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September 3rd, 2008

Cramer: A Lot of Bad News is Now a Good Thing

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Jim Cramer, host of CNBC’s Mad Money, feels the negative sentiment on Wall Street is completely overblown. Referencing an article that appeared in the Wall Street Journal yesterday, Cramer said articles like this one dictate when an abundance of bad news turns good. According to Cramer, when these types of negative stories begin to pervade the market, a positive turnaround is close by. Here’s why:

1) The housing index increased to 131 from a 52-week low of under 94, great news for the market! Recovery in many, if not every sector of the economy rides on the success of the housing market.

2) Despite the nearly dozen bank failures this year alone, a working model has been created to deal with sunken banks. In Regions Financial’s acquisition of Integrity Bank, the FDIC scooped up all their bad loans, allowing Integrity to keep the good ones.

3) Just yesterday, a barrel of crude dropped to around $107. Falling gas prices is an encouraging trend all around. Cheaper fuel prices will help support stronger consumer spending, which in turn will help boost business earnings. If energy prices can continue to drop, it will allow businesses who have been forced to raise costs because of high fuel and energy prices to lower them:

Deflation is key here, too. As commodities decline in price, the Federal Reserve can worry less about raising interest rates, in turn saving banks and maybe even keeping mortgage rates low enough to draw some bargain hunters into the housing market.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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