This post was written by Minyanville contributor Vitaliy Katsenelson.

"You should buy Freeport McMoRan (NYSE: FCX), Caterpillar (NYSE: CAT), PACCAR (NASDAQ: PCAR)." That is what I hear from friends of mine, who are in the biz, all the time. They tell me how cheap these stocks are -- three, six, eight times earnings. "You are a value guy! How come you are not loading up on them?" they ask.

Let me tell you when I'll buy "stuff" stocks (if I ever do, because I've never really cared for the cyclicality of that business). It's when everyone stops telling me how cheap they are and that they are "buys."

These stocks are very similar to housing stocks two years ago: housing stocks were down 50% and looked cheap. Value managers bought just to see their stocks get cut in half again and again.

One needs to subnormalize earnings in this environment for all stocks, but stuff stocks need to see their earnings to be "sub-sub-sub-sub normalized." I've said it before, but it is worth repeating: the global economy just started its journey into a recession, and demand for stuff will drop off the cliff most likely to a lot greater degree than anyone imagines.

How will we know when things have thawed? Everyone's looking at LIBOR and I can't blame them as that indicator of lending from one bank to another bank is crucial for the way the system is supposed to work. It's a good thermometer for certain, but I don't want it to overstay its welcome, because there are other "true" indicators out there besides just LIBOR.

I am looking at something else: takeovers. On Monday, we saw Waste Management (NYSE:WMI) pull its bid for Republic Services (NYSE:RSG) , a smart idea as WMI had dropped so precipitously despite reporting better-than-expected earnings that one had to question if it was worth doing it. More important, though, getting the money was proving to be possible, but difficult. This situation also prevailed in Altria's (NYSE: MO) buy of UST (NYSE: UST) where Goldman Sachs said, "Don't bother, wait," even though the integration of the two is crucial for Altria's growth.

Now I expect deals to be done if the banks are for real about lending.

Further, the endless margin selling has created tremendous bargains for well-capitalized companies to buy other companies that have brimming order books but are being kept down because of hedge fund redemptions. How can some company not want to buy a Trinity (NYSE:TRN), for example, which has been virtually cut in half even though both presidential candidates are pro-wind? Or how about a Foster Wheeler (NASDAQ: FWLT) or a Joy Global (NASDAQ:JOYG) or a Terex (NYSE: TEX) betting that if there is credit there will eventually be a revival?

"Recent weakness in commodities is just a pause to breathe , not the beginning of the end," says Yiannis Mostrous in Vital Resource Investor. His favorite copper play? Freeport-McMoRan Copper & Gold (NYSE: FCX).

"Most investors aren't able to grasp this commodities cycle's massive potential. The main reason is that few investors are willing to accept the big transformation that's taking place in several emerging market economies, led by China and India.

"We've been advocating this change for quite some time. And after several years of doing so, investors are more receptive. However, they're not totally convinced yet.

"This is the main reason this bull market in emerging markets and commodities has another strong leg up before it reaches all-time highs. But we're far from that point. Meanwhile, copper remains one of our favorite metals.

"Our long-standing recommendation to take advantage of copper's strength is Freeport-McMoRan Copper & Gold. Copper suffered from supply challenges along with investors' underestimation of its potential early in the year.

TheStreet.com's Jim Cramer says that rebuilding from natural disasters can alter the growth picture for a country.

Is it Katrina all over again? Or is it bigger? Much bigger? That's what I am thinking about this Chinese earthquake.

Katrina distorted the U.S.'s growth pattern for more than a full year. The raw materials, the effort, the work, the reconstruction affected businesses from small-scale retail to refining and infrastructure.

We don't really know how China works, although a lot of people tell us they do. To me, the Chinese are always a day away from revolution or civil war and the trick of the government is to stay one step ahead of the posse. (Chinese hands will dispute that, but you have to appreciate that it takes a special skill to be wrong for more than a century and still maintain credibility.)

That means massive reconstruction: bricks, lumber, cement, steel and all the trimmings. Massive imports, not controlled by the Chinese and their little negotiation games like they play with iron and steel and coal. Just full-bore buying and something that could take growth for China back to the levels that everyone thought it couldn't absorb without more inflation.

"There's no doubt about it: vital resources are in a bull market of gigantic proportions," note Yiannis Mostrous and Roger Conrad.

"The co-editors of Vital Resource Investor caution that "no market moves in a straight line, and in commodities, the action is often extremely violent." However, for long-term investors, they offer some favorites in iron ore, aluminum and copper.

"All commodity bull markets are ultimately gored by demand destruction, alternatives and new supply. But it will almost certainly be years before that happens to this one. And that means plenty of money will be made along the way.

"We're still extremely bullish on iron ore as the market remains in deficit and prices continue to rise. Chinese domestic supply has been falling and, if this continues, imports will make up the difference, thereby helping the miners.

"China consumes 51% of the world's iron supply. Portfolio holding Companhia Vale do Rio Doce (NYSE: RIO), the world's largest iron ore producer, will benefit from the shortage in iron ore supply.

"We favor aluminum in the industrial metals sector. We've been advocating aluminum for some time, and the market's finally going our way. Aluminum prices have been impacted by lack of available power in China and South Africa and higher alumina and bauxite prices.

"A once in a lifetime super bull market in commodities is underway," note resource experts Mary Anne and Pamela Aden. Here, the advisors look at some favorite commodity stocks in their The Aden Forecast.

"Commodities are in a mega super rise is because of the dramatic changes in the global economy. The rise that started in commodities in 2001 has continued to expand over the years and we believe the upmove is just warming up and it has years to run.

"There are several reasons for this. The weakening dollar and low interest rates have certainly helped push up the whole sector while investment demand grew as an inflation hedge. But the key reason why the commodities are in a mega super rise is because of the dramatic changes in the global economy.

MOST NOTEWORTHY: AstraZeneca, Massey Energy and Freeport McMoRan were today's noteworthy upgrades:

• Dresdner Kleinwort upgraded shares of AstraZeneca (NYSE: AZN) to Buy from Hold following the company's settlement with Ranbaxy on the Nexium patent.
  
• Massey Energy (NYSE: MEE) was raised to Overweight from Neutral at Massey Energy citing the company's leverage to metallurgical coal prices in 2009.
  
• Freeport McMoRan (NYSE: FCX) was upgraded at HSBC to Overweight from Neutral on valuation.

OTHER UPGRADES:

• Arcelor Mittal (NYSE: MT) was upgraded to Buy from Hold at Citigroup.
  
• Merrill upgraded Bernis (NYSE: BMS) to Neutral from Sell.

Freeport McMoRan (NYSE: FCX), a gold and copper mining company, closed at $93.97 Monday.

Gold is recently up 1.23% to $983.80 according to Bloomberg.

FCX overall option implied volatility of 56 is above its 26-week average of 50 according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Rio Tinto's above-consensus sale price for its gold mine to Barrick Gold almost certainly increases Rio's negotiating stance vis-a-vis takeover bids from BHP Billiton or from other potential suitors, an analyst told BloggingStocks Friday.

"Rio's sale of its gold mine to Barrick for $1.7 billion when the market was expecting something like $570-$700 million is a fundamental data point the market cannot ignore," independent stock analyst C. Leonard Bauer said Friday. "It will force BHP Billiton and others receptive to a deal to redo their fair-value projections for Rio."

Rio (NYSE: RTP) has twice rejected hostile buyout offers from BHP Billiton (NYSE: BHP), the last for $147.4 billion, involving at least 3.4 BHP shares for each Rio share, arguing that the bids substantially undervalue Rio. Rio gained 64 cents to $452.89 while BHP gained $1.01 to $72.89 in Friday afternoon trading.

At first glance, the idea of bidding wars for targets appears to be a paradox in the current economic environment. After all, the U.S. economy is barely inching along, and the credit markets can be described, at best, as being cautious regarding potential deals. But the mining sector is another story, Bauer said. Strong economic growth in emerging markets has created surging demand for raw materials, minerals, and commodities. Further, the sector is in the midst of mergers and expansions that will produce miners with global market capabilities.

Iron ore war?

The above demand, particularly from Asia, Bauer said, has offset recent, modest quarterly earnings performance from some miners, and has driven up the value of miners like Rio and Freeport McMoRan (NYSE: FC).

In addition, China's size and its economic development plan has further increased miners' value. China, which with Alcoa (NYSE: AA) earlier this year jointly purchased a 9% stake in Rio Tinto through its Chinalco aluminum company, has said it will continue to seek acquisitions of foreign companies, including mining companies, Bauer said. Bauer added that he does not have a rating on any mining company nor own their shares.

"China may ultimately try to outbid BHP because a BHP / Rio union would unite two of the three largest suppliers of iron ore, which China needs for its economy," Bauer said. "A BHP / Rio union would likely leave China in a weaker negotiating position regarding iron ore prices. So you can see why Rio feels BHP's offers so far have not valued the company fairly. Rio knows that as long as China grows, it has a commodity likely to increase in value substantially for years to come. And that's a good place to be in, from a corporate standpoint."

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) shares are rising this morning, helped by rising copper and gold prices. Copper is higher by more than 2% today, while gold is up by about 1% on concerns about inflation in a lower interest rate environment. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on FCX.

After hitting a one-year low of $52.51 in March, the stock hit a one-year high of $120.20 in October. FCX opened this morning at $100.26. So far today the stock has hit a low of $99.40 and a high of $102.82. As of 11:20, FCX is trading at $101.71, up $2.38 (2.4%). The chart for FCX looks neutral and improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $75 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just two months as long as FCX is above $75 at April expiration. Freport McMoran would have to fall by more than 27% before we would start to lose money.

FCX hasn't been below $75 since August and has shown support around $92 recently. This trade could be risky if the demand for copper falls due to futher economic weakening, but even if that happens, this position could be protected by the support the stock might find just below $80, where it bounced last month.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in FCX.

As commodity indexes surged to record highs Tuesday, an economist and analyst offered time-tested advice on the macroeconomic and portfolio implications of the market's latest investment obsession of the moment.

Economist Glen Langan told BloggingStocks Tuesday that the steep climbs in soybean, wheat, platinum, coal and gasoline all speak to, for the most part, a secular trend that the world's major economic regions will have to address at some point: rising commodity prices that outstrip the developed and developing worlds' ability to absorb those price increases.

Langan said demand for commodities and raw materials remains above average, even as prices have risen, due to strong emerging market economic growth. Typically, after extended bull runs, either demand recedes or prices drop. Prices, so far, haven't dropped. The UBS Bloomberg Constant Maturity Commodity Index gained as much as 2.8% to 1,441.593, the highest ever, Bloomberg News reported Tuesday. "So unless we've suspended a law of economics, growth in these regions has to slow, at least somewhat," Langan said.

According to Roger Conrad and Yiannis Mostrous, "Resource stocks are by nature volatile. The important thing is we're still very much in a long-term bull market. And when the market mood does shift, today's pain will convert very quickly to massive gain."

In Vital Resource Investor they explain, "There is ongoing consolidation in this sector and the recent setback in stock prices make deals more attractive for acquirers." Here, they look at Companhia Vale do Rio Doce (NYSE: RIO), a play on consolidation in the iron ore industry.

"And when the market mood does shift, today's pain will convert very quickly to massive gain. The long-term underpinnings for vital resources are strong as ever: Soaring demand from the world's emerging growth engines, a growing scarcity of easily accessed supplies, rising development costs, resurgent resource nationalism and ongoing sector consolidation.

"It's this last trend that's captured our attention lately. Importantly, when it comes to developing vital resources profitably, size is essential. This year has already witnessed two mega-deals: Freeport Copper & Gold (NYSE: FCX) has bought Phelps Dodge and Rio Tinto (NYSE: RTP) purchased Alcan.

"And we're certain to see many more announced in coming months. The recent dance between BHP Billiton (NYSE: BHP) and its giant rival suggest the need to get bigger is greater than ever. Even if it doesn't succeed, the proposed merger is already increasing rivals' urge to merge.

MOST NOTEWORTHY: Ericsson, Circuit City and Hot Topic were today's noteworthy downgrades:

• Societe Generale downgraded shares of Ericsson (NASDAQ: ERIC) to Hold from Buy after the company lowered its Q4 guidance. Goldman Sachs downgraded shares to Neutral from Buy on the company's lowered Q4 revenue outlook and the growing probability that the wireless infrastructure market will decline again in 2008.
• Circuit City (NYSE: CC)'s rating was lowered to Neutral from Overweight at JP Morgan, as they believe the company's high cost turnaround will require a strategic partner or acquirer, which may not happen until after 2H08 and this year's holiday season.
• Citigroup downgraded shares of Hot Topic (NASDAQ: HOTT) to Hold from Buy to reflect their pushed out expectations for an earnings recovery.

OTHER DOWNGRADES:

• Office Depot (NYSE: ODP) was downgraded to Peer Perform from Outperform at Bear Stearns.
• Lehman downgraded Telecom Italia (NASDAQ: TI) to Underweight from Equal Weight.
• Goldman removed Freeport McMoRan (NYSE: FCX) from its Conviction Buy List.

TheStreet.com's Jim Cramer says that this is among the worst markets he remembers, and explains how to live through it.

We've just crossed into no man's land with this dramatic selloff of what has been working: agriculture, oil, minerals and defense -- although the latter held up well.

We are now square into 1990, where only a few stocks hold up and things go very awry. It is a time to be defensive and be glad you caught as much as you did, but recognize that we will not go up without emergency Fed relief because there simply is too much stress in the system.

Are we in a bear market? I have long ago recognized the worthlessness of those labels. You say "bear market" and maybe you miss the next six points in Coke (NYSE: KO) (Cramer's Take) that could be had or the next five in Merck (NYSE: MRK) (Cramer's Take). We may have a nice leg up in dividend-oriented stocks. We can catch bounces in commodity stocks, and we might just want to start buying some beat-up stocks with solid rest-of-world exposure.

This article is part of a 20 article special report on "Metals, miners and money".

Dan Sullivan, a specialist in relative strength rankings, maintains a position in Freeport-McMoRan Copper and Gold (NYSE: FCX) in his model portfolio. The editor of The Chartist explains, "The world's largest publicly traded copper company, Freeport-McMoRan operates large, long-lived and geographically diverse assets around the world.

"The company owns significant proven and probably reserves of copper, gold, and molybdenum and has an extensive portfolio of expansion and growth projects.

"The company conducts its operations primarily through its principal operating subsidiaries, PT Freeport Indonesia, Phelps Dodge, and Atlantic Copper. PT Freeport Indonesia's principal asset is the world-class Grasberg mine which was discovered in 1988.

"This mine contains the world's largest single copper reserve and the world's largest single gold reserve. It is also a 25% owner of PT Smelting, which operates a copper smelter and refinery in Gresik, Indonesia.

"Phelps Dodge is a fully integrated producer of copper and molybdenum, with mines and processing facilities in North and South America and Europe. Atlantic Copper operates a copper smelter and refinery in Huelva, Spain.

"The company's second-quarter profit surged year-over-year due to the acquisition of Phelps Dodge and increased metal pricing. Net income rose to $1.10 billion, up from $367 million in the year-ago period. Revenue also surged to $5.81 billion, from $1.43 billion last year."

Each day, Steven Halpern's TheStockAdvisors.com website features the latest investment commentary and favorite stock picks of the nation's leading financial newsletter advisors.