The Sky is Falling - Part II

[hbunny_IHB]

<p>Cramer is also arguing that the "market tells" for mortgage-land, i.e., Countrywide's stock, bespeak a mortgage market that is going to be just fine:</p>

<p><strong>By <a target="_blank" href="http://apps.thestreet.com/cms/email/tscEmailStory.do?storyId=10335525&authorId=269&storyUrl=/markets/activetraderupdate/10335525.html">Jim Cramer</a>


RealMoney.com Columnist</strong>


<strong>1/30/2007 7:35 AM EST</strong>


</p>

<p>If everything is so horrible in mortgage land and credit card land, does someone want to tell me why anyone would want <strong>Countrywide </strong>(<a target="_blank" href="http://tools.thestreet.com/tsc/quotes.html?tkr=1&pg=qcn&symb=CFC">CFC</a> - <a target="_blank" href="http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=CFC&site=tsc">Cramer's Take</a> - <a target="_blank" href="http://www.stockpickr.com/thestreet-symbol/CFC/">Stockpickr</a> - <a target="_blank" href="http://ratings.thestreet.com/tools/basic/ratings.html?tkr=1&s=CFC">Rating</a>) or <strong>MasterCard</strong> (<a target="_blank" href="http://tools.thestreet.com/tsc/quotes.html?pg=qcn&symb=MA">MA</a> - <a target="_blank" href="http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=MA&site=tsc">Cramer's Take</a> - <a target="_blank" href="http://www.stockpickr.com/thestreet-symbol/MA/">Stockpickr</a>)? But Countrywide is the subject of buyout chatter by <strong>Bank of America</strong> (<a target="_blank" href="http://tools.thestreet.com/tsc/quotes.html?tkr=1&pg=qcn&symb=BAC">BAC</a> - <a target="_blank" href="http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=BAC&site=tsc">Cramer's Take</a> - <a target="_blank" href="http://www.stockpickr.com/thestreet-symbol/BAC/">Stockpickr </a>- <a target="_blank" href="http://ratings.thestreet.com/tools/basic/ratings.html?tkr=1&s=BAC">Rating</a>), which doesn't need to double-down on mortgages. Yet that's just what B of A would be doing if it does the deal. We're supposed to be so fearful of credit cards, yet there's been one of the most furious big rises that I have ever seen in MasterCard. Countrywide's got models that tell me if you know how to lend to the subprime market, you are not in trouble In fact, you are in clover. MasterCard's price action says that the consumer is spending and not stretched. When I see these moves I keep thinking, "Don't freak out on these two issues because the ultimate tells of the groups are ramping." That's just a great defense when the bears go nuts with these issues. </p>

<p>There's just too much pent-up demand evident in the most desirable places in the country. The temporary glut of houses is getting worked off, the prices are correcting, and the demand and competition for a place in these desirable areas will continue. Interest rates are looking to stay low, indeed fed lowering is looking pretty likely. </p>

 

[IrvineRenter_IHB]

Did you miss the 40% drop in the stock price of New Century Financial over the last 2 days? The number 2 sub-prime lender's stock plummeted because they are going to have to buy back all the bad debt they put on the market. Several of the other sub-prime lenders were down 10% or more today. By all means, if you think the mortgage lending industry is doing well, go buy some of their stock.

 

[graphrix_IHB]

<p>Oh yes please keep the positive points of CFC coming! I need for the the April and July put contracts to come down in price. Lets see CFC 05 to 06 pay option arm production increased 25% but the amount of negative amortization increased 775%. Ask Cramer how CPST is doing since he recommended it at $4.30. </p>

<p>The best thing Cramer has ever said is bulls make money, bears make money and pigs get slaughtered! And do your homework!</p>

 

[IIIrvine_IHB]

graphrix has got it right. Keep shorting those subprime lenders to zero. There is no intrinsic value to these companies. More bad news from that sector is yet to surface.

 

[crucialtaunt_IHB]

graphrix: CFC July 35 Puts are still attractively <a href="http://finance.yahoo.com/q?s=CFCSG.X">priced</a> despite their runup today. It should be an interesting week with Bernanke's testimony on Wednesday...

 

[graphrix_IHB]

Yes they are and I am considering it. I can't remember if I mentioned it here or not but the amount of neg am they are showing has increased from 2005 to 2006 by 775%. WHOA!

 

[graphrix_IHB]

crucialtaunt - If you haven't checked out Chris' blog <a href="http://iamafuturestrader.blogspot.com/">http://iamafuturestrader.blogspot.com/</a> or if you have keep checking it. I have been talking to him about the lenders and I think he might do a piece on them. I have been lurking on his blog for a while now and he has made some impressive calls.