Cramer: "What We Need to Get to a Turning Point"
Enviado: 26/11/2007 15:18"What We Need to Get to a Turning Point"
By Jim Cramer
RealMoney.com Columnist
11/25/2007 8:59 PM EST
"Beware of a turning point. No, it is not here. Not yet. Not until we get that failure that comes from a bank cutting off credit or an examiner having the gumption to force markdowns.
It hasn't happened yet because every bank has been forgiving with its homebuilding revolvers -- the lifelines -- and the Fed has enough ridiculous and, quite frankly, embarrassing pop-offs who are compromising both the cherished respect of the Fed and the authority of its chairman. Their lack of discretion and mixed Fedspeak, more than anything right now, has created a state of insecurity that is unhealthy for the markets.
But there is something else happening.
We are seeing a remarkably monolithic view that things are going to get much worse and that the housing crisis is just beginning. We don't usually get that kind of uniformity of thought when things are just beginning.
We tend to get that kind of uniformity of thought when things are near an end, even as the end could be a rout that is finally so obvious to the Fed that it can't help but do something. Judging by where the 3-year Treasury is vs. the federal funds rate, we are soon to be upon it.
Let's not forget that this all begins with housing. Let's not forget that in many areas the houses are still being built as part of a vast and soon to be Pyrrhic attempt to stave off bankruptcy by trying to keep impairments down.
An impairment happens when the cost of the land and the cost to build a house on it can't possibly be recouped by its buyers. We all know that this is happening, but we know that no bank is anxious to call the revolvers lest they have to take the real estate as "other real estate owned." Then the examiners would recommend action that could make the lenders not viable.
If we have a recession, my theory will not pan out and we are due for another bad down leg. But if we can avoid it and have these homebuilders stop building because of bankruptcy then we will work off the inventory over time and housing prices will stabilize, albeit at lower prices. Once that happens, the restoration of the housing market will begin and we will eliminate the greatest pressure on the system.
I am reluctant to trumpet this view, because I am not calling anything but a recognition that there is no one in this country except the paid shills of the Realtors' associations who agrees with this view. When it becomes quintessentially obvious that no one thinks that buying a house is anything but a massive mistake I have to believe that we are closer to when you should buy a house.
Now, houses are to some degree like stocks. If you consider the housing situation like the Nasdaq with its peak in 2000, you can see we have traced out a total retrenchment -- using the Philadelphia Stock Exchange Housing Sector Index, or HGX -- going back almost to the beginning of the bubble. I would expect more than a retracement, as things tend to overshoot, but all that will take is a couple of bankruptcies of the publicly traded stocks in the index and we will be there.
I believe that the index, which peaked well before the housing boom ended, will signal the same thing when it gets back to its 2001 levels, which is where this all began courtesy of a desperate Fed. We will get that desperate Fed again, and we'll reach the bottom. Believe me, this is not a call to buy the homebuilders. They are all almost finished as investable entities for now.
Using a 1990 mode, what bounces back first are the share-takers, the Wells Fargos (WFC - commentary - Cramer's Take - Rating) and the Wachovias (WB - commentary - Cramer's Take - Rating). I imagine they bottom somewhere near here.
Again, it is an out-in-time situation.
But I just don't think I can read or hear about one more "when the resets begin we are really going to be in trouble" stories, because we are so in trouble now that it will be resolved in a rapid six months' dissolution of the hangers-on in all the businesses, the last of the housing Mohicans, and we all will have to buy. "
(in www.realmoney.com)
By Jim Cramer
RealMoney.com Columnist
11/25/2007 8:59 PM EST
"Beware of a turning point. No, it is not here. Not yet. Not until we get that failure that comes from a bank cutting off credit or an examiner having the gumption to force markdowns.
It hasn't happened yet because every bank has been forgiving with its homebuilding revolvers -- the lifelines -- and the Fed has enough ridiculous and, quite frankly, embarrassing pop-offs who are compromising both the cherished respect of the Fed and the authority of its chairman. Their lack of discretion and mixed Fedspeak, more than anything right now, has created a state of insecurity that is unhealthy for the markets.
But there is something else happening.
We are seeing a remarkably monolithic view that things are going to get much worse and that the housing crisis is just beginning. We don't usually get that kind of uniformity of thought when things are just beginning.
We tend to get that kind of uniformity of thought when things are near an end, even as the end could be a rout that is finally so obvious to the Fed that it can't help but do something. Judging by where the 3-year Treasury is vs. the federal funds rate, we are soon to be upon it.
Let's not forget that this all begins with housing. Let's not forget that in many areas the houses are still being built as part of a vast and soon to be Pyrrhic attempt to stave off bankruptcy by trying to keep impairments down.
An impairment happens when the cost of the land and the cost to build a house on it can't possibly be recouped by its buyers. We all know that this is happening, but we know that no bank is anxious to call the revolvers lest they have to take the real estate as "other real estate owned." Then the examiners would recommend action that could make the lenders not viable.
If we have a recession, my theory will not pan out and we are due for another bad down leg. But if we can avoid it and have these homebuilders stop building because of bankruptcy then we will work off the inventory over time and housing prices will stabilize, albeit at lower prices. Once that happens, the restoration of the housing market will begin and we will eliminate the greatest pressure on the system.
I am reluctant to trumpet this view, because I am not calling anything but a recognition that there is no one in this country except the paid shills of the Realtors' associations who agrees with this view. When it becomes quintessentially obvious that no one thinks that buying a house is anything but a massive mistake I have to believe that we are closer to when you should buy a house.
Now, houses are to some degree like stocks. If you consider the housing situation like the Nasdaq with its peak in 2000, you can see we have traced out a total retrenchment -- using the Philadelphia Stock Exchange Housing Sector Index, or HGX -- going back almost to the beginning of the bubble. I would expect more than a retracement, as things tend to overshoot, but all that will take is a couple of bankruptcies of the publicly traded stocks in the index and we will be there.
I believe that the index, which peaked well before the housing boom ended, will signal the same thing when it gets back to its 2001 levels, which is where this all began courtesy of a desperate Fed. We will get that desperate Fed again, and we'll reach the bottom. Believe me, this is not a call to buy the homebuilders. They are all almost finished as investable entities for now.
Using a 1990 mode, what bounces back first are the share-takers, the Wells Fargos (WFC - commentary - Cramer's Take - Rating) and the Wachovias (WB - commentary - Cramer's Take - Rating). I imagine they bottom somewhere near here.
Again, it is an out-in-time situation.
But I just don't think I can read or hear about one more "when the resets begin we are really going to be in trouble" stories, because we are so in trouble now that it will be resolved in a rapid six months' dissolution of the hangers-on in all the businesses, the last of the housing Mohicans, and we all will have to buy. "
(in www.realmoney.com)