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:
- how to play this tough market;
- wedding proposals that haven't been forthcoming; and
- yet another wake-up call for the Fed.
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How to Play This Tough Setup
Originally published on Nov. 19 at 9:35 p.m. EST
Look, it's all bad. The recession stories right on the heels of the
saying it must be vigilant about inflation. The ominous
( CFC) sell. Little things like the decline in ETFs for municipal bonds and the skyrocketing yields on things as simple as banking preferreds.
The setup is actually getting clear: an accidental recession brought on either by Fed intransigence -- no "Bernanke put" -- or a desire to cleanse the system, wrench out inflation once and for all, make housing affordable and bet that a year from now things are better.
No amount of declining retail or transport or banking seems to have any impact at all on the people who run the Fed. They care about employment and inflation, and both are high enough to justify a tightening as much as a loosening.
All pretty ludicrous if you ask me, but it is more than certain that I am not being asked for any view and have become a strange poster child for the deflationary recession camp, albeit justifier of all things and people rich. It is an odd moment for the economy -- and for me -- for certain.
What to do? Once again, I find myself drawn to all things drug and health care and export with a smattering of worldwide development plays for some upside: oil and minerals, the latter headed down today, as always, until a takeover or a sense that worldwide demand -- not even Chinese demand -- is slowing enough to prevent critical shortages in important minerals.
Why hang in? Because just like in 1998, these Fed officers will be calling emergency meetings soon about what to do about
( CFC), which has the single worst balance sheet out there of the public companies I follow, with a percentage of 2005-2007 home-equity loans that would wreck Fort Knox, or a
( CFC) or a
-- all of which seems as plain as the nose on my face.
For that moment, you must have something on the sheets and stay the course, a truly ugly and precarious way to make money.
Unless you can be so nimble as to buy the oversold dips and sell the short-squeeze spikes. Something I could do in 1990 and perhaps you can do now.
At the time of publication, Cramer was long Citigroup.
Suit Up for Shotgun Marriages
Originally published on Nov. 20 at 9:29 a.m. EST
In a time not too distant from now, I think we will wake up and see shotgun marriages --
Bank of America
( CFC) at $4-$5, or
buying the brokerage assets of
( CFC) for nothing as E*Trade gives up. We will see some mergers in these mortgage insurance companies or they will sell themselves -- again, for next to nothing.
And we will see shotgun marriages of builders trying to save themselves. That's another hallmark of the 1990s, when you went to bed and your bank was Bank of New England and you woke up and it was another bank.
Of course, the
isn't in shape for this. The governors are looking at the price of corn or the dollar value of oil and thinking "tighten." That will all change the moment they see that these institutions can't make it.
I have to tell you that some of these outfits, like
need to get together and need to get together now. They just don't have enough equity to take the hits they need to, but if they got together it would give the banks they're on the hook to something that would let them recalibrate. Nobody's helped by out-and-out bankruptcy without a partner to subsume or hold up the corpse -- or balance it with another corpse -- until a larger institution, perhaps from overseas, comes along.
It will be the wake-up call we all need, and we know it is coming. Stocks don't drop like this and then do U-turns.
They drop and they disappear.
At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.
Freddie Should Wake Up Feddie
Originally published on Nov. 20 at 1:36 p.m. EST
must ease and ease now.
( FRE) and
( FNM) were integral in this process of working through the mortgage morass.
We now have taken out Freddie as a backstop. It has to
capital just to stay afloat. Fannie's probably just as bad.
A 50-basis-point ease right now would make it so there would not be as much pressure on the financial system, which is stressed beyond belief here even as the Fed seems to think things are OK. Without it, the prospects for a recovery for any stressed lender -- think
( CFC) -- dim
by the hour
!!! I can't believe the Fed doesn't see that we are back in August again.
Perhaps they are heartened by the cordon that so far protects the rest of the market from the financials and homebuilders. It is pretty amazing. They should be able to sink much more than they are doing. How in heaven's name can the crushing of Fannie and Freddie not trigger more of a selloff?
How can the rest of the market ignore it? In 1990, it tried, but ultimately all but the highest-growth names and the indestructibles rallied. The export market is powerful, but not this powerful.
You have to admit that the ability of the market to say, "Yeah, Fannie/Freddie's real bad but so what," is a bit mystifying. These are two institutions that are teetering that issue a huge amount of paper, and the implicit guarantee by the government is going to have to kick in.
One of the things I liked about this market is the shrinkage of equity. A whole lot more is being retired than issued. This FRE offering, however, even as it is convertible, will have to be
and will put even more pressure on the stock than we have seen until the deal is done.
But it is a template for many others, including the denial companies in homebuilding and mortgage insurance and banks. I don't know if Countrywide could do a financing here, but it needs to. Or it puts itself up for sale.
Same with a
, which tried and failed. You can always find a rescuer like
may have found in Gerry Ford, a great S&L investor.
At the time of publication, Cramer had no positions in stocks mentioned in this post
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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