Cramer: Throw It Back on Our List of Woes

Editor's Note: This article was originally published on Real Money at 6:10 a.m. EDT on March 20. To see Jim Cramer's latest commentary as it's published, sign up for a free trial of Real Money.

NEW YORK ( Real Money) -- We know we have to be troubled. It's in us to be troubled, because before the April-to-October period of 2011, the last serious correction -- 17% from top to bottom -- only the troubled survived. You needed to be able to see the punch coming, the counterpunch, and then get back into the corner from which you came.

But, other than the fiscal cliff fiasco -- the one that dawned on the market a week after the election and was resolved at the New Year -- it's been a real bad call to be too troubled.

Until now. Now, all of a sudden, you do at least have to be a little paranoid -- not about everything, but about a bunch of things, be it Wednesday's potential Fed bolt from hell, or the moment when the Cypriots open the gates of their banks of hell, or a whole new one that's beginning to really play havoc in peoples' minds: the incredibly strong dollar.

We've all stared Cyprus down with the flight to safety into U.S. bonds, the re-embrace of consumer packaged-goods stocks (this I didn't see coming, but their yields look better when bond prices go higher) and, rightly or wrongly, the selling of the financial names. But the real vicious action is in the metals and materials. These have collapsed, viciously collapsed, in the last 48 hours. They're the victims of a renewed Chinese slowdown, perhaps stemmed by Tuesday night's advance, coupled with what could be a lasting menace to earnings -- a strong and getting-stronger dollar.

Look, I understand the thesis. Take the iron ore trade, which is one way and one way only: down. We own Vale ( VALE) for Action Alerts PLUS, feel the pain every day, and the general consensus is that if you mine or fabricate iron, you are a goner. It reminds me of the first go-around with Cliffs Natural ( CLF) when it was Cleveland Cliffs, a bankruptcy flameout galore. I don't think the consensus is going to be right six months from now. A stock like Vale has already been cut in half. But you try telling that to the sellers who have banged down every bid from $18 to $16 and change.

Copper's been underwater for so long, it's turning green.

But it's the seeming pulverizing in the oils that I am watching most closely. I think this is one that could really snowball if the dollar stays strong, because the supply-demand picture should have tipped to the bears' hands already. Many countries are beginning to produce more oil than ever, particularly the U.S. and Iraq. All the while, the U.S. is using less -- and China, if iron and copper are any judge at all, might be reaching peak usage for now. A stronger dollar could be the clincher here to take the elusive Brent crude down to where it should be -- which, to me, is much lower than where it is now: maybe $10 lower per barrel.

I know I was -- and am -- spooked about the strong dollar and what it can do to the earnings of the consumer-products companies, including the drugmakers, which have heavy overseas-translations issues. I said goodbye to Kimberly Clark ( KMB) the other day on "Mad Money," a goodbye that has almost instantly seemed premature, given the move up in bond prices. But eventually valuations can crimp the upside of almost any security, even one as great as Kimberly Clark. The international-turmoil-flight-into-safety trade can only elevate these for so long.

Of course, a strong dollar isn't bad for everyone. If the dollar's robust the insurers are going to continue to blast higher, the home plays live on, the utilities are fine, the retailers should be good and the domestic banks will keep on rocking.

But a strong dollar cuts a lot of numbers, including tech earnings, which are heavily weighted toward Europe. As we head into the second quarter we will now, once again, have to consider the strong dollar as a headwind, courtesy the knuckleheads in Europe.

So add a climbing dollar to the list of newfound woes that must trouble a large part of this market, joining the incompetent European regulators and a Fed afraid of the strengths in the economy. Come to accept the hammering that commodities will get every time Europe puts a bid under the dollar.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has a position in VALE.

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