on last night), and Genentech is trading up even after a NYT hit job on drug pricing.

Oil & gas are trading down – bringing down the market with Fannie & Freddie. “We don’t want oil to be down huge, because there’s too much of the S&P that’s now oil, and too much is the financial.” People playing with stocks like Ambac and MBI with real money are met with derision.

A market expecting a 16% increase in tech company earnings will surely be disappointed. Cisco and Seagate are at new lows. Post-Bear Stearns, a lot of people bought tech, but Oracle is in a house of pain since they reported quarterly earnings – there’s not a lot of good news coming out of tech. “Sell in May, go away”, an aphorism seldom used by Cramer, has never been truer. It could be a major mistake to try to seek bottom-fishing bargains in tech.

CVS (not to be confused with “horrible stock” CBS ), in the wake of a negative Rite Aid report, is looking like one of the few retail stocks Cramer likes.

Questions for Cramer?

Questions, comments, suggestions for the Mad Money website?