DEVLOPMENT

good company outlook.

Buy Between 18 to 20

What do you buy when housing prices are going up but rates are stable? Do you buy Toll Brothers (TOL - commentary - Trade Now)? Lennar (LEN - commentary - Trade Now)? How about Hovnanian (HOV - commentary - Trade Now)? Who owns the most homes, isn't that what you want, someone who is the biggest homeowner?

In a blog post yesterday, Cramer wrote:

"What do you buy when housing prices are going up but rates are stable? Do you buy Toll Brothers? Lennar (LEN)? How about Hovnanian (HOV)? Who owns the most homes, isn't that what you want, someone who is the biggest homeowner?

"OK, I have three of them: Wells Fargo (WFC) courtesy of the reckless lending of Golden West, with that ridiculous "pick and no pay" plan; Bank of America (BAC), courtesy of its Countrywide acquisition, which was awful and has been a huge drag to the company but is now a drag no longer; and JPMorgan (JPM), where it looks like Jamie Dimon bought the stupendously horrible Washington Mutual and wrote the home portfolio right about to where it was before the index bottomed.

"Now these banks should trade as proxies of the house price index because of their vast repository of foreclosed properties. I knew when I called this bottom in housing we would get to a moment when OREO -- Other Real Estate Owned --would be worth more than what it's on the books for, and that moment's coming. What was a horrible drag will become a wonderful opportunity, and it is now going to be happening;

"No, that does not mean a lot of the toxic residential mortgage bonds will come back to life. That's because we now know there were so much fraud in the mortgage process that the stuff's often worthless. Frankly, it's criminal. But those who own the whole mortgages -- Wells, JPMorgan and BofA -- it's a windfall going forward. And eventually people will think like that. Not yet. They will be pulled in kicking and screaming. But it will happen.

"Which is why these three are not done going up. Maybe not by a long shot. You should hope the whole market comes down for a chance to buy these three before the big mark-up comes starting tomorrow."

In an Aug. 17 blog post, Cramer wrote:

"I understand the drumbeat of foreclosures, but anyone who is overwhelmed by what they might be doing must go and listen to Bob Toll on the Toll Brothers call. Things are looking up in so many areas of the country. The numbers this year are much better than last. Of course, he would still prefer some sort of first-time homebuyer incentive a la Cash for Clunkers, but Treasury is not going to give him that."

That day on "Stop Trading!" Cramer said: "Bob Toll is telling you, 'Look, we're at this high-level price point, and we've had more traffic than we've had in years."

And in another Aug. 17 blog post, he wrote:
"But anyone who was on the Toll Brothers call last week is struck with several contradictions:
"1. There are a lot of buyers of homes -- I am not kidding, there are.

"2. There is much financing as it is getting better and better as we know from the cancellation rate.

"3. Toll Brothers has projects in the worst areas -- New York City and Florida -- that are getting traffic and orders.

"4. The people who bought Toll Brothers' homes from 2004 to 2007 are all underwater but so what? What does it mean?

"I am struggling with the top down vs. the bottoms up. The bottoms up is turning up right when the top down is turning down. I simply cannot reconcile the two.

"I know that Toll Brothers is without a doubt an honest arbiter because the numbers don't lie. I know that Bob Toll had been extremely negative for 18 months. I know that he is a very shrewd observer of the new and existing homes markets."

Turn around

Dougie Kass shot me a piece about a possible Toll Brothers (TOL) upside surprise on the horizon, obviously good news, but it doesn't intrigue me as much as the banks, where I anticipate many upside surprises.

Aug. 11 blog post: "Dougie Kass shot me a piece about a possible Toll Brothers upside surprise on the horizon, obviously good news, but it doesn't intrigue me as much as the banks, where I anticipate many upside surprises."

"This is not a clarion call to buy Toll Brothers (TOL) or Lennar (LEN) or KB Home (KBH). It is a clarion call to buy JPMorgan Chase (JPM) and Bank of America (BAC) and Wells Fargo (WFC). The latter may have to do a deal; the former two have done them. (I would buy JPMorgan Chase on the broken print, which I don't think will last.)" ("Pending Home Sales Data Signal a Bottom," 6-2-09)

high price homes

must wait too long for Mkt recovery

not honest

May be too early

high end housing slow to recover unless jumbo rates come down

lost my shirt

all homebuilders

it will still be a while before the recovery

Jim Cramer keeps getting in he way of the natural course of the price.

bad industry