Nothing Else Working? Look to the Staples

A return to the soft goods and staples? One look at your screen today shows that the market has lost faith in a host of sectors. Even in declining flows of cash into equities, the money has to go somewhere. I think it is flowing back to the staples.

First, the case against the other large S&P areas.

1. The uncertainty in the common stock of the financials has turned portfolio managers on to the sell side endlessly. As you can tell from the misdirection in the financials that the government is offering, it is impossible to figure out the worth of the common stock. So, with the exception of Morgan Stanley (MS - commentary - Cramer's Take), Goldman Sachs (GS - commentary - Cramer's Take), Visa (V - commentary - Cramer's Take) and MasterCard (MA - commentary - Cramer's Take), there is no way a responsible portfolio manager can initiate new positions in the group, even if JPMorgan (JPM - commentary - Cramer's Take) and Wells (WFC - commentary - Cramer's Take) seem dirt cheap. This is all Geithner's fault, but there isn't much we can do about it. The destruction of the insurers -- Hartford (HIG - commentary - Cramer's Take), MetLife (MET - commentary - Cramer's Take), Prudential (PRU - commentary - Cramer's Take), Lincoln National (LNC - commentary - Cramer's Take), Manulife Financial (MFC - commentary - Cramer's Take), Genworth (GNW - commentary - Cramer's Take), Principal (PFG - commentary - Cramer's Take) -- remains one of the most astoundingly horrible sectors of the market.

2. The early-cycle stocks have simply been demolished on the worries about unemployment and the lack of credit. The end of the auto industry as we know it has further damaged the group and the bogus infrastructure story from the stimulus bill is revealing the machinery stocks as companies without catalysts. Same goes for steel, which is in free fall today.

3. The transports have been destroyed. There is no sponsorship whatsoever, and this group goes down pretty much every day. It is frightening to people because the losses are happening so quickly.

4. Health care's been rocked by the new Medicare rules. If you look at United Health (UNH - commentary - Cramer's Take) and Humana (HUM - commentary - Cramer's Take), you will see how the stress has just caused the group to buckle. The change in the law that severely limits Medigap, the staple of Humana, is on display today writ large. I would exempt the drug stocks, but they have gigantic strong-dollar exposure -- worrisome. I would say that biotech works, and that's why Gilead's (GILD - commentary - Cramer's Take) been such a strong equity. I think that will continue, but we have to recognize that the group's been strong and Gilead's had a great run -- one that can continue, but a lot of the easy money has been made.

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