Jim Cramer trashes IE
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CNBC host Jim Cramer, never far from the fringes of any financial argument, has now claimed the ‘sky is falling’ perch in the housing debate. In this video, Cramer rants that the Inland Empire is so awash with bad loans and unsold houses that it needs to be ‘plowed over’; he predicts a 100% foreclosure rate in 2/28 mortgage products; and encourages upside-down homeowners to be ‘smart’ and walk away from their houses. Wild stuff, but hey, he’s Cramer. Partial transcript:
‘I’m looking for a 100% default of the 2 and 28’s. 100 percent. The bears are looking for 50 percent. I’m saying that they’re foolish and way too optimistic.... Now, where are these 2 and 28 loans concentrated? Largely in Florida, in Phoenix, in Las Vegas, in the Southland of California, the northern part, Sacramento, but most importantly, the Inland Empire. I think the Inland Empire needs an agricultural adjustment company. ... we need to, like, plow over the Inland Empire, because there’s so many more homes. And the homebuilders have way too much inventory. And the people who have made these loans whoever, where the mortgages are, I think almost everything that was written from May of 2006 until the end of the year was worthless.’
More, he’s just getting going: ‘When your house drops 20% in value, then it doesn’t matter whether you’re prime or subprime. It’s better to walk away, even if you’re wealthy. Because you don’t want to lose your credit card, and you don’t want to lose your car. Your house is the one thing that’s fungible. It’s smart to walk away... It’s actually a good thing. I know that sounds a little counter intuitive. But if your home declines 20% in value, it’s really important to sell it, or walk away from it.’
More: ‘I’m calling for a dramatic decline in home values... I’ve sold all my real estate.’
What’s going on? Cramer is a smart guy, a good market-timer, but there’s no gray in his world. It’s black, or it’s white. It’s great, or it’s awful. You should own it, or you should run from it. He’s jawboning the Fed to cut rates to save housing. He’s telling the Fed the sky is falling.
Does it matter? Yes, we think so. Cramer is influential. We’re not saying he can influence the Fed; we’re saying he’s a smart, opinionated, outspoken guy who frames -- and then screams -- investment arguments for some traders and investors.
Your comments? Thoughts?
Hat tip, big time: Morgan at Blown Mortgage.
Photo Credit: Booksamillion.com