On Thursday’s edition of the Sell Block, Cramer revisited each of the 12 stocks from his August 3 Mortgage Madness index – a conglomeration of companies he predicted would be faced with a “big crisis” as the fallout from the subprime mortgage became clear. The index started at 100 when Cramer created it last summer. Five months later, it’s been cut down to 47. Cramer thought it was time to go through, one by one, to determine if these stocks still belong in the Sell Block.
Countrywide : A Bank of America takeover, if it were to happen, would be “brilliant,” Cramer said. It would take Countrywide off the government’s hands and it’s a windfall for BoA (the stock was up on the news of the talks). A deal like this would be unlikely under normal circumstances for antitrust reasons since both companies have such huge mortgage businesses, but these are not normal circumstances.
Washington Mutual : One of the worst subprime lenders, Cramer is now recommending that WaMu not be sold. There’s too great a chance it could get bought out, he said.
Citigroup : Cramer thinks Citi is about to receive a big capital infusion and is no longer a sell. And if the Fed starts aggressively cutting, Citi should benefit more than most.
Bear Stearns : Like Citi, Bear would be a big beneficiary of a new and improved Fed. The new management gives Cramer hope too, although he still believes Merrill Lynch is better.