How Bear Will Help the Market Bottom

Editor's note: Jim Cramer presents this special series on the fallout from Bear Stearns' hedge fund woes while he is on vacation. We hope you've enjoyed -- and profited from -- his contrarian view. Be sure to read Part 1, Part 2, Part 3, Part 4, Part 5 and Part 6. Cramer will return to his regular blogging on July 5.

So now I've explained all the ins and outs of how two Bear Stearns (BSC - commentary - Cramer's Take) hedge funds -- Dumb and Dumber, as I like to call the High-Grade Structured Credit Strategies Fund and High-Grade Structured Credit Strategies Enhanced Leverage Fund -- went awry.

To counter all of the commonsense reasons that this won't crash the market, the media are now talking about the repricing of much of the mortgages of the last six years that's about to happen. Again, I point to the seasoned nature of the portfolios and how if you haven't defaulted yet, it might be because you are a legit borrower, not a no-documentation speculator on multiple homes.

If you only own one home and your mortgage payments steepen, you will cut back on something, but it won't be your one home. You just will stay put and grin and bear it. Maybe that's bad for Wal-Mart (WMT - commentary - Cramer's Take) or J.C. Penney (JCP - commentary - Cramer's Take) or Darden (DRI - commentary - Cramer's Take). Then again, maybe it isn't, because those weren't hurt that bad by a doubling in gasoline prices.

It certainly won't be good, but if the economy slows appreciably because of it, even this stringent Federal Reserve will do something. In fact, I am counting on this to happen to get to Dow 14,500. My worry is that I might be too bearish, and the Fed won't come to the rescue.

Now let's deal with the size of the issue. There were about $500 billion in subprime mortgages let during this period.

The worst we have seen from these public originators is losses in value of 20% for the biggest liars and restaters. Before you think that is taking a Pollyanna view, go back to the 97 figure for Accredited Homes Lenders (AHM - commentary - Cramer's Take). That firm was supposed to be the worst of the bunch, and it had a mixture of 3% to 5% default. With the former being more prevalent on the paper, it would have sold for much, much less in aggregate -- and it didn't.

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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.

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