Shippers Troubles Show the Need for Rate Cuts

Holy Batman, that's one bad Manufacturing Index, down to 36 and flashing severe recession. No kidding. But you sure could have detected that earlier from the Baltic Freight Index, which is down nine straight days and depressed beyond all get-out. That is, of course, pressuring shippers, where stocks are so low that they are forecasting bankruptcy for companies like Eagle Bulk Shipping (EGLE - commentary - Cramer's Take), Diana Shipping (DSX - commentary - Cramer's Take) and DryShips (DRYS - commentary - Cramer's Take). I was worried about Frontline's (FRO - commentary - Cramer's Take) dividend, and that sure happened. I only have faith in Nordic American Tankers (NAT - commentary - Cramer's Take), but that's not bulk, that's oil. I would not touch the others because of their debt load.

But it is the commodity makers that this really signals increasing trouble for, and amazingly, it still isn't in the stocks, or it was in the stocks until last week's historic run. U.S. Steel (X - commentary - Cramer's Take), Nucor (NUE - commentary - Cramer's Take), Cleveland Cliffs (CLF - commentary - Cramer's Take) -- these are all up way too much, given the continuing decline. Freeport-McMoRan (FCX - commentary - Cramer's Take) ran too much, too.

Without huge rate cuts round the world you are not going to see any increases in this Baltic Freight Index and all that comes with it. China put the meat ax to rates, taking them down to 5, but it ain't doing a thing. It is also glaring that Germany is more worried about inflation when this index is a signal of unending deflation.

This Baltic Freight Index also signals that the mineral producing countries, including Brazil but also Canada, just could be devastating.

We cannot get out of this vortex without rate cuts. It is one of the reasons why I still prefer the Krafts (KFT - commentary - Cramer's Take) and General Mills (GIS - commentary - Cramer's Take) to the U.S. Steels and the Cleveland Cliffs, and without lift, the hedge funds with concentrated holdings in this area will be back in liquidation mode for these stocks if we don't catch a break in world trade. Remember, I think oil is bottoming, and can fall $4 to $5 more, although I doubt that, but iron ore, nickel, steel, copper, coal -- these seem to have no support at all.

At the time of publication, Cramer was long Freeport-McMoRan, General Mills and Kraft.

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