CNBC's Cramer goes nuts

Actually, I can believe it. These companies like Countrywide went punch drunk lending to people who couldn't afford the loans and NEVER should have been given the debt to equity ratios they were receiving. I know everyone wants everyone to be able to afford a home, but there is RISK in making large loans to people who can't afford them. This is the junk bond crisis all over again, except with poor credit risk individuals, not poor credit risk companies. If you give people without collateral loans and think the good times will continue forever, this is what you get.

The secondary market now won't touch these crap loans they have been out there giving away like candy for the last 3 to 5 years, and that now means that there have been companies making loans they can't back. That means less money for future loans, which means our economic growth is going to take a killing. The aggravating thing is that this was so predictable. I am not Mr. high finance, and I saw this coming, as did many people. It was the high-finance equivalent of maxing out a credit card and not giving any consideration to how you are going to pay it back.

I know very little about Jim Cramer, but my bet is he has been getting his butt kicked personally--which is why he was having that meltdown on TV. Guys like him play on a different playground from the rest of us. The hedge funds those rich bastards have been running and investing in that traded collateralized debt obligations (and they all were) have suddenly woken up to the fact that many of their assets might be worthless--probably are worthless. That's not the worst part of it for them, though. The banks that lend to them want more collateral, and in some cases now, they want their money back. That is what Cramer was screaming about "rich guys like him not being able to get a mortgage," or however he put it.

I'd say boo hoo to him (why should I care as much about the fact that he can't get a $75 million loan than I care about the poor guy who is being foreclosed on), but it isn't him or his wealthy friends I give a shit about it. It's the fact that the huge bank loans to guys like him are a major part of the investment that keeps our economy solid for the little guys like us. So when he can't get money, there is a chain reaction. Because of this all, hedge funds have been dumping other assets to raise the cash to pay back the banks calling for their money. This is an economic disaster and most people don't even realize it is happening. It's been a damned fire sale (which coincidentally SOMEONE is going to ultimately profit from, although you had better be willing to take major risks if you want to be that person). It is going to hit the economy at large. We have a looming disaster on our hands because of all of this that is going to hit Joe Sixpack soon.

 

Maybe. But trust me, there was more to that one than just that. He has been personally taking a killing. I am sure of it. The reason he is on the phone with the heads of all of those financial institutions every night, the way he said, is that they are calling him up saying they want the money they have lent him back. Hedge funds are getting killed. They can't get loans without more collateral and they are getting daily phone calls saying they have to pay back what they already owe. They have been selling off like crazy, at losses. This is happening to Cramer. I will bet anything he's been taking a beating. In that rant he was bitching about the Fed not coming in to bail out his sorry ass. This was personal, not just theater.