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TheStreet.com TV Recap: Shorts Look to Regroup vs. Subprime

TheStreet.com Staff

The shorts could be gearing up for another run at the subprime lenders, Jim Cramer said on TheStreet.com TV's Wall St. Confidential Webcast Wednesday.

After those lenders "took the shorts apart" on Tuesday, the shorts won't just sit back and take it, he told Gregg Greenberg, the host of Wall St. Confidential. "It's imperative upon the shorts to start new rumors right now just to be able to claim the rally was a short squeeze.

"That's the way to play it," and it's how Cramer would have played it if he were still at his hedge fund, he said.

Right now, it's "very important" for the shorts to get these stocks back down, he said. What Cramer said he sees happening is a rumor that Wachovia (WB) "will have to spend its dividend" or that Washington Mutual (WM) is in "big trouble." If he were back in the game, he would concentrate on those, he said.

Insurance

Cramer said he loves the insurance sector. He believes Prudential (PRU) and MetLife (MET) are the best in the group, and he owns AIG (AIG) for his charitable trust, Action Alerts PLUS.

Cramer said he's a "little more concerned" about Allstate (ALL), because it's not growing like he would like.

AIG had a "blowout quarter," but "$70 is where [former CEO] Hank Greenberg seems to live to sell stock," Cramer said. Hank Greenberg's not going to come out publicly and say it, but "he wants the stock lower because he hates it," Cramer said. "I respect that."

When asked about whether it's OK to get into the regional banks here, Cramer said it is not because they have mortgages.

"Remember where we are in the trading cycle," he said. "A company that has mortgages -- it's very easy to say a third of their subprime is in default. They're not going to answer that.

"I could rumor down any of the regional banks right now," Cramer continued. They are easy to take down and "easily picked on," he said.