Cramer's TheStreet.com TV

Return to Article

TheStreet.com TV Recap: Rate Cut Could Be Subprime's Gift

TheStreet.com Staff

"The bottom line is things are falling into place for the rate cut," due to the subprime lending crisis, Jim Cramer said on TheStreet.com TV's Wall Street Confidential Web video Tuesday.

"If this is the pain we need to have ... you are talking about 1% of the loan market bringing down the whole market ... then that's an opportunity," he told Gregg Greenberg, the host of Wall St. Confidential.

Cramer said he believes Accredited Home Lenders (LEND Quote) will get its loans called in first, followed by IndyMac (NDE Quote), Novastar (NFI Quote) and Fremont General (FMT Quote).

That, in turn, should make the Fed realize it can't have so many companies unable to issue mortgages, he said.

Broker Brakes

Cramer said he's been adamant that people not buy Goldman Sachs (GS Quote) today but rather wait until Friday, "when the smoke clears" on the subprime fears.

Cramer, who owns shares for his charitable trust, Action Alerts PLUS, said Goldman is going to be "tied unfairly" to the subprime crisis.

The investment bank "killed the number," yet it is "literally selling at a Lennar (LEN Quote) multiple, and Lennar is a hack company compared to Goldman," Cramer said.

However, he believes Goldman shares should be taken down here because it didn't have the subprime collapse.

"People have to recognize it's legal to take stocks down now ... and it's a great weapon," Cramer said.

Of the brokers, Bear Stearns (BSC Quote) seems to be getting the worst of it here because it made a series of acquisitions in the subprime business, Cramer told Greenberg. But Cramer said he's been told that most of the company's big mortgage business is in Europe, "which is very safe."

He also believes that Bear CEO James Cayne is "acutely aware of the problems, and Bear, like Goldman and Lehman Brothers (LEH Quote), can take affirmative action."

Moreover, Bear's "mosaic of business is far larger than people realize," Cramer said, adding that he would rather see a problem in Bear's subprime division than a decline in its M&A operation, "where its real profit margin is."

Dish on Deals

Moving on to recent deals, Cramer called UnitedHealth's (UNH Quote) purchase of Sierra Health Services (SIE Quote) "brilliant."

He said UNH, which he owns for his charitable trust, was "brain dead." The deal with Sierra, "the fastest growing HMO in the country," will help UNH tackle its biggest problem: the need to grow fast in Medicare. The transaction also shows market players how much cash UNH has, because it didn't pay for Sierra with stock.

Concerning Schering-Plough's (SGP Quote) offer to buy European pharmaceutical company Organon, Cramer said that while people were all over this deal as being bad, the market didn't go down because Schering CEO Fred Hassan is a "miracle deal maker."

"He's now got the critical mass he needs to be able to make that company attractive to other companies," Cramer said.

Cramer also called private-equity firm Kohlberg Kravis Roberts' acquisition of Dollar General (DG Quote) "brilliant."

"We will see Dollar General back in the market in three years," he predicted.

However, the fact that Citigroup (C Quote) has raised its takeover offer for Nikko Cordial is a "terrible deal," Cramer said.

"Citigroup is buying into the worst market in the world," but this is a "classic" move because Citigroup is "poorly managed," he said.