Cramer Thinks Dow Drops Further

“I don’t think the downside’s over,” Cramer said during Monday’s Stop Trading!.

As bad as the market is right now, and the Dow was down about 550 points with less than a half hour in the trading day, growing problems in Europe, massive hedge-fund selling and the resultant overwhelming lack of confidence on Wall Street could sink the Dow and other major indices even further.

The fear has grown to such levels that there’s “a complete and total buyer’s strike,” CNBC’s David Faber said during an appearance on “Street Signs” today. And that goes for strong companies that have been pulled down with the weak as the entire market has declined sharply.

“There are bargains,” Cramer said, agreeing with Faber, “but everyone’s scared to take them.”

While stocks aren’t working in this environment, Cramer did say that municipal bonds – general obligation, not revenue – were “a great place to be.”

Cramer said he took issue with a Wall Street Journal column that ran over the weekend. The article, written by Martin Feldstein, a chairman of the Council of Economic Advisers under President Reagan, claimed that there were 10 million U.S. homes where the mortgages exceeded the actual value of the house.

Cramer called those figures “completely wrong,” citing numbers he pulled from the National Association of Realtors database. According to the NAR, Americans bought 14 million homes between 2005 and 2007, and 7 million of them were linked to adjustable-rate mortgages.

Also, any home for which a fixed-rate mortgage was taken out pre-2005 already has a decent amount of equity in it, Cramer said.

“He’s betting that every mortgage that’s been taken out in the last eight years is worthless,” Cramer said of Feldstein.

Cramer’s hoping bad home loans in the U.S. work their way to the Troubled-Asset Relief Program just signed into law by President Bush, and then from there are directed to the Federal Housing Authority. The FHA can take any loan in danger of foreclosure, namely those adjustable-rate mortgages, and change it to a 30-year fixed loan.

The FHA also has the option to waive interest on those loans for a certain period of time, Cramer said, and that also would help out homeowners.

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