"I have dropped the term 'subprime,' because it's
mortgages" that have problems, Jim Cramer said on TheStreet.com TV's Wall St. Confidential
Web video Thursday. "All mortgages that were written between 2005 and 2007 I think are corrupted."
Cramer said he came to this conclusion by doing his homework. He said he's read the
conference calls and gone over
, which is a "disaster."
"You can read all the conference calls of the homebuilders and you can study their balance sheets and you'll see how impaired a lot of the balance sheets are, particularly
and Beazer, but there are two conference calls that must be read," Cramer stressed.
The first one is the "incredibly long and tedious"
call, he said. That is where people heard for the first time that there is no such thing as subprime and that it's all mortgages that are bad "because of the home equity loans that were piggybacking and because of the incredible rise in how much your rate is if you took a 2/28
loan, which is the most popular product."
From the Countrywide conference call, people will also find out that the company's CEO Angelo Mozilo doesn't think the homebuilders will turn until 2009, Cramer said.
The other call is
Annaly Capital Management
, with Michael Farrell, the company's chairman and CEO. There are "some incredible allusions to Moscow and Napoleon," Cramer said. Farrell used an analogy of when Napoleon sent 400,000 troops to Moscow and only 10,000 returned. Farrell believes the same is going to happen to the hedge funds and buyers of this product.
"What the essence is besides the metaphor is that the whole system is as corrupted as it was in 1990 and 1991, maybe a little bit less," Cramer said. "In 1990 and 1991, almost every major money center bank was insolvent, and most of the big regionals either went under or were so impaired that they had to do shotgun marriages.
"If you read Annaly's note and if you read the Countrywide conference call, you will be every bit as negative as I am and realize that anyone who owns these mortgages, anyone who puts them together, anyone who issued them and anyone who provided houses that needed mortgages, could very well be wiped out in this environment," he said.
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