It looks as though Jim Cramer and Doug Kass are locking horns again -- this time on the likelihood of a housing recovery in the near future.
Cheap Housing Markets Will Sow the Seeds of a Rebound
7/31/2008 7:23 AM EDT
This blog post originally appeared on
on July 31.
Home prices in Stockton, CA are down 40%. In Daytona, FL, houses are priced at 30% discounts with amenities. The Inland Empire of California -- you name your price. That's how the madness ends: with huge price cuts, the way it ended in Bradenton, FL.
And believe me, we get more
-- forget these darned covered bonds, lets just solve the problem. You get buyers after a year and a half that buyers went on strike.
Remember, while we can't live in stocks, we know they trade like houses, and when the first stocks to go down bottom, the others are not far behind.
With the new housing bill, the rate of foreclosures will go down and the bargains will be quite evident for those who want to take them. Either a new administration will remove the fear of the illegal immigrants from buying homes -- they were a huge part of the hard-hit Arizona, Florida and California markets. Or the dramatic decline in inventory at the home-building level has given us breathing room.
It is all coming together, just when no one sees it coming. Because you have to look at the hard-hit regions to know what's going on.
This morning the
Wall Street Journal
noted that more clarity on
arrangement with Lone Star is needed, and speculates whether Lone Star is going to renege on this deal, and whether this is not a fair arms length deal.
I say give me a break. These mortgages, if held with a private company with a servicing arm that is in the subprime business --
Accredited Home Lending
-- and has assumptions and models for this time -- would not have bid if it didn't want them. I think the loan is fine.
More importantly, if the homes are down 50% and you are buying mortgages that somehow -- we don't even know -- relate to those homes, you can figure you can buy them for 20 cents on the dollar and flip them for 50 cents on the dollar if you can work out the financing. And Lone Star can.
This deal works because of depressed markets like Stockton and Daytona and the Inland Empire. Not because of the financing.
You have to pay attention to the real markets, not the Wall Street markets if this stuff is going to be successful, and I believe it will at these prices.
I continue to believe that Merrill was a game changer and that things look brighter now every day.
Random musings: Did
lose share to
Procter & Gamble
It would seem so.
I have to admit that the
quarter shows powerful video-on-demand numbers and you can see with FIOS is the way for
At the time of publication, Cramer was long PG.
The Anti-Cramer Responds
7/31/2008 7:58 AM EST
This blog post originally appeared on
on July 31.
Jim "El Capitan" Cramer sees the seeds of a housing recovery this morning.
And I agree: At some time, the housing markets will rebound.
But where I disagree with Jim is on the timing of that recovery, and I continue to be of the belief that it is still too early for the equity markets to discount a housing turn.
As I stated on Tuesday, credit is getting
For the reasonable future (2008 to 2009), banks will rather play the yield curve than lend to home buyers.
For the reasonable future (2008 to 09), there will be no more securitized products, subprime mortgages, jumbo mortgages, non- and low-documented mortgages and option ARMs. If you don't believe me, try to get one!
And there will be plenty more headcount cuts and capital raises at the leading lenders.
In looking at the long history of economic cycles, when the pendulum of credit shifts, Jimmy, it shifts violently -- and in the opposite direction as lenders overcompensate to the extreme.
This cycle will be no different. Credit will remain dear.
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Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.