Lots Of People Out There Denying A Bottom Is In

As Cramer writes over at Real Money, the pressure is on to find some quick fault with C and GE, two common stocks that have been the linchpin of so many bear raids. The bears thought they had it with a deliciously negative piece in the New York Post about how Citigroup will finish dead last among the 19 banks being stress-tested by the government. GE? Basket case, right?

Both stocks have doubled from their lows, so take profits, right?

I have no idea, short term, what the bears can do. They waited a week before going to work on WFC with lots of warmed-over arguments about bad housing loans when we are about to find out that bad housing loans -- of the first-mortgage type -- could have a lot of upside. When I read that JPM doesn't want to sell in the public-private partnership and that its loans from WaMu are worse than Wachovia's and its writedowns not as steep, it says to me that we could be in for a moment when you want these loans.

Now, we are already asterisking Citigroup's numbers, and I have no doubt that Citigroup's stock is more short squeeze than performance, but given that JPM set us all up by saying March wasn't so good, and then March turned out strong, Citigroup's buoyant stock will be a difficult mission to keep down, especially because we don't have the full preferred cram-down going on.

General Electric, on the other hand, is quickly becoming the proxy for a worldwide earnings turnaround, not because it seems to be happening -- it sure doesn't look like it yet -- but because when it does, this stock could be a coiled spring because it has all the funding it needs.

Meanwhile, desperate mutual fund managers who fall behind the S&P every day and are way behind the Nasdaq are feeling their hearts jump every time they see "better than expected" or they see situations like FDX, now up 10 from where it had a bad quarter but called the bottom, or an ITW, which rallied hard on numbers that would have sunk it just three weeks ago.

What's going on? Three things:

1. the firings have been huge, so the sales are falling fast to the bottom line;
2. the stimulus, particularly the lower tax take, is playing a role; and
3. the housing bottom is changing the complexion of bank earnings.

Oh, and by the way, the endless stories about how Geithner's plan is being ripped by the banks and by important funds? There are really about two or three hedge funds that have sworn it off, and what the heck do you expect JPM to say? "We have a lot of bad loans we will sell for next to nothing"?

People still don't get the point of the program. When banks fail the stress tests, they get merged into the good banks that are developing and then the government sells the bad assets at cheap prices to the public-private partnership.

I can imagine, behind the scenes, all the sharpies setting up partnerships to buy this stuff from the government. Do you think they tell reporters their true intentions? Don't be naïve. The program's working and the new mark-to-market rules simply make it so everyone has time to dispose of what they eventually want to dispose of after they build a lot of capital.

The tape continues to be fought viciously by everyone. Everyone is hoping for the selloff. I remind people that things are getting better in housing and stabilizing in employment when China is on fire and earnings estimates are finally low enough to be beaten. This combination has been the prescription for the bottom every single time for the last 30 years.

Maybe this time is different. I think that could be a costly presumption.