This one is classic Cramer- I suspect you really need to watch him on a big screen TV to capture the entire ego.
This is last Friday’s "Mad Money" where he criticizes Bush’s "bailout," [I love it- he's right.] and puts forth his own plan to save the market. [I don't think so.]
Here’s hoping we have more than Cramer between us and the "end of the world," or we are in worse shape than I thought.
I have to admit this is the best plan I’ve heard so far for stringing a safety net under the markets(not real safe and way under).
It would not stop the tightening of credit or the deflation of the housing market. It would not create qualified borrowers for Banks to lend to. A tourniquet stops the body from bleeding out. It doesn’t miraculously heal the injured limb.
But it might let us finish limping on to the big “Boomer” retirement crash.
Hutch-
I think I kind of view this like flood insurance. If private insurers deem it to risky to provide, I’ve never liked the thought of the government providing it at below market cost- the solution to me seems to be to either pay the price to make it worth someone’s while, or move to higher ground.
Overpriced assets are risky to insure against default. It seems then that the solution would be to pay for the risk, or lower the price on the asset. The government stepping in seems to me like fools rushing in where angels fear to tread.
No it wouldn’t be pretty- but there is not going to be a painless fix. Yeah his proposal could slow down the unwinding, but putting off the inevitable has it’s own issues.
I find myself wondering why anyone would want to run for President at this point. He [or she] could end up with all of the blame, and no good solutions.
“putting off the inevitable has it’s own issues.”
True. Unfortunately I don’t believe we can stop TPTB from trying anything to preserve their political and economic power for a few more years.
“why anyone would want to run for President at this point”
It has to be sheer EGO. (and an ability to completely ignore what they don’t want to hear.)
URL for the video?
NVMike-
If the feed isn’t working for you, you can see the video here:
http://www.cnbc.com/id/22728371
[Scroll down.]
twist:
I have to say that Cramer is right (full disclosure: I actually like the guy, even though he’s often wrong – but who isn’t?).
As Cramer said, one of the main reasons that the market is tanking is the uncertainty. The government and FED have tipped their hand. They’re in full-on panic mode because there’s something HUGE on the horizon. Nobody knows where we’ll be in a month, and as he said, if the insurers go under we’re looking at a worst-case scenario. 2000 point drop? Sure, maybe more.
But recall that he was looking for a way to save only the stock market. Under that pretext, his plan would work, and his 2000 point rally may well happen.
That said, implementing his plan would be a HORRIBLE mistake for many obvious reasons (some of which you’ve stated very well). But the biggest mistake would be giving government the power to “take over” companies simply due to a recession *shudder*. Besides, I love the idea of picking up cheap stocks over the next few years to help fund my retirement (yes, retirement, and I’m sticking with that story
).
As for his ego, I really believe that it’s just part of the show. I know people who have met Cramer and say that he’s a nice guy off-camera.
I think he’s funny, &, if his picks weren’t so average, I’d probably watch his show. (he’s always been right around 50-50. why does anyone watch, really? has to be the entertainment.)
clearly, his point is what to do to beef up the market. his last line even says so.
&, if you believe that an average recession is going to hit us this year/next, then you should know that in the average recession the market drops 28% from it’s high. (typically, it drops about 17% then dead cat bounces to around 5% off high, then drops to 28%.) The high was around 14300 last year, which would lead to a low around 10,200.
at least 2000.
if you believe this will be an average recession.
I think Cramer is wrong about a 2000 point drop. If the Monoline Insurers go under there is no reason to believe that we couldn’t lose half of the market’s current value and more.
Did you know that the annuity giant AXA owned over 12 million shares of MBIA and over 3 million shares of Ambac Financial Group, as of 09/30/07. This (was?/is?) a tiny fraction of their more than 3,600 positions (heavily weighted toward financials) but can we doubt that their losses this January are large? These two groups; the Financials, and the Monoline Insurers, are hopelessly intertwined. Each invests heavily in the other and one way or another they must survive or hang together.
There are many disastrous forces working on our economy and most are the result of short sighted policies by just about everyone. Very few want to ‘pay the piper’ NOW…because they can’t, so the bill just gets higher.
Diana-
I don’t think there is going to be anything average about this recession.
[Igor's word: fiasco]
Hutch-
I’m not ready to weigh in on a percentage yet, but I think -2000 points is conservative. If “market confidence” were restored tomorrow and the credit markets started moving again, there are still TOO MANY DARN HOUSES out there for sale. The party won’t continue, the appreciation won’t continue, and the spending won’t continue.
That said, I doubt anything is going to get the credit markets moving real soon.
This plan just flattens the slope of the downward slide so Cramer can stay on TV longer.
Won’t be much for him to talk about when the DOW is at 3000.
The ONLY thing that fixes the mess is if all the Joe Six Packs who are way to much debt and way too little income all get 150K per year jobs in the private sector.
Then they can pay for their $600,000 McMansions and have a little something left over for Ramen noddles.
So if Cramer can figure out how to create a few million jobs that pay VERY well and only require a GED… Well now he might have something there….
Twist.
I knew you would pick up on my post about Friday’s Cramer show. I really felt it had some ominous and earth shattering commentary. Cramer is just a guy. We’re all guys (or gals). He knows what he’s talking about but can we trust him? Is he a the financial populist of our time or are the big coporations pulling his strings? Many above think he speaks at least some truth as do you. I love and distrust him too. But I really want to believe there is someone in big media that will speak truth to power on this subject. We shall see as it unfolds. Stay tuned, this is going to get very interesting.
Bruce-
I was watching Cramer pump HBs and CFC last year when it made no sense at all- then he comes back with this “told ya” stuff…. no question, it’s mostly about the entertainment. Can you imagine, say, Ben Bernanke hosting “Mad Money”? The only thing that would keep the ratings up would be that people would fall asleep before they had a chance to change the channel.
That said, Cramer’s right now and again, and it makes no sense to reject all his comments just on general principles.
When I first started Doom, I tried very hard to only have the best possible articles on the sidebar. I only wanted to put articles up I felt like I could endorse to readers. When John first joined me, I didn’t always like some of the stuff he put up- I’d think that yeah, maybe 10% of some articles were worthwhile, but the rest might be drivel.
I learned pretty quickly that John’s philosophy was much better than mine. 10% reality can be useful- heck, sometimes even the drivel can be useful- so I throw all kinds of stuff on the sidebar now.
I have the same philosophy on Cramer. Sometimes he’s good for insight, more often he’s good for a laugh, but he’s always good to get a discussion going.
Twist,
And maybe that’s why CNBC keeps him on. He gets people worked up so they tune in. Either way you gotta at least listen. Like I said, its comedy hour but sometimes its freaky Friday!
I agree with twist, and others… this is not your father’s recession. If this is the largest asset bubble in history, then it follow that the largest asset crash in history is coming.
It may not happen in a day or a week… but, the damage will be astounding. I think a market turn like this is extremely difficult to quantify. That’s why bloggers like CR at Calculated Risk are underestimating things like housing starts.
I suggest instead reading, ‘Panics, Manias, Crashes’ or better yet, ‘Collapse’… Americans will be much more materially poor in the future. This isn’t necessarily a bad thing.
Here in the Portland area, we’re already starting to see quite a few expensive, abandoned infill developments, and abandoned CRE projects.
Phoenix.. well, Phoenix is having one long come to Jesus moment. I’d guess this will last for years.
Cramer: “If billions do not turn out to be worthless, that’s good for the taxpayers”.
Monetizing debt is ALWAYS bad for taxpayers, as it promptly (1.) devalues the currency already in circulation (= inflation), (2.) drives down the dollar even further (= inflation), (3.) drives down other government debt (aka treasuries, = higher interest rates), etc.
&
Cramer: “With 250 billion max we would put this crisis behind us and start all over”.
Who in h*** except the NAR & NAHB cheerleaders would want us to “start all over”?
PS: @ Cramer: Jim, the 500 billion estimate is only the nominal outstanding value of “bad” insurance policies and does not yet take into account the notional value of all outstanding credit and other derivates linked to this toxic waste. Because of this, and because it would not jump-start housing starts or sales because supply is so much bigger than demand, it would only be a temporary stop-gap measure. Sorry Jim.
Why would we want to “start all over”?
[Slight edit- t.]
Thanks for the URL, twist.
The video worked fine, I wanted to pass the URL along in e-mail.
Austrian Economist-
I agree- somehow that sounds like a plan for sobering up just enough to make it back to the bar.
I suspect many people don’t really understand what “recovery” would be in the context of the housing market. “Recovery” would mean going back to historical trends where “appreciation” approximates “inflation”- not going back to the mania of the last few years with double-digit appreciation. [Not that we'll see anything resembling a recovery for years.]
A lot of people have made a lot of money gambling- not in Vegas, but in housing, MBS etc. I’m afraid that’s over- those folks need to go out and find a real job now- if they can.
[Igor's word: Lalaland]
ok, now I’m offically frightened at what lies ahead of us. Not just in Phoenix, but as a ‘World Economy’ as well.
It seems the 10/90 rule applies here where the smallest number of people have created the largest problem my generation will ever face.
anti-spam word: screwup. How ironic is this?
Twist,
I agree that throwing good money after bad is not a good idea. But I think we may be too far gone to worry about that right now. Look at what’s happening on the global markets today. It’s a truely horrible mess we’re in. Nothing is going to make it go away and it will need to run its ugly course. But somehow we need to contain a panic before we have marshall law and limitted or no access to our bank accounts.
I say bring on DOW 3000!
I sold all my stocks 2 months ago (silver lining of a Divorce??) and now I have ZERO in the market.
Looking forward to buying some IBM for $1.share.
Brucewho-
I think people were less panicked before Bush trotted out the PPT and his plan. I listened to his “Long term we’re strong, short term we have serious issues” comments and thought he was making things worse.
One of life’s lessons as a mom is that when your kid gets hurt, they look at you to see how well they are doing. When you panic, they panic. Bush and the boys seem panicked.
[Oh dear- Igor's word is "poverty"]
Twist and Gang,
What to make of this mess as I leave a slow work day due to MLK. The rest of the world is panicking on our day off. Tommorow will be a potential shocker for US. Stock futures are pointing to a big sell off as reported on CNBC.
Stocks Headed for Freefall As Bull Market Nears End
http://www.cnbc.com/id/22771281
There are many dubious workings on Wall Street. I get the bond insurer crisis but has anyone heard of Mark-It Partners. Who is this firm that is involved with all the major financial players?
http://www.counterpunch.org/martens01212008.html
Its going to take some time to sort this all out if we ever do. Igors word by the way is “coverup”. How aprapos!
Twist and Gang,
Here it is, we are on the cusp of financial doomsday:
Panic sparks plunge in global markets
http://www.ft.com/cms/s/0/604d71dc-c853-11dc-94a6-0000779fd2ac.html?nclick_check=1
The word is we got the wrong bail out going and the markets worldwide have reacted. Watch and see if the admin changes direction tomorrow. Or perhaps they are in bunker mode.
Twist,
I think I made a couple of posts that did’nt get through. I see them when I logon but they don’t show after I logout. Maybe I’m panicking myself or having a few too many bourbons to calm down. Maybe I’ve said too much for now. Maybe I forgot to feed Igor his word. Good night, pleasant dreams. Tomorrow is another day.
“There’s definitely a very slim chance we’ll survive”
http://globaleconomicanalysis.blogspot.com/2008/01/global-bloodbath.html
“See you on the other side, Dr. Venkman”…
-Ghostbusters
Brucewho-
I found one in Igor’s clutches…
FYI- he never trusts posts with multiple links- even if it comes from John or me. They always disappear until I figure out where in the dungeon he put them.
[I think he's sorry though. Igor's word: blunder]
Twist,
Thanks for finding it. I really got on my high horse last night with all those posts. I’ll just post one link at a time from now on. You guys are my favorite blog. A lot of like minded individuals here and I’m getting a good mix of entertainment and truthful information.
This is more than just a housing blog now as the problem has morphed into this monster economic killer. Here in Denver we have our own real estate issues. Not too disimilar from the rest of the sunbelt, just not as out of control. If something interesting comes up here I’ll pass it on.
Keep up the good work, stay under the radar if you can and I’ll throw in my 2 cents in from time to time.
Twist said ” “Recovery” would mean going back to historical trends where “appreciation” approximates “inflation”- not going back to the mania of the last few years with double-digit appreciation. [Not that we’ll see anything resembling a recovery for years.]”
————————————————-
Twist, IMO the pendulum will eventually swing back way beyond average (i.e. appreciation = inflation) towards a situation where housing is again seen as an expense instead of an investment.
Historically, manias do not just “end” by reverting to the mean, but tend to move back to the other side of the spectrum completely. In the 1600s one rare tulip bulb bought around 40.000 current $ worth of stuff, thanks to (option-like) financing schemes made available to the larger public and industry cheerleading. In 2000 priceline.com was worth more than all of the airlines combined, thanks to the larger public joining the cheerleaders in propping up prices. Just recently the average person could barely purchase a house in the desert on a 40-year mortgage, with slight room for error equity-wise. They still did, because they could (option-like financing) and because they expect that values would keep on rising no matter what.
The tulip bulb went back from being an “investment” to being… well, a flower. Internet stocks went back from being “a business model that can’t be beaten” to “did I ever believe that crap would make any money?”. I’m afraid we’re only in the very first innings of a long-term reversal to housing being just housing, a.k.a. shelter, a.k.a. part of “the cost of living” instead of “the best investment one can make”.
AutrainEconomist
Agreed. But isn’t ours is credit induced growth not real production growth (as previous industrialized and post war economies) We’ve been on in this trend for some time now and each time we hit what seems to be the Reckoning in the form of a recession we blow a bigger credit bubble. Tech bubble crashes we get the internet bubble, 911 happens and cheap money (via Greenspans rate cuts) gets us the housing bubble. I believe the merry bubble makers are out of bubbles to blow. So beyond the Mania of this whole thing there is’nt anything to go back to because its so BIG a problem that reconciling it will bring on a new Dark Ages. The “froth” will be gone and who’s going to loan us money? What do (can) we produce (at least in quantity and quality) to pay for the stuff we must import. Yes we will have to do with less, just how much less remains to be seen. I’m not sure I’d like to have a cyrstal ball right now. It might just scare me to death.