The Fed Finally Moves on Mortgages

This housing situation could have been avoided! It could have been avoided by the Fed buying mortgage paper. But no, the Fed thought it had everything under control.

Now they are doing it. Now. And the impact is huge, given that we have so much room to drop for mortgages.

There is no doubt in my mind that the key to the resurrection of Bank of America (BAC - commentary - Cramer's Take)/Wells Fargo (WFC - commentary - Cramer's Take)/JPMorgan Chase (JPM - commentary - Cramer's Take) is the return of housing. Housing returns when mortgage rates are down big, and pricing is down big, and that's what we have in Florida and California, the two hardest-hit areas.

Not only that, the Fed at last has given us some pocket change through refinancing, or at least through applications. That, plus lower gasoline, can lead to something better in 2009.

It bothers me immensely to see that the Fed just totally blew this. Buying government-sponsored enterprise debt was the easiest of so many courses. The easiest.

Yet they finally did it. What was the reason for waiting too long?

Given the total lack of accountability nobody will ever find out. But it is working, and housing will bottom next year from the combination of lower rates and lower-priced homes.

Random musings: Does this Baltic Freight Index ever lift? Down to the 672 now, a staggering decline. Demand is just nonexistent. The Financial Times says China is about to launch major infrastructure program. Could be good, but will anyone be around to enjoy it? ... It is amazing that finally the consumer nondurables are at last getting their due. ... Only 23% bulls on the Investors Intelligence Survey? Talk about hatred. That's the worst I can ever recall, and it should cause some sort of fear bottom if we get down to the 800 level on the SPX. ... Service economy jobless horrendous. Don't know how to put those people to work in an infrastructure jobs program...

At the time of publication, Cramer was long JPMorgan Chase.

Know What You Own: Cramer mentions consumer nondurables. This group includes Coca-Cola (KO - commentary - Cramer's Take), Pepsi (PEP - commentary - Cramer's Take), Colgate Palmolive (CP - commentary - Cramer's Take), Kimberly-Clark (KMB - commentary - Cramer's Take) and Procter & Gamble (PG - commentary - Cramer's Take).

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