- dangerous financial media,
- the right read on housing data, and
- life after the bad jobs number.
Warning: The Financial Media Can Be Hazardous to Your Portfolio
Posted at 2:12 p.m. EDT, June 29, 2009 You want a rebuke to the "never-ending woes of commercial and residential real estate mortgage bonds"? You get one every day in this market, and today is no different. Look at what is up big today: Genworth ( GNW - Get Report), Lincoln National ( LNC - Get Report), Wyndham ( WYN), Regions Financial ( RF - Get Report) and Zions ( ZION - Get Report). Each in its own way needs the residential or commercial real estate markets to be robust to thrive, and if the myriad articles I read about the horrible state of the mortgage bond market and the dim commercial real estate prospects were true, why would you be making money in Wyndham, a gigantic timeshare company? How could Regions and Zions be rallying? They are among the worst of the worst; unless you consider Genworth and Lincoln National, which are supposed to be roadkill because of all of their mortgage bonds. Something doesn't make sense. I think it is the articles, which are too easily written and written as if any of these institutions now needs to sell them. The simple truth is that by not listening to these lost-cause articles, the managements of these institutions have been able to hold on for better prices and preserve capital. (And I am not even including MBIA ( MBI - Get Report) or XL Capital ( XL) both of which are rallying today pretty strongly.) I believe these articles are vestiges of pre-March, when the moment of nationalization should have happened but Ben Bernanke and Tim Geithner simply refused to let it happen. I am waiting for an article that says, "Because so much capital has been raised and because the earnings are so great, these bonds can be kept until they dwindle to nothingness and it won't matter." Although it will, because hundreds of billions of them will come back to life if things get better. I am not a Pollyanna -- a trillion will be worthless, maybe even more. But much, much more than a trillion has been written off. So it won't even matter in the end. Random musings: Memo to the bears and lovers of ultra ETFs -- the bulls are being shameless and are 100% to blame for the rally here, which is obscene and wrong. How's that? ... As absurd as this sounds, I do not think that Sallie Mae ( SLM - Get Report), my speculative stock of the year, is done going up. Its book of old loans alone is worth $15, valuing the actual company (with real earnings power) at nothing! At the time of publication, Cramer had no positions in the stocks mentioned.
Stay Ahead of the Lagging Housing Index
Posted at 9:42 a.m. EDT, June 30, 2009 Terrific! The Case-Shiller index says home prices bottomed in June! That's right, June figures showed that all 20 metropolitan areas increased since the previous month, ending the long slide, and the keepers of the index declared that a bottom in housing had occurred June 30. There's a problem, though, a problem I knew that would cause an issue when I made my prediction that prices would bottom June 30. The index doesn't give you a June reading until the end of August. At that point it will be so painfully obvious it won't matter. Yep, it will take two months for this silly index to register June readings, and if you're an investor, by then it will be too late. It will be obvious that foreclosed property held by banks will be worth more than it was when the institutions repossessed them, and that the Other Real Estate Owned category will begin to go down in value from sales or actually be viewed as a positive because there will be so little inventory left, a combination of low price, low rates -- remember that 5.5% rate that freaked people out? we've round-tripped that back -- and little new home construction. The hazards of waiting for an all-clear have never been more deadly for those debating buying Bank of America ( BAC - Get Report) or U.S. Bancorp ( USB - Get Report) or Wells Fargo ( WFC - Get Report), which are so levered to Case-Shiller. I own BAC and WFC, and I have to tell you that by the time you get the all-clear, I expect to be cutting these positions in half to take the gains I expect when everyone recognizes the housing bottom. As usual, I do not expect this to be good news for the homebuilders. The homes being sold are foreclosed homes that must be sold, and they are driving down the cost of a new home to the point where it is not economical for many builders to build, something that should have happened a year ago. I see people buying Lennar ( LEN - Get Report) and KB Home ( KBH - Get Report) and that's fine, but don't do it on my account. Oh, and despite the endless attempts by editors to somehow imply that a foreclosed home sale isn't any good vis-a-vis a non-foreclosure sale, I come back and say, so what? A home sale is a home sale. Anything that removes inventory gives you equilibrium, and equilibrium means an end to house price depreciation, which was the root cause of the recession and was the genesis of the short-lived garden-variety depression bracketed by the fall of Lehman and the announcement by a few key banks in early March that they were profitable. Random musings: Dell ( DELL) device is all about mobile Internet. So is the Comcast ( CMCSA - Get Report) / Clearwire ( CLWR) announcement. These are the biggest thing to hit tech since the Internet itself. Best play: Qualcomm ( QCOM - Get Report), the brains behind 4G and a stock that has been stuck at $45 for a very long time. At the time of publication, Cramer was long Qualcomm, Bank of America and Wells Fargo.
Don't Paint Everything With the Jobs Brush
Posted at 1:43 p.m. EDT, July 2, 2009 Does unemployment trump everything? Does it trump Apple ( AAPL - Get Report) sales? Does it trump 3G and 4G? How about Chinese orders? How about General Mills' ( GIS - Get Report) numbers? Yum!'s ( YUM - Get Report) business? Does unemployment trump pending home sales? Or order pick-ups in autos and a subsequent bottom? That's what you have to ask yourself when you sell today. You have to ask yourself whether 40,000 or 60,000 jobs trumps everything good that has happened. You have to ask yourself if the government were to take 100,000 of those people and give them jobs taking care of federal lands and parks or working at the post office or having them go into a conservation corps, whether we would be up and not down. I point this out because perhaps we are letting one piece of data -- even though I submit it is the most significant piece of data -- overwhelm a worldwide recovery, albeit a slow one, and cause us to think that next stop is 6300 on the Dow. We have become so binary as to be ridiculous. Here's what I see happening: a slow recovery, one that doesn't produce a lot of jobs and a lot of spending but some decent profits because of the massive layoffs and the shuttering of facilities. That's not a recipe for Dow 10,000, but it is also not a recipe for Dow 6300. It is more of a recipe for rangebound with perhaps the low end being the high 7000s and the high end being the high 8000s. No lower, because job growth will be nil without a second stimulus. No higher, because if we get a second stimulus -- which we need -- we will not be able to catch fire and instead will just smolder along. Therefore I think it is easy to be bullish on the way down for defensives and high-yielders, as I am slightly less bullish on the way up to be in industrials and oils. In reality, a diversified portfolio gets you there with a little more cash than usual until the market goes toward Dow 8000. At the time of publication, Cramer was long General Mills and Yum! Brands.