Zombie Homebuilders Keep Shuffling Along

One look at Toll Brothers' (TOL - commentary - Cramer's Take) quarter today tells us we aren't there yet. They still have plenty of money. They still have plenty of cancellations. They still need a tax credit for more business, which we know they aren't going to get because this administration doesn't want it. No bottom. In fact, Toll and all the others are still where they were a year ago. Independent, hanging on.

This stubborn group refuses to merge or to die. Yesterday Centex (CTX - commentary - Cramer's Take) and Horton (DHI - commentary - Cramer's Take) got downgraded, the latter to a sell, and the market just yawned. Who cares, right? A bunch of $5 and $6 stocks. Still hanging on. Still building. Still adding to the problems. No mergers. No bankruptcies. Toll will plead for help, it will be denied, and why not given how the tax breaks have been so generous for them for their losses? Everyone in Washington thinks they are overpaid anyway. So nothing changes.

Look, I am not saying we need people to be out of work to put people to work. That's ridiculous. I am not saying that we need companies to go out of business to have a better market.

I am simply saying that if everyone hangs on, zombie-like, as is happening, then no one wins and they all go down. That's what is happening in every industrial industry I follow. No one is taking advantage of the situation and no one is going under, so capitalism is failing to produce winners and losers, so there is no one to back. Hence, the whole group is and remains a sale.

Random musings: This Doug Kass call could be timely. It dovetails with the Helene Meisler oversold rally. She's right about sentiment, everyone gets bullish fast. But that's because everyone has always gotten bullish fast. So, I don't see the difference except things are so awful in the economy now.

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

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Know what you own: Other companies in the homebuilder industry include KB Home (KBH - commentary - Cramer's Take), Pulte (PHM - commentary - Cramer's Take), Meritage (MTH - commentary - Cramer's Take) and Lennar (LEN - commentary - Cramer's Take).

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