Here's a headline, in today's Wall Street Journal, that I have read for the umpteenth time. It's a plug-and-play headline:
"Housing Risks Called Big Threat to Stocks."
You could have run it last year. You could run it next year. The problem is that the conclusion is wrong. Housing risks may be the only hope for this market.
We have a supply-and-demand problem for stocks. We have a consistent supply coming, mostly from new companies coming public but also from secondaries now that stocks have moved up.
But our demand, beyond stock buybacks, doesn't cut it. We need to see the money flushed from the sidelines.
We can't get it flushed from the sidelines in the inflation data. A soon to be disastrous energy policy based on raising chicken and beef prices to sell more ethanol, coupled with Rest of World demand for all metals, will make it so we will not get good inflation numbers.
But the bond market, despite all of the negative prognosticators, is telling us to ignore those intractable problems. The Fed, in the less-worried-about-economic growth, more-worried-about-economic slowdown statement, is telling us it has an eye on weakness too.
However, the only weakness is in housing. I repeat, the only weakness is in housing. Given that somehow this administration promulgated the notion that everyone should get a house, plus the ease with which money was given out a couple of years ago because of the low short-end rates and a belief that a house was the best asset to own, we've got a national problem on our hands.
Only that problem -- many are calling it a crisis but I resist because I know, in the end, we are a growth economy with good employment -- can save us. Only housing's negativity can get the Fed to move, which will then get the money flushed from the sidelines, which will then get stocks to move, because we need that demand. That's how you get to "Housing Risks Called Big Help to Stocks," that we really need to believe in less we miss the big move that will come when the Fed cuts.
Of course there will be spillover. Retail won't like it, but to be honest, most discretionary non-high-end retail (think Best Buy
(BBY)
) hasn't been so hot. High-end's always hot because high-end real estate remains very strong. The retailer that gets hurt the most, I would figure, is Wal-Mart
(WMT)
, the subprime shopping center. So be it. Everyone loves it anyway.
To me, though, if there was going to be a crisis that gets the fed moving, let it be lower-income housing. It has the kind of grabbing headlines that politicians can't resist. It has a "mom and apple pie" feel. Who will deny people homes? The Fed? And, most important it has the added advantage of being true. If you cut short rates you save a percentage of people, maybe even deserving people, from foreclosure.
I know the arguments against it: unfair to bail out the profligate; we have too much inflation; why not wipe out all stretched lenders. They don't cut it against the "mortgage meltdown" headlines.
I know, also, when you listen to a Lennar
(LEN)
conference call, or you look at the balance sheet of a Beazer Homes
(BZH)
, you think that this group could take a giant leg down.
To which I say, so what? Don't own them. They will not get their margins back in a very long time. We haven't even had anyone suggest that buying a home in tax-advantaged Florida may just make sense from an estate planning point of view.
"Housing Risks?" They are the hope, after the same kind of decline we had a few weeks ago, the Fed will not avoid this issue and it will not let inflation fears get in the way of a feel-good story that threatens the most important industry, politically speaking, in America: Your home.
Random musings: I am liking this Trade like Goldman portfolio that James Altucher has up. I also think that this Baupost portfolio is of interest. ... Still blown away by how great that GameStop
(GME)
quarter was. ... Still amazed that someone doesn't say "Fort Myers is so bad that you might want to buy something and put it away." ... Dendreon
(DNDN)
coverage by Adam Feuerstein has been superb ahead of its Food and Drug Administration powwow. ... Scott Moritz keeps breaking good stories. I like this Vyyo
(VYYO)
piece, wish it had more market cap. ... I like Energy Metals
(EMU)
, still as a uranium play. ... Syntax Brillian
(BRLC)
sure told a compelling high-definition-Liquid Crystal display story, but I like Harris
(HRS)
best as an HD play.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider BRLC, VYYO and DNDN to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.At the time of publication, Cramer was long Goldman Sachs.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.
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