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Cramer Call To Chase Ambac "Animal Spirits" Nets Those Who Listened Another Complete Wipeout

Tyler Durden's picture





 

Back on April 13, when Abmac hit over $2/share as the HFT swarm of locusts decided to make the insolvent mortgage insurer its plaything, we highlighted Cramer's call that even though the company is bankrupt, investors should "chase it" there. To wit, the CNBC pumper said: "The purists out there have spurned these points. I could care less about purity. I could care less that someone might be able to say Cramer likes worthlessness.  But the !@#$% animal spirits have it going, and a worthless stock can be worth something if it moves up that much and starts offering equity or bonds against it." We are not going to say that Cramer likes worthlessness. For that to be the case, Cramer should be able to voice a reasonable argument for or against over/under-valuation. He has proven time and again that he is completely unable to do that. Instead, all Cramer does is recommend stocks that go up or down, and throws his viewers into the lemming vice, while constantly hiding behind his disclaimer. Unfortunately for those who listened to Cramer, as he predicted that his situation is "real. [It is] happening. [It has] happened. And this is one of them that I feel is destined to happen again" are now facing yet another complete loss, as the stock opens trading at pennies in anticipation of Chapter 11, and as Cramer esposued momentum trading is proven once again to be lead to nothing but financial ruin.

Chart below shows how ABK has performed from the date of Cramer's recommendation.

And here is the original Cramer note from April 13:

Give Me Some of That 'Worthless' Ambac
04/13/2010 11:49 AM

I
hate Ambac Financial (ABK - commentary - Trade Now). I believe the
current stub of equity is worthless. The claims are too big and the cash
too small. But so what.

Ouch.

That's painful to write.
Especially, when you consider the Columnist Conversation tune of Tim
Collins, and the excellent work by Andrew Wessel at JP Morgan backing up
that analysis.

But it doesn't matter. You could argue that none
of these insurers are technically solvent: Radian (RDN - commentary -
Trade Now), PMI (PMI - commentary - Trade Now), MGIC Investment (MTG -
commentary - Trade Now), MBIA (MBI - commentary - Trade Now). It hasn't
meant a thing.

MGIC has rallied 400% during its extended period
of "worthlessness." I want some of that worthlessness. Radian's up 600%
during its "worthless" period. I would have liked a piece of that
worthlessness. How about grabbing a hunk of the 800% rally in the
"worthless" PMI? Wouldn't that have been delicious?

Do you hold your nose and buy ABK because of those rallies? I believe, oddly, yes. Now,
there is simply no percentage in admitting you would ever recommend a
worthless security. But this is a game of performance, not a game of
valuation. There are plenty of genuinely worthless stocks that have gone
up huge. There are tons of cases where gigantically worthless stocks --
almost every dotcom circa 1999-2000 -- gave you great returns.

The purists out there have spurned these points. I could care less about purity. I could care less that someone might be able to say Cramer likes worthlessness.
But the !@#$% animal spirits have it going, and a worthless stock can
be worth something if it moves up that much and starts offering equity
or bonds against it.

Again, I hate these situations. But they are
real. They are happening. They have happened. And this is one of them
that I feel is destined to happen again.

Sorry.

 


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Mon, 11/01/2010 - 09:29 | Link to Comment skyr191
skyr191's picture

casino, bitchez. 

Mon, 11/01/2010 - 09:29 | Link to Comment TheGreatPonzi
TheGreatPonzi's picture

Cramer is no different than 99% of "analysts", "stock-pickers", mainstream financial mags, and cie.

The newbie who watches CNBC follows Cramer's advice once, loses everything, and then stops watching his bullshit. But as there is nearly the same number of people who watch CNBC for the first time than people who quit watching CNBC after being ruined, the illusion is maintained.

Turn-over, bitchez.

Mon, 11/01/2010 - 09:33 | Link to Comment morph
morph's picture

They all do the same. They look at stocks that have gained and say "buy". They look at stocks that have fallen and say "sell". They do not predict, they merely tell the story.

Mon, 11/01/2010 - 09:44 | Link to Comment eigenvalue
eigenvalue's picture

Top-ticking is difficult and trend following is rather safe. But analysts should point out the fundamental factors and tell whether the current trend is a bubble or not rather than assume every trend is a reflexion of the fundamentals

Mon, 11/01/2010 - 09:56 | Link to Comment lizzy36
lizzy36's picture

Yes, and i should have been Mrs. JFK. Jr.

Sell side analysts, like cramer, have an agenda:to get paid. In order to do that, they pretend to talk fundamentals but in fact merely chase momo, and NEVER EVER identify a bubble until after it has popped. 

There are no bonus points for originality unless one is Steve Eisman.

Mon, 11/01/2010 - 09:36 | Link to Comment eigenvalue
eigenvalue's picture

CNBC is full of hot babes. That's the only reason watching CNBC. By and by, occasionally, CNBC does invite some clever guys like Jim Chanos.

Mon, 11/01/2010 - 09:32 | Link to Comment Marge N. Callz
Marge N. Callz's picture

For those that follow Cramer's advice, buy his books, etc. deserve to get their ass handed to them.  But at least when the market really crashes they will have plenty of extra toilet paper.

Mon, 11/01/2010 - 09:35 | Link to Comment AUD
AUD's picture

Evidently the 'smart money' that bought in early '09 sold into Cramers buy.

Mon, 11/01/2010 - 11:56 | Link to Comment Minion
Minion's picture

He's kind of a contrary indicator like that.  :D

He said buy CAT a month ago....... it's been stuck under its all time high since then.  He made a case for diversification into China's construction market (mother of all property bubbles).

They always make up some story to justify why it will keep going up.  That's how the price chaser's mind works.

Mon, 11/01/2010 - 09:37 | Link to Comment Gromit
Gromit's picture

I'm with Cramer....$7 Billion in tax losses gotta be worth something to somebody.

I'll buy 100K at 20c.

Mon, 11/01/2010 - 11:11 | Link to Comment kaiserhoff
kaiserhoff's picture

Better not.  To actually get the benefit of the NOL carryforward, you have to maintain the same line of business for a few years.  Good money after bad.

Mon, 11/01/2010 - 12:13 | Link to Comment Gromit
Gromit's picture

picked up 10K at .39....

Mon, 11/01/2010 - 09:37 | Link to Comment SheepDog-One
SheepDog-One's picture

'Animal spirits', lol all these people are loonies.

Mon, 11/01/2010 - 09:38 | Link to Comment TooBearish
TooBearish's picture

Cramer will claim he warned and say he was right on Ambac...Booya

Mon, 11/01/2010 - 09:40 | Link to Comment firstdivision
firstdivision's picture

Cramer, helping the retail get raped since 2005

Mon, 11/01/2010 - 09:41 | Link to Comment DollarDive
DollarDive's picture

Was there any timing considerations on the decision of AMBAC to miss the interest payments right before the election.  Let's send some fear into the marketplace and get America out to the polls on Tuesday to "vote the bums out".  It's comical really.  Just a coincidence, I suppose, that AMBAC has been floundering around for 2 years, completely insolvent, and 1 day before the midterms, talk of bankruptcy surfaces again.  If I had guess, I bet they make the payment within 30days.  Right after the election and the FED's decision.

Mon, 11/01/2010 - 09:42 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

Cramer's call to buy/chase Sketchers/SKX at $40 in August was a killer. It now trades at $19.

Mon, 11/01/2010 - 09:44 | Link to Comment Pladizow
Pladizow's picture

**Recent Press Release**

Both Cramer's Show and the network are to be renamed - "Had Money on CNBS"

Mon, 11/01/2010 - 09:45 | Link to Comment TheGreatPonzi
TheGreatPonzi's picture

Good one.

Mon, 11/01/2010 - 09:44 | Link to Comment LeBalance
LeBalance's picture

So Lymore sez: "Put your hand in the flame!"

And the normal result happens.

So when Lymore sez again: "Put your hand in the flame!"

Whose fault exactly is putting YOUR hand in the flame either time?

And what was that definition?

Doing the same thing repeatedly expecting a different outcome....

Mon, 11/01/2010 - 09:45 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Ambac has said that the Companies that wrote Credit Default Swaps on their Company have more to lose than helping them pay their Debt.  I wonder who the Companies are that wrote those Credit Default Swaps?  They would be in Big Trouble if the Companie goes belly up.  Plus, it will be a huge impact on anyone that holds Municipal Bonds.  This in my opinion is to get someone to come in with Capital.  A veiled Threat so to speak.

I do not think that they can let the Company fail.

Mon, 11/01/2010 - 09:50 | Link to Comment Gromit
Gromit's picture

Worth more alive than dead to important players.

Mon, 11/01/2010 - 09:58 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

Yeah if this thing dies, we get to find out just how WMD the CDS market really is. I get the feeling that Ambac is going to get bought out.  Nothing that has any significant CDS exposure is too small to fail. 

Mon, 11/01/2010 - 10:10 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Ambac said that they had enough liquidity thru Q3 of 2011.

Note in their 3 options, that one of them is to pay the amount due.  Also, note that if forced into Bankruptcy, even a Pre Packaged Bankruptcy all of the NOL will be lost.  A lot of their value is in the Loss Carryforward. 

This in my opinion is to force those who wrote the Credit Default Swaps to come forward and help them with their Debt.  A veiled Threat so to speak.

Mon, 11/01/2010 - 09:55 | Link to Comment Superdrol
Superdrol's picture

Jim Cramer is a domestic terrorist.

Mon, 11/01/2010 - 09:55 | Link to Comment Rogerwilco
Rogerwilco's picture

All the mortgage insurers are bankrupt. Some are just better at hiding the weenie.

Mon, 11/01/2010 - 09:58 | Link to Comment Careless Whisper
Careless Whisper's picture

but he owned it in "his charitable trust"

does ANYONE know of a single donation that his charitable trust made to a charity ???

 

Mon, 11/01/2010 - 10:00 | Link to Comment tallystick
tallystick's picture

Large amounts of Ambac CDS in Maiden Lane.

Looks like $50B in Ambac

 

http://www.newyorkfed.org/markets/ML_Holdings.pdf

 

 

Mon, 11/01/2010 - 10:11 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

http://ir.ambac.com/phoenix.zhtml?c=80774&p=irol-newsArticle&ID=1458280&highlight=

Detail of their 2nd Q balance sheet, they have yet to release 3Q.  So far about 14 billion has been thrown at this sucker and it still looked extremely ugly in 2Q.

http://ambac.com/CABS/CABS.asp

Securitized private asset insurance of 120 billion, ~31 billion net par exposure.

http://ambac.com/pdfs/Top%2050%20PF%20and%20Top%2010%20HLC%20Final.pdf

Securitized public finance, ~45 billion net par exposure.

Kind of blows a hole in the argument that CDS has a very low net impact.

Mon, 11/01/2010 - 10:00 | Link to Comment firstdivision
firstdivision's picture

In other news, Apple is trying to castrate itself. http://www.eweek.com/c/a/Mobile-and-Wireless/Apple-Sues-Motorola-Over-Multitouch-in-Android-Phones-404214/ 

They have gone mad with suing, and now are starting to attack those that could kill the iPhone overnight.  Motorola has the largest amount of cell tech patents, and Nokia is not far behind. 

Mon, 11/01/2010 - 10:01 | Link to Comment tmosley
tmosley's picture

Jeez, it's like playing Roulette, waiting for the ball to land in a given slot, and then putting money on a losing square.

Mon, 11/01/2010 - 10:18 | Link to Comment pat53
pat53's picture

Nobody calls them all right.However, those that have been riding Cramers coattails for the last year and a half have done excedingly well, can't argue with that !

Mon, 11/01/2010 - 10:24 | Link to Comment RobotTrader
RobotTrader's picture

Looks like Cramer was stuck dryhumping one too many Van Nuys hookers.

Mon, 11/01/2010 - 15:39 | Link to Comment Problem Is
Problem Is's picture

Dry Hump is the politest thing you could say about Cramer the Clown...

Numb Nutz Cramer
Reminds me of somebody's meth-ed out, sweaty, semi-bald, frizzed hair, gambling addicted Uncle who always shows up to "borrow" a couple of $100's....

Your friends ask: "What's up with that dude?"
You answer: "Uncle Gambling Ho, bitchez..."

BTW: The chick is my friend "Chesty" Chelsea laughing at Uncle Numb Nutz...

Sat, 11/06/2010 - 13:44 | Link to Comment ExploitTheMarket
ExploitTheMarket's picture

In true Cramer fashion, one of his current faves is CMG--which is of course at an all time high and priced for perfection only by its PEG. He fails to mention the effect that rising input costs will have on that earnings growth...Can it become even more overvalued? Of course, but its just so typical of him to recommend a stock like this, he is one of the greatest contrarian indicators out there.

Mon, 11/01/2010 - 10:42 | Link to Comment let x equal x
let x equal x's picture

BUY BUY BUY BEAR STEARNS!!

Mon, 11/01/2010 - 11:05 | Link to Comment Gimp
Gimp's picture

Cramer is nothing more than a vaudeville act. Don't take him seriously just enjoy  the show...boooya!

Mon, 11/01/2010 - 11:08 | Link to Comment curbyourrisk
curbyourrisk's picture

Cramer is a fucktard.  End of Story.

Mon, 11/01/2010 - 11:41 | Link to Comment Humpty Pundit
Humpty Pundit's picture

+1

Mon, 11/01/2010 - 11:49 | Link to Comment RockyRacoon
RockyRacoon's picture

Sure.   That's what we need.   Another clown for this three-ring circus.

It's accepted gospel that Cramer is a clown; is further confirmation needed?

Mon, 11/01/2010 - 12:45 | Link to Comment tony bonn
tony bonn's picture

cramer is the same asswipe who called the end of the real estate crisis for june 30, 2009.....i can't believe he was wrong...

Mon, 11/01/2010 - 13:59 | Link to Comment calgal
calgal's picture

Coked up lying sack of sh$!t!

Mon, 11/01/2010 - 20:43 | Link to Comment Buck Johnson
Buck Johnson's picture

Cramer needs to get back into trading instead of having a show.

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