Jim Cramer fills his blog on RealMoney 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:
- more home-equity losses,
- the power of the heartland, and
- Icahn vs. Yang.
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Still More Losses on Home-Equity Loans? You Don't Say!
Originally published on Tuesday, May 13, at 1:33 p.m.
Let me say at the outset that I am not accusing anyone of lying. But it is disheartening to see
Bank of America
widen the loss guidance on home-equity loans.
Look, here is the truth about home-equity loans, and everyone in the business knows it, but nobody talks about it.
A gigantic amount of people took out home-equity loans after putting little money down for their houses. They stop paying back the home-equity loans and they gamble they will not be foreclosed. They are mostly right. The complications with how these loans were made and who owns them and the smaller size of them make them really hard to focus on. The people who took them are now using their credit cards and will most likely default on them, too, which is why
should be sold up here.
What bothers me is that the banks did no due diligence and don't seem to know the collateral. If you bought a home with little or no money down and you attached a home-equity loan to it, the loan's going to fail. You know it, I know it, Bank of America knows it. But they persist with the fiction that there won't be that huge a number of defaults.
Now there is a bit of a Sarbanes-Oxley problem. The banks are not supposed to project losses or gains off their current book. The Sarbanes-Oxley rules pretty much insist that you can't take the writedowns ahead of time.
But you can still project the darned things. You gave a mortgage to people in 2005-2006. They took a home-equity loan out right after. They are going to skip.
That's what you need to know.
That's what the banks know.
Why don't they just tell us the numbers for heaven's sake? Are they worried they are scaring investors?
The truth has no deadline. The banks could come out and say, "OK, here are the numbers, here's what's happening."
They don't do it, and we get this ridiculous pattern of short-squeeze-and-sell that has marred the stocks for months and will continue to do so. This is still a group to avoid.
: Looks like no one waited for the natural gas numbers. Oh well, still the year of natural gas and the most compelling stories out there.
At the time of publication, Cramer had no positions in the stocks mentioned.
Heartland Thrives While the Coasts Wither
Originally published on Wednesday, May 14, at 2:52 p.m.
It's time to ask a simple question: Is this a coastal downturn? Over and over and over again I have heard the same thing from every company I follow: the problems are in California and Florida. I don't care if it is the spirits business or the homebuilding business or the office supply business, the problems are in these big coastal states as well as pockets of slowdown as we go up the East Coast (
captured that in its call last night).
I don't want to make too little of the problems. The news out of everyone today is so bad other than
-- dividend boosts and buybacks -- that it's hard to believe that you can limit the losses to a couple of states. (I am lumping the negatives:
, which I want to buy;
( FRE), which is actually bad but not as bad as was feared; and the same retail, which is good vs. big guidedowns.) But the problems are solvable if only because the heartland and the companies within -- the new techs like
-- is doing so much business. Plus, anyone in energy or
energy is can hardly keep up with the orders. In fact, if you got that
strike settled -- that's just killing
-- you would see how crystal-clear the coastal problem is.
Of course, we don't get anything from Washington other than a rebate that goes to all, not to the states that need it, and a $300 billion farm bill --
not a housing bill
-- that goes to the most affluent folks in the country. A $10,000 to $15,000 tax credit if you bought a house might just make the difference to the coasts. Bob Toll suggested as much last night.
You know I think this market bottomed when
( BSC) collapsed. I remain bullish, and the further containment of the problems to the coast could be the next theme you hear in the recovery of the economy.
At the time of publication, Cramer was long Owens Illinois.
Icahn's a Pro, Yang's an Amateur
Originally published on Thursday, May 15, at 4:01 p.m.
, be prepared to get pantsed. Carl Icahn has spent much of his life working just on the kind of situations that CEO Jerry Yang just engineered -- a situation where entrenched management doesn't own a lot of stock but doesn't want to lose its job and is willing to screw all of the other shareholders.
I have believed from the beginning that Yahoo! did
deal in good faith with Steve Ballmer of
. I believe that every time Ballmer tried to reach a deal, Yang went higher. He wasn't a seller because he believed he owned the company.
Now Icahn has put together a slate that I think can be a winner. I think he knows that you can buy the stock at $23-$25 and flip it to Microsoft after the election.
I think he is right. And I think he will have the support of a lot of shareholders, new and old alike, who feel like they've got a great opportunity or they have been wronged. I imagine that
, which just disclosed a big holding, isn't a Yang supporter. The day this deal broke down, the stock should have broken to $22. It didn't, I believe, because Icahn saw this kind of hubris and wanted to get to work. I predicted it immediately on "Squawk Box" and on video because Icahn lives for these situations.
Icahn's a pro, Yang's an amateur. Any weakness down to $25-$26 and this is a buy. Why not here? Time value of money -- this is going to take some time, and if the deal ultimately gets done at $33-$34, you are going to have a long time waiting, and the spread needs to be bigger.
: The tech trade is so NOT supposed to be happening right now. I have to tell you the action is so bullish that it takes your breath away. I have owned this
forever, and it has been such a stinker. Suddenly it is the cat's meow! Go figure.
At the time of publication, Cramer was long EMC.
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