A Turning Point

No, it's not that the worst is over. It is that the Treasury Department has its arms around the problem. We are going to see the Fed accepting commercial mortgage-backed bonds, not just residential paper, and that's the sign that someone at Treasury at last wants to get ahead of the problem.

Of course, there is an endless rearguard action about this, niggling people in niggling positions saying this level of intervention is uncalled for and smells of a bailout. I have been adamant that the real issue is how to save taxpayers' money down the road. Those who are against the JPMorgan Chase (JPM - commentary - Cramer's Take) intervention and the $30 billion guarantees are the exact same people who thought cutting rates aggressively was a mistake and the same people who pooh-poohed the notions that the Fed should buy mortgages and that the Federal Housing Administration should aggressively buy mortgages. They are the proponents of laissez-faire policies who will end up costing the country a trillion dollars in bailouts simply because they refused to go with an ounce of prevention. They no doubt will be upset if the next bank goes to Wells Fargo (WFC - commentary - Cramer's Take) with similar guarantees. They should stop being upset and try to make some money for their clients, if they have any left.

The laissez-faire-ists will soon be so discredited that we should have media show trials about all who held that the fundamentals were sound as a strategy to cover their unwillingness to intervene in a mortgage market and an economy that were so clearly collapsing.

No matter. The rally in so many of the "bad" stocks shows that the proposals are starting to work. Could we have another swoon like we had after the last dose of Fed cuts? I don't think so, because the problems have not been at the short end. The problems were with the rates that the 30-year fixed-rate mortgages are benchmarked against, and they are heavily dependent on the rate the agency paper was selling at. Of course the nitwit position by Treasury not to acknowledge the implicit guarantee cost us Bear Stearns (BSC - commentary - Cramer's Take) and a run on Fannie Mae (FNM - commentary - Cramer's Take) and Freddie Mac (FRE - commentary - Cramer's Take) and those who invest on their curve. I don't mind either, frankly, as many were levered 30-to-1. They deserve it.

I hope we have margin rules one day, but that will have to come with a Democrat in the White House because no one in this administration is going to propose such a thing. Nor will the timid Fed, which, at last, is now being run by Treasury, in what almost feels like a transcendent operational hand off from amateurs to pros.

The new interventionist policies that are for once ahead of the problems mean that the early-cycle plays actually make sense, even though that might seem absurd. We don't have any earnings -- although we will soon get bad March numbers that will cause another round of retail estimate cuts -- so we are in shape to run a little, even after the next financial run on a bank.

Anyway, it will soon be clear that the stories that say it looks like we are in a recession now, will be eclipsed at the first sign of any better monthly foreclosure rates by stories asking whether the recession is over. That, plus a couple of weeks of commodity price declines or stabilizations, will make people say that victory for the Fed will soon be at hand.

I know all of this sounds awfully bullish, but remember this: If the Fed had cut rates last year at this time and we had had a wave of refinancings, we would be out of this jam already. Now the economy will simply slow down on its way to the bottom and then it will turn.

Of course, as always, the market will turn first, which is what it is doing right now.

Random Musings: The REITs are on fire, especially the commercial ones, since the Fed decided to get ahead of that looming problem. ... The Barron's piece about Fannie Mae was perhaps the most perfect bottom call I have seen in my life. But you will never hear that elsewhere because it is too likely that you will be featured in Barron's negatively. I feel immunized, not because they won't do it again, but because when they do it again, I have been drilled that the sun still comes up that Monday. ... Don't forget to read a piece I wrote Friday on this moment in the market.

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

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