We're being held hostage by France
With no one willing to lend to the biggest French banks, we'll remain in a bizarre standoff with them until we get some sort of government action.
Sure, Italian banks are really bad. Spanish banks? No, thanks. But it is these three French banks that the world seems to want to break. These three banks are the ones everyone is whispering, "Don't lend to."
These three -- which are pretty much like JPMorgan (JPM), Bank of America (BAC) and Wells Fargo (WFC) in terms of importance to France but feel more like Lehman, Bear and Countrywide (or Citigroup, Wachovia and Washington Mutual, name your poisoned bank) -- are holding us hostage right now.
They will keep holding us hostage until we get some sort of government action, because of their lack of transparency about what they own, how much they are lending against collateral (are they lending 40-1 against Greek bonds?) and how they are valuing sovereign bonds.
We've been held hostage on this issue for some time. We know that the stocks of these three banks are rolling over just the way the stocks of our biggest banks did in 2008 -- hence all of the Lehman analogies that we all dread.
That, I think, Treasury Secretary Tim Geithner put to rest. But the story does grow more acute. We are in a bizarre standoff, as these banks need everyday funding. Yet if you help fund them, you are hostage to them.
You want to stop the contagion beyond France? Don't give money to these three. If you are a money fund, don't buy their paper. If you are China, don't risk it. If you are a British bank already in trouble with your government, don't try to pick up the additional yield that you can get from lending to them.
And if you are an American bank and you want to be able to say to investors "We are not exposed to France," you have to get your money back now.
So the lender of last resort will be the government, or whatever governmental entity that wants to be the lender of last resort. But someone has to be the lender of last resort.
What's so strange, at least from my point of view, is that we know these governmental lending pipes worked here. Of course, they didn't go away until our banks got TARP and raised a ton of money.
The French haven't taken those last two steps, though. We are still in the early part of the crisis, because nothing has been done to resolve it.
So why not panic? Because there is a path. It is a path to break the cycle of "They can't get private funding, they get downgraded by ratings agencies, they have to pay up even more and they default" that so many really are betting will happen. In fact, I still believe that's the operative bet over there. That's why the stocks can keep going down. It is why the stocks are still shorts, because the solution at this point involves a level of dilution that would be positively Citigroup-like at best.
Every morning we wake up and hear one or two or all of these banks is going down and remember that nothing has been solved yet -- but it can be solved. If you had unlimited abilities -- including clairvoyance -- you would sell all stocks the moment you are about to hear that some institution cut off funding for the French -- China? U.S.? U.K.? -- and then buy them back after everyone knows what you know.
I don't know anyone that good. But that's the ticket for the moment.
At the time of publication, Cramer was long BAC.
this guy picks hundreds of stocks.........some go up,most go down
he claims rigor so lets just look at his last 2 MOST RIGOROUS picks: he recommends nyx as his STOCK OF THE YEAR at 90....when it goes to 60 his RIGOR says buy more...it is now around 30
this year his RIGOR comes up with the best dow 30 stock of 2011.....alcoa at 17...
a few days ago he said buy more at 12
and oh yes....not only is he RIGOROUS he is here to educate us
this article contains hundreds of words and says nothing
the man was cut from the hedge fund business for a reason
You will beleive anything wont you. We made money on TARP? If you just take the government at face value sure, but did you know that only days before all the big banks "paid back" their TARP funds that they borrowed more money than they paid back to TARP from the Federal Reserve. So it is more of a rob Peter to pay Paul scenario. The gov and the federal reserve have been playing this game of privatized profits and socialized loses for 100 years now. Did you ever wonder why our dollar loses purchasing power over time? Well now you know, if you are sentient enough to process what you were just taught.
wrong wrong wrong
the tax payer made money on tarp
it has all been paid back with interest and fees
Copyright © 2014 Microsoft. All rights reserved.
Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.