Monday, January 26, 2009
(Cont'd from above)...

Jim (cont'd):    But if we are going to get a sustained upturn… something that makes us want to buy everything from the home builders to the financials… that are levered to home price… and to the commodities and to the industrials, which ultimately, along with retail, get carried up when we get a bottom in housing… that tells us that it is more important to tackle housing than unemployment right now… see cause the Obama administration has a plan to deal with unemployment… they know it is a huge problem… and they are focusing the stimulus package on fixing it…. well, whether you think it is going to work or not you know they are doing it… but we still need them to do something about housing… that will allow us to truly rally… raise everything… that will make people feel better for both their housing wealth effect and their stock wealth effect… when you hear the numbers that are branding out about for infrastructure spending, clean energy, green jobs that is them trying to placate just Charybdis not the housing Scylia…

We… what we don’t hear about is the thing that we really need if we are going to fix housing on my time table… a Scylia slaying… tax credit… for people who buy not new homes… only existing homes that are currently in inventory… we got good news on the housing front today… because wonder of wonders lower prices and lower mortgage rates bring buyers out of the woodwork… I don’t care if they are speculators… those houses are being taken out of inventory… that allows all other houses to go up in value… or at least stop going down… and if we are going to have a sustained good news in housing… we need this tax credit nation wide… but I haven’t heard a thing about it from Obama… or from Geithner… and this matters, because as we found out today… housing can trump unemployment… without the tax credit.. we are going to have people sitting on the sidelines with little new supply… and foreclosed homes selling at very low prices to speculators… who sense opportunity… instead of to real buyers which is ultimately what we need… because they can make a permanent change in the supply of housing… we need my tax credit to make these housing inventory reductions sustainable… so your house can stop losing value… people on the ground know it… why doesn’t Obama know it… why won’t he act to hasten the bottom in housing… something that will also bring back so many of the reserves on bank’s balance sheet and allow them to lend again… maybe he will… and we are just not hearing about it.

If today tells us anything, it is that we can’t just fix housing or unemployment… we need to fix both… but housing matters… and that means adopting my tax credit for buying existing homes… if we want more housing good news… so how come I am the only guy talking about the tax credit… the only one that is willing to tackle this root and branch… I gotta… I gotta real capitalist feel about this… there are plenty of lobbyists for new homes… pick a home builder… any home builder… and they are spending money in Washington to make sure that their story line about how they put people to work gets heard… but we don’t hear the flip side… which is that building new homes is building up inventory… and we need to reduce inventory if we want to get housing to bottom in time… so here I am a one man lobby in favor of giving people who buy old homes, a big fat tax credit… that with a combination of the Fed lowering mortgage rates even more… we have a Fed meeting this week, let’s hope that they keep talking about that… by buying more mortgage paper that would make up the difference in down payments and help trim the endless losses the banks are taking on existing loans… all of which start with housing… that would take the pressure off the banks… and give them the capital to make loans again… do you know that at one point, the banks were flying today because of this number… and then people said well wait a second… there are problems, Lincoln National‘s got a little problem… Aflac is down again… next thing you know, talking about unemployment… banks go down… then banks go down, rest of the market with it.

Here is the bottom line…

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The Bottom Line!:     As the market showed us today, while we may be stuck between the Scylia and Charybdis… sometimes Scylia takes the day off… and good news in housing slightly out weighs bad news in unemployment… since the Feds have a plan to deal with unemployment… what they need is a plan to make sure the new… the news on the housing front… first good month in two years stays good… that is why we need to adopt my plan… to give everyone who buys an existing home a notoriously B.I.G…. perhaps as much as $25,000... juicy tax credit.

Yes, jobs are important, but I think Pres. Obama needs to act on housing & fast.   Good news in housing can trump bad news in unemployment… but you have to join my lobby for tax credits for people who buy only old homes… not new homes… we don’t need any more new homes built… and that will cause the bottom… and that will make it so we get out of this mess.


[verbatim recap]

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Jim went on after this segment to take questions from callers, and responded with his comments...

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Q:    Is the federal government going to create what they call a bad bank, to buy the toxic ash sheets that are on the balance sheets of banks. And, is this a good things for banks, will it nationalize them?

Jim:    Okay… let me take it from there… we do not want nationalization of banks… we want to fight that… our country is not in a position to run banks better than the people who run banks… you may have total contempt for the people who run banks… but believe me, they are better than if we bureaucrats in to run banks… secondly, the bad bank structure was something that was adopted in the very successful resolution trust times of the late ‘80’s… and it something that Sheila Bear, who runs the FDIC favors… however, Tim Geithner, who is the fair haired boy… has not said anything positive about it… so I have to tell… I don’t have a feeling that they are going to do it… I do think they should do it… it is a way out of the mess.. and I will be addressing more ways out of the mess… because I am trying to offer solutions on Mad Money… and not just constantly knock and criticize.

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Q:    It is really obviously beneath all of our economic problems, like the car sales, the company profits, and jobs and stuff. Are foreclosures being caused by these upside down mortgages. The housing prices recalibrating themselves to tighter credit standards. Why hasn’t the government done anything to re-index these principal amounts on mortgages?

Jim:    Okay… there is a very good reason… and I think that is a great, great question… first of all remember… we were… it was Republican nation, a Republican regime… and the last thing they are ever going to do is cut the principal… they have been fighting that tooth and nail… that is just something… they thing that is communism… remember these Republican had to be dragged kicking and screaming to be as active as they were… so that was too much for that to swallow… I think that the original TARP plan allowed the government to readjust and make incentives… but Paulson got caught up trying to ring fence… and make sure that not every institution just went bankrupt…. so they left that behind… I think the new administration has a clean slate… they are going to have to buy these loans… put them in a First National bad bank… then readjust the principle… and just accept the fact that has to happen… in order for all housing to go up… and to get us out of this mess… the focus must be on housing… not just job creation.

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Q:    I need to know how Home Depot is going to do over the next six months?

Jim:    Alright… you are my guy… now listen, Home Depot bit the mat… I feel very bad for the people who got laid off at Home Depot expo… but that concept is not going to work in this environment… that is too expensive for people… they have cut back… they are trying to clean up the balance sheet… they offer a bountiful 4% yield that I think they are going to do fine with… they do have too many stores in California and Florida but those areas will come back… the bottom line, if you buy that stock under 4% yield… which is where it is right now… and then buy a little more at 4 ½$… and then a little more at 5%… you are going to make money… I bless that transaction… Home Depot is for me.

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[verbatim recap]

[end of segment]

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