Jim Cramer and Doug Kass debate the direction of the consumer staples.

Jim Cramer

Lower Oil Will Be a Boon -- Next Year

11/20/2008 6:50 AM EST

This blog post originally appeared on

RealMoney

on Nov. 20.

These year-over-year declines in energy costs along with the inability of the Chinese market to fall much further are the two bright spots that long-term investing can give us. The notion that there are consumer-products companies that have put in price increases that for the most part are sticking and that the developing world could come back with lower rates, makes me feel that the

Unilever

(UN) - Get Report

/

Procter & Gamble

(PG) - Get Report

/

Colgate-Palmolive

(CL) - Get Report

cohort could have a remarkable rally.

But not until after this current quarter, because the price decreases have been incredibly slow to come in and the dollar is so strong.

I key on those because frankly, oil looks like it is going to struggle to hold $50, and while that is a sure sign of a terrible recession coming, it is, alas, good news for the companies like

Kellogg

(K) - Get Report

and

General Mills

(GIS) - Get Report

that use energy and whose product pricing has held.

Oil going down is

good

. It isn't what this particular market wants -- this market needs those stocks up no matter what because of the trapping of the hedge funds -- but it will be good.

Why point it out?

Because I think this year will be a washout. You have to think about next year. With oil at $50 and going a little lower, energy users that don't have to roll back prices to consumers will be the best game in town. The year-over-year comparisons beginning at the end of the first quarter will be like a windfall of unbelievable proportions, and you will want to be in them before it happens.

Why even bother to point this out? Because the gloom is beginning to anticipate horrible things for

all

companies, but horrible things for energy simply removes the possibility of horrible things for all companies. It's one of the rare positives in an endless litany of negatives.

At the time of publication, Cramer was long Unilever, Procter & Gamble and General Mills.

Doug Kass

The Anti-Cramer on Consumer Staples

11/20/2008 7:40 AM EST

This blog post originally appeared on

RealMoney Silver

on Nov. 20.

This morning, Jim "El Capitan" Cramer extols the virtues of consumer staples.

As many are aware, I have taken the opposite tack; I have been short the consumer nondurable sector most of the year and remain so.

Basically, I depart from Jim's view regarding the significance of lower commodities costs (particularly of an energy kind) on profit margins, as I believe the wealth-destruction (see opener coming up) in home prices and stock prices materially offsets that benefit and will lead to lost market share to generic producers.

Here are some excerpts from my May 2008

interview

in

Barron's

, which outlines my bearish case:

But why are you so bearish on the U.S. consumer?The consumer is spent up, not pent up, and more levered than during any period in history. That's one of the structural problems facing the economy. At the same time, job growth is declining and real disposable incomes are pressured as inflation literally is eating away at the consumer's buying power. It is frightening that the consumer has entered this economic downturn with the most levered position in history. On top of that, we're facing four consecutive months of job losses. We've seen the depreciation of the two most important assets, home prices and equities. Consumer confidence is at a 26-year low. The availability of credit continues to be a problem that will plague the economy for a while. Inflation, the cruelest tax of all, is rising as energy and food prices, in particular, are soaring. And the first-quarter GDP report contained a number of ominous signs that the consumer is spent up while the housing depression continues apace.So, which consumer stocks are you shorting?Colgate-Palmolive (CL) - Get Report, Kellogg (K) - Get Report and General Mills (GIS) - Get Report, which are trading at 17 to 18 times earnings, but have secular earnings-growth rates of 7% to 10%. These companies historically are seen as recession-resistant, but we doubt it. All three are aggressively lifting their selling prices in response to huge cost increases, but demand is starting to suffer as private-label companies and generics gain market share. Demand elasticity, or sensitivity to changes in prices, in toothpaste, soaps and other consumer products has begun to surface in the current recession, as consumers trade down to private-label products.

At the time of publication, Kass was short Colgate-Palmolive, Kellogg and General Mills.

Jim Cramer

Durable Nondurables

11/20/2008 8:47 AM EST

This blog post originally appeared on

RealMoney

on Nov. 20.

Year-over-year comparisons are what drive stocks. We like them when they are better than expected, and we love them when margins expand with moderate top-line growth.

That's why

Procter & Gamble

(PG) - Get Report

and

Unilever

(UN) - Get Report

will do well next year.

Now, let me just say to Doug Kass, who disagrees with the thesis, that Procter & Gamble thought for sure that this quarter, the first one after some monster price increases, the company would see a big top-line selloff. Instead, the company saw its regular increase, and the increases lasted throughout the quarter.

Because of currency problems and no rollback yet of raw costs, Procter & Gamble was adamant that this current quarter will be bad, which is why I say no hurry unless you are willing to own for 18 months. But when I look at the stocks that will keep the

DJIA

from going to 5,000, Procter & Gamble is one of them. Unilever is especially good because it is not hurt by a strong dollar, given that its translation is not denominated in dollars.

Frankly, my view is incredibly bearish. It stems from the fact that these stocks are the

only

ones that I believe will have positive year-over-year comparisons, so they will be magnets for money.

All others, I believe (some 6,000 of them), will have crummy compares, which is why, unless they have accidentally high dividends that have good coverage or are selling for cash, they won't be able to rally on next year's earnings.

Random musings:

Big Buffett undercurrent in this market. People aren't as much worried about

Berkshire Hathaway

(BRK.A) - Get Report

as they are worried about all of the bullishness his call to buy America gave them. The piece was absolutely Buffett being able to tell you "I specifically didn't tell you that we would go up any time soon or go up at all." That's the luxury you get if you are Buffett. No one else has it. As I made my call for a big fall, I was labeled the Anti-Buffett. Now we are all beginning to get Anti-Buffett.

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

Know What You Own

: This article discusses the personal products industry, another company operating within this space is

Kimberly-Clark

(KMB) - Get Report

. For more on the value of knowing what you own, visit TheStreet.com's

Investing A-to-Z

section.

Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for

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Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.