Tackling the sector rotation dilemma
It may be time to move money out of some industries and into others, but which stocks to choose?
One minute you can't own enough drug stocks. The next minute you can't own any drug stocks. Same with the foods. But where to go?
Do you go to the worst, knowing they can only get better? Or do you go to the good, knowing that they are good?
I have been in this dilemma many times in my life and I have always resolved it in a practical, but chicken, way: pick the worst who have already told you things are bad. That way you won't be shocked when they stay bad.
Along these lines you can make a case for Cliffs Natural (CLF), Vale (VALE) and Alcoa (AA). Cliffs Natural and Vale are iron-ore plays and nothing's more in glut in iron ore than aluminum, hence Alcoa. Here are three companies that are still being shorted, still being bet against with everyone writing them off. Vale, no matter what it does, is known as one of the absolute favorite hedge fund shorts because of its relationship with China. The shorts don't care about the yield, they think the dividend's a goner even if it was just declared.
Alcoa? The rap here is that it needs to do an equity offering to satisfy the ratings agencies. No matter that it is closing expensive capacity in Europe and building cheap capacity here. The company's extremely well run, but it doesn't matter as long as aluminum is in glut. But take a look when it wasn't in 2007. You get a fivefold hit.
Cliffs is the most difficult of all. First, its balance sheet is improved ever since it did what, in retrospect, was a brilliant deal offering stock at $29. Unfortunately, everyone who bought in on it was crushed, something I know I didn't see coming. Second, not that long after, a major brokerage said that Cliffs is about to fall victim to a major expansion of iron ore sales in this country, which sounds suspiciously like what happened to the old Cleveland Cliffs when there was too much iron ore. So, it became a free-fire zone.
What do you do? Alcoa's a call already, by virtue of its $8 stock. Vale can be done in Sept. 15 calls for a couple of bucks and Cliffs October 15s for 6 and change.
Now, I am reluctant to short anything here because the sector rotations are very swift. But a long call/common CLF, Vale, AA, long put Amgen, BMY (preferable the in-the-monies) might be the way to play this next leg.
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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The Markets are giving me a little "warm fuzzy" this a.m.
But I had a better one earlier here, sitting in the chair; Must be time, to change the Depends??
If Bobo says buy, sell. If the sell signal is on, buy....Remember the Buffet, Buy on fear, sell on greed.
Or the best advice ever given by anybody; Whomever "anybody" was?? Buy LOW, sell HIGH.!!
Unions as I've known them have never been to hard to negotiate with....
I don't know of ANY union that wanted their Company to fail....That's just stupid.
"the hand that feeds,yada,yada..."
Most Contracts were about Benefits, Healthcare, Safety, pensions and long term employment with COLA type raises....Few were ever about a "lot of Money"....Workers just wanted to keep up..
I always saw lower levels of Management agreeing with most Union demands..It made their jobs easier....A happy workforce, lesser tensions, more productivity and raises for management too.
Usually that's how most worked out in a Good Company...I was on both sides of the fences..
Never road the fences, very bad practice, and was always happy where I worked.
I moved money out of metals, alum,iron,palladium a few years ago...Too many cycles to watch.
Decided only to concentrate on PMs and that hasn't worked too well lately.
Nice day. I've almost got enough money for a Hoverround chair.
But then, there was the baker union that killed the Twinkee. Booooooooo.
As far as Alcoa goes, they are one of THE premier "economic" barometer companies. If Alcoa's sales are up, some economy somewhere is booming. If they are down, the global economy is down. The one thing that is slightly odd about Alcoa is that they've flown under the radar as a union shop. Just about everywhere else, unions are making a big stink about whatever. But for some reason, this doesn't happen much with Alcoa, or John Deere for that matter. I remember there being a couple of picket lines for a short time back in the 80s, but for the most part, John Deere and Alcoa seem to be able successfully negotiate with the unions without giving away the farm (pardon the pun). This may change in the future, and I'm too lazy to go look up when their current contract expires. It's possible that Alcoa and the union will suffer from some tense relations somewhere along the line, depending on that particular union's leadership. For now, they appear to be one of the least politically active, politically motivated unions out there. And it wouldn't be a surprise if Alcoa and the unions continue to get along for decades. It's also possible that they could be somewhat radicalized, like the teacher's union in Wisconsin and others. Just something to think about moving forward.
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Do it once a year. This allows the best-performing asset classes to take off and run.
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