Stop Trading!: Mortgage Insurers 'on the Ropes'

Tuesday, 23 Oct 2007 | 5:36 PM ET

Mortgage insurers like MGIC Investment MTG and PMI Group PMI were down about 10% with an hour left in trading on Tuesday. Cramer said these stocks “give the appearance of going down every day.”

That shouldn’t come as much of a surprise after a Lehman Brothers report saying, “credit is clearly unraveling,” “delinquent loans are worrisome” and “the estimates are for big losses.”

“These companies are on the ropes,” Cramer said.

MGIC and PMI have “sliced through their book value,” which is usually a bottom for these stocks because they’re supposed to be cash. Now with lowered earnings, they’re expensive on a multiple basis.

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Cramer’s solution? These companies need to issue equity.

Cramer also admitted his latest buy call on Coach was off. COH just reported a disappointing quarter. “Something’s wrong,” Cramer said, and the blame can’t be placed on sectorwide problems in the retail.

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