6 reasons Alcoa means everything

Consider the aluminum giant the equivalent of a worldwide labor report.

By Jim Cramer Oct 8, 2012 9:07AM

TheStreet.com logoimage100, CorbisWe make a huge deal of the employment numbers, and I can understand that. It's a decent gauge of the U.S. economy. It's certainly a political hot potato.

 

But when it comes to numbers that should matter to the stock market, it's hard to beat the earnings report we'll get Tuesday from Alcoa (AA).

 

I know at times I have cursed at the prospect of a stumbling Alcoa kicking off earnings season with a miserable first quarter. The number of times this company seems to miss estimates is boundless. The tone it creates makes people cringe, and because it is the long standout of a new season -- there's not much else that happens Tuesday -- it can be the backdrop for at least a full day's chatter.

 

How unfair that this stumblebum set the tableau, I always used to say.

 

But while you may not like how Alcoa does, believe me, if it is bad, it is no longer Alcoa's fault. The last quarter was actually a gem with good guidance.

 

But the issue isn't Alcoa itself and its execution or lack thereof. The issue is Alcoa sells into pretty much every market that matters. In that way Alcoa is my own barometer of worldwide growth, a far more important tell for things, for example, than a now totally politicized labor report. (And, yes, I am still steamed by the steamroller that ran me over for saying that the employment number was good and that it wasn't phony. Oh my, how I hate politics, and does it ever get in the way of thinking and making money.)

 

Consider the markets in which Alcoa plays a crucial role.


First, Alcoa is the dominant raw-materials supplier to aerospace, a business that employs millions of people worldwide. An astounding 1 million Alcoa screws go into each 787 or A380. All plane production uses aluminum. So I don't know how you are going to get a better read on this important industry, certainly not from the individual plane makers. Oh, and let's not forget that Alcoa's aluminum is the skin of choice for Navy and Air Force jets, so we will hear our fiscal cliff chatter for the quarter from this company. 

Second, aluminum's a huge raw material for cars and trucks, in part because it is so lightweight and saves so much energy. Again, we can get data from Ford (F), GM (GM), Toyota, BMW and Cummins (CMI). But Alcoa is in all of them and has a much better read of things.

 

Third, construction. You need Alcoa's building materials to skin buildings. Commercial construction uses a huge amount of aluminum. It's commercial construction that's lagged so badly. Lately we are hearing of a turn. Alcoa will tell us whether it is real.

 

Fourth, we have a tremendous amount of switching to gas turbines from coal utilities. But there's no real way to judge the growth, because of the disparate turbine makers, but they all use Alcoa aluminum. So we will get a read on one of the most important secular switches now in place.

 

Fifth, Alcoa makes drill pipe, the kind we use for deep finds of oil. It's the only game in town. We will get a nice insight from them.

 

Sixth and finally, aluminum, courtesy Steve Jobs, has become an important part of the technology chain. That, plus bottles and cans and wrap, all present insights into the worldwide consumer.

 

Unfortunately Alcoa also makes ingots and alumina, the raw and even rawer part of the aluminum chain. That's pure commodity, and that's what keeps Alcoa down, because financial interests -- hedge funds -- dominate that market. It's there that the shortfalls keep coming, in part because of Chinese overproduction and in part because hedge funds keep banging the stuff down.

 

No matter. Alcoa will give us a huge and important statement of where the world is heading. Don't dismiss it. Consider it the equivalent of a worldwide labor report without any chance of the alleged shenanigans.

 

Jim Cramer, theStreet.com

 

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 has no positions in the stocks mentioned.

 

 


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88Comments
Oct 8, 2012 12:15PM
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60 % of Americans dont trust the polls.Real investors know not to trust the media centers.And most people dont trust the government anymore and for good reason. VOTE....It really scares the politicians.

Oct 8, 2012 11:25AM
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Instead of dropping how many hundreds of billions of taxpayer funds into the forever needy banking system with neglible benefit to most Americans I have a better idea for stimulating Americans individual finances and the economy as a whole.  We should have a temporary direct payback rebate  for small business.  For every new employee hired that business can claim a $4 per hour rebate paid monthly by the Federal Government.  We would hopefully have small business tripping over themselves attempting to hire many new taxpaying employees. Imagine hiring an employee for in essence the same wage being paid in Korea, China, Mexico.  An employee working and contributing and gaining needed workexperience. Now this would create a more even playing field. This  would allow our decimated small business to  be more competitve with Asian countries.   I think coupling and encouraging a partnership could prove very popular and beneficial to many more Americans than this present pig in a poke nonsense.  This would only be effective of course if the present Administration is truthfully and loyally committed to benefitting working Americans as well as small business and not the New World Order as I and many suspect. This would also skirt the free  trade nonsense that most can agree with has destroyed competitiveness here at home. JMHO
Oct 8, 2012 11:06AM
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Wrong Jeep!

I would love to see the market go up, the value of my house go up, and the price of gas go down, and stay there, no matter who's in office. 

Oct 8, 2012 10:37AM
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Funny, msn lets us comment on this nothing article, but won't allow comments on the Gas Price, or Market article.

Funny, but no surprise, those aren't left friendly statistics.
Oct 8, 2012 1:00PM
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I have noticed that more Americans have now given up on personal responsibility and self determination.  They no longer feel they can "make it' on their own. Just listen to Tumbleweed. Many are scrambling to get any aid they can.  Many many have filed disability claims, many are sueing for recourse for traffic accidents, surgical procedures, product liability, and many more in divorce proceedings.  I believe a panic is setting in.  Folks are losing their confidence in the American way. How do you calmly explain to people their lives will be changed for the worse and nothing can be done?  The opportunistic socialists of the world see this as their opportunity.  There you go Jim. This is what Alcoa won't tell you.
Oct 8, 2012 10:44AM
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Alcoa is cramer's tar baby. For those of you who do not know he started psuhing the stock as one of his best of breed a couple of years ago ..... at the time it was around $18 or so a share ......it started going down and he kept recommending his "viewers" buy it at $15....$12 .....$10 ....... finally it goes to $8 a share and he says he would SHORT IT !!!!


How this man gets airtime and internet time is almost beyond belief !
Oct 8, 2012 12:05PM
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Jim must have dropped his crystal ball.  Now he actually is looking for a company to show him the future .  One can no longer wonder why a guy without a personal information processing center; a brain, thinks he needs an aluminum manufacturer to tell him what sooo many Americans have been trying to tell him and Wall Street for the last five years. What you are doing isn't working.  Hello
Oct 8, 2012 2:14PM
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Gsoline at $ 4.70 a gallon for Regular ?  There is no Rule of Law in the United States of America !   It is merely a illusion to SCREW THE PEOPLE !
Oct 8, 2012 12:49PM
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 Israel claims Iran will not cross it's red line-- weapons grade enriched uranium production- until April. Merely a ploy to set the Iranian mind at ease for the winter and then a sucker punch long before April? A good move but the Iranians are great chess players too and may preempt if they get a whiff, especially if sanctions are tightening the economic noose anyway
 If Obama had met with Net, it might have aroused Iranian suspicions of strike plans being set. Best not to meet if something is up
Oct 8, 2012 11:11AM
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"I would love to see the market go up, the value of my house go up, and the price of gas go down, and stay there, no matter who's in office."

Almost got it correct... Markets collapse because they are false, home values rise because they are our homes not investment vessels, gasoline eliminated in favor of alternatives, grubbers and degrees in office suites thrown out windows and jobs recovered.
Oct 8, 2012 10:56AM
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Funny. Last year on the basis of Cramer I bought ALCO. This stock was going to be taken over and all were going to profit. Well, one year later and a -47% loss, we are still waiting for the take over or good news on the profit side. Give me a break. This stock is a looser and needs to sell it self to may I say this, to the highest bidder(how about a take over artist)
Oct 8, 2012 12:03PM
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Ragweed said;
"Hey Righties Our "Socialism" worked out just FINE for 65 year old me."

JFK, arguably one of the great Presidents in history, would have been dubbed a right wing conservative capitalist by today's standards. So take your socialist BS and shove it straight up your AZZ!
Oct 8, 2012 11:28AM
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Do you ever stop to wonder....
Why do we never see Woody Harrelson and Cramer in the same place at the same time?  This far exceeds questions about Alcoa potential or what Obama can be blamed for today.

Happy Columbus Day, btw. 

Now get back to buying stocks...you're killing me here.

Oct 8, 2012 10:56AM
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From the comments made on a lot of MSNs blogs.....

Particularily the Articles about the BLS's cooked books..

 

I would think aluminum foil would be in high demand, highest in history ??

Some are making full suits of it now and wrapping their houses also...

A lot more houses then there are jetliners.

Oct 8, 2012 10:09AM
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Jim's right, outside of rolled steel aluminum is about as basic metal as there is.
Oct 8, 2012 11:13AM
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Don't get too hopeful, Aluminum has dropped in price over 20% this quarter on low demand. Maybe exports will skew the #'s but that doesn't mean things are going to be all rosy for the US.
Oct 8, 2012 1:00PM
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 We can't simply just exchange smart bombs with Iran. The entire Middle East oil infrastructure will end up in ruins and Europe's Nuke plants may be targeted
 And anti ship torpedoes of the type used on the S.Korean ship- that was on full alert due to war games being played at the time-- will likely close the Strait of Hormuz with the wreckage of not only oil tankers but perhaps some of our Navy's ships as well. What DO you do if they succeed in sinking one. Carry on as usual?

 Ground troops necessary in other words especially if the Navy is neutralized
Oct 8, 2012 1:05PM
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Why is it that if a country kicks out US oil companies, they become a mortal enemy of the US? Iran, Venezuela, etc
Oct 8, 2012 10:50AM
Oct 8, 2012 12:29PM
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"It's the DEADBEATS who never work, never pay a dime in taxes,  who are bilking the system."

Sorry, could you clarify if you are referring to the Uber wealthy or the ultra destitute here, A BS?
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