TheStreet.com's Jim Cramer says it's a good deal, but there isn't enough risk capital about.
So TALF is dropping off -- not enough money going into the program. Not enough at all. And it worries me.
This program is integral to the turnaround thesis -- we need money to flow into these asset-backed markets. It's a sign that people aren't willing to put in more money than last month -- the program needs a push.
Sometimes we have to own some surprises and I was surprised this program isn't doing better. I hear all of the usual excuses: there are strings nobody likes and people are worried about government intervention. But it's not that it isn't a good deal -- I think it is -- but that there isn't that much risk capital out there after all.
I see opportunities in this market for people who are willing to lever, such as in student loan markets and small-business loan markets, and I thought they would be worth the default risk. Looks like I am wrong -- for now.
What's the effect? Hard to say. Most people have a more negative view of TALF than I have, so it might not matter to them.
It matters to me, though, because the market now has a legitimate reason to sell off tomorrow instead of trumping up Alcoa (NYSE: AA) (Cramer's Take), which frankly was just fine, but there's such dilution from its many mistakes that, well, who cares?
At the time of publication, Cramer had no positions in the stocks mentioned. Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO.
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Reader Comments (Page 1 of 1)
4-08-2009 @ 9:41PM
mike said...
To President Obama, Home Depot and Lowe’s:
Re: Gov Carcieri of Rhode Island
As the housing market keeps declining and the foreclosures keep mounting, we need to find alternative and creative ways to deal with these problems. We must come up with new ideas as to how to get these properties back into the hands of the people who were treated so unfairly by the banks and mortgage associations. I believe the main reason people are having trouble paying their mortgages or have even lost their homes is the greed of the unscrupulous banking industry and the realtors and appraisers who helped push these horrible loans.
We need these unfortunate people to be able to buy homes again; this country will never return to what it was unless these millions of people are back in the market. Let’s not push them aside and label them as irresponsible and unworthy of help. In most cases it was not their fault. All of us Americans need them back to grow this economy once again.
I am an investor and I understand this foreclosure market well. Some of the homes the banks are selling are in terrible condition. Most are uninhabitable. They are moldy and termite-infested. The septic systems are failing, the foundations are crumbling, the roofs are leaking, the kitchens and bathrooms are dirty and outdated and heating systems are faltering. Banks are selling these homes to people who do not have the money to fix them.
My plan will help to put thousands of people back to work from all the trades in the housing industry. Instead of a building boom of new houses, let’s have a building boom of repairing and reconstructing existing houses.
We need to sell these homes back to the people who suffered the foreclosures. We need to give them affordable rates such as 4% mortgages. These families will have homes of which they can be proud and a 4% rate they can afford.
I have a proposal to help get these homes back to the people who deserve a second chance to have America’s dream of owning a home. It is a bold and creative proposal to put Americans back to work and back into homes.
I am putting out a challenge to Home Depot and Lowe’s and to President Obama.
My challenge is as follows:
1. Should Freddie Mac, Fannie Mae or any bank agree to participate, all foreclosed properties owned by these institutions would be restored by investors.
2. A board will evaluate the homes and draw up a proposal listing the requirements for repairing the structures.
3. Investors will buy the home and will be responsible for paying all labor and permit costs. Their bid for the home will include an architectural plan to fix the home according to the requirements of the proposal. This plan will include a list of materials from Home Depot or Lowe’s and a labor cost.
4. Investors will receive their labor cost back plus 50% of the profits of the home once it is sold. Investors will be responsible for selling these homes within one year.
5. All supplies to rebuild the home will come from either Home Depot or Lowe’s and no moneys will be paid to either vendor until the house is sold.
6. There will be a lien placed on the home by Home Depot or Lowe’s, once the home is sold. Home Depot or Lowe’s will have first position.
7. Home Depot or Lowe’s will receive 15% on the profit of the home.
8. Finally, Freddie Mac and Fannie Mae will also carry a lien and receive 35% of the profit as the second position. Some of this profit will help pay the board.
We are looking for investors who will accept this challenge. All investors will be subject to an audit of all supplies and labor cost. All investors will obtain the proper permits and abide by the strict building codes. If any investor is refused for any reason, he will not be able to participate in this program.
Home Depot and Lowe’s will establish a list of requirements and rules, such as inspections of homes for the materials, disbursement schedules, etc., which must be followed.
What I would really like to see is Home Depot and Lowe’s each create a division of building and remodeling and have them become the investors. Just think of the possibilities of these new divisions. Americans will have the same comfort buying a remodeled home from Home Depot or Lowe’s as the comfort of buying a burger from McDonalds. It could be amazing.
Let’s fix these horrible homes the right way and let’s start a remodeling boom……we can put millions of people back to work.
Michael Bovill
Cranston R.I.
401 301 3976