Retailers Don't Dictate Fed Policy

Hovanian (HOV - commentary - Cramer's Take) will show us the way -- the way toward a rate cut. People keep confusing this darned issue: Wal-Mart is not going to signal that a rate cut is coming. The Fed could care less about the consumer's retail fancies.

The Fed cares about down payments. And we should hear from HOV when it reports that down payments are few and far between.

The homebuilder industry, a $32 billion industry (publicly traded at least) was a $64 billion industry a couple of years ago. I think it will be a $5 billion industry a year from now, of which half will be Toll Brothers (TOL - commentary - Cramer's Take), because it is higher-end and people have down payments.

I don't care that housing may or may not spill over to retail. I don't care if a lot of people don't spend at Macy's (M - commentary - Cramer's Take). I just don't think it is politically palatable to have all of those homebuilders get wiped out and have all of these second liens -home-equity loans -- crush the homeowners who bought between 2005 and 2007.

Sure, that's not the majority of people, but that and the structured product that will fail because of those failures is at the fulcrum of the Fed cut thesis. The arcane nature of that Achilles' heel is what makes so many commentators who come on my network seem so out of touch. Look, the simple truth is that if we were to base the Fed's policy on retail, we would be tightening to 6%.

The fact is that we cut the discount rate to save Countrywide (CFC - commentary - Cramer's Take) -- looks like it ain't working. We will cut the fed funds rate to save some homebuilders and perhaps Washington Mutual (WM - commentary - Cramer's Take) -- at least judging by the dividend that WM has.

Speaking of dividends, the homebuilders keep declaring them. That will go away when the banks pull credit, which they will soon do, like they did to all of the mortgage brokers.

All of this is to come. It is not in the market now. But it is so easy to see that I can't believe so many in the media are saying "Given the sales at Target (TGT - commentary - Cramer's Take), they won't ease." The sales at Dayton Hudson held up well in 1998 and they eased. So did they in 1990. Because the sales at Target, or any other retailer for that matter, do not matter to Fed policy.

Beazer (BZH - commentary - Cramer's Take) does. Standard Pacific (SPF - commentary - Cramer's Take) does. Centex (CTX - commentary - Cramer's Take) does. KB Home (KB - commentary - Cramer's Take) does.

And when they go, you will say, "What were all of those commentators thinking?"

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