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TheStreet.com's Jim Cramer says we have to see when the buyers return. Can't get your arms around these fears. The Carlyle fear -- that's the "too much leverage in the system ... who knows what people are really borrowing" fear; the Bear (NYSE: BSC) (Cramer's Take) fear -- the "legitimate worry about counterparty risk that can't be stopped until Bear sells itself or goes and gets a 20% investor so it has cash" fear; and the dollar decline fear -- the "who is still stupid enough to have on big trades that lever that currency?" fear.
All of these, in the end, are about the same thing: leverage. The reckless way that hedge funds borrowed and brokers lent in order to make up for low interest rates and the insatiable desire to have a seemingly low-risk way to make money on a monthly basis.
What's discouraging is that the Fed's actions on Monday were actually meant to address some of these problems, but the actions are oblique, meaning that they don't get to the heart of things -- to put money in and take bad paper out. Not borrow bad paper but take it out.
And if agencies get bought, we relieve the bad marks on agencies, which takes the inventory pressure off the lenders.
None of this stuff has to do with what we trade, but it infects everything.
So, the rally gets unwound or tested and we see where the buyers come back in, presumably at someplace, somewhere, after the futures pressure subsides.
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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 the stocks mentioned.
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Reader Comments (Page 1 of 1)
3-13-2008 @ 6:26PM
phillip said...
Jim,
Want leverage? Give me $100k and I'll leverage this cash 1:9 to buy 6 to 7 foreclosed, single-family properties here in Houston.
Each house is $30-50k below market price, has a 15-30% cash flow yield, and great tax benefits. You'll have $180-350k in equity and $21k / year cash flow off of your $100k.
Don't trust me? Then, I'll let YOU buy a house and help you rent it out to see how easy it is to get 200% ROE, and 25% ROI right now.
Leverage is a wonderful thing if you know how to use it properly!
Phillip
http://www.mylifechanger.com