Click chart to enlargeWe love Cramer's optimism and passion for his work, but it is nevertheless important to question his advice from time to time. Many blogs have been set up specifically to bash Cramer. This is not one of them, but we can't help but notice how his "recession-proof" stocks have fared.
In late 2007, Cramer warned that the market looked very ominous. He suggested that investors "stay in the game", but exercise caution. He chose a handful of "recession-proof" stocks that were intended to protect your capital while keeping you invested.
The two stocks we remember him choosing were FWLT (Foster Wheeler), and FCX (Freeport McMoran). FWLT is down about 71%, and FCX is down about 75% since that recommendation.
The chart above is of FCX.
On March 14, 2008, Cramer chose a new group of "recession-proof" stocks. Again, intended to preserve your capital while keeping you "in the game". This time, he chose AVP (Avon), HLF (Herbalife), and TUP (Tupperware). Since that recommendation, AVP is down 53%, HLF is down 60%, and TUP is down 56%.
Without being overly critical about Cramer's investing acumen, it's important to note that no stocks are "recession-proof". In a bear market, the best approach is to avoid ALL individual stocks. Make a note of that, because no bear market in history has ever rewarded stock pickers.
Here's a link to the article/video in which Cramer chooses his "recession-proof" portfolio...
The stock prices in the text of the article are constantly updated, but if you watch the video, you'll see that the stock picks were made in March when the stocks were much higher.
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20 comments:
I amazed with this insight of market you have made only 5% this year. Did you not Short stocks on your insight or you were too scared to trade and just keep posting here.
Actually, we're down almost 16%, not up 5%. We cannot short individual stocks, as we trade only in retirement accounts. Given the time degradation of Ultrashorts, they cannot be held long term, so we have no option to make money on the short side unless we trade aggressively, we would do not.
We're a long biased fund, and have fared better this year than most. We are not proud to be in the red, but given that we're in the midst of a 100 year storm, wit's hard to complain.
Snot,
I would like your thoughts on a couple things. First, what do you think about china at this point in time. Specifically buying one of the etf's like FXI. I remember when the whole market started to slide and you were playing FXP because you said that china would move in tandem with the falling DOW. You were correct back then there appaered to be no decopuling. I am wondering if you feel that page is now turning a bit that perhaps China will lead us out of this mess while we here in the USA remain stagnent or in a long term decline. Secondly, I have basicly given up "trading" I played and lost. I have set up a Roth IRA I have a 15 year time horizion. I am wondering if NOW really is the time to buy these really depressed ETF's like URE, UYG, UYM, USO, FXI UNG, KOL, SSO etc. and just sit tight. I have already bought just a little of some of these and they are already down 20%. I keep waiting for a bottom that never arrives. So at this point I am thinking why buy anything? Maybe we aren't going to really go higher for many years? I know your not a real long term guy but would apreciate hearing what you would do in a 15 year time horizion.
Thanks
Thanks
The DOW just took out 2002's intraday lows. 6 points on SPX and we take out its Nov lows.
I got my popcorn.
Snot, you were following the market when we bottomed in 2002 right? Do you remember what the first piece of news was that made you think this could be the bottom?
And do you remember seeing this chart in 2002? I know that's why greenspan blew the housing bubble, because he saw that chart and thought he could prevent it. (Or pretended that he thought he could prevent it...)
Whew! I was finally able to unload the QID I bought in Dec. What a waste of time. Lesson learned: inverse ETF's work great short-term, but degrade badly over time. I lost about 1.2% on that trade but learned a valuable lesson.
I see we have a new, more vague, poll. How about a tab labelled 'Don't Know', or 'Am Totally Clueless'. Just to be able to view the results I went ahead a selected 'lower'. I felt like throwing a dart, but that would damage the screen, so I hovered the mouse over the area a clicked away. Let's see if this is the 'take out the stops' scenario bantered about earlier.
It feels so damn refreshing to sit once again on the sidelines.
This is really scary stuff. The Dow is basically down 50%. If we had a 15 year time frame, we'd buy some SPY (not SSO because Ultras are so unpredictable). Then wait and buy more SPY if it goes lower. Buy on panic selloffs. There's no reason to buy a handful of ETF's at this point. SPY does it all. If you want to gamble a little, the ferts are actually pretty strong compared to the broader market (POT, MOS). Perhaps not heading to 14 cents as we previously predicted. GE, however, will bottom out a 14 cents. It's amazing how people don't start talking bacnkruptcy until a stock is under $5. It's pretty clear GE is quickly approaching C, BAC, GM, F numbers... under $2.
We have yet to add to our longs. We're sitting with popcorn watching and waiting for the big puke (Dow 5200 intraday, something crazy like that). If indeed we have that cataclysmic moment, we're going to just dive in and throw caution to the wind, mostly buying SSO, but maybe a little MOS too. There's a point where if the market goes much lower than that, lost capital will be the least of our problems. If we have another major leg down, the depression on Main Street will be palpable, if it isn't already. Remember, the Dow hasn't fallen this much since the Great Depression. The closest it's come is 45% in 1973.
MOS is currently generating an ominous sell signal. Actually, it is imploding spectacularly. I'm seeing support for MOS at 34.05, and I think it would be a tempting buy at that price. Support for POT is way down at 69.32. If both those supports are hit at the same time, I'll definately be buying.
I got my eye on solars again. They are showing signs of bottoming. LDK, CSIQ, STP especially. Some still look horrid, such as SOL, TSL, and ENER. I dont have a signal yet though. If STP goes up tomorrow it will generate a buy signal. If we dont crash tomorrow, solars should have a good day. (I suppose we could say that about a lot of sectors though.)
Snot,
When the recovery comes, whether in 2009 or 2010, what will MCD and WMT do relative to the rest of the market, since they have been so strong?
Anon,
Everyone says that WMT is doing well now, but that's just becasue it's resisting decline. It isn't going up, though. In fact, it hasn't gone anywhere in the past 10 years. It just fluxuates between 42 and 64... big deal. Even though the theory is that stocks that resist the decline become the leaders when the market turns around, we don't think this will be the case with WMT. They are not likely to do any better in the years ahead than they did during the raging bull market of the early 2000's. For WMT, we're predicting more of the same.
MCD, on the other hand, actually has a nice long term chart. If you had to buy an individual stock when the market pukes, MCD is not a bad choice. Until it finally announces a horribly unexpected quarter, MCD should continue to outperform the market, perhaps even making new highs if/when the market rebounds. But after that first bad quarter, consider the tide to have changed. Not a bad idea to sell prior to earnings each quarter, then repurchase if the coast is clear.
Thanks. That makes sense.
MCD: a possible head and shoulders is forming. The 150/200SMA starts to flattening out. The neckline is 50 USD. So be careful.
Icon, be careful with LDK. It just got downgraded today by someone, which might be a sign that some hedge fund is getting ready to short the snot, pardon the term Snot, out of it again. Crazy, I know, shorting a stock that has already fallen so far, but in this market, why not. The news is bad. The market is crumbling. The economy is a bad train wreck. LDK can't get anything right lately. So what if it is under $6. If you can drive it down to $4.50, you make 25%.
I doubt I will be buying any solars, not when half of them look worse off than even LDK. If the bad ones line up to look as decent as STP and CSIQ then it'll be another story.
I see a triple convergence on MCD, happening at the middle of next week, at a price level of around 52. I am expecting an almost direct repeat of the last 5 days. That jives with my analysis of the DOW and SPX. I'm setting a closing price target of 6950 for the DOW, with intraday target around 6700. My target prices will drop by about 40 points per day till the middle of next week. So if we bottom out next tuesday my closing price target will be 6750.
Let me guess. When Ben spoke, Snot bought SSO. Right?
Well, Mr. Ex-Goldman spoke today, and the markets loved what he had to say. Now, couldn't he have said this last week? The nationalization talk has been going on for some time now with a resounding silence from the Fed. Now that the lows have been taken out, he weighs in with his comments. Coincidence? I'm beginning to think Snot was right with his scenario. Does anybody really think that the Fed and Goldman aren't joined at the hip?
Meanwhile, the single biggest factor in the meltdown, home values, continues sliding down an ever increasing slope. This should scare the hell out of any banker holding this paper. Even in its wildest dreams, the Fed doesn't have the wherewithall to plug this widening gap.
What would happen if C and BofA were allowed to fail? Why not? They are simply the intermediary between the Fed and the homeowner (a little simplistic, but it'll have to do). We know the Fed can't save every homeowner, so I say let the cotton picken banks go under.
For better or worse, my portfolio shifted today from a majority of bonds to a majority of equities with a transfer into the mutual fund equivalent of VHT (medical; low fees; non-ultra). Two days ago I started a very small position in RF, a regional bank (it popped over 20% today), and another very small position today in KBE, an ETF of regional banks. I'm looking at RF and KBE as short term holds (in and out in a week or two with tight stops) and VHT more likely as a longer term hold that hopefully will do well, relatively, during this second half of the recession. Opinions?
Joe
I too am in the process of rolling my 401k from bonds into something ... less safe. I chose KSCVX. But most of the mutual funds look the same. They look to me like they are going to bottom out in the middle of next week. I plan to transfer another chunk friday. (It takes 3 days for my transfers to clear, so I have to try to anticipate the bottom.)
If I was going to go with VHT, I'd try to target 42.50 as an entry price.
KSCVX could be a good choice in that small caps often lead the way out of a recession and these are value stocks which means that people might be more likely to put their money in them because of fundamentals. I hope it works well for you Icon.
My small entrance into financials paid off again today. RF popped again and KBE isn't doing bad, but my positions are pitifully small. My major positions in telecommunications, consumer goods and energy are doing well, though. I wish Obama would let Ben do all the talking.
Joe
I sold my two bank positions yesterday for 50% and 10% gains. Just in time to escape Citi crashing the whole financial sector further. But those did not make up for other losses. Not even a decent portion. It appears like we are going off the edge of the cliff and dragging the whole world with us and that no position other than cash, a short position or raw land is safe.
Joe
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