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Housing Crisis Just Beginning

Originally published on Aug. 27 at 6:26 p.m. EDT

Too many stories saying the crisis has past. That's why I think the banks got whipped. What the sellers may not realize is that 1) the hedge fund crisis is past, but 2) the housing crisis is just beginning.

The housing crisis is all resets and evictions. It's something that is beginning to dawn on people at the highest levels -- great piece by Larry Summers in the FT -- that the woes are too big for individuals to handle.

The most important thing you can do right now is go listen to that Toll ( TOL) call, and not just because there is a hysterical interaction between Doug Kass and Bob Toll. It is not clear how many homebuilders will make it through this period, but the one that I am sure about is Toll, because it builds houses that only people who are wealthy or at least upper-middle-class can afford.

Toll can help you get a loan. Its buyers have a miraculously low default rate. They are good bets.

That's the good news.

The bad news is that almost everyone else is a bad bet, and unless you have an unregulated market, like we had, in which you can trick people into taking crummy loans and then pawn them off in a package to some German bank, you are not going to get loans for these people at prices they can afford.

I have read at least a half dozen articles about how things are finally getting better, and I find myself thinking, Where are they getting that? My certainty about the Fed has to do with the fact that there is not a shred of evidence that things are getting better, and I am not one of those people who is willing to say, "Nobody thinks it is going to bottom, so it must be able to bottom." That's like saying you can see the bottom of the Marianas Trench when no one else can. You can't.

I reiterate that when this era is through, you will have some homebuilders that won't make it, and I think that two of them will be Standard Pacific ( SPF) and Beazer ( BZH). At least let's wait until that happens before we say "the bottom is here" like so many others seem to be willing to do now.

As long as I hear that kind of talk, we will not have a good market. Good news is bad news now when we are in a moment in which the bias has switched to being worried about growth and not inflation.

Not a bad market though. Just a mark-time market.

At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.


Think About What Not to Sell

Originally published on Aug. 29 at 10:10 a.m. EDT

Trust it? Trust what? The builders? The bankers? Anything financial? This is a seasonably good time, but that was wrecked Tuesday. The anemic bounce in the financials may return. At least the group didn't rip upward at the open, which would have been deadly.

How about looking at it like this: what not to sell?

I wouldn't sell semis or networkers, like the Ciscos ( CSCO), because the financial business, where the weakness is, won't affect them much.

I wouldn't sell ag.

I wouldn't sell oil.

And I wouldn't sell health care; those names keep catching bids. Notice that Schering-Plough ( SGP) is still above its secondary offering price. Notice that Celgene ( CELG) hangs in. And they can't crush the device companies or the health care cost-containers -- you have to like the Medcos ( MHS) of the world, and let's lump in CVS ( CVS), for that matter.

I have to admit that after Tuesday's shellacking I was drawn to Goldman Sachs ( GS). I also thought that it was intriguing that they got to the Northern Trusts ( NTRS) and the State Streets ( STT) and the Bank of New Yorks ( BK) Tuesday, traditional repositories of safety in the banking world. When they get to Chubb ( CB), my insurance gold standard, we'll have to believe it has at last run its course.

Why Goldman? I think it is going down at this point because you can raise a lot of capital selling it. At last, if you believe the numbers, it's cheap enough to start buying. Goldman's not defenseless like a State Street and it is more nimble.

Of course all of this revolves around whatever is AAA-rated. I would look at it like this: If you are worried that a company has something to do with AAA-rated bonds, stay away from it for now until we see genuine evidence that the contagion stopped somewhere. I know the market thinks it stops nowhere, so that's important.

All in all, I think the dark day that was Tuesday has produced hope that Ben Bernanke will accelerate his rate cuts or make them bigger.

I know that there are good people on this site who believe the prospect of a cut doesn't matter. I ask, did you just pass up the 800-point rally we had off the bottom? Did it mean nothing to you? And aren't you confusing the fundamentals with the stock prices, which, at fulcrum moments, is just a bad move?

I think you are.

And I am losing patience with those who tell us that we can't bail out this guy or that guy. At this point I could care less if we bailed out the people at NovaStar ( NFI). That's how bad things really are and how in need of relief we are.

I also am beginning to resent those who confuse relief for trading desks with relief for the 310 million people who don't work on trading desks.

They matter, too.


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 CVS and Goldman Sachs.


Transocean's Swell Here

Originally published on Aug. 29 at 3:43 p.m. EDT

Before the private-equity nonsense struck, Transocean ( RIG) was rivaling National Oilwell Varco ( NOV) and Schlumberger ( SLB) for king of oil service.

It should have been: Transocean has the longest contracts, the best day rates, the least leverage to North America -- essentially none -- and the best deepwater profile. Then Transocean went and did the smartest thing it could possibly do: merge with GlobalSantaFe ( GSF), offering a fantastic new company to shareholders. It was a brilliant move.

Interestingly, the deal put the stock in the hands of arbs, the worst possible place to be. The arbitrage style has been bunched with so many other strategies that have been failing that if Transocean had done nothing at all, instead of bettering itself with this transaction, its stock would be much, much higher -- probably closer to $120.

You can only imagine, though, if you are an arb in lots of fields, including fixed income, and the redemptions are coming all at once and fast and furious from the funds of funds -- what are you going to sell: CDOs or Transocean?

So Transocean got tagged.

Now is the time, with oil at $73 a barrel, to buy some Transocean and take advantage of the arb throwaway. Transocean is so much cheaper than Schlumberger at $95, and it could be up gigantically as the deal draws to a conclusion and is fully funded.

I know people don't even want to touch this stuff. But I know that everyone is going to be rooting around and dusting off their oil and gas plays now that oil declined to slide into the $60s.

Transocean's the play.

Random musings: Nokia ( NOK), EMC ( EMC), Cisco ( CSCO), Google ( GOOG), Texas Instruments ( TXN), Research In Motion ( RIMM), Adobe ( ADBE) and Apple ( AAPL) all distinguishing themselves and worth taking regardless of Fed action.

At the time of publication, Cramer was long EMC and Transocean.
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 Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. Click here to order Cramer's latest book, "Mad Money: Watch TV, Get Rich," click here to order his book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

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