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Homebuilders Bottom Before Banks

It's a fearful day in the markets, Cramer said during Monday's Stop Trading!.

He attributed a bulk of the problem to single-digit stocks. They're falling on a percentage basis that is just "ghastly" if you're a shareholder.

Cramer also rejected the idea of bottom-fishing in this market. Wells Fargo and Washington Mutual might not even make it through this rough period, at least if the 1990 savings-and-loan crisis is an accurate model. In fact, Cramer urged investors to stay away until all the weak banks had gone under.

"We just lost the first one, IndyMac," he said. "Give us the chance to lose some more."

Downey , BankUnited Financial and FirstFed Financial all need to raise more capital or suffer the same fate as IndyMac, Cramer said.

Switching to the latest on Fannie Mae and Freddie Mac, Cramer said homebuilders made sense as a trade now that home-buying is being encouraged. He expects the group to bottom ahead of the banks.

"I do really feel like we're getting close," Cramer said, but that bottom won't happen until a major merger takes place in the housing sector.

Lastly, Oceaneering International , Schlumberger and FMC Technologies all are plays on President Bush's lifting of the ban on offshore oil drilling. Of course, Congress has to approve the measure before any drilling takes place.

CORRECTION: A previous version of this post listed Bank of New York (NYSE: BK) as one firm in need of raising capital, instead of BankUnited Financial. It was the author's mistake, not Cramer's.


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