Take Heart in the Housing Story

"Buyers Scarce, Many Condos are for Rent."
-- New York Times, front page, Jan. 16, 2007

To which I say, thank heavens!

In the past two weeks, we have seen the case against loosening rates virtually disappear. Decent retail sales, a decline in commodities, a strong employment report -- all of these have had the sobering effect of taking the rate cut off the table.

But as we shall see today with bank earnings, without at least the potential carrot -- not even the carrot -- out there of lower rates, we should not be able to keep the slow and steady bank rally, as manifested by the BKX, going to new heights.

Then, I read this New York Times article and the release from Centex (CTX - commentary - Cramer's Take) (which looks more like Centox, the deadly nerve gas from season five of 24), and I think, "Wait a second. We have plenty of negatives in the economy out there that could still force the Fed's hand."

There's a major misperception out there about the Fed. It does not hate growth. It hates growth without inflation. When you read these housing stories, you know that there is neither growth nor inflation, as building has been severely cut back.

The Fed wants both growth and low inflation, and if it gets only one of these, it will act.

Take heart in these articles. There is real life to the cut scenario from them. Those who take it off the table could miss a big rally. And those who sell the banks today on the news because they think the Fed will never come to the rescue of the inverted curve, I believe will be mistaken.

At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.

ALL JIM CRAMER BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. Click here to order Cramer's latest book, "Mad Money: Watch TV, Get Rich," click here to order his book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

TheStreet.com has a revenue-sharing relationship with Traders' Library under which it receives a portion of the revenue from Traders' Library purchases by customers directed there from TheStreet.com.