You will recall CNBC's jewish ex hedge fund manager Jim Cramer recommended buying Bear Stearns days before it's bankruptcy, since that time I have always referred to him as Jim "buy bear stearns" Cramer, now though after reading this article on Zero Hedge I think I may change it to Jim "buy BAC" Cramer due to his call to "buy, buy buy" BAC earlier this year. Since then of course Bank of America is down over 50% and down 20% today alone.
Here is the article presented in all of it's glory.
Published: Thursday, 6 Jan 2011 | 6:09 PM ET
Investors who want to bank on America’s return to greatness, Cramer said during Thursday’s “Mad Money,” should buy Bank of America.
He believes that job growth will return. He believes in stabilizing and then climbing home prices. He believes in even a rising standard of living and the inevitable return of investors to the market. Put simply, he’s bullish on America. And if you are, too, he thinks Bank of America is the way to play it.
Here are 10 reasons why you should get on board with Cramer:
Look at BAC’s chart going back to January 2007. Cramer said he’d heard more negativity about the bank and more downgrades of the stock between its move up to $14 from $12 than during its decline to $3 from $50. “This chart is screaming, ‘Buy me! Buy me! Buy me!’” Cramer said, “yet the bears are growling that Bank of America is the most dangerous bank to own in the world.”
Point two is directly related to point one in that BAC is not dangerous at all, Cramer said. The bank is well capitalized. So much so that there’s no need for it to raise more money. Certainly in what Cramer described as “a world full of dangerous banks,” Bank of America does not rank among them.
Reason three is the fact that Bank of America is about to reinstate its dividend, Cramer said. Investors seemed to love the stock until the dividend was cut, and now they hate BAC when the payout’s coming back? Cramer doesn’t get it, especially when you consider capital the bank is sitting on. He thinks that means dividend boosts are on the way.
Then there’s the huge market share that Bank of America captured during the downturn. The company now controls, thanks in part to the addition of Countrywide Financial, 20 percent of the mortgage market. That should translate into a huge windfall once the housing market improves.
Speaking of housing, Cramer said Bank of America owns the most houses in the U.S. Admittedly, that was a result of some pretty bad underwriting. Regardless, though, this so-called shadow inventory will turn into a boon in 2011 as job growth gives rise to housing demand, and BofA serves as home supplier to the nation.
Reason number six is Ben Bernanke, who wants American banks strong and healthy. By keeping the interest rate that banks pay you for your deposits low, Bernanke has allowed Bank of America and others to make more from the interest rate they charge for loans. And when you factor in this company’s huge deposit base, Cramer said, BAC makes money “simply by turning the lights on everyday.”
Merrill Lynch, meanwhile, offers what Cramer called “the most powerful network of high-net-worth advisors in the country,” which is perfect now that investors look ready to leave bonds and move back into stocks. And unlike Countrywide, Merrill’s reputation was never tarnished.
Number eight here is jobs. Steady employment leads to increased credit and borrowing, and that means more profits for Bank of America. Cramer said he almost hopes that Friday’s job number will be weak just so investors can get into BAC on a dip, because the employment trend in America is headed in the right direction.
And don’t forget that the Republicans now control the House of Representatives. So say hello to a hands-off approach to regulation, regardless of the reform bill that was passed this year. Of course, consumers will be paying higher fees for their checking accounts, but that’s some great no-risk income for the banks.
Finally, the company’s put-back mortgage exposure to Fannie Mae and Freddie Mac has turned out to be miniscule compared to what the bears thought. “And now that that risk is taken off the table,” Cramer said, “this is big.”
