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[Ulisses Pereira]

"Bank Could Burn a Hole in Any Market"

By Jim Cramer
RealMoney.com Columnist
7/1/2008 12:47 PM EDT


"These banks could stop any rally. They are simply the most toxic stocks I can recall. I haven't seen a group roll over like this since the Nasdaq's highflyers in 2000 or, of course, the group itself in 1990.




The breathtaking declines in stocks like Bank of America (BAC - commentary - Cramer's Take), Wachovia (WB - commentary - Cramer's Take) and now JPMorgan (JPM - commentary - Cramer's Take) are just amazing. It is as if someone thinks they are all going to zero.

Mind you, I don't like any of these. I continue to believe that even JPMorgan got beaten on this Bear Stearns deal. Too much bad mortgage paper. I had thought that someone would step in and start buying these because the value guys seem to have unlimited capital.

That was sure wrong. They seem incapable of doing anything but selling them.

I just don't know where it can end. Bank of America and Wachovia are certainly disasters. I still can't believe that Wachovia was writing those bad mortgages until yesterday! Bank of America swallowed hemlock with Countrywide. The make-goods that Legg Mason did last night obviously don't help.

The amazing thing is that these banks seem to stand there and take it. They say nothing. They give you no encouragement. They are mum. Their silence in the face of this onslaught is tantamount to "Beat the heck out of me, will you?"

The stocks are also signaling another round of dividend cuts. Wachovia, Bank of America, Citigroup (C - commentary - Cramer's Take), Fannie Mae (FNM - commentary - Cramer's Take) and Freddie Mac (FRE - commentary - Cramer's Take) all seem on the verge of cutting their dividends in half if not eliminating them.

What's really going on? I think that there are immense write-downs ahead off of the portfolios that were nominally protected by "insurance" from the monolines which turned out to be a big joke but was relied upon by some of these. The end of the personal mortgage guarantee is also upon us, thanks to the lack of reserves by PMI Group (PMI - commentary - Cramer's Take) and MGIC (MTG - commentary - Cramer's Take), although they sure don't seem to know it yet.

We should have had a good rally going by now, courtesy of the turn in the Nazz, but without buyers for the banks, particularly the three in the Dow Jones: Bank of America, Citigroup and JPMorgan, the prospects are severely diminished.

Those are just free-fire zones, just as they were when the quarter ended. "

(in www.realmoney.com)