Jim Cramer's Best Blogs

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Behold: the Short Handbook

Originally published on Tuesday, Sept. 9, at 12:30 p.m. EDT

One of the bears' best arguments is that we have far to fall if the world's in recession. There is an abiding sense that when things unwind, there will be no wealth created at all by the commodity boom we have experienced and that the whole move has repealed.

So I went back to take a look at when the commodity boom really took off -- April 2005 -- just looking at the charts, mind you, to see what awaits us if that's the truth. That's a somewhat arbitrary time, but I think some of the negativity comes from the notion of a giant top that formed in 2008 with China's ascendance, and a catastrophic decline coupled with the Chinese collapse.

I think, to give the bears their due (as they certainly deserve it) that you can expect some stocks of some segments of the economy to have drastic falls from these levels, notably the mineral, oil, infrastructure and steel segments. So let's take a look at what a total wipeout of the gains -- that's right, no capital gain creation for the companies and shareholders -- would mean. (That's not a small amount of the component here given the meager dividends these companies pay.) I will use common, everyday representative companies as the examples, all considered to be in the throes of a horrible bear market.

First, there are the minerals. Let's start with Freeport (FCX Quote). I think one of the reasons people keep selling this one is a sense that copper is abundant, and the marginal buyer -- China, with 30% of the market -- has just vanished. If you repeal the whole move, FCX goes to $36, a substantial decline from these levels, but a stunning decline from its $127 high. That's like 2000 to 2001 on the Nasdaq.