Jim Cramer Expects Housing To Bottom By Third Quarter Of 2009
For CNBC’s Jim Cramer, things are looking up these days.
First, stocks reached a bottom (or so he claims)…
Back on July 29, 2008, I noted that CNBC television personality, former hedge fund manager, and best-selling author Jim Cramer declared that the bear market in stocks was officially over. Cramer said that stocks would not revisit their lows of July 15, when the Dow Jones Industrial Average ended the day at 10,962.54, and the S&P 500 at 1,214.91.
Soon, it will be housing’s turn (or so he claims)…
From the CNBC website this past Tuesday:
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. Cramer pointed first to the stock charts of Pulte Homes, Toll Brothers, DR Horton, KB Homes, Lennar, Centex and MDC. All of them show a peak exactly one year before housing did in July 2006. Well, guess what? 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?
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. Part of the reason Cramer’s saying a year this time, though, is because the market is so horrible he’s allowing for setbacks. He doesn’t want to be premature, especially considering the aforementioned stock charts seem to indicate a year is a better timeline.
Who knows? He might be successful at calling the bottom of the housing slump, since his timeframe is extended out quite a while. Recent calls for a floor have proved to be premature. MarketWatch’s Greg Robb wrote Tuesday:
Economists who are calling the housing bottom are like a baseball team that’s close to clinching a playoff berth but keeps losing, and its clubhouse staff has to keep loading and unloading Champagne across the country.
Every month, these economists say the bottom is close, but really some poor souls are putting the Champagne back on the truck for the next month.
Sources:
“Cramer Calls the Housing Bottom”
Tom Brennan
CNBC, August 26, 2008
“Housing hasn’t bottomed yet”
Greg Robb
MarketWatch, August 26, 2008
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