Steer clear of big-bank stocks

Forget B of A, Wells Fargo and JPMorgan until they can avoid negative news long enough to sustain a 2-day rally.

By Jim Cramer Dec 1, 2010 5:14AM
Jim Cramer

So much for the big-bank-stock rally.

 

As I wrote Tuesday, the headlines are too overwhelming. You can't get any uglier than Tuesday's smoking gun at Bank of America (BAC) -- except a smoking machine gun. The company's shares hit an 18-month low of $10.95 amid speculation that the bank may be the next target of WikiLeaks.

 

The press is not going to let up. It doesn't matter if the net interest margins are getting better or the fees are growing or credit is stronger. What matter are mortgage malfeasance and the inability to put that issue behind the big banks.

 

Now the calendar is really working against these companies. Who wants performance destroyed by what will be an ongoing, negative drama playing out on the front page of the papers?

These stocks are like tobacco stocks before the big master compromise eliminated the bankruptcy risk. There are hidden documents that are damning everywhere, and lawyers and reporters who want to break the stories on a daily basis.

 

Against all of that is a group of stocks that are cheap but can't defend themselves because every day the press creates what looks to be an imminent capital call.

 

Until we can put together a two-day rally that encompasses Bank of America, JPMorgan (JPM), Wells Fargo (WFC), U.S. Bancorp (USB) and BB&T (BBT), you can forget this group.

 

These stocks will just remain cheap. And get cheaper.

 

Just for the record, Citigroup (C) isn’t part of this drag. At $4.20, its shares could be as much as 70 cents higher before it would be as low as the others.

 

At the time of publication, Cramer had a long position in JPMorgan.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Follow Cramer's trades for his Charitable Trust.

 

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1Comment
Dec 2, 2010 12:59AM
avatar

cramer is nuts. The banks are getting stronger every day. Yup, bac has been beat up on fear and fear of bad news.  It's at quite a low right now too because of fear. Now is the perfect time to buy, when the shares are low. You make money buying low and selling higher.  Ok, look at today, bac has gone up (fear disapeared) so maybe tomorrow it might go up more, thats your two days cramer.  So then, if it goes up tomorrow all is well with the world and we can buy the big banks again according to cramer.  This is story is all BS.  And whats with that last pargraph about citi? that paragraph don't make sense at all!  I think you were drunk when you wrote this articule.  I want your job, i could do better in my sleep.

Yours,

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