Rethinking Retailers as Refis Recede

Should you be selling the retailers at this stage of the game because of the end of the refinance boom?

That's a tough one. I know you should be selling the pure plays in mortgage refinance, the First Americans (FAF - commentary - Cramer's Take), the Radian Groups (RDN - commentary - Cramer's Take) and the Countrywides (CFC - commentary - Cramer's Take). (I would hold on to Washington Mutual (WM - commentary - Cramer's Take) because it is so darned cheap and has a lot of other things happening, and I'd buy more of E*Trade (ET - commentary - Cramer's Take) because mortgages are only a part of the business.)

But selling the retailers because you think the discretionary income that refinancings generate will be cut back, requires you to believe that both the tax cuts you're receiving now and the potential for new jobs being created won't matter.

There is no free lunch in this game. If you cut taxes but don't cut spending, you end up boosting interest rates. That kills the refinance boom. But you also have to believe at a certain point that the one-time gains from refinancing have to be "in the system." You have to be crazy not to have refinanced already.

However, the tax cuts can be meaningful for some and the potential for jobs to be created can't be dismissed, given the earnings we're seeing from so many sectors of the economy.

Frankly, at this point, I'd like to see spending being driven by hiring, not refinancing.

So, my take is, if you are sitting on one of the retailers with huge gains, by all means don't be a pig -- take something off the table. But the thesis that retail is a good place to be for 2003, as it was in 1991, the road map we are following, remains very much intact as far as I can see.

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James J. 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. At the time of publication, Cramer was long E*Trade. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail]. Listen to Cramer's RealMoney Radio show on your computer; just click here. Click here to buy Cramer's latest book, "You Got Screwed!" Click here to order Cramer's autobiography, "Confessions of a Street Addict."