Jim Cramer Says European Lehman Is Upon Us

Sep 12, 2011
J. Webster
Comments Off on Jim Cramer Says European Lehman Is Upon Us

To me, this is the new Jim Cramer. Someone who doesn’t want to have to answer to people like Jon Stewart if and when the stock market collapses again like it did in 2008. To me, this is Jim Cramer sort of covering his own ass in a way. Plus, I could have sworn I heard him say to buy certain stocks this morning on Squawk on the Street? Don’t get me wrong, I like Cramer, and love his crazed enthusiasm for stocks, but I don’t know what to make of this new Cramer just yet.

Although it’s wise to head Cramer’s call and proceed with some caution, to me, this seems like more ‘dire’ talk and something on par with a Nouriel Roubini. As far as the U.S. stock market outlook, I don’t think it’s that bleak and there’s hope that perhaps even China could help save Europe. The Chinese are looking to buy Italian bonds as we speak. Sure, Europe is in trouble but just how much will this affect U.S. equities that don’t have any connection to Europe? We will see though…time will tell as they say.

At Cramer’s website The Street.com he laid out the 7 reasons why another Lehman Brothers is upon us, this time from Europe:

First, at least it is no longer complicated. We know a European Lehman is upon us. Or, more like it, a European Lehman/Bear/Merrill/Washington Mutual/Wachovia/Citigroup.

That’s the first proposition.

Second, we know that “they” have no plan to deal with it.

Third, we don’t even know who “they” is anymore. Is it the Germans? The French? The IMF? The European Central Bank? Trichet?

Fourth, it is now too late for the banks to raise capital. As you recall, when the ratings agencies strike, it very quickly leads to Lehman. The banks can’t get short-term funding and they collapse.

Fifth, the French banks in particular have been getting away with hiding their version of subprime debt, Greek debt, forever.

Sixth, our country isn’t able to stop any of this. We are too weak and it is none of our business.

Seventh, because of how tightly correlated we are with Europe, individual stocks can’t buck the trend, at least initially. Later on they will, because while our banking system won’t collapse, it can’t help but cause a worldwide recession if it all goes bad, which it looks like it is going to do.

So, the only battle plan is to brace yourself if you can’t short. Raise some cash if you can. And short the S&P and double- and triple-short the financials — the levered ETFs will certainly give you that chance.

At least we will get this over with soon and we can see what it looks like when the smoke clears.




Related Posts Plugin for WordPress, Blogger...

Comments are closed.