Commodity stocks left behind -- and that's good

The rally's shunning these related companies, and that's fine -- we don't need a repeat of 2007-2008.

By Jim Cramer Mar 14, 2013 9:22AM

thestreetCommodity Exchange report Fotog Tetra Images CorbisI have been hearing lamentations that perhaps this market isn't that strong because whole groups are being left behind. The steels aren't rallying. Copper's been hideous. The oils aren't keeping pace. The miners are bad news. Aluminum's horrendous. The fertilizers can't get out of their own way.

To which I say: good!

Have you ever spent time going back and looking at the charts of what led us into the valley of the shadow of the deadly bear market of 2007 -- until, well, perhaps, the present, when the averages just took out those highs?

It was a total rogues gallery of leaders -- narrow, dependent upon the kindness and steroids of the Chinese government and in need of hyperinflation in order to maintain growth.

Hardly a day goes by when someone doesn't say, "Can we really be in a trustworthy bull market if Freeport-McMoRan (FCX) can't rally?" First, Freeport, with its recent $9 billion foray into oil-and-gas assets, has done what can only be regarded as its level best to destroy itself. The borrowings alone are hideous, even with money costing so little right now. But, as Freeport is a miner and refiner of mostly foreign copper and gold, I question whether you want it as your leader, as it was during its January-to-June-2008 rally from $33 to $61. Back in that antediluvian moment, Freeport was the most visible of the leaders.

Latin American mineral giant Vale (VALE) spurted from $14 in January of 2007 to $42 in May of 2008. It's now struggling to maintain $17.

Peabody (BTU) put on 50 points between January of 2007 and June of 2008, rallying as high as $89 as a leader in the great coal bull market of that moment -- impressive, but not as strong as Arch Coal (ACI), which rolled from $27 to $75 in that same period. Of course, these moves pale in comparison to Cliffs Natural (CLF), the true leader of the era, which pushed from $24 to $120 from the beginning of 2007 until the middle of 2008.

Alcoa's (AA) been in the Dow Jones Industrial Average ($INDU) kennel for so long that I think its parents forgot about it. We need a PetSmart (PETM) for aluminum companies. Alcoa rose from $29 to $45 between January until June of 2008, a move that defined the halcyon days for the commodity players -- which, despite Alcoa's gigantic efforts to become more proprietary, is still very much the company's lot in life.

But of all the components of that faux bull market that brought stocks so high last time, nothing defined it more than the fertilizer companies. The stench still hangs over Agrium (AGU), which soared from $30 in January of 2007 to $113 in June of 2008. Potash's (POT) miracle move from $15 in January of 2007 to $80 in June of 2008 is still the stuff of bull-market legend -- perhaps outdone only by total market darling, Mosaic (MOS), which tore from $20 in February of 2007 to $157 in June of 2008. The descent from these heights, of course, was every bit as precipitous. We discovered just how easy it really is to make fertilizer; the barriers to entry turned out to be much lower than anyone had thought at the time.

Also on fire back then were steels, a commodity that rallies only on severe price increases over contained periods of time. That's how U.S. Steel (X) could run from $72 in January of 2007 to $191 in June of 2008. Terrific, but nothing like shooting star AK Steel (AKS), which vaulted from $18 in January of 2007 to $73 in June of 2008. Don't even bother to look at that flyspeck of a stock now.

Oil and gas played kingly roles. Those were the days when Chesapeake (CHK) was levitating, going on a run from $27 in January of 2007 to $69 in June of 2008. Apache (APA) doubled in a similar time frame.

Yep, those were the leaders of that era, companies that made undifferentiated product that needed rampant inflation and an ever-growing China to beat the numbers and stay strong.

You want that leadership? You worried about those stocks? Then I think you ought to recognize how zero-sum those stocks were at the time. They had everything going for them, and the rest of the market had very little going for it. All in all, I'd rather take what we have going now. It's a lot healthier, and certainly a lot safer and potentially much longer-lasting.

 

Cramer

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long VALE.

 

 

 

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31Comments
Mar 14, 2013 10:20AM
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An interesting dynamic is currently taking place - the USD is strengthening simultaneously with stocks.  This is completely the opposite of what was happening just a few weeks ago.  This may be a good thing, or it may not.  More than likely it is unsustainable - either the dollar will drop off or stocks will.  If stocks break first, we could see the Euro touch 1.20.  If the USD breaks first, we could see the S&P headed for 1620.   Regardless, when you combine the USD moving in lockstep with record stock prices, along with the dismal volume, you have a pretty strong indicator of a major shift taking place.  Combine this with $85 billion/month of QE and you're left with a paradox, rolled in an enigma and covered with contradiction.  This too shall pass.
Mar 14, 2013 10:49AM
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Speaking of 2007 - 2008 Cramer we should offer you congratulations on the 5 year anniversary of your screaming "BEAR STEARNS IS SAFE ....BEAR STEARNS IS SAFE....." rant ......well done sir you made the 2nd worst stock call ever uttered on live TV and you retained your job ....truly an amazing feat !!!
Mar 14, 2013 10:52AM
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And the worst call ever ?  Why would that would be you agaiin ....approx 5 years ago when you went on the today show or good morning America or some such ....and "warned" the public to "get out of this market if you need the money in the next 5 years ...."

That little nugget basically locked in losses for the poor hapless sycophants who follow your advice.

Dow doubled since cramers rant !!!  

And how on earth is he still on the air ?????????
Mar 14, 2013 10:49AM
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"I'd rather take what we have going now. It's a lot healthier, and certainly a lot safer and potentially much longer-lasting."

 

What??? ............ QE? That is what you have going now Bobo. Really healthy. What an idiot.

Mar 14, 2013 1:27PM
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iT IS ALMOST IMPOSSIBLE to call a bottom,,,few indicators come in quick enough or at one time to predict what's next?...And bottoms vary, extremely in Different Sectors.

But Markets are normally forward looking events, "controlled a little" by past History.

And "lagging indicators" are the wild cards...imo.

 

Predicting crashes and extreme downturns are about as predictable...The old saw, about a "broken clock"...Rings somewhat true...."Say it long enough, it might happen."  

The "severity is the issue" and all the big boys really missed the last crash in 2008, even though some indicators were pointing....Most and many investors were half-way down the cliff hanging onto threads when they finally broke or ran....Leaving them in a "dismal place."

 

Now they are "spooked" and have "spooked a younger generation also" so a recovery for the Middle Class, Small investors and Retirees has become just that...Much harder.

Those that didn't stay in or go back in, along with others not investing in say 401s have really missed out on this "Market recovery"...To little avail, we can not compare the Economy to the Markets.

Alhough many think they are the same, or they cannot afford to participate..

Re-adjusting, re-allocating and diversification wins the Race...IMO

But don't expect 4% for CDs or other monies, until we are deep into Inflation.  

Mar 14, 2013 10:26AM
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brutus - i wonder if the lack of volume is reflecting the exodus of boomers who no longer do their 401K style deposits (at their strongest eraning year rates) and the remaining new employees - former kids - who have little cash to set aside or work for companies that don't have any 401K programs (like burger flipping joints). 

 

i never bothered to find out how much volume the average guy applies to the market.  we're not the 1%, but do "we" reflect much overall thru 401K deposits? 

Mar 14, 2013 11:04AM
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Can QE outlast the memory of burned investors?

 

That is the question. JMHO

Mar 14, 2013 10:48AM
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The lack of volume is probably caused by a bunch of different things.  However, IMO, it's more disturbing since the advent of HFT.

You have less people contributing to their retirement plans.  HelloWallet just did a study and found that 1 in 4 people with a 401k or other retirement account are cashing them out to pay current expenses.  This was written about in the Washington Post.  In my mind, if you're to that point where you need 401k money to pay current bills, you're just going to close out your 401k permanently.   Yes, some are taking 401k loans, but many are cashing out and closing their accounts for good.

You also have less individuals actively buying/selling via online trading platforms like there were in past bull markets.  There were a ton of everyday folks trading stocks all the time in the bull run of the 90s, and again in the bull run 6 years ago.  This time around, at least from the people I know and talk to, much fewer are doing that anymore.

From what I can tell, lots of people are leaving stocks all-together.  A stock portfolio and big house aren't the status symbols anymore.  They've been replaced by freedom from debt and cash flow.  Instead of adding to their stock holdings, people are are starting small businesses at their kitchen tables and figuring out alternative ways to build reliable revenue streams.  You can do it a thousand different ways and for many at this point in time, it just makes more sense than investing in a bunch of paper.  Steve - you are a classic example of this with your pottery tool. 

Mar 14, 2013 11:42AM
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The PPI rose 0.7% last month. Ok, 0.2% excluding what people spend on, fuel and food. The Fed had said it would halt its purchases of bonds when inflation reached 2.5% per year. Well, what you think is coming next?
Mar 14, 2013 12:59PM
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Long Term Investor Today = House Flipper in 2007
Mar 14, 2013 3:26PM
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One more for the cramer sycophants ..... 

Before the houseing crash cramer said EVERY SUB PRIME MORTGAGE in AMerica could go BAD and it would not have ANY effect on the overall housing markets !!

Look it up !
Mar 14, 2013 1:34PM
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Long term Investors...Or Buy and Hold, till you die...Will never be known as a House Flipper...

 

Hence the term "flippers"...We played that game for pennies when we were kids..

 

House Flippers got what they deserved in '07-'08...They were much of the "Problem".

And un-scrupolous, Realtors and Banks...Most buyers were caught up in the Circus..

And paid the price, that they couldn't..

The "American Dream" that went South...Very sad indeed.

Mar 14, 2013 1:16PM
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With still three hours to go we have another decent day....S&P approaching record territory....Have to acknowledge volume is not what we would like...Believe it or not, sort of a quiet day here so far, now, we know things can change in a second...More later.
Mar 14, 2013 1:20PM
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As a Freeport (FCX) shareholder, it sucks that commodities (copper in their case) are being left behind the rally, but it's good for the economy as a whole that commodities are staying relatively cheap.
Mar 14, 2013 7:43PM
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A lot of buying before the close almost brought the S&P into record territory...The day is over though...Lets focus on tomorrow and see what happens...Wouldn't be surprise at all if tomorrow is a down day, these scumbags are fit to be tied....Oh well, what is that, 10 in a row for the Dow? Blasphemy as far as these crooks is concerned.
Mar 14, 2013 12:51PM
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Whats being left behind is the middle class. Between rising food, energy, and medical expenses I can't afford to put anything into a 401k and wouldn't trust the "wall street casino" if I did.

Most of the spending increases I am seeing are due to the concerns of a weakening dollar along with increased taxes coming down the pipe, with 4 more years of the same irresponsible spending and more QE expected to happen. Spending is widespread from large corporations putting up multi story buildings of tiny apartments to catch the fallen middle class, to the little guys hoarding guns and ammo as a far better investment than having a matress full of USD$.

We need the end of Q/E, hiked interest rates, and more balanced international trade to get things back to sustainable.

 

Mar 14, 2013 11:31AM
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Cramer really had to reach for this story.Housing is improving rapidly,auto industry is

doing fine,employment is improving every month,cruise lines are booked, the market

is on fire.The far right hates positive news from Obama`s successful policies.They want

to hear war,hate,recession,hard times.Sorry,Repubs,we wouldn`t have that until we get

another Repub in the WH.That`s history repeating itself.

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