A silver lining in an ugly market

Europe is still the big problem, but plunging commodities prices will help lots of companies.

By Jim Cramer Oct 5, 2011 9:21AM

the streetIt's tough to be bullish when Europe is the albatross around our necks. Who knows what will happen overnight? Somehow, it tends not to be good. And they are in huge bear markets over there.

 

But I can't resist talking about a silver lining that no one seems to care about. A little less than three months ago, we heard company after company talk about skyrocketing raw costs. We heard about how oil keeps going higher or is stubbornly high. We heard that paper board wasn't going down, that plastics aren't coming in and that grains are just way too elevated. Steel costs were too much for car companies, and copper was too much for homebuilders.

 

Companies as diverse as Ford (F) and Clorox (CLX) and Procter & Gamble (PG) and Kimberly-Clark (KMB) continually sounded alarms about inflation. Their conference calls were filled with downbeat input cost caveats that were going to hurt earnings, going to hurt costs for a very long time to come.

 

Meanwhile, the restaurateurs and retailers talked about how much prices at the pump were killing their traffic. The airlines were decimated by fuel costs.

 

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Then suddenly, in this quarter, all of these commodities collapsed. All of them. Just obliterated. All of those worries and woes about so many input costs have diminished, some in radical fashion. And the declines are happening at the perfect time, right before the quarters are reported.

 

Sure, there's plenty of worry about demand, but the raw costs are just plain better and the companies will point that out for certain. It could change the tone, a tone that hurt us after the last quarter.

 

What does this mean? You can have more confidence in the transportation stocks, such an important group. You may not hear such negativity about the upcoming holiday season. You can own the food companies with good dividends because they can beat the numbers. And you are able to pick at decimated retailer and restaurant stocks precisely because of the decline in the cost of gasoline.

 

Look, I am not backing away from my view that Europe is the cause of the big turmoil here. We get a resolution in Europe, and we are going higher from wherever it occurs. So it is important to know what will be in good shape for earnings if we get one soon.

Think of the inputs and you will be able to make some good money come reporting season if Europe ever recedes from the front pages.

 

At the time of publication, Cramer had no positions in any of the securities mentioned.

 

Jim Cramer of TheStreet

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for his charitable trust.

26Comments
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Just who is it that cuts into a turd looking for a silver lining?

 

 

The finacial world is the only place where "the best and the brightest" of employees get yearly  bonuses that equal 5 average Americans lifetime earnings to completely destroy the entire planets financial environment , (YES, that is right, they are STILL called irreplacable even when destroying the only industry they must work within).........and then chase that down with another bonus, while still able to maintain that they are even as smart as a cashier at Mc Donalds who would be fired if her till was off by $5 per day!

 

Those who are considered the smartest in finance are simply those willing to endanger your money without care if you lose ..................as long as they are absurdly overcompensated to the same tune that thier Harvard frat brothers are for bankrupting the rest of us!

Oct 5, 2011 12:55PM
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I still don't get it. Europe sent Timmy Geithner packing two weeks ago by saying there are only 17 invited members of the European Union out of 26 candidates. It would only take $1 trillion to bail them all out if there was a banking problem but they claim Europe is in fine shape overall and we are the problem. We are $14-20 trillion in debt with a war on terrorism, a failed war on drugs and huge outflows to friendly dictator nations that we support and not a single agreement out of Washington, D.C. to fix our finances. How can Europe be the problem, Kramer?? The Europeans are building chunnels to Africa to ship back all the minerals, oil and natural gas they can and we are sending them more jobs. The United States sucks. I was just in Europe and saw no panhandlers, no hustlers, no guys with signs saying "will work for food" and no young hoods dealing drugs in broad daylight. The U.S. is a failed pyramid scheme that is bleeding internally from too many dropouts and too many illegal immigrants and too many stupid failed economic advice givers. And is there anybody out there who still thinks Greenspan was a genius??
Oct 5, 2011 10:19AM
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what lower fuel cost?fuel goes up 50 cents then comes down 15cents and you call that lower fuel prices,what the hell pack up the motor home lets go on vacation.
Oct 5, 2011 10:13AM
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You mention that transportation should show gains due to lower fuel costs. 
Since the great volitility of fuel prices hit hard in 2008, all transportation companies have instituted fuel surcharges that are keyed to fuel prices.
That means that the fuel costs are removed from the loss equation -and- therefore had better be removed from the profit equation as well.


Oct 5, 2011 11:39AM
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has anyone noticed that everything Jimbo touches turns to ...well, you know? He tells us a week ago to buy gold....then it tanks...nice job

Not that I listened to him...I bought when it was low...7 years ago...

Oct 5, 2011 12:00PM
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this guy should change his name to anti midas

everything he touts plunges

then he makes it even worse with his shrill inane diarreah babble terminology

Oct 5, 2011 12:58PM
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I still remember Kramer saying Disney was going to $60. It dropped and continued to drop since. Anybody can do what Kramer does which is guess and guess wrong.
Oct 5, 2011 10:33AM
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time is past! Get out asap. Come back when Europe is healed. This is all about "news". And the market runs on news not facts, etc. Hysteria is in full motion right now.
Oct 5, 2011 11:23AM
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Cramer's on CNBC because Big Money wants him there. 
Oct 5, 2011 11:06AM
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he says he's here to educate us

educate me on your high yield strategy pick of con ed

you say while it goes down i'm getting paid to wait

then the market goes up and it goes down more

man i need education

Oct 5, 2011 1:17PM
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If you can do instant trading there is a lot of money to be made.  But if you have to wait a day or 2 to get the trade done, someone will have allready taken your profits for himself and sold you his losses. 
Oct 5, 2011 12:21PM
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MSN Headline:  "Bear attacks couple in their N. Carolina home."

 

... And I thought that all bear attacks occured on Wall Street.

Oct 5, 2011 2:10PM
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"Be bold when others are fearful and fearful when others are bold." "Buy from the panicked and sell to the euphoric." Whichever quote you want to listen to, time-tested investing advice always holds true. You guys go ahead and buy gold... I'll buy real estate.
Oct 5, 2011 10:37AM
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Jimmy Boy, I was in New Haven Conn. diesel fuel was 427 a gallon. hell, its all the way down to 398 now, that's just great 398 a gallon.
Oct 5, 2011 1:16PM
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You just go north and smoke em if you got em.  Have you noticed, that they seem to have plenty of money while the South of Eurpoe is dying.
Oct 5, 2011 4:13PM
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It looks like my late eminent cousin -- Lord Eric Roll -- was right:

 

NOW IS THE TIME TO BUY!  MODERATION IS FOR MONKS! TAKE BIG BITES BEFORE THS PLATE PASSES!

Oct 5, 2011 3:16PM
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It may be true that some raw costs are coming down but just remember...when this happens those companies that sell to retailers such as Clorox, Kimberly-Clark, Proctor and Gamble etc. all are then hammered for lower prices by those retailers they sell to.  The net result is margins don't necessarily always improve just because raw materials go down...
Oct 5, 2011 12:17PM
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Jimmy: Plunging Commodites , Europe is  a big problem , but there could be a silver lining . Your big problem is your plunging into a big killjoy  Jimmy keep looking for  good . I bought Rimm late yesterday , this was good. Greece , Spain , Portugal ,Italy , Is not Arizona and Texas , Greeks, Spanish ,Italians, Portugese have they ever gotten along ? Buy USa buy Canada . Stay positive

even if your wrong for a few months . 

Oct 6, 2011 7:43AM
Oct 5, 2011 6:51PM
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Europe is in flames because of over size well fare states. when Europe down size look more like Germany in terms of size of well fare state.
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