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 junk in the mortgage market;
- the need for mergers in the financials; and
- the recession cycle.
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, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Junk Caused the Pain
Originally published on Feb. 5 at 3:42 p.m. EST
These stupid securities established to gaffe customers keep clogging up the system.
You have to understand this junk. You have to understand that it was all unnecessary and the creation of these instruments was well beyond the ken of most of the clients out there who are easily seduced into reaching for yield and do stupid things because they are talked into them.
I say that because this whole decline is caused by pieces of paper based on mortgages chiefly from Florida and California and pieces of paper set up to mimic those pieces. It is so stupid it makes me scream.
The only reason we are in this jam is that the salespeople were able to sell the stuff to gullible accounts who didn't know any better and trusted their brokers. The brokers sold it because they wanted to make more money than selling Treasuries. The risks were unfathomable and the rewards so small that I can't believe anyone was fooled by this stuff.
In the end, until this stuff is all downgraded, digested, and written down to zero so it can bounce back, we are going to have to deal with these endless downgrades and the saga of the insurers who bet that there would be no downgrades. We are going to have to deal with the fact that we will not be able to bundle much of anything that should never have been bundled to begin with -- mortgages based on no docs and ever-rising prices -- and we are going to have days where the world seems like it is ending.
Today's one of those.
I blame not the service index and not the earnings but the recognition that there is still no home price appreciation yet visible to make it so the so-called structured product can bottom. Get ready for more of these days. They will be the norm until you see housing tick up or some relief from the lower rates the Fed is going to give us.
We Need Some Mergers in the Financials
Originally published on Feb. 6 at 3:33 p.m. EST
( BSC) all the way back to where other institutions had been interested in buying it. That's important; we have yet to see any consolidation anywhere it this market, and that's just awful. The big issue in this market is not low interest rates or a worry about lending.
It's that there isn't enough capital at the banks to meet the levels needed to stay in business.
So you can raise capital, as
Bank of America
have, or you can merge and lay people off and get hold of that capital.
None of that is happening,
including the layoffs
. In fact, the bonuses, the payouts, were big at almost all of these firms, solving nothing.
I am amazed that this late into the downturn, we still don't have any capitulation, just endless rollovers of obligations and waivers like the one that we just saw
get. No homebuilders close, thereby permanently taking off inventory, and no banks and brokers merge.
Lets hope this new decline -- third day in a row -- might stimulate some mergers. Those would put a real floor under here. Yet I don't know if we will get them, because managements at most of these firms are too scared to pull the trigger.
: Disgusting that the
( TRB) deal's bonds are already trading at a big discount. That's employee money on the line. Why didn't someone in the government stand up to this deal? Why didn't the Labor Department? That will be a great travesty when it fails. ... Shockingly bad numbers from two companies that are addicted to buying back stock and that paid huge premiums --
. I always knew
was doing terribly, I am surprised that the writedown didn't come earlier. Macy's? What can I say? How does this company skate and
only take lumps?
At the time of publication, Cramer was long Sears.
We're Still Early in the Recession Cycle
Originally published on Feb. 7 at 10:34 a.m. EST
This is another "Where are we in the cycle?" day. You see it in every trade that's being done. We are selling the hot stocks and the momentum stocks -- what we always do when we are in a recession -- and we are buying the stocks that do well coming out of a recession.
Of course, there are others who are buying stocks that do well regardless of a recession --
-- but those are few and far between.
This is a battleground, a tug of war between
( BSC) -- which is up despite an indictment story! -- and
, which hasn't even reported a bad number but is presumed guilty. This is a tug of war between
, which is doing terribly and is going up, and
, which is doing well but not as well as we thought, and going down.
Who is winning? Pretty simple: the early cycle --
( MER) -- vs. tech and ag and the days-of-yore stocks.
We will shift again sometime, but not now -- too much money going into the early cycle for it to reverse, particularly because we know the
will keep cutting, and that will turn around things year-over-year with the consumer, and
that's all that matters.
At the time of publication, Cramer was long Altria, Citi and Sears.
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