Jim Cramer's Best Blogs

Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:

• the Dirty Dozen stocks getting filthy;
• a call to the bargain hunt; and
• what has to happen for the Fed to get it right.

Click here for information on RealMoney.com, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.

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The Mortgage Dirty Dozen Gets Filthier

Originally published on Nov. 26 at 1:05 p.m. EST

These financials are just deadly. Just amazingly deadly.

This market just gets crushed every time it tries to advance.

The ground zero? The housing index (HGX) and all its spawn, from FannieFNM and FreddieFRE to CITCIT and E*TradeETFC, Washington MutualWM or CountrywideCFC. (For a real depiction of the geographic ground zero, watch Wall Street Confidential with Farnoosh Torabi.)

One of these players has to blink. It can't be Fannie and Freddie; they'll be kept afloat by Congress no matter what, even if they are insolvent. Somehow the federal government will get money to them.

But there's only one real way to make it happen, and it is not a question of putting more liquidity into the system. There are only two ways to stop this slide:

1. the federal government must create a resolution trust for residential mortgages, or
2. we need to lower rates below the two-year Treasury now.

Neither looks like it is going to happen.

Earlier this year, in March, I talked about a dirty dozen of mortgage-related entities. I recapped them in August. It is telling. (The first number is where it was in March, second in August, last now):

1. IndyMacIMB: March $29, August $21, currently $8.50
2. CenterlineCHC: $19, $10, $12
3. Friedman BillingsFBR: $5.10, $4.60, $2.76
4. Fremont GeneralFMT: $7.40, $5.50, $2.55
5. Redwoods TrustRWT: $54, $28, $30
6. Newcastle InvestmentNCT: $27, $15, $13
7. American Home Mortgage: $25, $1, $0
8. GramercyGKK: $30, $22, $21
9. RAITRAS: $29, $8, $7
10. AccreditedLEND: $9.43, $8 and takeover at a premium, $11.75
11. ThornburgTMA: $23, $23, $8
12. CapitalSourceCSE: $24, $16, $14

Those declines in the last reading are the kinds of declines I am forecasting for the housing companies and their spawn now.

In each case, when I talked about these stocks in March, people thought they couldn't go lower. When I talked about them in August, people thought they couldn't go lower.

You see the November prices.

Get used to it. This is what is going to happen without a Resolution Trust Corporation (RTC) or Fed cuts below the two-year.

Random musings: I left out the mortgage insurers because for a couple of days you are going to hear rumors of partnerships and infusions, like the French did for a little one of these on Friday. Then when the rumors prove to be untrue, the rollovers will start all over again.

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Please note that due to factors including low market capitalization and/or insufficient public float, we consider Friedman Billings, Fremont General, RAIT and Accredited Home Lenders to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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

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Tally Ho! Hunt for Bargains Is On

Originally published on Nov. 27 at 10:13 a.m. EST

Bargains. With the market down 10%, you get them. I know that no one believes that. I am hearing people come on TV and say, "Not yet." But when you get these broad declines you have to sit up and take notice.

Remember that the chief problem in the system is credit. But it's just the U.S. system that has a credit problem. While there is some debt over in Europe that we exported, for the most part there's lots of excess capital over there.

We also know that there is 50% more capital than there was in relation to the U.S., courtesy of the euro's increase against the greenback. The Middle East is so rich with our dollars that it is natural for them to swoop in a la AMDAMD and now CitigroupC. Russia's flush. Brazil is flush. Most of all, China has a ton of money. At this point it would not surprise me if people began to look the other way if the Chinese were interested in our institutions. I mean, after all, we bought big chunks of theirs.

It's not easy to guess what these flush parties would buy. It is easy to guess what you should buy: companies with solid, consistent earnings whose stocks have been pushed down along with everything else even though their businesses have not lost value.

That would be everything from retailers with good fundamentals to service companies that are well off because, simply, they are U.S. stocks -- particularly companies that have been buying back stock with no impact whatsoever.

Don't forget, also, these folks abroad love U.S. financial stocks. Does anyone believe that JPMorganJPM wouldn't want to sell a big stake to someone? Legg Mason'sLM Citigroup stake is for sale. How about that piece of business?

How about a big Internet company, such as Time Warner'sTWX AOL?

There are so many companies that make sense to be bought down here if you are a foreigner, because marquee names mean something to these countries even though we don't even think about it anymore. U.S. SteelX, AlcoaAA and MotorolaMOT are all brands that are down on their luck right now.

Now, I never like stocks on a takeover basis when the fundamentals are deteriorating. But when you consider that AMD and Citigroup just got bids, and you could argue that GenlyteGLYT could be facing deteriorating fundamentals, we have to realize that these foreign companies are much less concerned with the near term than we are.

Simple facts. Something that says the emphasis must be equally on bargain hunting and loss avoidance.

At the time of publication, Cramer was long Citigroup.

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BAC and C Hold One Key to This Mess

Originally published on Nov. 28 at 9:32 a.m. EST

In 1990, you began to hear things you couldn't believe. Manufacturers Hanover might merge with Chase? Are you kidding? Security Pacific to tie up with Bank of AmericaBAC? Bank of Boston taking over large banks throughout the country? Say it ain't so.

But that's just what happened when things began to bottom. You had a Middle Eastern interest taking a big stake in CitigroupC and unthinkable mergers occurring to build what turned out to be some of the best-performing stocks I have ever seen.

It is happening again. The unthinkable: Bank of America and Citi. You think Bank of America is done? You think they aren't calling JPMorganJPM today? Or WachoviaWB? You think this ridiculously pro-"whatever companies want" government wouldn't bless them?

Of course, we had the Resolution Trust Corporation then. If we get this SIV (structured investment vehicles) bailout, we can have some clarity on that front, too.

I still believe that the mortgage insurers, CountrywideCFC and Washington MutualWM are in big trouble. But the WaMu branch network will be coveted by someone and when that bank hits rock bottom it will be shotgunned to someone else. Not a reason to buy WaMu but a reason not to be too negative, for certain.

Let me give you an example of too much negativity. Deutsche Bank's Mike Mayo, who is doing some fabulous work, this morning pulls up the HELOC exposure for the major banks.

HELOC itself is not bad. It is HELOC that is purchased from bad issuers like NovaStarNFI that has no documentation that is above the value of the house. It is HELOC that is from 2005 to 2007. It is HELOC from California, Arizona, Nevada and Florida.

Now, don't get me wrong, that's a ton of HELOC. But if you bought your house before the bubble went nuts you are paying your HELOC.

That won't matter until we get a big dropoff in jobs. Then those loans are cooked, too. But not yet.

Fed vice chairman Donald Kohn seems to get the domino effect of this paper, something that Ben Bernanke and other out-of-touch Fed governors do not. They are all concerned about "the Greenspan put" on the stock market and how to avoid it. They care more about not having one than making it so we will need a government bailout of HELOC-ridden banks.

Believe me, lower rates will save us taxpayers a minimum of $500 billion when this stuff goes bad. Unless the Fed wants to stick us with that bill, it needs to forget the put and start cutting. That, plus the bank combinations I see occurring, will get us out of this mess.

But only when we segregate the bad loans, lower rates, get some homebuilders to go belly-up, see a mortgage insurer go bust and have a run on a major institution. All of those must happen in order for Kohn's view to prevail over the clueless Fed heads.

Random musings: The other day some trader emailed me and told me he had great respect for me before my rant about the Fed but that after that he could not take me seriously. I told him that when we look back on this era, I will tell my kids, "Your dad tried, but failed, to make a difference." That's what hangs in the balance right now. The mergers, the SIV bailout, a write-off of 2005 to 2007 and lower rates would mean that rant wasn't in vain.

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Please note that due to factors including low market capitalization and/or insufficient public float, we consider NovaStar to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

At the time of publication, Cramer was long Citigroup.

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