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:

  • oil's decline,
  • the misleading inflation headlines, and
  • Fannie and Freddie as martyrs.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.


Amateur Hour Drags On

Originally published on Tuesday, Aug. 19, at 8:58 a.m. EDT

Who leaked? Who told Barron's that there is a plan to take over Fannie ( FNM) and Freddie ( FRE), and then who leaked yesterday and denied such a plan? Who tolerates this nonsense at Treasury, and who speaks for Treasury? Did the SEC not know that the short-selling suspension coupled with a "bad article" about Fannie and Freddie could undo months of "they are well-capitalized" rhetoric from the regulators and the administration? Could the administration be so stupid as to spend thousands of man-hours investigating leaks about Iraq and let this nonsense go on, thus destroying billions upon billions in capital? Does anyone really know what they are doing here?

The Treasury-SEC amateur hour is a wondrous thing to behold. I am not excusing Fannie and Freddie: They are worthless. That's clear from the bad loans they made. However, they could be a superior dumping ground, a genuine Resolution Mortgage Trust, if the administration would just think this through and realize that there has to be a place for the FDIC to dump bad mortgages when they seize a bank. Otherwise, they will be running dozens of regional banks and using up capital at a reckless clip.

What seems to be missing in this morass is a plan -- a plan that is active, not passive and reactive -- from someone of responsibility in this government. They are so steeped in laissez-faire that there's an actual debate about doing NOTHING to help figure out this house price depreciation -- they are actually debating the fate of the U.S. economy and whether anything should really be done to fix the banking system. What an incredibly preposterous position! What are we doing? Teaching everyone a lesson at the taxpayers' expense? Why doesn't the government just close the ne'er-do-wells and take them over and then redistribute the equity after sanity replaces recklessness? Why can't they be SMART?

I am aghast how predictable all of this is. The SEC suspends the short-selling rule just when the earnings collapse of the banks allows short-sellers to help the rout and make capital-raising impossible. That then drains the FDIC and causes a total lack of confidence in anything that the agencies or Treasury says, let alone the institutions like Citigroup ( C - Get Report) and Washington Mutual ( WM - Get Report) that so desperately need to raise capital -- of course, they would deny that in a heartbeat.

How can all of this obvious collapse-to-be not be stopped?

Simple: Because they don't want it stopped. On the one hand, they leak to Barron's that they are going to take over FNM and FRE; on the other hand, they strenuously deny it.

One or the other.

Can't have both.

So uncertainty breeds reckless short-selling, an inability of the bulls to actually deploy capital -- they really want to!! -- to these situations, and the despair and ruin they are precipitating.

Just beyond-belief dumb. And nobody says a thing.

Random musings: Once again, the July producer inflation index reflects the top of commodities, but I am getting tired of saying this stuff, because the futures react to each piece of rearview-mirror news as earth-shaking until it is figured out. ... Housing starts were the lowest since 1991, when we had a lot fewer people -- again, BULLISH, but the market interprets it as bearish as if we need more starts! Good grief!

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


Look Beyond the Headline on the Inflation Number

Originally published on Wednesday, Aug. 20, at 9:48 a.m. EDT

The headline's scary as all get-out: "Jump in Wholesale Prices Shows That Inflation Remains High." No way that interest rates would be going down on that. No way we should be thinking of anything but a tightening by the Fed.

But neither is the case. Rates are going down. The Fed's not going to do anything, it is scared of its own shadow and is -- as usual -- paralyzed about the big issue of the day, house price depreciation.

Which brings me to the index itself, the one that "soared" the worst in 27 years.

I am never a top-down guy, I am a bottom-up guy, and if you break down the components that screamed higher, you will understand why inflation has not only peaked but is coming down hard.

First, the big issue, before we even get to the index, the most important component in inflation isn't included in the index -- home prices. We have seen double-digit declines throughout the country and 30% to 40% declines in the big population growth areas. That they aren't included in this index or the consumer price index means that the index is a bit of a canard. If the largest and most important asset you want to buy is down big year over year, how can inflation be soaring? How?

Now, to the components:

The biggest change year over year is in iron ore and scrap steel, up 110% year over year and up 5.2% from June. The best forward indicator of scrap is the biggest scrap steel: Sims ( SMS) went from $40 when this index was compiled to $26 today. The stock is even with last year. That's a 35% decline from when this number was created, and it is flat year over year.

The next, crude petroleum, is again a big decline. The price of crude had doubled year over year; now it is up a little more than 50%, but the month to month is incredible, down more than 25%.

Even bigger is the next component, natural gas. It was up 87% year over year, and up 7.8% from June 2008. Now it is down almost 50% from June and is flat year over year.

Now the next three biggies -- soybeans, corn and milk and rice -- are up 84%, 80% and 94% year over year but down month to month. And as Richard Bond, CEO of Tyson ( TSN - Get Report) will say on my show today, "Mad Money at the Half," more than half of those gains are ethanol mandate and ethanol mandate-related (farmers switching to corn because of the subsidies, driving up the other grains because of scarcity of planting). Scrap the mandate, and you'd crater these year over year. Shortening and cooking oil, up 56.5% year over year and up slightly for the month to month, would be down very big without the mandate.

Finally, home heating oil is up 80% year over year, but as the Spectra Energy ( SE - Get Report) CEO told me recently, the switching from oil to natural gas is in earnest because of this increase, and 63% of homes are already heated by natural gas.

If you add all of these up, you are going to see a collapse of commodity prices of epic proportions.

Which is why the numbers are dead wrong about the future. If they are extrapolated to today, the Fed can declare inflation victory and cut rates. It's a gigantic difference.

Now, factor in the cost of wages, which are going to be down year over year because of unemployment, and you get a defined deflationary scenario, that would make rate cuts not only possible but probable.

So I dismiss the headlines on inflation. After you see these raw components, I hope you agree.

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


Fannie and Freddie Could Be the Martyrs

Originally published on Thursday, Aug. 21, at 7:45 a.m. EDT

The most important positive that must occur in this economy is for housing to stop going down. It is even more important than oil going down, because it cuts to the core of consumer confidence and credit.

House prices are coming down, but that's not enough. We also need lower mortgage rates, and the spread between the mortgage rates and Treasuries is so high that it's hard to make case that you are getting any sort of bargain at all on the money you are trying to borrow. It should be a great time to buy a house -- no demand, plenty of supply -- but mortgage rates are just too high.

But we all know how they would go down and go down big -- if Treasury took over Fannie ( FNM) and Freddie ( FRE) this weekend. If you back off Fannie's and Freddie's bonds, you get a decline in rates of mammoth proportions. It might make sense to buy a house simply because the rates would be so low.

I believe that's one of the reasons Wells Fargo ( WFC - Get Report) and JPMorgan ( JPM - Get Report) rallied yesterday. The possibility of the long national housing price depreciation ending-- with the congressional housing legislation, the decline in housing starts, the tax credit for buying, the 30% to 40% declines in many markets and now an end to the Fannie/Freddie chaos -- could be in our grasp.

Sure, the common-stock shareholders would be crushed. But if they make the bond holders whole -- and that's all, but that must happen -- you are going to see good things occur, not bad.

It's time people started thinking that way.

At the time of publication, Cramer was long JPMorgan.

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. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

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