Cramer: This Week's Housing Data To Disappoint
As an investor, would you like to have tomorrow's headlines today?
That's just what Cramer delivered on Monday's Mad Money, where he said housing data to be released this week will likely disappoint. Cramer said June housing starts and June building permits will likely be short of expectations when announced on Tuesday. Existing home sales will also be lower than anticipated when released Thursday, he said. The disappointing data, Cramer predicted, will be blamed on the expiration of tax credits for first-time home buyers. But in addition to the tax credit, Cramer's expectation for "drastically lower" housing data comes from recent unemployment data and commentary from the homebuilders.
"My knowledge comes from them," he said of the homebuilders. "They are uniformly far more negative than the moronic consensus of estimates created by economists who own one house rather than the builders who sell thousands."
Economists, Cramer pointed out, tend to incorrectly estimate housing data.
"The estimates have been wrong for month after month," he said. "First wildly underestimating sales from the tax credit and then wildly overestimating sales when it expired."
Those "ridiculous" estimates, Cramer said, create an opportunity for investors. When he worked as a hedge-fund manager, Cramer would look for these kind of estimates and adjust his exposure, meaning the amount of stock one owns versus cash or bonds. Knowing the estimates were wrong, he would ready himself for the decline and not trade ahead of "meaningless data points."
In the week ahead, Cramer suggests ignoring the negative headlines. If Federal Reserve Chairman Ben Bernanke continues to provide liquidity, homebuilders keep building fewer homes and births continue at the same pace, Cramer thinks prices will rise, foreclosures will go down and the overall housing picture will improve. Housing, he added, is not a big percentage of the economy and said executives who have appeared on Mad Money have moved "well past" housing as the drivers of their earnings.
Housing data to be released this week is "bound to disappoint thanks to the eggheads economists who've created absurdly bullish expectations," Cramer said. "But remember that you have the real numbers from me, and you can rest assured that you have not only seen tomorrow's headlines today, but Thursday's as well, and it can't get any better than that."
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