Jim Cramer's Best Blogs

03/29/08 - 12:17 PM EDT

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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:

housing headlines;
homebuilders; and
a nibble of food stocks.

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

The Housing Headlines Got It Wrong

Originally published on March 25 at 10:32 a.m. EDT

"Existing-Home Sales Rise as Prices Plummet" -- Washington Post. "Property Sales Pick Up as Prices Plummet" -- Financial Times. "Wave of Foreclosures Drives Prices Lower, Lures Buyers" -- Wall Street Journal.

In every one of these pieces the emphasis is on the price drop, as if somehow that is a continuation of the problem in the housing market. None of them states the real obvious: Just like any other good, when you cut the price, people find a way to buy.

This price-cut attraction is at odds with what the homebuilders have been saying forever. They have said over and over again that the issue isn't price at all.

We now know that it was always about price. If the homebuilders were willing to lose some money on houses and move their inventory, they could have. They simply don't want to, or their covenants don't allow them to.

But the existing homes, owned by people, will move, either in foreclosure or in the inevitable need to move, by prices going down. We now have "price discovery," which emboldens you and makes you -- at last -- feel you are not overpaying. First time in three years anyone has felt that way.

All of this is great news if you are trying to figure out when we get to the bottom of the issue that has brought this nation to its knees: house price depreciation. You can't get a bottom in homes until homes trade and they weren't trading when the sellers were holding out.

Also, this number shows there is mortgage money -- another canard -- if you want a home.

Further, I don't expect any house price appreciation. We don't need any. We just need inventory to trade, wherever it trades, to stop the process of whole neighborhoods being pulled down by the marginal, and margined, sellers.

There is a sense right now that this spiral can never end. There is a sense that these stories are going to provoke fear. They should conclude the exact opposite: Plentiful mortgage money plus realistic prices means a cleanup of the inventory and an end to the spiral.

Can you go buy the housing companies off this? Can you buy Lennar (LEN - Cramer's Take - Stockpickr), Toll (TOL - Cramer's Take - Stockpickr)?

I don't know. I think what you are seeing in these numbers is PRECISELY why you got the big January bottom in the group and the remarkable run since.

No run like this can't have a pullback. Just as we see a host of downgrades today in the likes of Merrill (MER - Cramer's Take - Stockpickr) and Bank of America (BAC - Cramer's Take - Stockpickr), you will see another group of downgrades in the homebuilders as they are beginning, at these prices, to predict a boomlet, if not a boom, in the market.

Strangely, this group may be more dangerous than almost any other given the fact that they are going to have horrendous quarters. The only thing that gets taken off the table by the existing-home sales is the VIABILITY of a Lennar or a Horton (DHI - Cramer's Take - Stockpickr) or Pulte (PHM - Cramer's Take - Stockpickr), not an earnings boom.

All that said, the right headlines would have been, "Buyers at Last Come Out of the Woodwork to Buy Existing Homes." I know as an old headline writer that that's too long. But it happens to be right.

Random musings: What a run we have had in the REITs. Some of my favorites, like Federal Realty Investment Trust (FRT - Cramer's Take - Stockpickr), have had a move that actually makes me want to ring the register. Too much too soon. But that can be said about a host of stocks. If you bought on the way down, tomorrow should be the day you start to scale out.

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

Homebuilders Are an Intriguing Option Here

Originally published on March 27 at 9:38 a.m. EDT

So tempting to down sell the homebuilders. They failed just where one of our excellent technicians, Helene Meisler, told me they would -- 150 on the Housing Index (HGX). They just couldn't get through, and the move up at the end was on light volume.

It would be so easy to say that we should just put these on the sell block as they have all moved too far too fast, and that there was nothing really great in that Lennar (LEN - Cramer's Take - Stockpickr) number, just more gloom.

But there is a macro story building here: These monster homebuilders just aren't putting up a lot of homes anymore, and they are cutting them -- sometimes as much as 20%. It is a truly amazing reduction and it is making it so that the excess inventory will be worked off pretty much no matter what.

I have watched Toll Brothers (TOL - Cramer's Take - Stockpickr) spring back to life here even though there is really nothing special there and even though there will no doubt be new problems if employment keeps struggling. That said, the balance sheet is clean, the short story is lacking and the only thing it has against it is that many people are recommending it.

But will you be able to get out and then get back in? Ryland (RYL - Cramer's Take - Stockpickr) is another stock that has just jumped from $19 to $31. It would seem that it could retreat back to $25 without a problem. However, there is nothing new really BAD happening at Ryland, and if something good does happen, then you are not going to be able to get Ryland in the 20s for a long time.

Some things didn't happen that I did want -- bankruptcies, for example. We have gotten through this period with such massive sales and writedowns by the likes of KB Home (KBH - Cramer's Take - Stockpickr) and Centex (CTX - Cramer's Take - Stockpickr) and Horton (DHI - Cramer's Take - Stockpickr) and Pulte (PHM - Cramer's Take - Stockpickr) that I believe their balance sheets are actually in pretty good shape. One reason this worked was that the banks showed tremendous forbearance with these players, stretching out the revolvers and giving them breathing room. No one wants to own houses if you are in the banking business.

We just don't have enough negative anymore with refinancing occurring and with so many homeowners -- 53% -- in the country having no mortgages at all. They aren't going to walk away from their places.

The mortgage issue will soon be California, Florida and the auto region and not much else.

Too late to sell the homebuilders, interesting opportunity to buy them.

Random musings: The bottomless Schering-Plough (SGP - Cramer's Take - Stockpickr) is so painful, but there was a 5-million-share seller, no doubt anxious to clear the decks for one of the biggest losers of the quarter. Meanwhile we have scrips turning up for Vytorin and earnings numbers going up. I believe that this is my favorite stock now that Altria (MO - Cramer's Take - Stockpickr) is splitting into two.

At the time of publication, Cramer was long Schering-Plough and Altria.

Food Stocks May Be Worth a Nibble Here

Originally published on March 27 at 3:36 p.m. EDT

The good action in the food group, especially General Mills (GIS - Cramer's Take - Stockpickr) -- whose CEO I just had the pleasure of interviewing -- is signaling the belief that:

the recession will be deep,
the grains have peaked, and
they are hedged well enough that they can still meet profit growth.

I disagree with 1 and 2, but I do believe that 3 is in play. When I see the rally in GIS and Pepsi (PEP - Cramer's Take - Stockpickr) and Coke (KO - Cramer's Take - Stockpickr) and the smart moves by ConAgra (CAG - Cramer's Take - Stockpickr), I am emboldened to think that Kellogg (K - Cramer's Take - Stockpickr) and Heinz (HNZ - Cramer's Take - Stockpickr) will play -- ha! -- catch-up and that they can be bought.

These are big, worldwide companies and the two that are doing among the best are actually largely domestic: Pepsi and GIS. I think that Heinz and Kellogg -- perhaps the most overseas-oriented save KO -- are going to surprise nicely next time around.

The amazing thing about this group is that there has been virtually no consolidation for many years, just spinoffs that have been disasters for the targets spun, and divestitures like we saw from ConAgra.

I think that could change, too. If the dollar bottoms, Nestle would be nuts not to take action. Further, I believe that Kraft (KFT - Cramer's Take - Stockpickr) has to do something to reignite growth, and it would be a natural to try to merge with someone.

I like the fact that these stocks finally have some spring to their step even though it should have happened months ago.

It is a good place to be in light of the quarter's currency and the hoped-for consolidation even though I think that the recession will be over by the end of the year.

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