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The equity markets have a funny way of healing themselves, Jim Cramer told his Mad Money viewers Monday. While many bears are dismissing the rally in commodity stocks as simple short covering, Cramer said there's actually a lot more in play.
Case in point: Marathon Oil (MRO) , a solid performer through mid-2015, when shares were trading at $41. Then, almost overnight, Marathon's fortunes turned as oil began its decline and earnings per share plummeted. That was soon followed by a decline in its stock price and, ultimately, a 76% cut in the company's dividend.
Marathon shares bottomed at $6 a share when oil hit its low of $26 a barrel. But then, on Feb. 29, when it appeared all hope was lost, the company did a 135 million share "in the hole" equity offering that was soon boosted to 165 million shares. Marathon shares now trade at $11, a 44% gain for those investors who took advantage of the deal.
Cramer said the Marathon deal was dilutive to equity, but in an instant the company put to rest fears of its demise. Devon Energy (DVN) and countless other oil companies have done the same and saved themselves.
And it's not just oil, Cramer added. Iron ore, copper, gold and other commodities lifted from their bottoms and other commodity companies are following suit. Even Caterpillar (CAT) has seen sizable gains as commodities have recovered.
So while some may dismiss the commodity rally, Cramer said most rallies start with short covering, then broaden into something more. This time feels no different.
Was Jamie Dimon Right?
Back on Feb. 11, Jamie Dimon, CEO of JPMorgan Chase (JPM) made a bold move, buying 500,000 shares of his company's stock for $26.6 million. Since then JPMorgan's stock and the markets overall have only rallied, causing Cramer to ask, did Dimon's move mark the bottom?
It may be hard to recall but last month, things were looking pretty grim. The last of the leadership stocks, tech, had rolled over, and talk of systemic risk from the oil and banking sectors was back on the table. Oil hit a low of $26 a barrel and the political scene was looking pretty dicey with Bernie Saunders and Donald Trump shaking up the establishment.
Then, despite all of the chaos, which once again included fears that European banks might also be in trouble, Federal Reserve Chair Janet Yellen said more interest rate hikes could not be ruled out.
It was then that Dimon made his move, doubling down on the negativity.
Since then, things have generally been positive. The political scene is becoming clear, oil is rising slowly and the banks are affirming that they are on solid footing. Indeed, the stealth bear market that had been plaguing the markets for months may indeed have been broken, Cramer concluded. That sure is welcome news.