Senator Dodd's Housing Solution - Cramer's Mad Money (5/21/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday March 21.

EnerSys (ENS)

Is a “new tech” company which is the largest producer of industrial batteries for forklifts, mining and railroad equipment, and most recently, nuclear submarines for the U.S. Navy. ENS has perfected its own technology using Think Pure Plate Lead which is used to make batteries smaller and more efficient. These batteries will soon replace the litium-ion batteries found in hybrid cars. Demand is increasing for the TPPL technology, which currently comprises only 10% of ENS business, and Cramer thinks this segment will grow. The company can pass high commodity prices on to the consumer and derives 60% of its revenue from overseas. A Merriman downgrade brought the stock down 8%, and Cramer would take advantage of this buying opportunity, which follows a big run in the stock following its successful quarter.

Special Guest: Senator Chris Dodd [D-CONN]

Senator Dodd appeared on Mad Money to discuss the Homeowner Rescue Bill which will allow troubled homeowners to seek loans and refinancing help from the government rather than foreclosing. Senator Dodd added a “contagion effect” as debt exceeds equity for 9 to 12 million of the nation’s homes, foreclosures are growing, and other sectors of the economy are being affected. “The heart of the problem is housing,” Dodd said. And “the heart of the housing problem is the foreclosure issue. Until you address that, all of this is going to continue and get worse.”

The Senator believes helping the homeowner will help everyone, as even solvent households are affected by falling property values when neighbors foreclose. Although the President might veto the bill, Senator Dodd is optimistic it will be passed into law. Of the bill, Cramer said, “This is the beginning of the end of the decline in your house’s value.”

Mad Mail: DeVry (DV)

While a viewer touted DV, Cramer referred to his rule not to touch a company that is being investigated for accounting irregularities.

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Comments

[Chuck:]

The BUG in Moody's bond rating program was probably not a Computer Bug, it was probably a coding mistake in their software. But the big thing that will probably get them in trouble is not that they made a mistake, but that they tried to cover it up.
Just like the politician who gets "caught with his vote in someone else's district", as it were, is not the event getting on the evening news, it's always .... always, the Cover-Up that gets them in trouble.

2008 May 22 08:25 AM

[thku4grace:]

Christopher Dodd and Cramer are both wrong about this housing bill. This bill may, in fact, entice many to stop making payments in the hope of getting a lower principal loan. While there are many that can no longer make payments and have stopped or will stop with this housing bill or not, there are others that will continue to make payments because they can and because they don't have much confidence that their lender will refinance with a lower principal loan. With this bill, these payment makers will start feeling foolish to make a larger payment when they can easily follow others down the path of nonpayment so as to trigger a new deal with their lender. The devil in these details is that the lender can reject a deal and take the home back, but if this snowballs, they may find it impossible to take back such a large number of homes. One must remember that a certain percentage of people who will be failing lied about their income and thus will not be eligible for help anyway. If we add together all those who can't make their payments but still qualify together with those that can but want a better deal, the numbers could create more damage to the real estate market than if we had no housing bill at all. But let us assume that this housing bill does the job in reducing the downside of this housing market. The Senator would say that it helps all Americans, but does it? The housing bubble was created due to demand that wouldn't have existed had lenders done their jobs and qualify only those that could afford. Therefore, the housing market would never have seen the heights that it saw had it not been artificially inflated as it was. Existing homeowners saw a spike in their values that wouldn't have occurred if lenders had done their jobs. The only thing they are out is the extra property taxes they may have paid on inflated values. Last of all, this bill does a disservice to those who resisted the temptation to buy a home in the bubble environment of the housing market over the last few years and astutely raised capital over these years for a larger down payment after the bubble bursts. Shouldn't these responsible people be reimbursed for the potential loss of opportunity? Why is this segment of the population being mistreated? Who are the true beneficiaries in all of this? The politicians! This is an election year and it will surely buy votes with a bill that will not help the current situation but will likely be forgotten in the next election cycle.

2008 May 22 11:06 AM

[freddie:]

thku4grace, Excellent summary of the bill's potential foibles.

2008 May 22 12:00 PM

[jackooo:]

Typical senator. Retroactive.

2008 May 22 12:45 PM

[gordon:]

Apparently, Dodd has accepted more lobbying money than almost anyone in Congress. Reportedly, the homebuilder group even bought one of his vacation homes at an inflated value recently. Homebuilders, as expressed yesterday by Hovnanian, are counting on Dodd to get them the 4-year carry-back loss provision, allowing them to writeoff income taxes paid back 4 yrs instead of 2 So they get back all the taxes they paid in 2 GOOD YEARS! CAN WE GET THAT? Also, they want tax credits for buyers of new homes! THIS ALL SMELLS. DODD smells! This guy wanted the Presidency? He is slime. Expose where his money is coming from.

2008 May 22 01:50 PM

[HangingOnBy...:]

Housing prices will eventually return to the market adjusted price. This bill may temporarily prop up home values, but in the end the values will still fall. All those looking to purchase will also become victims of the Senators political maneuvering as they watch their hefty down payment slowly slip always. This is a temporary solution that will end up costing billions and still hurting millions, while bailing out investment banks, home builders and speculators further.

2008 May 23 12:18 AM

[ATHELSTAN:]

The Dodd proposal smells of private interest money working behind his bill. It is too little, too limited, and too late.
Since nobody seems to know just how many ALT-A and higher mortgages are set to go up in the years 2010 to 2011, it is safe to say we are far from seeing the tail end of this housing and credit crisis.
That being the case, the Congress and the administration must be ready to deal head on with the most extreme scenario ready to unfold between now and 2011. Massive middle and upper middle class housing failures across the country with dire prospects for the states and their ability to raise revenue from property taxes.
Only a bailout by directing cash in the form of 35 to 50 year loans at low interest rates to help the broad middle class from going under will stave off the worst scenarios of the Bush depression now in the making.

2008 May 30 12:42 PM