The Nazz May Help in Forecasting Housing

The history of the Nazz is really bad for appreciation. It didn't come back. The history of margin relief for those who bought on margin was pretty awful -- no relief. Those who bought for cash just took a beating and still aren't whole, but the S&P growth put the problem behind them.

I know that the big difference here is that the financiers of the houses have not been able to figure out a way to take the houses back en masse and dump them like the margin clerks did, mercilessly, in 2000-2001. If they could, they could repossess, cut price, and get to the bottom quickly. But this problem is too complex and the inventory isn't saleable.

Worse, the owners of the properties aren't even clear. We do know that there's a last-resort owner of a lot of junk, Fannie Mae (FNM - commentary - Cramer's Take) and Freddie Mac (FRE - commentary - Cramer's Take), and we know that they would be goners if it weren't for the Federal backup because they would never be able to sell that debt.

The other holders, the big holders, can get foreign capital, although Citigroup (C - commentary - Cramer's Take) and Merrill (MER - commentary - Cramer's Take) -- the two worst -- have already gotten a lot and it hasn't meant much because they need house price appreciation badly.

The other player that is struggling to stay afloat -- Washington Mutual (WM - commentary - Cramer's Take) (I am eliminating Bank of America (BAC - commentary - Cramer's Take) and Wachovia (WB - commentary - Cramer's Take) because they can limp along taking charges until the Fed bails them out with lower rates and higher interest rate margins) -- got hit today by a downgrade. They are "long" Nasdaq big-time with no way to get rid of it.

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