When you’re supposedly an “expert,” and you have a financial strategy that argues to the opposite of what you suggest, then the “expert” label you garner is probably without much merit.
The “expert” in question is longtime CBNC host Jim Cramer, and like so many times in the past, he suggested and promoted the buying of a specific stock, only for that stock to eventually see massive declines.
For his latest blunder, we don’t even have to go back that far.
On February 8, Cramer suggested the stock for the now-collapsed Silicon Valley Bank (SVB, Stock abbrev,: SIVB).
Long term private equity and venture capital, they’re not gone away. Being a banker to these immense pools of capital has always been a very good business. Stock’s still cheap.
Now you have to remember that a stock that falls 66 percent, like SVB Financial did last year, it takes it a lot more to recover. After losing two-thirds of your value, you need a 200 percent gain to get back to even. This is arithmetic. Some people call it geometry. So you could argue SVB’s nearly 40 percent rally this year is barely a drop in the bucket, and that’s how I want you to think it.
I think it’s also a good example of why these bounce back moves might be far from over. These stocks have more room to run, especially if you think they were driven down to artificially low levels.
For context, the SVB stock that was so “cheap,” as Cramer put it, was a not very cheap $320 per share at the time Cramer promoted it.
If you noticed in the last few days or so, SVB is one of many regional banks that are in peril, despite President Joe Biden’s attempted reassurance that the Federal Deposit Insurance Corporation (FDIC) would help bail them out without any financial impact on taxpayers or patrons of the banks affected.
American entrepreneur and mortgage expert Barry Habib gave his take on SVB’s collapse during Monday’s edition of the “PBD podcast.”
Here’s why this is significant, because this draws attention to SVB. Now, whether you want to think of it as investment or not, now people start digging in. And as people dig in, what do they see? They see this $15 billion in unrealized losses that they didn’t have to report. But now that you dig in — and what do they start telling their clients? They start telling your clients, ‘Hey, you know what? This bank is vulnerable. I’d probably take my money outta there.’ And as deposits start cascading out of there, this is where they have to raise money. They go to raise $21 billion, and they do, because they have to. But, how do they do it?
They sell some of their assets. Now, when you sell those $21 billion, they cherry-picked them. Only $2 billion in losses, but now you have to realize those losses, right? So when people look under the hood, they say, ‘There’s another $13 billion in unrealized losses.’ People start pulling out money in droves. They can’t borrow money. The shorts are attacking the stock. They can’t issue stock, and this is how it happens so quickly.
So are people like Cramer just bad at their job for getting many stock predictions so terribly wrong? Or are they doing the bidding of the people that we normally think are in charge of the establishment media — the politicians and government themselves?
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If Joe Biden wants to know who's responsible for recent bank collapses, he should look in the mirror. pic.twitter.com/ex2sJodnEE
— MRCTV (@mrctv) March 14, 2023