Cramer Flip-flops: Bond Insurers Won't Cause Dow Crash

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Two weeks and two rate cuts later, CNBC "Mad Money" host Jim Cramer has a revived faith in the U.S. stock market.

On January 18, Cramer appeared on MSNBC's "Hardball with Chris Matthews" and warned if the government didn't intervene and prevent the failure of two large insurance companies, Ambac and MBIA, the Dow Jones Industrial Average would drop 2,000 points in the upcoming weeks. Cramer isn't talking about that sort of collapse 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 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."