If I have any ambitions of being a financial pundit, should I try to come up
with stuff like this, from Jim Cramer?
Just some of the Cramer gems there:
"I’m looking for 100% default on the 2-and-28s. One hundred per cent.
The bears are looking for 50%. I’m saying that they’re foolish and that they’re
way too optimistic."
"I’m not distinguishing any more between subprime and prime. That’s
a meaningless distinction. When your house drops 20% in value, then it doesn’t
matter whether you’re subprime or prime. It’s better to walk away, even if
you’re wealthy, because you don’t want to lose your credit card, and you don’t
want to lose your car. Your house is the one thing that’s fungible. It’s smart
to walk away… If your home declines 20% in value, it’s really important
to walk away from it."
"I’m calling for a dramatic decline in home values… If the Federal
Reserve were to cut rates by one full point, things would just reverse dramatically,
and everything would go up in value… Until then, we’re going to be in what
I believe now is a total crisis."
Is it worth responding to this as though it’s rational? Is this what passes
for informed commentary on TV these days? I can see how it gets ratings, in
a train-wreck kind of way – hell, I’m blogging it. But the idea that wealthy
people will stop paying their mortgages because their houses are "fungible"
(unless we get a 100bp cut in the Fed funds rate, of course) – it’s like
some kind of incredibly unfunny parody. Nouriel Roubini et
al might be shrill, but at least there’s coherent logic to their position.
What scares me is that this could be a rare and genuine glimpse into how traders
actually think. In which case the Great Moderation and decline in volatility
of recent years is doomed to die a sudden and extremely unpleasant death.