Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- the commodity beating,
- the next bull markets, and
- the facts about the banks.
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, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
The Herd Is Trampling the Commodity Names
Originally published on Monday, Aug. 4, at 11:18 a.m. EDT
No hope for any commodity plays. That's what people must be thinking. That's what you do when you sell down stocks like
even after they have been clocked. The thinking is that with the commodity collapse comes drastic cuts in numbers, so the 12 and 7 P/E's for next year aren't realistic at all.
I always come back and say that these are companies that have fundamental international worth, perhaps more worth then their $28 billion and $33 billion valuations, respectively.
I also want to emphasize that these are moving targets. At this point, people are fleeing these because they fear valuations that might be three-quarters of what they are now, as you don't sell down 3 or 5 if you think that the stocks are only going down by one-eighth.
I bring up this analysis because these are companies that traded so much higher, that have so much worldwide earnings power and scarcity value and worth to others, that I simply don't believe they can be crushed like banks from here.
Now, it is possible in a recession that FCX's earnings can get cut, maybe by a quarter, although a half seems like a stretch, and from here I think you are betting on a 50% earnings cut. Deere's harder. Not really linked to the economy, but to worldwide demand for better food and for renewable energy. But, again, I can see a 25% reduction in earnings. More than that seems hard.
Here's another view of things, though, that might be a more realistic way of looking at these stocks: There are no bids, it is the summer and the hedge funds are caught in these names. They are still liquidating their commodity values and they don't know how else to alleviate the pain.
I know, I have been there. That's what makes you sell down 5.
Because you fear the next down 5, even though you had the down 5 the other day.
Just herd instinct and a sense that the downside will never end.
At the time of publication, Cramer was long Deere and Freeport-McMoRan.
The Next Bull Markets
Originally published on Tuesday, Aug. 5, at 10:28 a.m. EDT
There's always a bull market somewhere, and now the bull market is with all of the companies that are big users of oil that have very little economic sensitivity, because people are convinced that there is a worldwide collapse in earnings. The tough thing about this switch is that the real bulls are the overstretched valuations:
Procter & Gamble
However, just like the oil and gas stocks are forecasting dramatic declines that will do much more than crimp earnings, you have to believe that
of the estimates for these consumer staples are way too low. That's what I would bet with a KMB and a PG, especially as they have taken pricing. So has
( KFT) and General Mills.
is doing it now. These seem to be headed higher because of those. Pepsi, when it takes a lot of pricing this quarter, could be the best of all. (I am buying it.) Don't forget
, both with great quarters; the latter is a huge beneficiary of the nat gas collapse. The drugs don't benefit from oil and they need a weak dollar, which isn't in the cards for the moment. But for those who think that the decline in commodities is signaling total collapse of the economies, then these will work.
( SGP)? I don't know ... I like
, which is on fire.
had a great quarter.
? The latter, thought of as a resin play, seems particularly good for the moment.
Then there are the techs that react well to the decline in commodities, and the financials that get the pressure taken off by the Fed. The issue with both of these, unlike the PGs of the world, is that they offer no assurance that the earnings are going to come through. I think
has the best visibility, and I believe that
is so low you could catch a little bounce, but that's a tough call.
The brokers and banks are suffering from huge dilution for the most part, but if the worst is over in terms of raising capital, then I continue to believe that the July 15 bottom will hold and the good ones can build on their gains. While some of the bad ones will go out of business, the Fortress Four --
Bank of America
-- are going to go substantially higher.
Then there are the others, the retailers and restaurants that will benefit from the inevitable lower price at the pump. That's the toughest call of all. I think that you have to go with the ones that have good profiles already:
. There's some valuation underpinnings in
, but nobody seems to care at all, so I can't recommend them.
I believe the best restaurant chains that are not fast food, notably
, can be bought, but you are going to have a lag between the pump's decline and now, and that will make these much more dicey.
just reported a decent number, add that to the list. I would love to buy
, but the commodity lag won't let them have a good quarter, although they have already tempered expectations.
I come back to PG/CL. Just too hard otherwise.
Oh, one other wild card: When do the industrials get too cheap? When do we buy some
? There I would say the key is aerospace. Those are long cycles, and the cycle's going really badly. They often have military, and the ascendancy of Obama in the polls makes them difficulty to own.
At the time of publication, Cramer was long Pepsi, Procter & Gamble, McDonald's, Abbott Labs, Schering-Plough, Wal-Mart, Gilead Sciences and Qualcomm.
Look at the Facts
Originally published on Friday, Aug. 8, at 9:31 a.m. EDT
If you listen to the bank bears, everything's worse than it was four weeks ago. The losses are increasing, the auction-rate preferreds are now biting, the mortgage implode-a-meter now measures how many homebuilders are going under. German banks are repossessing Vegas vanity projects, and
( FRE) moaning that it isn't their fault, they didn't compromise standards, things have just gotten much worse.
To which I say, let me give you some evidence that would suggest otherwise. Check out the prices from July 15 and those from last night's close:
- Ambak( ABK): $1.70 -- $4.59
- MBIA (MBI) - Get MBIA Inc. Report: $3.90 -- $8.28 (not including today's blowout earnings!!)
- Wachovia (WB) - Get Weibo Corp. Report: $8.90 -- $17
- Bank of America (BAC) - Get Bank of America Corp Report: $18 -- $31
- Fannie( FNM) (yes, FNM!): $6.90 -- $9.90
- Freddie (yes, FRE!): $4.05 -- $5.89
- Wells Fargo (WFC) - Get Wells Fargo & Company Report: $19.90 -- $29
- JPMorgan (JPM) - Get JPMorgan Chase & Co. Report: $30 -- $39
- Lehman( LEH): $11 -- $17
- WaMu (WM) - Get Waste Management, Inc. Report: $3.10 -- $4.90
- Citi (C) - Get Citigroup Inc. Report (yes, C!): $14 -- $18
- AIG (AIG) - Get American International Group, Inc. Report (yes, AIG!): $20 -- $24
When I made my bottom call -- as usual maligned by people who say I have called many bottoms -- regardless of whether I was saying a trading bottom or whatever, I was simply speaking of
violating those levels. There's a host of other commodity-consuming companies' levels that also hit bottom at the same time with the peak in oil that I don't think will be violated.
My evidence doesn't say that things are going to roar. I believe that Fannie and Freddie will have to be bailed out by the federal government and the common will get crushed, contrary to what the regulators are saying. I think Fannie's numbers today are much worse than should be allowed, and the common should be confiscated this afternoon -- the heck with the shareholders. Both FNM and FRE common shareholders should be given 10% of NewCo, with the government getting 90%, so we can benefit from the comeback. FNM and FRE are both worthless right now; I am not one who defends them. I think they are worse minus 10 or something, but stocks stop at zero.
I do believe that Washington Mutual doesn't have enough money to get by, and I would be more emphatic if it weren't for that lawsuit against Dick Bove meant to silence hard-working critics. I do believe that AIG will have to do a $15 billion to $20 billion in-the-hole financing to get out of this period, and I think that management should be investigated for alleged fraud. I don't believe
common shareholders will have anything more than
shareholders have in the end. Their common is worthless, too, that's how bad the obligations, the car models, the leasing, the gas mileage, the legacy contracts and the unions are.
I do believe that housing will not bottom until the end of 2009, and that most houses will still have to fall 20% to where buyers are if the patterns of the bottom in Stockton and Bradenton are followed. I do think that one or two of the major homebuilders will go under, but it
hasn't happened yet
, and their balance sheets are improving, so this is looking too bearish. As you can see from
this morning, the public guys keep being able to skate.
Is that negative for you? How about this? I think Citigroup needs to sell 500 million shares at $10, eliminate the dividend and then issue $10 billion in preferred on top of that. And that's just to stay in business. BUT IT WILL.
I am simply saying that despite all of those negatives, I do not believe we will take out the July lows, because we should have by now -- we haven't. Instead, we have seen commodities collapse, inflation dwindle, the
have the ability to cut if it wants to now, a
( MER) rebalancing of its books so it will make it, a stabilization of the endless run on Lehman so it can breathe, and a plan to be able to get out of auction rate hell.
Again, I hate the market. I hate that it can be up 300 one day and down 200 the next. I despise it, don't trust it, think it is phony on up days and would like most days to be 100% short because I hate it so much.
as intellectually satisfying as it sounds
, may not make you as much money as being long a lot of stocks that are in bull-market mode.
I think the easiest thing in the world today is to say, "This market is horrible, and you should short everything, particularly commodities, financials, retail, agriculture and tech."
But I am stuck in the real world: That strategy, except commodities, hasn't worked since July 15.
What can I do? I am so stuck with these darned facts that it infuriates me. Nothing would be more satisfying to then to say, smugly, that it is all a big joke and I am 100% short things that are bad.
Or, even better, I am short everything that is bad and long everything that is good.
What a luxury. But the facts haven't supported that thesis.
Maybe they will, but in the end, I am stuck with the facts.
Those prices I quoted aren't illusory. Billions of dollars traded there.
They are the facts. I am betting they will withstand the onslaught.
If I am wrong, then I'm wrong. I am not paid to say nothing or to report the news. Others do that. I am paid to try to figure it out.
My work says those prices will hold, that they were the bottom. Only one stock of the major financials, just one stock, has violated those lows -- Merrill Lynch. And because it did, that broker's in the best shape to survive of all but
. I don't want to own it, but I doubt anyone now questions Merrill's viability, even though Doug Kass is right about the potential captive managers (although the people in those funds are wealthy, not like the holders of auction rate preferreds).
To me, it is still in the bears' court to prove that those levels will get taken out, or at least taken out in non-Merrill Lynch style. Until then, I am sticking by my call, because so far it is right.
At the time of publication, Cramer was long Morgan Stanley, Goldman Sachs and JPMorgan.
Jim Cramer is a director and co-founder 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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