Bernanke Dumb Like a Fox — RE Bear Turns Into Ragin’ Bull — Cramer Says RE Investment Now a No-Brainer

Posted @ 5:09 pm - Filed under Real Estate Investing, Financing, Market Correction, Economy

I’m among the group for whom Jim Cramer is only palatable in small portions. I respect his track record and investment expertise immensely. He’s flat been there and done that. He’s done it in the trenches in daily hand to hand combat. He’s also been the biggest real estate Bear around. His definition of real estate as a potential investment, has until yesterday been one word — toxic. I’ve followed him as I do a few big time investors, and nobody seems to supply the depth of reason he does. What I mean by that is he may be wrong which he’ll admit to when it happens, but the reasons proffered for his original decision are always detailed and based upon solid investment principles.

Nobody’s always right. The trick is to be right when it counts. Duh.

Cramer has been telling folks for quite awhile now how stupid it would be to invest in real estate. We’ve, ah, disagreed on this point. It’s interesting however to point out what I think is the reason we disagreed. It’s all in a video you can find on The San Diego Home Blog, written by our own Princess of all that is blogging, Kris Berg. The video appears to be having some problems, but take a chance. It’s a long one, so the first 5 minutes will probably do the trick for you.

Before continuing it’s important to point out there have been times I’ve told folks to stay on the sidelines and avoid buying. Ditto with selling. I’m definitely not one of those silly brokers who are constantly smiling like Howdy Doody while saying enthusiastically it’s ‘always the right time’ to buy real estate. As I’ve been saying for quite awhile, in my opinion the window allowing us to stay under the radar will be closing soon. I’ll add the usual BawldGuy Disclaimer — That and my heavily armed Starbucks card will get us both some coffee and cookies.

Cramer is now not only drinking the real estate Kool-Aid, he’s making it himself. I listened pretty closely as I watched the video. He didn’t leave himself much wiggle room at all. It seemed he was on a mission to communicate clearly and without ambiguity — buy real estate now. It’s coming back, and it won’t be that long. He then went on to give his take on the various financial firms, which I won’t go into here, accept to say he made it clear he wasn’t worried about them whatsoever.

I’ve been a consistent believer in Dr. Bernanke’s strategy as Fed Chairman. In a nutshell he’s been doing whatever he could, using whatever tools he had or could invent to ensure the real estate market avoided collapse. It appears Cramer now agrees. Of course, he’ll say it was the draconian cuts of 1.25% in the Fed Rate in the last 10 days or so. That Bernanke has ‘finally seen the light’. Fair enough. But when you look back using 20/20 hindsight, you’ll see the order in which Bernanke took care of business.

His primary approach has always been through the sledge hammer of money supply. He’s virtually flooded not only our system, but indirectly the world’s banking system with ever increasing liquidity. Why lower rates if lenders don’t have money to lend? Once the liquidity was handled Bernanke acted swiftly and with great leadership. He chopped the knees from under rates.

Now, as Cramer so correctly and loudly reasons, the banks are now paying rates low enough to provide the required spread for operating profit. Again — Duh.

Since the above statement is now reality, allow me to bring up one of my favorite BawldGuy Axioms:

LENDERS LEND! The busiest folks around are gonna be your friendly neighborhood mortgage brokers. So I hope you’ve played nice with them lately.

So now the lenders have bucks to lend, profits to make, and according to Cramer, buy buy buy!

Cramer says Bernanke now gets it, while I say this has been his plan from Day 1. I’ve been saying that here since early last summer. You could look it up.

All Jim had to do was read Bernanke’s book, alluded to before in these pages, in which he lays out for everyone to see exactly what he believed about the Fed’s tools and how to use them. I realize this space has been a broken record on this subject, but Ben put his beliefs in writing for all to see. The difference between Cramer and me is I believed him, and Cramer ignored him.

Now he’s a believer. Again, he says Bernanke ‘woke up’ while I say he played all the so called experts like rookies at a Texas Hold ‘Em tournament.

Bottom line? Bernanke has just about finished setting the stage the way he wants it. The Bears are about to fall into the abyss. You heard it here first. Cramer talked on the video about the Bears taking it in their ’shorts’ pun intended. I’m hoping having Cramer as a new ally is a good thing, an not a sign Cramer’s losin’ it.

Real estate investors? Move it or lose it — in my opinion.

This entry was posted on Thursday, January 31st, 2008 at 5:09 pm and is filed under Real Estate Investing, Financing, Market Correction, Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.