Cramer: Housing Does Worry Me
NEW YORK ( Real Money ) -- You bet I am worried about housing. I say that because housing has been the linchpin of this recovery and without it -- or with a big slowdown in it -- or with hedge funds dumping homes because they fear the boom is ending, we could crimp the other hiring machine beside oil and gas and aerospace. And there's no one to take up the slack, least of all the government, which racked up an amazing surplus with many more to follow.
I write about this worry because that sector has almost fully recovered from the May 22 downturn. It's almost gotten back to even, and I think that it would only take one bad number, one slow number in starts, in permits, in sales, in housing company earnings, in consumer sentiment, to send these stocks back down again. Oh, and if rates go to 2.75% on the 10-year then we get a selloff, too.
Obviously, as I have said over and over, housing punches above its weight. I am a huge believer in retail here, but at the same time there's retail -- apparel -- and then there's retail -- Lowe's
As far as the broader economy, I can't be as sanguine if we lose housing. We need to build 1.5 million homes to meet the demand instead of the 1 million we are going to build. The upside to the GDP comes from housing. If we don't get it, we don't have the upside.
Now, of course, in the upside-down world of bonds, that just means the Fed stays easy. Nevertheless, I think that the stays-easy trade is not going to go down well if housing-related stocks are weak.
So, I say, what's the point? You almost back to even? I would go. Yes, we will have a diminished universe of stocks to pick from if we lose housing. Still, there are plenty of other areas with less risk, and I would gravitate to them until we are certain that the housing-related numbers are still coming in strong and the hedge funds don't start dumping their inventories because they didn't see the rise in rates coming.