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Cramer on BloggingStocks: Commodity collapse will buoy earnings

Posted Aug 15th 2008 8:52AM by Jim Cramer
Filed under: Earnings reports, Forecasts, China, Market matters, Commodities, Oil, Cramer on BloggingStocks, Recession

TheStreet.com's Jim Cramer wonders why no one's cheering about this -- the headwinds are gone.

This is an epic collapse of commodities, one that is cutting every investor to the core. It is as if whoever was actually buying them -- not trading them, not speculating in them -- has vanished. That's how little demand there is. It is as if everyone in the world who was being paid in dollars now actually wants those dollars. It is as if all demand leading up to this moment for the last several years was all phony and disappeared. It is as if any country that was hoarding minerals and oil and grain no longer needs them. And it is as if every hedge fund in the world had purchased everything to sell into that demand and is now long the stuff and dying.

To me, all you need to watch is gold. The fact that gold could not hold that long-term trend line, that it sliced through $790, tells me that we are not done with this great unwind.

What's amazing is how silent it all is. We heard about how horrible this commodity rally was for the world every step of the way. With each dollar up of each commodity, we heard how it would destroy the Western world. How many times did you hear that the weak dollar would be the end of us?

But nobody's cheering now.

That's just wrong. The tax on everything is being removed. Everything. The consumer, the corporation, the government, everything.

If we can simply go back to where we were a year and a half ago with commodities but keep the same job level and the same prices to consumers, we are going to have a huge year-over-year increase in earnings.

That's what I believe will be the focus.

That, and the question of whether it was all China. When the Olympics ends, will the demand return?

I don't know about the latter, but I do know that it is as if the whole world's supply production machine finally had a chance to catch up with demand. When that happens, it's great for the demanders, and really bad for the suppliers.

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.

Tags: commodities, earnings, featured, jim cramer, JimCramer, oil, recession

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