Cramer on REXI:
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Wrong! Rear Echelon Revelations: Raid Time
By James J. Cramer
8/26/98 8:52 AM ET
Raid!!!!!!!!!!
Yes, it is that time again, when stocks go down and then go down some more on rumors and reports that may or may not be true, but are so damning that who cares.
Tuesday's raid was on Resource America (REXI:Nasdaq), one of these specialty lenders that had been so hot up until a few weeks ago.
I know the folks at Resource. Anybody who is in Philadelphia and in finance knows them. They are totally honorable people who work at an interesting but boring niche of workout loans in real estate. They are pros. Doesn't make me want to own their stock, but the people behind this company are the same as the people behind Jefferson Bank (JEFF:Nasdaq), and they have made a ton of money for themselves and others over the years. (Jeff is the largest independent bank left in Philly.)
No matter. We are back in 1990 again, when there used to be reports galore that financial companies were in trouble. By the time the answers were ferreted out and the bodies reburied, it was too late and fortunes had been lost. This time some outfit out of Boston did a slam job on REXI and the stock fell as if it were pushed from Billy Penn's Hat, or whatever else passes for a tall building in the Philly skyline these days. Despite heated denials and conference calls and calls to Joe Kernen, REXI became Humpty Dumpty. (At one point I heard REXI being castigated for making risky Far East Asian loans. Heck, Far East to Resource is Camden!)
I wanted to tell the good people at REXI not to waste their time defending themselves, that this is the tape we are in, kind of like when Hyman Roth tells Michael Corleone "this is the business we have chosen." There is not much anyone sane can do about it, as big money is being made right now "raiding" and "operating" on stocks to the downside and REXI was yesterday's snare.
We saw this pattern quite vividly in 1990, which remains my analogue until proven innocent. Word would come out that a negative report on National Community Bankshares of Rutherford, N.J., showed that the company was bankrupt. No matter that insiders were buying and it was in talks to be acquired for three times the price, this was money in the bank, and the shorts would go to town burying the stock for all sorts of vile untrue "reasons." Denials would come, but the stigma would remain and NCBR would vanish to oblivion for a few days -- just long enough to bring in the short. And then it would be on to the next bad name.
This period lasted for about seven months. It was a period where, by the end of it, you had to shoot as soon as you heard a whiff of a bad story, and marvel that the thing that kept you in the game was your speed! Not your intellect.
The period ended when the bears started ganging up on companies like Wachovia Bank (WB:NYSE), which had done nothing wrong, and like the Army in the Army-McCarthy hearings, could stand up for itself and embarrass the bears by asking if they had any shame. (I have written about the denouement of this period before.)
We aren't in that phase yet. Heck, we just started this stuff, can't expect it to end just like that. More pain must be visited before we can say adieu to this era.
Be careful out there. >>
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