We are buying 50 shares of Home Depot at roughly $364.95. Following the trade, Jim Cramer’s Charitable Trust will own 100 shares of HD, increasing its weighting in the portfolio to about 1.1% from roughly 0.56%. Stocks are selling off Wednesday after the August consumer price index report came in mostly in line with expectations, though there was a slight uptick in so-called core inflation, which strips out volatile food and energy prices. Inflationary pressures are easing by nearly every account. Still, the market seems disappointed by the data because it suggests the Federal Reserve can’t aggressively cut interest rates by 50 basis points — equal to half a percentage point — at next week’s policy meeting. Instead, the market will have to live with a traditional 25 basis point reduction. We raised cash ahead of September, noting how it’s a seasonally weaker month for stocks. We’ve maintained this high cash position — in fact, we even raised it a little on Monday into strength to replace last Friday’s small buy — as we waited for another big down day. Now that another sell-off is here, we are putting some cash to work in our newest name. When we initiated a position in Home Depot last week, we explained that mortgage rates somewhere around 5% to 6.5% is historically there range that unlocks a new housing turnover cycle, which is the main driver of Home Depot’s business. We are starting to see this play out now. Earlier Wednesday, it was reported that mortgage rates fell for the sixth straight week last week to 6.29% from 6.43%, leading to a 1.4% weekly increase in total mortgage demand and 1% increase in refinance applications. Those may be soft numbers, but remember rates are still at the top end of the range. Rates will come down and activity should pick up after the Fed gets a few rate cuts under its belt. Some believe the 5% range may not be too far away. That, at least, is what Toll Brothers CEO Doug Yearley said on “Squawk on the Street” earlier Wednesday when speaking about 30-year fixed-rate mortgage rates and the luxury homebuilder’s business. “That’s where it feels like it’s headed,” Yearley said, referring to below 6%. “If we have three cuts in the fall … we should have a 30-year fixed, no-point mortgage in the 5s, and look out,” Yearley said. “The market should take off.” If Yearley is correct, then it won’t be too long until mortgage rates are at a sweet spot where housing turnover really starts to pick up. We want to be building our Home Depot position before this happens, which is why we started the position last week and are adding on weakness Wednesday. (Jim Cramer’s Charitable Trust is long HD. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
