Cramer vs. Kass Update: Consumer Staples

Jim Cramer and Doug Kass continue to spar over the direction of consumer nondurables.
Author:
Publish date:

Jim Cramer and Doug Kass continue to spar over the direction of consumer nondurables.

Jim Cramer

I'm Not Buying the Inflation Trade Yet

12/09/2008 11:07 AM EST

This blog post originally appeared on

RealMoney

on Dec. 9.

Suddenly the inflation trade is back. People are buying the ags and the coppers and the coals as if the economy is going to boom and we are about to ignite a level of inflation that allows us to go back to the old plays.

Plus, the Baltic Freight Index is up for two days, and we have to admit that things could look up with a gigantic infra program.

I am not buying it. I think that the most salient fact here is that the raw cost of much of what makes consumer products fly -- plastic -- is going to come down hard, and by the second quarter we will realize that we are still not out of the deflation woods and that we can make more money buying

Johnson & Johnson

(JNJ) - Get Report

and

Procter & Gamble

(PG) - Get Report

than we can buying

Deere

(DE) - Get Report

and

Potash

(POT)

here.

That said, I like the banks because if we get inflation -- typically the enemy of this group -- then we are going to get some movement up in home prices and that's going to change the dynamic for

Bank of America

(BAC) - Get Report

,

JPMorgan

(JPM) - Get Report

and

Wells Fargo

(WFC) - Get Report

, all of which I like.

People want to sell

General Mills

(GIS) - Get Report

and

Kraft

(KFT)

really badly. They want to crowd back into

Schlumberger

(SLB) - Get Report

and

Caterpillar

(CAT) - Get Report

and

Joy Global

(JOYG)

.

They feel totally emboldened and will sell

Celgene

(CELG) - Get Report

and

Gilead

(GILD) - Get Report

into oblivion and buy

Transocean

(RIG) - Get Report

and

Devon

(DVN) - Get Report

even though earnings won't miss targets.

I don't blame them. If

Texas Instruments

(TXN) - Get Report

and

Altera

(ALTR) - Get Report

can rally on bad news, so can these infra plays and the inflation plays.

Oh, and don't forget that a lot of the stocks that are now rallying were owned and are owned by hedge funds that were under redemption attack before they decided to tell their investors, "To heck with it" and they stopped redeeming.

At the time of publication, Cramer was long Celgene, Deere, Gilead, General Mills, Kraft, Johnson & Johnson, JPMorgan Chase and Procter & Gamble.

Doug Kass

I Am Not Buying the Consumer Staples Trade Yet

12/09/2008 11:36 AM EST

This blog post originally appeared on

RealMoney Silver

on Dec. 9.

Jim "El Capitan" Cramer and I remain on different sides of the pew on the consumer staples sector.

I see the lift in margins owing to the schmeissing in commodities (especially of an energy kind), but I also, in my conversations with industry contacts, continue to see the trade down into non-branded, lower-priced, generic products and the associated loss in market share.

So, for now, I continue to see sales shortfalls stemming from the share losses trumping the profit margin expansion story.

I remain short General Mills,

Colgate-Palmolive

(CL) - Get Report

,

Clorox

(CLX) - Get Report

, Kraft and

Kellogg

(K) - Get Report

. They continue to act punk!

Game still on, Jimmy!

Doug Kass is the author of The Edge, a blog on

RealMoney Silver

that features real-time shorting opportunities on the market.At the time of publication, Kass was short General Mills, Colgate-Palmolive, Clorox, Kraft and Kellogg.

Jim Cramer

Soft Goods Are Hard to Pass Up Here

12/09/2008 12:33 PM EST

This blog post originally appeared on

RealMoney

on Dec. 9.

Here's a compelling question. How do you divine what the difference is between a shortfall in Texas Instruments or

Altera

(ALTR) - Get Report

and a shortfall in

FedEx

(FDX) - Get Report

or

3M

(MMM) - Get Report

? Can you really say that the "tech" selloff is built in?

I don't think so. I think that the shorts had swarmed over the semi names ahead of the reports because the channel checks were dismal for all of those. They hadn't attacked FedEx because everyone's gotten very bullish on a recovery and on lower gasoline prices.

Of course, no one can resist

Apple

(AAPL) - Get Report

and

Google

(GOOG) - Get Report

now that the economy has "bottomed" even though they hate FedEx? I am having a hard time with this, other than to believe that what has happened here is just frustration with shorts.

I am a buyer of what is being sold. I see General Mills and Procter & Gamble down huge, and I can only say, "Wait, we have absolutely no signs of a revival in the economy whatsoever, and we know that these companies are huge beneficiaries of oil going down."

Not only that, but you know they are going to come for Johnson & Johnson and

PepsiCo

(PEP) - Get Report

and all the usual suspects in one of the most obvious raids on the stable group in years.

I have always used these selloffs to pick at these stocks when I see employment going down, because there will come a moment when they switch back. The selloff is so bold today that you can sense that the soft-goods ETFs are going to get schmeissed as shorts pile on.

Be ready.

There comes a moment when the velocity of the decline ends and you will have missed the chance.

I know Doug Kass disagrees with this view. And I know they could have further to fall. But I also know that these stocks rarely get put on sale, and when you can put 'em away like this, you are getting a good chance to buy something you can own through the recession to the revival when, you can then sell them.

I am cursing myself that I am restricted on most of these. You just don't get Procter down this much, or General Mills, without something being wrong.

Nothing's wrong.

Juicy....

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

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

Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer),"

click here. Click

here to order "Mad Money: Watch TV, Get Rich," click

here to order "Real Money: Sane Investing in an Insane World," click

here to get "You Got Screwed!" and click

here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by

clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.

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.