Wrong!
Sep 29, 1998
Wrong! Rear Echelon Revelations: The Bailout Fallout
By James J. Cramer
The post-Long Term Capital world looks entirely different from the pre-LT world. For example, if you are a financial institution that escaped being part of the bailout, you may end up getting a much higher multiple, if the Long Term stuff is as toxic as I hear it is.
And if you knew that General Electric (NYSE:GE - news) wasn't doing the same thing as Long Term Capital, you would have to believe that GE could be a winner. Same with the regional national banks. They seem like they might get a higher multiple than their money-center friends, as had been the case pre-1991.
Somebody like Schwab (NYSE:SCH - news) might turn out to be the biggest winner. They don't have the costs of research -- and remember those had gotten out of control -- they don't have that fixed-income overhead and they don't have a whole corporate finance department sitting around looking at their expensive cufflinks.
Strangely, in this world where sectors are the thing, what could happen is that the money comes out of these financials and goes back into safety. For me safety means low-multiple tech, but for most others safety means back to G (Nasdaq:G - news) and P&G (NYSE:PG - news) and CL (Nasdaq:CL - news), darn the fundamentals.
One thing is for certain, the timing could not be worse for the brokers participating in this Titanic-like bailout. They have to come up with some sort of way to handle it this quarter. Take a charge? Take a big charge? Predict what will come of this portfolio? I'm not even sure if the accountants know the answer.
To repeat, this thing is bigger than anything these brokers have ever had to handle. The losses just can't be predicted. But the Titanic analogy works large -- the iceberg that these brokers hit turned out to be a lot deeper than it looked on the surface.
In the meantime, I am starting a "genius" watch, to count how many times the press lauds these guys as "geniuses." Hoo-hah, what a laugh.
James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. At time of publication his fund is long General Electric, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to TheStreet.com at letters@thestreet.com.
© 1998 TheStreet.com, All Rights Reserved.
|
