- The economy will never recover if housing doesn’t find its footing first. But when will that happen? Cramer said he expects a bottom by the third quarter of 2009. There is, of course, the usual Mad Money rigor behind this prediction (of course)
- Now these charts are showing that housing stocks bottomed last month. So if the logic worked for housing’s peak, why not for it’s bottom? (they do? must have a different set of charts than I do)
- On top of this, Cramer added his thesis that stocks usually tell the story of their respective industries for six months out. So in a sense, investors can use stocks to see six months into the future. (and as you know 6 months out from 3rd quarter 2009 is... umm... well not 3rd quarter 2008 but we can't let facts get in the way of a good TV show segment)
- But here are 10 more reasons Cramer thinks we’re in store for a housing bottom (I will spare you but you can follow the link above to read those 10 reasons you must drink Kool Aid - or watch the video below)
I don't know when the real bottom is but I have my instinct that it will be farther out than most today assume. [What Should Median Home Prices be Today?] But I also know the market will run up these stocks many times in advance of a real bottom because everyone is trying to outguess each other on when that bottom will be. Hence why we own this type of merchandise.
I'm cutting Lennar (LEN) on it's 10% spike from a 1.9% stake to 0.7% here in the low $12s. It would be nice if it could run to upper $12s soon so I can sell most of the rest there, but not counting on it. I plan to rebuy this somewhere in the mid $10s, maybe in the next few days as this market punishes whatever it runs up within 48-72 hours. This stock has actually created some nice trading, if nothing else of late - mid $10s to mid $12s has been quite a winner. At some point in 2009 I expect this group to make a premature large rally as some data point (hey this quarter only 32.2% of all sales in America were foreclosures! Down from 36.2%! Huge improvement! The bottom is in!), and then probably a real rally into 2010. Until then we're just trading these for these nice 10-15% type of moves that happen quite often now as we swing from "reality" to "hope".
I have no rigor myself - but I see a chart making a series of lower highs and we are now butting up against the next high - so time to cut back. "Fund my Mutal Fund: Rigor-less and proud of it"
Long Lennar in fund; no personal position
4 comments:
I like his bottom call http://madmoneyrecap.com/ARCHIVES/daily_recap_closingcomments_101106.htm
http://www.youtube.com/watch?v=kgPzZJCTSLE&eurl=http://www.ibankcoin.com/flyblog/index.php/2008/08/27/jim-cramer-is-insane/
wow nice catch Sia.
In full disclosure we all get it wrong but this is a doozy. But it simply reinforces what i keep saying - everyone is trying to jump ahead of each other trying to guess the bottom in everything - airlines, financials, retailers, housing - but man this was 'early'. ;) Now when Bill Miller did it with real money he lost 1/3rd of his fund's money. When Cramer does it we just clap like seals and then forget about it ;)
10/06 after interviewing Toll Brothers CEO
JC after interview: Let me just say that this business has bottomed! Now, he says that it's bumping along the bottom. You know you cannot wait - if you're buying a stock - until the 'all clear' bell is sounding. It is never sounding. But, guys like me, getting ahead of the turn, like we got ahead of the decline, and I am blessing LEN; to a lesser extent, TOL; and KBH. This group is now right. I don't want you backing away from it.
I need to do more research on this but a quick perusal of the very long term charts shows that Cramer may be right. Let me clarify that I try to define those times where markets might be making a secular change. I have a set of tools that I have developed for this purpose. For example, positive divergences between price and an oscillator develop after long down trends; or how many legs down has a price move had. I quantify all of this. Basically, I ask the question when these things appear what does price look like 6 months from now or 12 months from now. I have applied this kind of work to the major indices because this is what I trade, but I have done little outside of this area. I do like to take my tools and see how well they work in different markets; I always look for something that works across various markets.
Anyway, the housing stocks have a lot of characteristics that one would associate with a bottom. Once again let me clarify, I have not backtested this but a precursory look shows that it appears that way.
Lastly, by a bottom in housing I think one might say that the stocks should stop going down. They may not go up, but they should stop going down.
I guess I need to spend a little time at the computer trying to see how well my tools really do work. It might be interesting.
Guy I hope so
I'd like to find some, any, group that works for more than 2-3 weeks.
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