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:
- the Dirty Dozen stocks getting filthy;
- a call to the bargain hunt; and
- what has to happen for the Fed to get it right.
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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
( FNM) and
( FRE) to
( CFC) or
( CFC). (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
a question of putting more liquidity into the system. There are only two ways to stop this slide:
the federal government must create a resolution trust for residential mortgages, or
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):
IndyMac ( IMB): March $29, August $21, currently $8.50
Centerline : $19, $10, $12
Friedman Billings : $5.10, $4.60, $2.76
Fremont General ( FMT): $7.40, $5.50, $2.55
Redwoods Trust : $54, $28, $30
Newcastle Investment : $27, $15, $13
American Home Mortgage: $25, $1, $0
Gramercy ( GKK): $30, $22, $21
RAIT : $29, $8, $7
Accredited ( LEND): $9.43, $8 and takeover at a premium, $11.75
Thornburg ( TMA): $23, $23, $8
CapitalSource : $24, $16, $14
Those declines in the last reading are the kinds of declines I am forecasting for the housing companies and their spawn
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
cuts below the two-year.
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.
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.
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
. 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
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
wouldn't want to sell a big stake to someone?
Citigroup stake is for sale. How about that piece of business?
How about a big Internet company, such as
There are so many companies that make sense to be bought down here
you are a foreigner, because marquee names mean something to these countries even though we don't even think about it anymore.
( MOT) are all brands that are down on their luck right 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
( GLYT) 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
At the time of publication, Cramer was long Citigroup.
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 America
? 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
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
? 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,
( CFC) and
( CFC) 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
( NFI) 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.
vice chairman Donald Kohn seems to get the domino effect of this paper, something that Ben Bernanke and other out-of-touch Fed governors
. 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
happen in order for Kohn's view to prevail over the clueless Fed heads.
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.
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.
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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