Jim Cramer fills his blog on
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:
- Getting over subprime's collapse.
- Why critics of the pharma deals are wrong.
- The shorts' dirty dozen.
- Putting the crisis in perspective.
- The real value of the positive view on subprime.
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Get Over Subprime's Collapse
Originally published on 3/12/2007 at 8:43 a.m.
a shocker now? Will someone give me a break on this stuff?
most of these companies are going to fail. If we are going to react individually to each failure or charge, we're going to be dead wrong.
If you're going to own financials, you should be prepared to have a total collapse of this industry. It's what's going to happen. If the futures are going to react negatively each time one fails, we're going to have a monster amount of selling.
To me the real issue here is to immunize yourself and get ready for the selloff every time one of these goes belly-up -- and I
repeat that they all should go belly-up. If some are saved, it will be a miracle and miracles do happen, but my bullish thesis involves a total collapse of loans for poorer people, which then will require the Fed to ease while the rest of the market's earnings are relatively unphased.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider New Century 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 had no positions in any of the stocks mentioned in this post.
Why the Critics Are Wrong on Pharma Deals
Originally published on 3/13/2007 at 8:37 a.m.
We've seen lots of analyst criticism of the
deals. I think the critics will be dead wrong.
First, both UnitedHealth and Schering-Plough both
to do deals; people need to know they had a pulse.
UnitedHealth has been a pariah since the options-backdating scandal, and it has failed to grow at its old pace in some of its businesses. This deal jumpstarts the corporation into faster growth, and it shows that UnitedHealth isn't paralyzed anymore. Given that the deal is for cash, I am less worried about stagnation in the common, as one of the chief reasons to own this stock is its aggressive buyback.
Schering-Plough has been criticized over and over again for not having much of a pipeline. No longer, although there's a perception that Organon doesn't have much of a pipe itself and is troubled company.
But Schering-Plough CEO Fred Hassan has had a history of acquiring troubled companies and turning them around, including the one he is at now, which is one of the few pharmas that has actually made you money in the past few years.
In fact, both companies are seasoned acquirers and are more able to create real value from deals than most. That's why these stocks did
get hit yesterday, and UnitedHealth actually traded higher.
Not all deals are bad. It depends on the price and the ability to integrate. I am not certain about the price of either, although Sierra was at this price not that long ago.
I jus think the critics are wrong, and the market, which liked these two deals, is right. That's often the case, and I will take the market's judgment any day of the week.
Footrace for oblivion? And here I'm talking about
Accredited Home Lenders
. Of course. What I find amazing about these companies is that none of its CEOs comes out and says, "Wait a second, our loan process was rigorous and we don't have as many defaults as others." None does it; that's why the pessimism is warranted. ... The banks are in a big rush to get what they can out of every one of these stupid subprime lenders. Some of them probably wouldn't even be in a jam here, but we have to remember that when any bank calls the loan, almost no one has the money to pay. ... If you want to follow my
five oil picks from last night's show,
Stockpickr makes it easy for you. ...
reports one bad quarter in three years, and that's the one before which I highlighted the stock. Still angry about that.
TheStreet.com holds a minority ownership interest in Stockpickr LLC and serves on its Member Committee.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider Accredited Home Lenders, New Century and NovaStar 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 was long UnitedHealth.
Shorts' Dirty Dozen
Originally published on 3/14/2007 at 9:17 a.m.
You asked for it. You asked for what some would regard as irresponsible, but others would describe as prudent. You asked for the Dirty Dozen that the shorts are operating on, and here they are:
American Home Mortgage
Notice that I'm not including
, which is on its deathbed. I am also not including
, which is also, to me, a goner.
Accredited is still alive, but I believe not for long, at least in this current form.
I do not believe that
is in trouble, although both are not done going down.
is in trouble, but it's been crummy for so long, I guess it doesn't matter. I do believe that
is still a bleeding hole but I would no more short
off this stuff, although a lot of others will.
Do I think that all of the Dirty Dozen will go out of business? That's not the question. I'm saying that these are the shorted stocks. If you think that some of them have liquidity problems, then you short them to zero. If you think that they don't, wait a week and buy them.
Now, most important:
I would not own a single one of these myself.
I feel badly about including some of these. RAIT is run by Betsy Cohen, an old friend from Philadelphia. The IndyMac people are adamant that they're not in trouble, but so were the Accredited people, and I believed in that. But this is what shorts are gunning on, so why not tell people?
OK, there you have it. Use it for what you will. But I wanted you to have the short operating list because the shorts are not stopping, not one bit.
And they are in control.
Oh and let this be an end to the thinking that I've been a Pollyanna. You don't put this list out if you are a Pollyanna, particularly because Thornburg and IndyMac are pretty well-run. And a Pollyanna wouldn't include a company like Friedman Billings, which people don't even realize has problems.
This problem is nasty, and we're not done with it yet. In my opinion, as each one of these crashes, the futures will be down big and we will lose 200
points. Lot of points.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider Fremont General, Accredited Home Lenders, NovaStar Financial and ECC Capital 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.
General Electric owns CNBC, for which Cramer is a featured commentator. At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.
Subprime Gets a Breather
Originally published on 3/15/2007 at 10:45 a.m.
If you take the pressure off the crummy loan companies for a couple of days, if you break the rapid-fire spiral that
precipitated, here's what happens: You get a chance for these companies to refinance, find buyers or take in capital
they have to file Chapter 11.
All three brokers that reported this week,
, want in to this business. A number of companies have been pushed back into what looks like oblivion, including some that don't deserve to be.
As I indicated Wednesday in
the Dirty Dozen list, many of these companies
be targeted but are. We are, for instance, seeing the incredible results of what happens when you do a failed raid:
, and soon
mortgage and another one,
, which should be bought, not sold.
The big three, Goldman, Bear and Lehman, seem to be short this mortgage stuff. They can repackage it, the way they repackaged loans in the 1980s that were going bust, make it equity and allow people to play the upside or short the downside. That's what will happen next.
These three know the market -- they know what's bad and good, turns out they aren't morons -- and they can pick and choose while making money in the structured and distressed credit. Oh, that's what they are doing, aside from
seeing a contagion despite the bears' most adamant saber-rattling. (Again, Bear,
like Goldman: not known as a bunch of liars.)
I repeat, these guys are now packaging the bad loans and allowing you to short or go long them and making fortunes off them. Not getting hit by them. Profiting from them.
Do we still get the
cut? Of course, the Fed is political; it won't let one-third of the country's homeowners -- the possible amount that could be hurt -- get crushed. That's not its mission. It doesn't matter if ethanol drove the PPI -- that's what is really going on.
The breather will help the solvent crummy loaners (not subprime, but bad subprime lenders) stay solvent. It will not help the insolvent get solvent. Seems fair.
People have to recognize that
the expiration look at 2:30 p.m. EDT Wednesday, which showed positives, can trump even a PPI
that some think bad.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider New Century 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 was long Goldman Sachs.
Banking on the Positive View
Originally published on 3/16/2007 at 8:52 a.m.
If someone's positive, he's lying. If someone's negative, he's truthful. If someone's sure that things are horrible, he's rigorous. If someone's skeptical but believes things are good, he's a fraud or a naïf. If you are positive, you are part of the mob, and the mob is always wrong. If you are negative, you are a lone wolf, and lone wolves are always right.
And I sit here and wonder how it got that way, how it got so distorted that the notion, for instance, that
are either lying or stupid about the crummy loans in mortgages
impacting other loans has credence.
believe them? People like David Viniar at Goldman or Jimmy Cayne at Bear
did not get to where they are
by being dopes, Pollyannas, dreamers or liars. They actually care about their reputation. They do not go to work every day trying to figure out how to deceive people and they are not about trying to make something negative into a positive.
Their stocks are also priced for anti-perfection. They are getting the same multiples as homebuilders, as if the party had to end sometime.
Thursday I heard the term "mortgage meltdown" used by the media. That's a great headline and rubric if your goal is to scare people. But what do you do when the folks at
says there has been virtually no uptick in mortgage defaults in its business, which has stringent rules about who gets a mortgage. Doesn't it, per se, have to be part of the mortgage meltdown?
What do you do when
, perhaps the biggest subprime lender in the U.S., doesn't see much of an uptick in defaults as its stock stays within a couple of points of its high? Or when
raises its dividend because, while its loan portfolio isn't great, it is still growing and taking share? Do you say that WaMu and Wells are whistling past the graveyard?
I don't know if I can do that. I remember doing that in 1989 when Wells was supposed to be teetering from construction loans in California -- a much bigger issue than this one, one that we also got through -- and it turns out that Wells had been a good lender who took enough collateral to make out just fine.
Does that make me a fraud and a naïf, or does it make me someone who actually has experience with this kind of stuff? I remember selling loans backed by raw land miles outside of Phoenix and finding many takers because we moved them at a big discount. Does that make me a clown or someone with more experience than the bears, who color the tape and "own" a couple of media people?
It is so much easier to be negative than positive in light of
, and soon
(And by the way, I think that
has done almost everything wrong, from overpaying for Household to offering way-too-high teaser rates for your cash to get you to open an account to giving anyone a loan -- including many undeserving people.)
I just wish I hadn't listened to the Bear or Lehman or Goldman calls and I wish I hadn't heard the Thornburg guy with the positive data. I wish I hadn't seen the declines in delinquencies for
Master Trust. Instead I wish that I had simply listened to the economists who say it is spilling over, economists who have not worked on trading desks or listened to conference calls.
I guess you could say I am burdened by the rigor. I must try to be more slothful; maybe that's the key to being negative, or perhaps I just need to forget everything I have learned in my career and join the multitude of scared traders and investors out there.
Thursday some fool attacked me for not retracting my forecast of a
cut. I am saying we won't get it
until May, for heaven's sake. And I am saying that the poor people who need mortgages and who deserve mortgages because we have swung the other way so fast need the Fed's help. That's not a bullish position. You don't predict a crisis and call yourself a bull. I am just saying that part of the economy that the Fed stewards is in trouble. The rest isn't.
But that part is enough to trump all of those people who do nothing but look at data and not psyche.
I have no choice but to go with what brought me to where I am, which, reluctantly I have to say because it is embarrassing, is real rich. I made it in the market with these beliefs. I can't change what I do or how I do it, even as it would be so much fun to call everyone in finance a liar or a bozo, and believe me, no one is more vocal about calling out stooges than I am.
I can't change this time. These people have built up too much credibility with me for me to believe that this time they are different. I am banking with the brokers and with Thornburg,
the mortgage meltdown/contagion folks. If you make no-documentation, silly loans to low-income people, you are going down. If you didn't, you will be fine. That's the bottom line.
James Altucher does it again. Read his
column this morning on the thinking behind his latest great idea, the
Poverty Index. He's collected the stocks of companies that cater to lower-income consumers, the thinking being that these should hold up during a recession.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider New Century, Accredited Home Lenders and NovaStar 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.
TheStreet.com holds a minority ownership interest in Stockpickr LLC and serves on its Member Committee. Jim Cramer is a director, co-founder and stockholder of TheStreet.com. At the time of publication, Cramer was long Goldman Sachs and Capital One.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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