Jim Cramer's Stop Trading! 1/31/08: Buy a House

Recap of Jim Cramer’s comments on Stop Trading! .Thursday January 31. Click on a stock ticker for more analysis:

MBIA (MBI) and Ambac (ABK): Although Cramer is no longer worried about bond insurers MBIA and ABK since their problems are so well-known, "I would never own those stocks," he said and called them a "moral hazard."

Pulte (PHM), Ryland (RYL), Masco (MAS): Cramer urged viewers to look at PHM and RYL's quarterly report and predicted that there will be a housing shortage by next year; "I was the first guy to tell you to burn your house down. Now I'm telling you to build one."

Black & Decker (BDK), Whirlpool (WHR): On the subject of Congress' stimulus package, Cramer said, "Go buy a Black & Decker power saw," but added the money should be used instead to pay off credit card debt. "I'm telling you what they will do with the money," he added, "That's why whirlpool ramped." Cramer suggested sticking with early-cycle stocks and avoiding momentum plays.

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Comments

[Victhom:]

Was easy Jim...Moody's news will hurt all banks with this...
Some bond insurers may lose AAA ratings: Moody's
Companies could go into 'runoff,' leaving fewer participants, agency says
By Alistair Barr, MarketWatch
Last update: 11:57 a.m. EST Feb. 1, 2008Print E-mail RSS Disable Live Quotes
SAN FRANCISCO (MarketWatch) -- Some bond insurers may lose their highly coveted AAA ratings and go into "runoff," leaving fewer active players in the $2.4 trillion industry, Moody's Investors Service says.
The influential ratings agency also increased its estimate of losses on subprime mortgages originated in 2006 to a range of 14% to 18%, up from 6.6% to 15% late last year. That's important because higher subprime losses will likely feed through into mortgage-backed securities and also hit more complex securities known as collateralized debt obligations, or CDOs.
Bond insurers have already suffered big losses from guarantees they sold on CDOs -- and there's concern more losses could follow.
"Some existing firms may be unable to restore financial strength to levels consistent with a Aaa rating and be downgraded," Moody's said in a report late Thursday. "This could possibly lead them to pursue a more narrow business focus or enter runoff."
Runoff occurs when an insurer stops taking on new risks and slowly shuts down, allowing current policies to expire while paying any claims.
"The industry is likely to undergo a restructuring, resulting in fewer active players," Moody's added.
Such bond insurers as Ambac Financial Group Inc. (ABK:AMBAC Inc
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Last: 12.83+1.19+10.22%

11:45am 02/01/2008

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ABK 12.83, +1.19, +10.2%) and MBIA Inc. (MBI:MBIA Inc
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Last: 16.19+0.69+4.45%

11:45am 02/01/2008

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MBI 16.19, +0.69, +4.5%) have been hit hard by the mortgage crisis. Rising mortgage-related losses have already caused some companies in the business to lose their AAA ratings.
Without those top ratings, bond insurers' business models may be imperiled.
Moody's said it will finish a review of its ratings on bond insurers by mid-to-late February but also noted that it may take rating actions sooner if some companies appear to be struggling to raise new capital.
Alistair Barr is a reporter for MarketWatch in San Francisco.

2008 Feb 01 12:10 PM

[silvia77:]

Downgrade the bond insurers!!

downgradetheinsurers.w.../

2008 Feb 01 01:09 PM

[tcsnetwork:]

"predicted that there will be a housing shortage by next year"

Is he out of his mind!

2008 Feb 03 02:36 PM

[Victhom:]

From Wall Street Journal.....

Rescue Plans Won't Prevent Downgrades
By Karen Richardson, Liam Pleven and Carrick Mollenkamp
Word Count: 931 | Companies Featured in This Article: MBIA, Financial Guaranty Insurance, Credit Agricole, UBS, Citigroup, Barclays, Security Capital Assurance
Rescue plans are starting to take shape for struggling bond insurers, but they aren't likely to prevent further ratings downgrades for many of the companies.

At least one such company isn't waiting around. In an effort to raise capital, MBIA Inc. yesterday said it would issue $750 million of common stock, a bigger offering than the $500 million issue it had initially planned.

The company also said it will revise its fourth-quarter loss of $2.3 billion, cutting it by $65 million. MBIA also added $100 million to its loss reserve, bringing the total special addition to $200 million

2008 Feb 07 03:03 PM