FNM and FRE Aren't Signaling a Housing Bottom

Fannie (FNM - commentary - Cramer's Take) and Freddie (FRE - commentary - Cramer's Take) with their recent rallies are either signaling that someone is so short and getting squeezed -- makes sense, these could be huge shorts -- or that house price depreciation has hit bottom. (Minor profit-taking today, but I am confident that unless the Fed raises rates this week -- not a chance -- these stocks should squeeze higher.)

I point out the latter because if house price depreciation ends, these stocks could be triples. More than that. They have all of this stuff valued as if it is worthless, and they have all these new fees that they are getting because they are the only game in town and houses have fallen so far in price that they are conforming!

Sorry, but I don't believe that house price depreciation is over. Maybe I have read too many conference calls, like the Pulte (PHM - commentary - Cramer's Take) call yesterday. Maybe I have been on too many bank calls. Maybe, just maybe, somebody knows of an initiative -- a $15,000 credit if you buy a house?? -- that could make a difference.

To me, here's the trade. If you think these are really all that good, go long Wells Fargo (WFC - commentary - Cramer's Take), which has taken a monster amount of mortgage share and is doing fairly well, or buy Bank of America (BAC - commentary - Cramer's Take), which sports a better dividend and is really levered with Countrywide (CFC - commentary - Cramer's Take).

But don't buy FNM and FRE, which we know need more capital.

I do believe that by this time next year, housing will have bottomed. But it has to fall 10%-15% just to catch up with the declines in new-home prices. When that happens, I'll be a believer.

But that's the valley of the shadow of the death of FNM and FRE equity, and I just can't get into buying these.

Random musings: If you sold Ford (F - commentary - Cramer's Take) off the silly downgrade last week, you no doubt feel like you did the wrong thing now that Krekorian has stepped in. You did!

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

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