A Tale of Two Cramers: CNBC Host Does Complete Reversal on Market Outlook

     One day, he says the stock market is supposed to drop 2,000 points; two weeks later, nah.       


     It’s funny how a 125-basis-point drop in the Federal Funds rate in two weeks will change someone from a completely downbeat bear to the most optimistic bull market cheerleader.


     Jim Cramer, the host of CNBC’s “Mad Money” famous for his outrageous antics, had a complete change in attitude coming off the Federal Reserve’s decision to cut interest rates. He appeared on MSNBC’s “Hardball with Chris Matthews” and said the stock market would plunge 2,000 points if the government didn’t step in and keep bond insurance companies from failing.


     Not so anymore.


     “For months I was worried about [MBIA CFO] Chuck Chaplin and MBIA (NYSE:MBI) and ABK [Ambac Financial Group, Inc.] (NYSE:ABK),” Cramer said on the January 31 “Street Signs.” “Everyone’s worried about it now? Why should I be worried about it? When you have a problem on your hands and everyone’s worried knows about it, [New York State Superintendent of Insurance] Eric Dinallo to [President of the Federal Reserve Bank of New York] Tim Geithner, it’s done. It’s done.”


     Just two weeks ago, Cramer was adamant about a stock market crash if problems with these bond insurers weren’t immediately rectified. Flash back to January 18, on MSNBC’s “Hardball with Chris Matthews”: Cramer warned these same companies – MBIA and Ambac – would cause a 2,000-point drop in the Dow Jones Industrial Average (DJIA).    


     “But there is an element – something that I would urge all the candidates to think about and our Treasury secretary, which is that there are a group of insurance companies that insure all these bad mortgages,” Cramer said. “And, Chris, I think they’re all about to go belly-up; that will cause the Dow Jones to decline 2,000 points.”


     Cramer identified Ambac and MBIA to Matthews as the “group of insurance companies” later in the interview.


     Cramer also made some other surprising predictions – the revival of the financial sector and a complete reversal of the housing crisis to a “housing shortage.”


     “[A]ll I’m telling you is these banks are going out for a reason,” Cramer said. “And the reason is because they’re going to make a fortune. If we get any tick-up, I'm predicting a housing shortage and a bank stock shortage right here – housing shortage. … I'm telling you, there will be a housing shortage a year from now. I was the first guy to tell you to burn your house down, now I’m telling you to build one.”


     Cramer wasn’t as enthusiastic following the Federal Reserve’s January 22 emergency rate cut. However, it’s a marked change from his original “they-know-nothing” tirade on the Aug. 3, 2007, “Street Signs.”