Think Hard Before You Short Brokers, Builders

Don't bother to refute.

That's how I felt Tuesday off the story that everyone's about to get killed -- banks, brokers, mortgage insurers, bond ratings companies -- off the downgrades by McGraw Hill's Standard & Poor's unit.

Think about it. What trader is going to hold on to Citigroup (C - commentary - Cramer's Take) or Bank of America (BAC - commentary - Cramer's Take) or Goldman (GS - commentary - Cramer's Take) or Lehman (LEH - commentary - Cramer's Take) or Bear (BSC - commentary - Cramer's Take) through this? What's the harm of shorting an ETF of this group? How can you get hurt?

You know the media will use that story and run with it. You know the easy story is that the companies that hold these mortgages tend to be stupid -- that's the wisdom -- and just sat around and waited for S&P to act.

Therefore, you have to believe traders have to sell them now, because their charter says so. Why not sell Franklin Resources (BEN - commentary - Cramer's Take) or T. Rowe Price (TROW - commentary - Cramer's Take)? How about Fortress (FIG - commentary - Cramer's Take)? Aren't they stupid enough to be long all of this?

Shouldn't we be cutting Bear's numbers because they are obvious dopes?

Tuesday on Stockpickr Answers, someone asked me for some short names off this stuff.

I have learned from my hedge fund days never to be glib about shorts. We get oversold, you are history and people will blame me for advocating doing exactly what I wouldn't do back at my hedge fund -- go-with-the-flow analysis that says to short companies that are selling at 8 times earnings.

After all of this, the only shorts that I am in bed with are the homebuilders. I believe it is at last dawning on people that Lennar (LEN - commentary - Cramer's Take) and Toll (TOL - commentary - Cramer's Take) and Pulte (PHM - commentary - Cramer's Take) and KB (KBH - commentary - Cramer's Take) and Horton (DHI - commentary - Cramer's Take) have used land inventories -- and are on the hook for so much infrastructure buildout because of them -- that they cannot help themselves and have to build.

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

---

As originally published, this column contained an error. Please see Corrections and Clarifications.

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.