Cramer on BloggingStocks: Cheap housing markets will sow the seeds of a rebound
Posted by: in Latest NewsFiled under: Earnings reports, Deals, Private equity, Market matters, Merrill Lynch (MER), Colgate-Palmolive (CL), Federal Natl Mtge (FNM), Comcast Cl’A’ (CMCSA), Procter and Gamble (PG), Verizon Communications (VZ), Unilever ADR (UL), Housing, Cramer on BloggingStocks, Recession
TheStreet.com’s Jim Cramer says 30%-40% discounts have a way of bringing out the buyers.
Home prices in Stockton, CA are down 40%. In Daytona, FL, houses are priced at 30% discounts with amenities. The Inland Empire of California — you name your price. That’s how the madness ends: with large price cuts, the way it ended in Bradenton, FL.
And believe me, we get more Fannie Mae (NYSE: FNM) (Cramer’s Take) money — forget these darned covered bonds, let’s just solve the problem. You get buyers after a year and a half that buyers went on strike.
Remember, while we can’t live in stocks, we know they trade like houses, and when the first stocks to go down bottom, the others are not far behind.
With the new housing bill, the rate of foreclosures will go down and the bargains will be quite evident for those who want to take them. Either a new administration will remove the fear of the illegal immigrants from buying homes — they were a large part of the hard hit Arizona, Florida and California markets. Or the dramatic decline in inventory at the homebuilding level has given us breathing room.
It is all coming together, just when no one sees it coming. Because you have to look at the hardest-hit regions to know what’s going on.
This morning, the Wall Street Journal noted that more clarity on Merrill’s (NYSE: MER) (Cramer’s Take) arrangement with Lone Star is needed, and speculates whether Lone Star is going to renege on this deal, and whether this isn’t a fair, arm’s-length deal.
I say give me a break. These mortgages, if held with a private company with a servicing arm that is in the subprime business — Accredited Home Lending (Cramer’s Take) — and has assumptions and models for this time — would not have bid if it didn’t want them. I think the loan is fine.
More importantly, if the homes are down 50% and you’re buying mortgages that somehow — we don’t even know — relate to those homes, you can figure you can purchase them for 20 cents on the dollar and flip them for 50 cents on the dollar if you can work out the financing. And Lone Star can.
This deal works because of depressed markets like Stockton and Daytona and the Inland Empire. Not because of the financing.
You have to pay attention to the real markets, not the Wall Street markets if this stuff is going to be successful and I think it will at these prices.
I continue to think that Merrill was a game changer and that things look brighter now each day.
Random musings: Did Unilever (NYSE: UL) (Cramer’s Take) lose share to Colgate (NYSE: CL) (Cramer’s Take) and perhaps Procter & Gamble (NYSE: PG) (Cramer’s Take)?
It would seem so.
I have to admit that the Comcast (NASDAQ: CMCSA) (Cramer’s Take) quarter shows powerful video-on-demand numbers, and you can see with FIOS is the way for Verizon (NYSE: VZ) (Cramer’s Take) to go.
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RELATED LINKS:
Home Inventories Fall, but Foreclosures Rise
Cramer: Housing Bill to Move Builders, Banks
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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. At the time of publication, Cramer was long PG.
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