TheStreet.com's Jim Cramer says the number of things that went wrong in one day is astounding, and is led by the woes of Fannie Mae and Freddie Mac. There aren't many days like yesterday. Or let's hope there won't be. Let me refresh all of the things that went wrong so we have the context of how treacherous this market really is.
1. The Treasury and the President saw fit not to endorse the "implicit" guarantee for Fannie Mae (NYSE: FNM) (Cramer's Take) and Freddie Mac (NYSE: FRE) (Cramer's Take) paper. For those of us who have bought and sold this paper for most of our lives, this was the signal that almost everything could be worthless. Their refusal to acknowledge the problems was so in the Hoover playbook that it was shameful.
2. We always figured that you should be able to lever up if you are in the bond market, with nine to one being an acceptable level for rock solid collateral like Fannie Mae mortgage paper, which was presumed to pay off at par with the only question being when. Now, because the question is no longer "when," but "if" that level of leverage is going to be obliterated. Maybe three or four times is all we will get. There have to be trillions of dollars at risk in loans right now because of that loss of implicit guarantees.
3. We have lost what is known as the "high-end' entirely with what happened yesterday with Nordstroms (NYSE: JWN) (Cramer's Take) and Saks (NYSE: SKS) (Cramer's Take) and yes, JC Penney (NYSE: JCP) (Cramer's Take), which had been moving up scale. Wal-Mart's (NYSE: WMT) (Cramer's Take) ascendency is because people are at last too poor to go elsewhere as Wal-Mart is the soup kitchen of stores.
4. The issue I heard more about than any other yesterday was inflation. I heard it a gazillion times because of oil and copper and gold. That presumption is so wrong that, well, suffice it to say that I have never seen so many people worried about the wrong thing in my life other than in 1932.
5. The student loan system, one of the gems of this era, is going, very quickly, to be obliterated if something isn't done soon. Could this, and the destruction of Fannie Mae be some sort of GOP last act, as the government involvement in student loans and home mortgages is something that the Republicans have hated from inception. Is this Bush's legacy?
6. We have no FDIC. Who is that clown who runs this once important organization?
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The Five Dumbest Things on Wall Street: March 7
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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 had no positions in stocks mentioned.
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Reader Comments (Page 1 of 1)
3-07-2008 @ 11:31AM
joe jackson said...
One half good president is worth more than two named Bush!
3-07-2008 @ 1:37PM
Ron Tarter said...
This is partly in response to the White House economic assessment: The truth is that we ARE in a recession, albeit a mild one, and we've been in one since the last quarter of 07. The parallel and equally emphatic truth, however, is that we are rapidly moving out of that recession. NOTE: WAL-MART HAD BETTER THAN EXPECTED SALES IN ITS MOST RECENT QUARTER. Wal-Mart is a great barometer of the nation's economic conditions. The country has NEVER plunged into a a recession following a quarter in which Wal-Mart's sales were significantly better than expected !!! The implication of this is that we HAVE achieved a somewhat "soft" landing, though the pilots have slightly misjudged the location of the runway and landed us just slightly on the wrong side of the tracks. The FED's lowering if the interest rates is beginning to help. WHAT WE NEED NOW IS A COHERENT ENERGY PROGRAM - major new tax credits for the purchase of hybrids, federal quality control standards for hybrid vehicles to add quality and confidence and plug-and-drive capabilities at every turn, AND major new tax credits for auto companies that place new, high-quality hybrid vehicles on the market over the next two years. Enough of high gasoline prices - this is a policy that will work !!
3-09-2008 @ 11:24AM
MB said...
What do people expect, that the fed should just say"Folks, were in deep $hit here, were looking at deflation and a severe recession"? That would cause hysteria. Informed people already know.
Truth is, this has been coming for a long long time. It goes back to the 70's , the total break away from gold standard, and the creation of an economy that outgrew itself due to dependence on credit and debt, while the govmt inflated the money supply in double digits, and lied to the populace about real inflation. And most were stupid enough to fall in line and believe it.
While the govmt says we have 2.2% core inflation, shadow statistics show that when measured the way it was in 1980, our inflation rate last year would have been 12%!.
It was simply not-sustainable. The consumer ran out of ability to service their debt. Time for a paradigm change in attitude and a return to savings and lowering debt. Which means severe contraction and deflation.