Nat Gas Loss Is The Market's Gain

Procter & Gamble's (PG - commentary - Cramer's Take) $3 billion inflation bill, if reversed or even curtailed, would make the earnings comparisons next year simple, and it would put the lie to a 17 multiple. We can read the natural gas chart -- their biggest expense -- and it is obvious that they are going to blow away the numbers next year on a combination of pricing that will stick and raw costs that will plummet from the second quarter.

Plus, if you look at the chart and what the fundamentals say, there is no way that nat gas doesn't retreat to slightly higher than where it was last year. In fact, if it overshoots (as commodities are want to do), you put a 6% price increase on top of a 1% to 2% increase in nat gas, and you can see next year producing an $80 stock.

It's the same for a company like General Mills (GIS - commentary - Cramer's Take), which is a screaming buy despite its increase, because its grain and plastic and oil bills should be down appreciably. That's probably the main reason this stock is so strong. Given the strong top line from Kimberly-Clark (KMB - commentary - Cramer's Take) despite the commodity-depressed EPS hit, you can see how that company could be severely undervalued.

What's weird, and what makes this setup more bullish than any other since the bear market began, is that the financials and the techs are rallying too, even though the correlation with energy is specious at best. Tech stocks seem to rally on as-expected numbers. Bank stocks rally on hideous numbers. Both groups are anticipating a turn.

Health care's strength is simply a flip side of commodities. The quant funds determine a recession, they sell all the coppers and irons and steels and they buy Wellpoint (WLP - commentary - Cramer's Take) and Gilead (GILD - commentary - Cramer's Take). Meanwhile, the decline in interest rates, courtesy of the decline in business and commodities, makes the group a real natural.

Only the advertising components of business remain weak, and that is all endgame, as GM (GM - commentary - Cramer's Take) and Priceline (PCLN - commentary - Cramer's Take) sink radically, two metaphors for advertising's future. The hope for some -- including me -- is that when things get better, the secular decline in newspapers, radio and magazines (ex some Conde Nast publications) will prove that the Web's advertising troubles are just cyclical, as the Web offers definable value. I love how I hear that banners have no value these days ... as if print ads do? But that's just my own biased view talking. You look at a full-page Web ad longer than you do a magazine ad. I still believe TV ads have great value, and that's an unchanged position.

Right now, natural gas is in control. As it comes down because of adequate domestic supply -- more on that later -- you can bet that all of these consumer companies are going to enjoy better-than-expected to much-better-than-expected earnings. Given that you only need expected earnings to do well in tech and less-than-expected in financial, you can see that the setup is an immensely positive one, enforcing my belief that the bottom was put in in July. We know there is plenty of room to run, that's the room of the commodity money going to the rest of the market.

At the time of publication, Cramer was long Wellpoint, Gilead and Procter & Gamble.

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