This article was originally published Feb. 23
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"The supermarket aisles are the only place to hide," Jim Cramer told the viewers of his "Mad Money" TV show Monday.
On yet another chaotic market day, he said consumer staples are one group that's not coming unhinged.
Cramer said it's a simple matter of supply and demand. As money flows out of other sectors, it needs to flow somewhere, and through a process of elimination, consumer staples are the only sector left standing.
He acknowledged that consumer staple stocks may not be done going down, but they're going down far less than everything else.
He said it would be suicidal for money managers to start a position in the financials. He said the early-cycle stocks won't work with unemployment so high. Meanwhile, autos, he said, are untouchable, and the machinery and steel stocks lost their luster when the stimulus bill passed with no significant outlay for infrastructure.
That leaves only retail, which is getting stretch thinner and thinner, said Cramer, and the REITs, which have no defenses against the onslaught. Technology, he said , is also getting attacked from all sides. Even the utilities, he said, are lowering dividends, making them undesirable.
Cramer said gold remains his favorite sector in the market, but he cautioned that even in a horrible market, investors can't have just gold in their portfolio.
The list goes on, said Cramer. Healthcare is getting rocked by new Medicare rules, and even the mighty biotechs are finding the easy money's already been made.
Cramer: Buy Oil
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And so there are only the consumer staples, said Cramer, the only sector that thrives in this environment. These companies, he said, have rock solid balance sheets, have raw costs moving in their favor, love plummeting advertising and are jumping with joy over lower gas and transportation prices.
"Hard assets keep their value in times of turmoil," Cramer told viewers. That's why he remains a huge supporter of gold producer
In addition to gold, Cramer said there's another asset that's about to get its day in the sun: crude oil.
Cramer said the historic plummet in oil prices from $147 a barrel to $33 a barrel is largely assumed to be from demand destruction and over supply, but this notion isn't entirely true.
He said that price manipulation by hedge funds also played a large part in the rise and fall of the commodity. And with hedge funds now selling in record numbers, the price of oil has become artificially low.
But Cramer said there's a lot more to like with oil. OPEC is set to reduce supply next month, which should also help stabilize the price. China, he said, will also play a huge factor, as its economy is poised to be the first to recover.
Cramer said oil will be a big theme in 2009, and he likes
, a stock which he owns for his charitable trust,
Action Alerts PLUS, as the way to play the recovery. BP, he said, is the integrated oil company that will do the best due to its low cost production and its monster 8.6% dividend yield.
Sticking With Devon
Continuing with his oil and natural gas theme, Cramer welcomed
chairman and CEO Larry Nichols to the show to discuss his company's outlook and sometimes complicated financials.
Nichols said Devon's slumping share price is being caused by investors only looking at the short-term weakness of natural gas, and not at the company's long- term value. He said natural gas prices will quickly rebound, and when the market return, Devon will be ready to take advantage.
Nichols attributed the volatility in the company's earnings to the fact that the SEC does not allow the company to account for its reserves in accordance with current market conditions. But he said new rules, which take effect in 2010, will allow the company to eliminate the volatility and provide more accurate and stable earnings results.
Nichols went on further to explain why he feels Devon's share price has been lagging that of its peers. He said the company mitigates risk different than its peers, not through hedging, but rather by maintaining a strong balance sheet and a portfolio of the best properties available. Nichols said that all of Devon's long-term projects are on-going, even if they're not generating cash this year.
Cramer said he continues to stand behind Devon.
Outrage of the Day
Cramer once against sounded off against what he called "the ETF of mass destruction," the ProShares UltraShort Financial Fund, trading under the symbol "SKF." He said he's already shown how this fund doesn't work and why it has no reason to exists. But this time he said he's taking issue with the fund for another reason.
By his estimates, he said the fund wields a staggering $18 billion worth of selling pressure on the financials, the same stocks the Treasury Department is trying to save on a daily basis. With this constant selling pressure, the fund is only making it harder for the financials to raise capital and save themselves and shifting the burden onto the taxpayers.
Cramer said the fund is costing taxpayers hundreds of billions of dollars, as the Treasury works against the fund to save our financial system. He again called for an immediate ban of the fund. "This vicious cycle has to stop," he said.
Cramer was bullish on
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At the time of publication, Cramer was long Wal-Mart, Caterpillar, Goldman Sachs and BP.
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