Cramer's Got My Number

[rffrydr]

Well here's the Madman once again: couldn't help reprint 'cause now he's talking to--at--me. Is this really the "secret consensus"?

[lewie2004]

FIG, Blackstone Are Huge Black Eyes
By Jim Cramer
RealMoney.com Columnist
10/9/2008 3:34 PM EDT

Editor's note: Jim Cramer will present his 2009 stock outlook for the first time at TheStreet.com Investment Conference on Saturday, Oct. 25. Click for details.

Lost in the struggle of all the financial chaos is the incredible collapse of Fortress Investment Group (FIG) and Blackstone (BX) .

These were top-of-the-market IPOs of a hedge fund and a private-equity fund that went to giant premiums the day they came public.

You know what these feel like now? They feel like the last dot-coms out of the chute. Especially FIG, which just suspended its dividend, claiming that it wants the money to invest in distressed financials. Oh, please.

Of course, because these are two entities that can't be divined -- they are private partnerships that the SEC should never have let come public -- we can't figure out what they own. If we can't figure out what they own, we have to presume they have credit default swaps and CDOs and whatever else there might be until they tell us otherwise.

In other words, these are total black boxes and are without a doubt the easiest stocks to be crushed by the short-selling cohort. Frankly, I don't understand for the life of me why a bunch of shorts just don't punch both these to $1? Why can't they? Why can't they just lean 'em all the way down and then declare victory?

Now here's something to think about: Blackstone was the best of the best. Nothing like it. Considered to be the biggest and most powerful private-equity firm in the world. When those who believe that private money has to come in eventually, they think of people like those at Blackstone? You think that's going to happen?

Do you think they can defend their stock? Without an uptick rule they are just fodder.

Maybe they deserve to be. I know these aren't Ford (F) or GM (GM) , but if they go down it would be a couple of spectacular collapses because of all of the money they have borrowed.

Isn't it amazing how you don't even hear defenses anymore? You would think that we would be getting a "we have no CDOs, we have no Lehman exposure, we have no WaMu preferreds.

But they are silent. Silence is brass.

Random musings: When are they going to break Citigroup (C) ? You know that they can't resist. I hope Chris Cox enjoys that one! ... Stuff like Level Three (LVLT) , anything that needs high-yield financing, is just going away. Incredible. ... How about the way Sears (SHLD) trades without the short ban? Unbelievable, they are all over it. I wonder how they can borrow the stock? It is really impossible to borrow. ... Speaking of financials, I think AIG (AIG) is worth zero now that we know the real exposure. ...

At the time of publication, Cramer had no positions in the stocks mentioned.

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.

Read our conflicts and disclosure policy.



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[lewie2004]

Lincoln National's Crime? It's a Main Street Stock
By Jim Cramer
RealMoney.com Columnist
10/9/2008 10:02 PM EDT



Last weekend I bumped into the former CEO of Lincoln National, and I complimented him about how his old company had avoided the Met Life/HIG scenario and hung in well in the high $30s.

Today it closed at $18.

It's crime?

It's a main street stock. That means it sells annuities, and suddenly everything we are hearing about is that the annuities can't deliver what they promised.

Somehow whatever they were doing to make their promises, they can't any more.

Of course we don't have a clue what's going on at any of these companies until after they tell us -- as we found out with Horace Mann, Educators, which blew up today.

But the Lincoln National problem, or the perceived one, is that it is supposed to have sold tons of annuities on the S&P 500 and guaranteed them.

That's been the "crime" that has been ailing many of these annuity sales companies, and people are just shooting first and asking questions later. They are shooting, stabbing, poisoning and beheading them first, and then asking questions.

When you couple that with the ease with which you can take down any financial through gang-tackle shorting, this moment has become one of the most lucrative I have ever seen for those going short. Any company that tried to insure an S&P 500 fund is perceived as having blown it!

Why is this main street? Because annuities is how people invest. It has always been how they invest unless they are in plain vanilla mutual funds. And they are scared. And, this time, they should be.

Main street's waking up to the fact that their money isn't safe. I have no way of assuaging it. Not when there are stocks like Lincoln that on Friday was one of the good guys and on Thursday just gives up the ghost.

It's just real rough out there, and not done, either.


At the time of publication, Cramer had no positions in the stocks mentioned.

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[gregf]

A couple of points I'd disagree with my bald counterpart,...

1987 crashed off the HIGHS, not off a 5 year LOW. Now, what was the similarity????

Jim obviously is very dialed into the gold market,....a couple of thoughts,....


Gold is getting bought because of panic buying (gold, the ultimate reserve currency, never worth zero, blah), no one is buying gold because of inflation worries Jim - the world is freaking deflating, who's thinking about inflation, sheesh.

They sure as the world aren't buying it on the technicals at this point - the gold chart is as big a mess as I've ever seen. The recent rally put gold right in the middle of a bunch of congestion, not something you exactly buy into with confidence from what I can tell,..

Also - gold has been going up inspite of the $ rally - that's something worth a 2nd thought.

The long decline in the USD has been broken.
http://futures.tradingcharts.com/chart/US/M

Which, if you've been buying gold as a $ hedge, (which has been a great strategy for a while) that strategy seems to have run it's course and you're working with borrowed time at this point. Unless we really do fall into the abyss and welcome in the next great depression.

I look at the fed data like everyone else - the deficits and the amount of $ pumped into the system is crazy. Doesn't matter evidently. The USD is in rally mode, big time.

Also - the gold stocks are getting hammered with the rest of the market - inspite of gold's rapid rise of late. That divergence alone should be a concern for gold bugs.

On the Nasdaq debacle point - looking at it pretty simplistically - The Nas problem in 2000 was JUNK COMPANIES, today the problem is JUNK ASSETS. Dramatically different problems.

[lewie2004]

I guess he is right until proven wrong!!!!!!
This Tough Market Has Shades of 1987
By Jim Cramer
RealMoney.com Columnist
10/8/2008 6:08 PM EDT

This market is so much like 1987, it freaks me out. In that market, in the week leading up to the crash and the crash week itself, you would enter an order to buy a stock when it was up 2, get the report that you bought it up 3, and then it would be down 2. That's exactly what happened with Goldman Sachs (GS) today. Exactly.

In that market you felt ripped off like you wouldn't believe. Every day. You would try to buy when the market sold off and never get the low or even lower prices, and you would feel like you could do nothing right.

It ground you up and spit you out. In that market you would get good news, and it would last long enough to draw you in, and then it would spit you out -- like Morgan Stanley (MS) .

Now, I have to admit that I thought the market would finish up today. I figured it almost had to, because in the end it is still a big deal that we got a coordinated cut, even if it wasn't bigger.

Didn't matter.

I also figured that with credit markets actually beginning to thaw -- and I am talking about what Tony Crescenzi talks about -- we could catch a break. And the trade where hedge funds hedge their individual stock names with and S&P future shorts, the one Doug outlined, should have been good for more of a squeeze than we got. That seemed like a reasonable reason to go up, not to mention the minus 10 reading on the oscillator and only 25% bulls.

You didn't get those kinds of readings very often in the last 20 years and not bounce.

In fact I can only recall one of them: the week before the crash of 1987.

Tomorrow the short ban will come off. Tomorrow I presume that someone will try to break Bank of America (BAC) . I figure someone will try to break General Electric (GE) . Someone will try to push down Citigroup (C) . These are all free-short-fire zones, if not tomorrow than Friday.

It is why, again, I reiterate, the operative models are 2000-2003 Nasdaq Composite and 1987.

Alas, I am heartened that the central banks no longer think inflation is the issue. I just hope they keep their eyes off gold for a moment, because it is going to go up, as there will always be people who believe the Fed should tighten, and they will buy gold. There are enough of them to take the precious metal up.

Why should you care? Because an aggressive ease -- which they refused to forecast, and all they had to say was "We will not stop cutting until business is revived and the deflationary spiral is broken" -- will eliminate the 1932 scenario.

Considering that I think 1987 and 2000-2003 NDX are on the table, you might not think there is much to be thankful for. But that's wrong, because the market came back from 1987, and in the end the 2000-2003 experience left you a lot of bull markets away from tech to play in.

Random musings: I was spooked by Met Life (MET) and appalled that BAC wasn't able to rally, but it was a huge offering with an arb component, so even if it was in the hole I guess it didn't matter. ... The rally in the oils looked like the end - momentarily -- of a liquidation...

At the time of publication, Cramer was long General Electric, Goldman Sachs and Morgan Stanley.

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.

Read our conflicts and disclosure policy.



Terms of Use | Privacy Policy
© 1996-2008 TheStreet.com, Inc. All rights reserved.

[rffrydr]

The "kesselschlacht strategy"--that sound grim. It was the terrorists 10days ago. Now, only the germans can be so vile. Grimm fairytale.


ps Keep your eye on BAC.
_________________
Today is the Tomorrow you worried about Yesterday!

[lewie2004]

this is scary!!!!! Now it seems everything these days is either bad or real bad..

Bank of America Is Key Wednesday
By Jim Cramer
RealMoney.com Columnist
10/7/2008 7:18 PM EDT

Bank of America's (BAC) underwriting will be the crucial test. No, not of the print holding. The thing is enough in the hole that someone might want to own it. But of a return to the free fire-zone shorts, where a gang of shorts can break the print price of the deal (where the stock is priced on the secondary) and then cause a mass panic from all who bought it.

This is the kesselschlacht strategy I have told you about, the battle of annihilation by the shorts of great American companies. I am sure, right now, there short-sellers buying the heck out of credit default swaps, placing big bets on Bank of America getting killed. Tomorrow they will buy all of the October 25, 22.5 and 20 puts they can legally buy, and then Thursday they will start the operation to push the stock down, en masse, simultaneously through the print price. That we could have this sad and horrid confluence is just unbelievable.

As someone who loves the stock market dearly, I can see this playing out in a fashion that simply must be stopped before it happens. I don't know how. But this is the kind of merchandise that can just wreck a tape.

Alternatively, if the stock rallies and holds, we could get a Merrill (MER) situation -- at least before it broke down -- where the print held and the stock rallied. But, of course, that was John Thain's deft use of the anti-short rules. Well, at least Bank of America got the money, unlike Citigroup (C) which, incredibly, never took advantage of the spike after Wachovia (WB) or the rules. Only Fannie Mae (FNM) and Freddie Mac (FRE) were more obstinate.

All day today I fretted about this market. All day today I saw the disruptions, the big prints from the hedge fund belly-ups and the incredibly disconcerting action in Prudential (PRU) and MetLife (MET) and Bank of New York (BK) . These are great firms. It means nothing.

You know why I fretted? Because this is the kind of action I saw right before the crash of 1987 when the stock market lost 508 points in one day -- hmm, 508?!

The week before I was frantically trying to liquidate everything into a miasma of selling. I remember selling Johnson & Johnson (JNJ) down 9 points and Merck (MRK) down 12. I smarted and stewed when I got the reports. The stocks had been in the $90s and $100s, and I banged them out 10 and 20 points lower.

They opened on Monday in half. HALF!

Now what I would like to think is that there is no follow-through and this is it. But, like the Great Depression II, I don't want to presume anything until this kind of action is off the table.

I say, no hurry. Pick if you want, but let's see what happens to Bank of America. I never thought I would ever see anything as frightening as that Monday after I sold the Merck and the J&J. I don't ever want to see it again.

But if BAC doesn't hold and we don't get coordinated interest rate cuts later this week, then I guess it will be a once-every-21-year phenomenon.

I believe it can be avoided. Big rate cuts, an announcement from FDIC head Sheila Bair that she is done confiscating things, a dramatic decline in Libor, some takeovers, a few big buybacks announced -- even as I don't favor them unless they are near rock-bottom valuations -- and we will have a big rally based on how oversold we are and how illiquid the market is.

But so far it is Murphy's market, everything that can go wrong has gone wrong, so I am waiting, watching and trying, like you, to fathom this historic and horrible action.

Random musings: Have you heard a bad word about Ben Bernanke from anyone besides me and Doug Kass? How does he get the halo?

At the time of publication, Cramer was long Johnson & Johnson.

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a

[rffrydr]

How the permabears across the pond are looking at it:

http://ftalphaville.ft.com/blog/2008/10/06/16697/capitulation-booyah/
_________________
Today is the Tomorrow you worried about Yesterday!

[lewie2004]

We're in Worse Shape Than in 2002
By Jim Cramer
RealMoney.com Columnist
10/6/2008 1:19 PM EDT

Editor's note: Jim Cramer will present his 2009 stock outlook for the first time at TheStreet.com Investment Conference on Saturday, Oct. 25. Click for details.

You have to imagine this market as a market that could be at Dow 7700. You have to imagine what you will be doing if we get to 800 on the S&P 500.

You have to imagine those because that's where we were in October of 2002, six years ago, and let me ask you, to appropriate Ronald Reagan's great debate line, are you better off than when you were then?

I don't think so.

Those levels seem fanciful, but one of the reasons I felt compelled to stress raising cash today is that I can't think of a reason why we shouldn't revisit those levels. The U.S. economy is far weaker than it was then. We had a Fed chairman we trusted without worry. We did not have major bank failures, or major insurance failures or the failure of outfits like Fannie (FNM) and Freddie (FRE) and Lehman.

Yet we are substantially higher than we were then.

We have companies that spent more than a trillion dollars buying back stock since then. That money has vanished. Didn't do one whit of good.

We had a much lower budget deficit. We did not have unemployment going higher like this.

Most important we did not have the Great Depression 2 on the table, with worldwide problems like we have now. As long as that scenario is on the table, the idea that we won't take out those lows seems too Pollyanna-ish for me.

Most important, despite all the carnage you see on your screen, we are just now going into a recession. We are just now beginning to see the cracks and the weaknesses. We have a Federal Reserve that has stressed inflation-fighting while deflation rages. The last major pronouncements out of the Treasury were that the fundamentals were sound.

I would feel better if we were already neck-deep in the recession rather than just now going into it.

Hence my call to raise what you need for the next five years and take it out of the stock market.

The worse that happens is some opportunity risk loss.

That's a smart bet.

One last word: I am besieged by reporters off-camera wanting to know what "this bull" is thinking. The answer? I am still trying to find bull markets, but we must never forget that we are strictly in a stream with bears fishing for salmon up in Palin country.

We don't want to be the salmon.

At the time of publication, Cramer had no positions in stocks mentioned.

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.

Read our conflicts and disclosure policy.



Terms of Use | Privacy Policy
© 1996-2008 TheStreet.com, Inc. All rights reserved.

[rffrydr]

I can think of no better coda for our own Gilded Age than this from the Madman this morning:

[rffrydr]

He's thinking Retail next in line for CDS swap attack (Macy's in particular debt full): this pronouncement shows he's not Paulson's rally monkey anymore used the word "vortex" after a week full of "vicious cycle" talk:

They say bear markets don't end on hope--they end on dispair.
_________________
Today is the Tomorrow you worried about Yesterday!

[lewie2004]

yes, but he has been that way for last 1k points. this is is latest little blog.


Pervasive hopelessness
10/5/2008 9:05 PM EDT
There is pervasive hopelessness despite many extreme readings... But that should not prevent people from continuing to sell....
Position: nothing

[nodoodahs]

Now THAT'S capitulation.

I haven't seen his show in months ... was he that bad on Friday? Will he be that bad tomorrow?
_________________
I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[lewie2004]

A Time to Sell
By Jim Cramer
RealMoney.com Columnist
10/5/2008 8:55 PM EDT

If you haven't sold some stuff and are worried that you haven't, you should not let the down futures market stop you from selling something. I have spent the whole weekend working on what can go right in this market and if we get it (a rate cut), the response should be to sell a lot. If we don't get it, you have to sell some anyway and be as defensive as you can be.

It is imperative that we have substantial worldwide rate cuts beginning tomorrow morning to stabilize things. I am presuming we will get them, but they will produce nothing more than a great opportunity to sell or a better one than we deserve. Without cuts, though, selling must be done too. Even into the vortex.

High-yielding stocks, stocks selling near their cash and recession-proof stocks of the Procter & Gamble (PG) ilk (and I know they can have earnings weakness, too, but it is irrelevant) can be held. But industrial exposure of any sort that does not fit the yield/cash prism can't be held. It has to be liquidated into strength if possible, until you have raised enough money to ride out what could be a prolonged decline.

There's no two ways around it. While I believe the Troubled Asset Recovery Program has taken the Great Depression Two off the table for now, I just don't see how we are not going to be rocked by the astounding lack of confidence and fear that faces everyday Americans and, for that matter, consumers around the world.

Is this a "sell everything piece"? I only ask it like that because I said that high-yielding stocks, stocks selling near cash and recession-proof stocks can be held, but a very large cash position is now a necessity, and should be by far the largest holding in your portfolio. If you don't want to own the kind of stock I just mentioned, then you shouldn't be in any stocks.

It is that rough out there right now. Our goal is to get through this. There's no other course. I am not saying anything different from what I said all last week. I am just trying to make it very clear that this market is going lower and it is only taking a handful of prisoners. When it gets lower we can re-examine it for some buys. But cash is the best asset here.

I am not allowed to short. Obviously what I am saying is that having a sizable short position would be a darned good thing at this moment, and that's not going to change any time soon, except when we get so oversold that we get a killer squeeze where you can start selling all over again.

At the time of publication, Cramer was long PG.

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and


How to Prevent a Second Great Depression
By Jim Cramer
RealMoney.com Columnist
10/5/2008 10:04 AM EDT

Editor's note: Jim Cramer will present his 2009 stock outlook for the first time at TheStreet.com Investment Conference on Saturday, Oct. 25. Click for details.

In this horribly negative, whatever-can-go-wrong-will-go-wrong era, it is only natural to presume that the $700 billion Troubled Asset Relief Program legislation will do nothing.

But on the off chance anyone is listening, I think there's a way to make the legislation do something (even though I don't think it will send the stock market higher).

I think it could: 1.) Limit the Dow to a fall to 8,400, rather than one to 5,000, and 2.) Keep the coming depression -- no, it won't be a mere recession -- shorter than the Great Depression.

With that low bar in mind, let me tell you what I would do if I were coordinating the package at Treasury -- and I would take that job in a heartbeat. Here's the order of things:

Call in Sheila Bair, the now rogue confiscator at the Federal Deposit Insurance Corp., and say, "After you seize Downey Financial (DSL) and BankUnited Financial (BKUNA) , the last of the option ARMs lenders, you are done. You will publicly state that there will be no more seizures." The rest will be worked out with TARP. That will allow money to flow back into bank preferreds and bring capital into the market for banks, which is the real issue here. With the $250,000 deposit insurance and the purchase of whole loans there's no more reason to seize anything. The only question mark is Citigroup (C) , which did not do an equity offering. If it doesn't get Wachovia (WB) it could still be in huge trouble because it is in the Lehman "too big to fail but let it fail anyway" category until declared otherwise as part of the overall non-seizure ban.

Buy whole loans first. It's true that there is lots of bad mortgage paper out there, and much of it will be hard to locate and buy. The exception is whole loans, like the loans on the books at Wachovia and Washington Mutual. When the government gets a whole loan it can immediately end the foreclosure proceeding and begin the workout on the loan. It is possible that there is more than $100 billion worth of whole loans on the books that can be purchased quickly, taken out of the foreclosure pool and removed from the books of the banks so they can lend. This would be especially important for the Wells Fargo (WFC) /Wachovia link up and Bank of America (BAC) /Countrywide/Merrill (MER) . We get those two back on their feet along with JPMorgan Chase (JPM) and we have markets. Taking whole loans from National City (NCC) and the like in the Midwest will allow Goldman Sachs (GS) and Morgan Stanley (MS) to get deposits cheaply.

Buy CDOs next. These are very complicated because the government can't buy a whole trust. It can buy only pieces of it from banks and hedge funds and pensions and whoever else owns it -- nobody volunteers that they own this junk, but they do. A scale will have to be set up -- it can be set up -- that will describe what needs to be purchased. This typically will be done by year, as you can't do geography -- too diverse -- or even credit, because of the flow-through nature of the darned things. You can't just say, "We want the AAA portion that is still paying off, usually at about 60%," because that will leave nothing for the mezzanine tranche. So they have to be purchased whole. The trick here is simply to establish a market, because right now there is tons of sideline money that wants in but can't get in because this stuff can't be used as collateral; it can't be used in repos (repurchase agreements). That means no one can borrow money to buy the stuff. Everything is done with cash and it is too risky. Once we get a market, then we will see the private sector come in to buy the stuff and the brokers will lend against it.

Lastly, we need to see home equity loans be bought, even if it is for pennies, because that stuff has to come off the books somehow. This stuff will be very bad as it will require huge hits to capital, which is where the equity stakes come in as most of it is worthless.

You can see how, with some hurry, we could: 1.) Stabilize foreclosure through whole loans and 2.) Free up capital to lend, with the CDOs stored.

None of this is ideal, but it sure beats doing something piecemeal, which is the only other suggestion I have seen out there.

The plan is not a bad one if you run the numbers. There are $3 trillion of floating-rate mortgages made from 2005 to the first quarter of 2007. Those are the troubled vintages. Much of this was securitized. (However, a lot is with Fannie Mae (FNM) , which is whole loan; that's good news because it can be worked out relatively quickly.) If you presume that 33% of the floating-rate loans will go bad -- we're not seeing anything near that percentage now, but it could easily reach that level with an 8% unemployment rate -- you will have taken out the bad loans with $700 million. So the number is not a thin air number. Right now JPMorgan Chase is using a 20% foreclosure rate for some of the worst option ARMs, so you are still using a very big safety factor.

One of the things that is missing in all of the coverage is that there is a way to figure out the prices historically, and it will be done relatively quickly despite protestations to the contrary by Congress and the media.

So that's how I would work the plan for quick action. Given the knowledge and data, I think it would take no more than six months if done effectively.

That's not fast enough to free up capital, and it leaves some very big bankruptcies out there, including any company that can't roll over its commercial paper.

But keep in mind I am not thinking the plan makes stocks a buy. I am only thinking that we can take the Second Great Depression off the table. It's a low bar, but it's a realistic one.

At the time of publication, Cramer was long GS, JPM and MS.

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[lewie2004]

His latest blog Former Giants Become Mid-Caps to Watch
By Jim Cramer
RealMoney.com Columnist
10/2/2008 6:45 PM EDT

Sometimes I sit back and I think, is it possible that Deere (DE) could trade down to be a $10 billion dollar company? Why not? It is only a $16 billion dollar company now. Ingersoll-Rand (IR) is only an $8 billion company. That's incredible, given its earnings power and its de-cyclicalizaton. Parker-Hannifin (PH) , $8 billion. Eaton (ETN) , $8 billion.

These are just midsized companies now, profitable, well-run, midsized companies with lots of cash, doing very well. McDermott (MDR) and Foster Wheeler (FWLT) are $4 billion companies. Fluor's (FLR) only $8 billion. How can this be? How can it be? These are not the same companies they were when they were last this size. They are better, smarter, faster. They have great global businesses.

Understand that these companies diversified mightily from the U.S., and that was long considered good. But with Europe and Asia slowing, we are going to see earnings estimates come down hard, but not as hard as the stocks. But nobody cares.

Don't even go to the insurers. They have become a ridiculous, panicked group. All because of the usual gyrations of the behind-the-scenes credit default swaps and an irresponsible Senator Harry Reid from Nevada who said one insurer is about to fail.

Now, there are only two ways to look at what is happening. One is that a global credit crunch will not only wipe out earnings but wipe out whole companies. I find that hard to believe, because there is enough business worldwide that doesn't need huge financing to keep these companies thriving, although not at the pace they once were.

The other is that the managers have lost control of their money, that they sent out their returns yesterday and people saw them and they said "get me out, get me out now."

I think that the latter is a bigger issue than the former.

I want to focus on energy and energy exploration for a moment, because I believe these stocks have been so hurt by hedge fund selling that they bear notice. Despite the remarkable decline in the stocks, people are still paying $3.50 at the pump. The demand has not let up to the point where the price must fall. Natural gas has been at the $7 level for two months. Most of these companies have $2 finding costs. They are going to make a huge amount of money.

They are worth more to each other than they are to themselves. Yet Chesapeake (CHK) is now back to where it was three years ago with natural gas at the same price, but with CHK having found far more natural gas than it had then. CHK has come down harder than the others, and If you look at a three-year chart, you will see that the others look like they have further to fall.

But it is important to note that, once again, like the industrials, these companies are presumed to have created no value during this period other than what they may have paid out in dividends. So you can have natural gas companies that are sitting in twice or three times the reserves they had that they can get out of the ground much more cheaply and still be at the same prices.

Now, what's possible is that the whole thing is wacky and the stocks were dramatically overstated three and four years ago. I find that hard to believe, because we didn't have an energy crisis three or four years ago. There was still a sense that oil was plentiful, even as we were paying $60 for it. There was also, per se, because it is finite, a lot more of it back then.

OK, now you have heard all of that. The simple truth is, why buy them? Why buy them when it does not seem that the hedge funds are finished, and it does not seem there will be any takeover activity. I bought some Deere, and I was down 7 on it the next day, even as I had waited 20 points. I waited 40 points on Freeport-McMoRan (FCX) , and I was down 7 instantly.

This, frankly, is madness.

I will continue to pick -- I have some cash -- and perhaps buy in bigger increments as things come down. But I, like you, am chastened. It's too hard to guess when the sellers are done.

What's amazing is that these stocks have gone from growth to value in record time (I am not including the ferts, which to me are still overvalued). But the value guys, perhaps because they lost so much on the financials, seem like they are too out of cash to do any buying.

Someday we may look upon these prices and think to ourselves, how did we not buy Deere when we knew it wasn't going out of business? But maybe the smarter question is, why didn't we buy Deere when it was in the $20s?

Too darned hard.

So I pick small and wait, keep my hand in and wait. And whatever I have too much of, I don't even pick.

Just too painful.

At the time of publication, Cramer was long Deere, Freeport-McMoRan and Foster Wheeler.

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[rffrydr]

FCX...trading Armageddon was supposed to be easy...just buy and hold.

Bugs bugout last.
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