Cramer: Housing "Total Crisis"
Submitted by
CalculatedRisk on Mon, 07/30/2007 - 3:06pm (69 comments)
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Is the world coming to an end?
Cramer on Calculated Risk!!!
God, people dont really listen to this idiot do they. (rhetorical question)
Moodys honest? Fed can save the market by lowering rates 1%? How does that affect the 10 year and CDO risks?
Boo-yah!!!
"total crisis"
How about, "total idiot" or "totally late prediction" ?
I'm sure most of recall Kramer's bullish stance on housing not too long ago.
Have you been drinking CR?
This may actually be the first indication that things are going to start looking up! I'm psyched!
Did he really say, at the very end "I've sold all my real estate"?
This is pretty much like yelling "fire" into the theater intercom from outside the theater, no?
Outsider, that was my initial reaction too! I just thought this piece was hilarious, but I took down the video because I didn't want to look at Cramer.
Best to all.
I have been working in real estate development in the IE for the last three years after relocating from SD. I think a lot of what Craemer says is valid. But the IE is a huge area and various areas will perform differently.
Cities like Hemet and San jacinto will just crater, they are so far out from the job base.
Older cities like upland and claremont don't have that much new product and many residents have been in thier homes for years.
The High desert has a large supply, but there is a job dirver related to globalization that will support wages and foreclosures may not be so bad. Rancho Cucamonga had so much new construction and such price appreciation that there will be major foreclosures.
I also know of a number of private builders who are putting projects on hold but am agast that manhy of the publics keep building.
Personally, I think we are in for a 2 year 10-30% price adjustment before prices stabilize. This area will have growth because it is still more affordable than LA/Orange County and southern california has a decent jobs situation. LA and Orange County has become so crowded that there is also a quality of life factor. Of course, a lot depends of the capital markets situation.
Ok, keep your pants on folks. I was in my gym locker room when this "episode" came on the boob toob. He prefaced it as "I'll be more bearish than the bears." As such, it was a theoretical exercise, not his take on things. He was playing monkey boy, as usual. The guy is a buffoon.
That said, the CNBC segment that was on before was even more ridiculous.
interview on NPR :
Marketplace: Credit market ills go beyond subprime
"Bose George: It makes it much harder for prime borrowers as well. Because when they, you know, go to refinance their loan or if they default, their recovery is much lower.
George says that's not a serious worry as long as the economy keeps ticking along. Primes borrowers only tend to default on their loans when they lose their jobs or their incomes take a serious hit."
Incomes take a serious hit...you mean like, you know, when they go from paying interest to interest plus principal????
Moohahahahahahhhahahaa!!!!
"Moodys is the only one being honest"
"if your house loses 20% of its value it's important to walk away from it."
"100% of 2/28s will default"
I think I just threw up in my mouth.
OK, new rule :
No one here is allowed to throw up in there mouth anymore.
Did he really say "your house is the one thing that's fungible"?
I seriously thought the market would be significantly down today... what happened?
Dustdevil, you are a day early. Wait til tomorrow's premarket opening bloodbath. Hope you positioned right today, because it only the ride down a bit steeper tomorrow.
No difference between subprimers and primers? Whoa. Subprimers don't pay their bills. That's why they're subprimers. Primers pay their bills. I'll venture to guess when the going gets tough, subprimers will walk into their next life crisis while primers will take on a second job to pay their mortgage.
Let's not forget, Cramer's a Trader
And A momo trader at that
he'll always alert you to the last $1.50 of a ten point move
So , he's entitled to a change of opinio
No one here is allowed to throw up in there mouth anymore.
I second THAT motion.
Dustdevil,
In my second month on the street I was delivering a document to Salomon Bros head govvie trader before the opening. The long bond had come in higher from London and I asked him why. He took a long look at me and said "More buyers than sellers" and went back to work.
Sometimes that's all there is.
Outsider,
Great comment.
Did he really say "your house is the one thing that's fungible"?
albrt | 07.30.07 - 7:51 pm |
I thought it was spongeable. Hmmm.
Geoff, I'm not positioned in the Stock Market at all. I have 1 CD, a Roth IRA and I'm going to get a pension 21 years from now... you know who I work for.
I can't risk the cash I've saved for my first house on the stinkin' stock market. I just want this "blood bath" to get on and trickle down into the home prices. I need to have a house by the end of the year. I've got a kid on the way! Whoooo HOOOO!
Wasn't he raving about housing stocks a while back? I saw he was telling people to buy DSL just a week or so ago.
Cramer is the Calculated Risk for morons, He actually bragged once about how easy it would be for him to make money misleading people...
Dustdevil - Maybe you can buy Cramer's real estate. He's selling.
OT but also FYI - the opener on NPR's "Marketplace" radio show tonight was a story on AHM...
When a hedge fund and their banker announces they are suspending a bond offering due to the market "turmoil", Does that create a suspension bridge?
I didnt realize my house was fungible, nobody told me until now. I would think the pre-inspection would have turned that up.
Dustdevil: If you think there will be good deals by the end of this year, just wait till you see the deals in late '08 or even better '09.
Lori - it creates the first half of a chunnel. When they figure out how to create the second half, they'll be back above water.
I'm a primer and I would absolutely walk away if I could buy a comparable house down the street for 20% (+) less than what I owe on my mortgage. If those whining bankers didn't want to make no recourse loans they should have just kept their money in their pockets.
To me the interesting question is whether primers or subprimers are likely to be better at arranging the purchase of the new house before allowing the old one to go into default. Many subprimers are likely to have experience sleazing up the loan application process, but with the transition to tight credit conditions I give an edge to the primers.
If there is any point to what cramer said, it might be the same point Bill Gross made in his rant a few months back: "Its about home prices, stupid!" The daily scoreboard of winners and losers on Wall Street is amusing now, but when 1/2 the people in the Inland Empire come to realize that their house is worth less than their mortgage, that is when we will see REAL problems. At that point, you might want to be short on muni bonds.
Folks- He was being facetious and satirizing the bear case.
"100% of 2/28's default"? Come on! Ride along with the joke.
"Give up the house so you can keep your credit cards and car"? Get it? Joke!
Is was such a joke he didn't even need to actually understand the jargon: 'two of 28's"?? Nobody I ever worked with used that wording.
He was essentially poking bears in the eye with a stick. Taunting. Don't let him fire you up.
Side note: nobody has mentioned this, but it is not just risk of "2/28's" (twotwentyeights) grenading, it is the "2/28 IO's" that will be the real weapons of mass destruction.
"Interest Only" in those first two years. It is the only thing most buyers could quality for as it would bring in the DTI to loan approvable limits.
Where's the WMD's!?? Iraq? No! In ur portfolio! hehe
SBM
Thanks SBM.... I made that case earlier up the thread, but yours was funny anyway.
"Give up the house so you can keep your credit cards and car"?
A lot of folk seem to have done just that and that ain't no joke.
SBM: problem is, he was mostly starting to sound like he was getting it. It almost seemed like Cramer drank the truth serum for lunch.
Sale History
10/19/2004: $173,000
06/03/1998: $63,000
12/10/1997: $85,492
03/03/1995: $15,000
02/26/1993: $81,500
Siberian Donkey Muffin see that little price dint in 1995, that is what a fire sale REO looks like when people walk.
Two things. First, it appears from Cramer's body language that he has lost some serious money recently.
Second, A lot of people listen to the guy. If he was serious and talks that shit on his program, there's going to be a lot of jingle mail.
"A lot of folk seem to have done just that and that ain't no joke."
Very true.
And as far as the difference between subprimers and primers - well we'll have to see how much that line gets blurred. These lending practices were unprecedented in history. My guess is that if rates haven't been lowered significantly, a whole helluva lot of those primers will become subprimers rather than take on a second job to pay the mortgage of a house that has lost 20%-40% of its value since they bought it.
Of course the Fed could always slam rates back to the floor and try to inflate us out of this mess. Who knows if even that would work insofar as halting the fall in nominal home prices. The mainstream media is finally on board with the housing crisis. A lot of people will be too scared to buy for years to come, at least with anything except a traditional 20% down, 30 yr mortgage, which most cannot afford unless prices drop precipitously, regardless of rates.
His message to the Fed - Cut rates or else face depression?
Difficult to determine WHY and for WHOM he says what he says. His CFC buyout plug ($45+) still bugs me.
lol, actually that was a funny video. I liked the way Cramer was trying to pump up Downey Savings just prior to last week. Maybe that's what's causing all his facial tics.
Maybe Cramer is just helping the FED with PR -- he said if the FED drops rates 1% it would help housing. This of course is hooey, but the FED will drop rates anyway to help the dollar fall and give the US an export edge thereby fixing the trade imbalance. When the Fed drops then homeowners can remember Cramers remarks and look at them as good guys. Of course what will happen is any advantage to homeowners will be a very short lived because the stuff consumers import will go up in price so much that houses will need to drop to fend off inflation of other goods.
"Two things. First, it appears from Cramer's body language that he has lost some serious money recently."
Really? I thought he was on drugs. Seriously, I've never actually seen the guy before -- I avoid financial TV -- and to me, he was fidgeting like he'd just taken a(nother) hit of crystal meth. Or if that's too downmarket for him, good old fashioned cocaine.
You all may think he's pulling your chain. I just think he tanks up on whatever he can snort up his nose and just babbles according to the state of his brain. A perfect television personality.
I hope I'm wrong, but don't be too surprised if he shows up at Betty Ford someday.
The point about dropping rates 1 whole point could be a satirical jab at somebody like Bill gross at Pimco.
Do any of you know what it was like in the Inland Empire in 1993-4?
It was a freaking disaster!
1 Have any of you cleaned up a crack house down the street from where you live?
2 Have any of you cleaned up a house that has been foreclosed?
3 Have any of you seen what urban miners can do to a foreclosure?
4 A nice neighborhood can be destroyed in a matter of months by having too many empty houses.
5 I became very nervous when I saw the mortgages that were being thrown around the last 5 years.
6 This is starting to happen in Phoenix where I live.
It is going to be a nasty ride, so buckle up.
Oh please.I hate to see a grown man cry. Please FED, please,please,please, Can we have a rate cut or my show will be cancelled.
"Where's the WMD's!?? Iraq? No! In ur portfolio! hehe"
iz in ur portpholio, defaultn on ur cedeoz
CR: ... but I took down the video because I didn't want to look at Cramer.
Thanks, I guess. The added strain on the server had our Admin tearing his hair out all afternoon
Look at what Jimmy sez here:
YouTube - So Subprime Blows Up; So What, Says Cramer
The above is thanks to Twist of HousingDoom !
One thing I have never heard anyone do any analyses on is the spread between adjustable rates coming due and todays fixed rates in the different future "batches" of ARMs resetting.
I think I remember the spreads 3-4 years ago were way bigger than today. Today there is hardly any spread between the ARM rate and the fixed rate, like ½ a point. Back then it was more like 2 points I believe.. and I think it has narrowed over time. So will there be such a big shock when the latter batches adjust as they might be closer to affordable and default less?
With the adjustment in lending standards and the debt markets, a Fed rate cut isn't likely to help much.
THIS HAS NOTHING TO DO WITH HIS RUSE ABOUT "WHAT THE WORLD WOULD LOOK LIKE IF THE BEARS WERE RIGHT".
HE DID THAT ON HIS SHOW; THIS WAS FROM AN INTERVIEW ON THE STREET... THESE ARE HIS SERIOUS OPINIONS...
If not 100% default, then 95%. Refi and sales option are off the table. That leaves us with short sales or foreclosures.
No way can these people handle an increase in their mortgage payments.
People are totally maxed out, and they are even unable to pay their property taxes.
As much as I dislike Cramer, this was a spot-on video.
Did you catch him at the end, when he said he sold all his real estate, just as the camera was fading out?
Please don't lump Claremont in with the rest of the IE. Claremont's east LA County all the way!
Wow. Sounds to me like Cramer is being used to set up a nice big bear trap.
"As much as I dislike Cramer, this was a spot-on video."
I hope you are not serious. The estimated figures are 1/4 subprime will default (and this in the very bubbly areas).
Just watched the Utube video....first , a 1 percent cut of the fed fund rates might help Cramer's buddies on Wall Street ( Goldman , Merrill , Lehman and CitiGroup might benefit ) , but a rate cut doesn't change the vastly different lending standards in place. Second , if I was the CEO of a home builder or mortgage lender , I probably would have thought I just heard the functional equivalent of something yelling ( in the proverbial dark theatre ) "there are 100 angry jihadists taking over and they're all strapped with suicide vests " -- we've heard the voice of panic as never expressed before. Third , as goofy as Cramer can be , folks watch his show and give his thoughts some weigh so you just can't dismiss out of hand his ramblings... he does have a following.
"Please don't lump Claremont in with the rest of the IE. Claremont's east LA County all the way!"
And you're proud of that?
Anyway, CR, I disagree with you vigorously on this one. The IE is a job making powerhouse right now. The land is still cheap by most standards, folks by the thousands are coming in from OC where the mortgage crisis has left thousands without jobs and unable to find a replacement that can fund the cost of living there. The Hispanic invasion also has caused a lot of growth, especially in Riverside County.
By any measure right now, the IE is better positioned than OC and LA Counties.
"I hope you are not serious. The estimated figures are 1/4 subprime will default"
Yeah the quality of estimates has been just stellar recently hasn't it?
From ac,
His message to the Fed - Cut rates or else face depression?
Difficult to determine WHY and for WHOM he says what he says.
Remember- birds of a feather flock together
Most of the borrowers are going to make out better than most people think. Banks will just have to come up with easier terms to keep them in the house. I would just tell my lender either I'm walking or we are going to make a new deal.
How Cramer works:
Cramer get weak shorts to short HB and ML and then he or others will come up with a rumor (like the one Buffet buying HOV) which will cause the weak shorts to cover. This amplify the short squeeze.
2 days before the HOV rumor he said short HB.
I would just tell my lender either I'm walking or we are going to make a new deal.
Try telling that to the tranches that 'own' your loan.
The IE in the 90's was a mess. We bought our home in '88 for $98k in Riverside, CA. Our homes value rose to $129k by 1991. Then all of a sudden it was worth $74k (we were able to get our property taxes lowered based on this value). There were whole housing developments half finished and neighborhoods where every third house was a forclosure. This was partly due to the base closures and partly due to the recession.
Well, we still owned the same house up until last year. We sold it for $400k to a very nice family with children using and 80% first and a piggyback second. We are renting.
There is going to be some hurt coming. There are already many forclosures. Prices have come down about 15% where we are now (zip 92508). This is a move-up community too.
When we first sold our house (Feb06), there were 7 homes for sale under $300k (our price target) in the City of Riverside. Today there are 184 of them. About 1/3 of them are forclosures and another 1/3 are short sales. That tells me prices are coming down.
We'll just continue being patient paying rent. We are in the best schools now and our rent is cheap.
Angela
I have seen the graphs of declining home equity, and I know we are at the lowest levels ever.
The point I would like to make is that at least some of the low equity is explained by the very low interest rates we had in the past few years. And by that I mean, who pays off the principal early on a 5.5% fixed mortgage?
Who didn't refinance a fixed mortgage back when the rates were in the 5% range? And who now is encouraging people to pay down 5% mortgage debt? Some of it was squandered, but some of it was invested.
The increase in net worth of US households between Q1 2006 and Q1 2007 was 3 Trillion dollars (while the savings rate remains near zero). More than 1 Trillion of that was real estate, but there was a lot of homes built in 2006.
http://www.federalreserve.gov/Releases/Z1/current/z1r-5.pdf
Cramer, huh? It's probably time then to start thinking about making the opposite trade ...
OT, but what the hay, it's 6:35 AM:
Mozilo dumps more CFC shares:
CNNMoney.com: 404 Page Not Found
Cramer's an idiot.
If he says there is a such a serious problem in housing then I am beginning to wonder if the problem is almost over. Never have I seen someone who is so consistently wrong about so many things.
Housing prices are not falling everywhere. Nor is this price decline unprecedented. We saw much more significant declines in the real price of housing in 1980-82 and 1990-91 than we have seen so far in this cycle.
Quick, sell you homes now before they're worthless! Why are we listening to a man with this kind of record stockTagger: Jim Cramer Track Record on NYSE Euronext (NYX) - Analysis of Jim Cramer stocks performance record ?