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[Ulisses Pereira]

"Sometimes, the Consensus Is Wrong"

By Jim Cramer
RealMoney.com Columnist
3/24/2008 8:34 AM EDT

"Sometimes it just hits you. You will be reading an article about some fund manager somewhere who sounds perfectly intelligent and you will spot it, the holy grail of the moment -- THE CONSENSUS. I won't mention the fellow's name -- it is unimportant -- because he's good at his job, but the thoughts he is currently expounding sound like many others I hear, to wit:

1. Oil prices will fall to $80 a barrel.
2. The dollar will rise when the Fed stops cutting rates.
3. GDP growth in China will slow.

First, let me just say that those events would be bullish for every domestic company in our universe, including the financials, and we would have a miracle bull market where less than 20% of the market -- ag/mineral/oil and gas/infra --collapses and fully 80% of the market can rally (I am including the health care stocks because, somehow, they have been seen to become hostage to the weak federal government, and in this scenario I don't see the federal government as worried about cutting back spending).

So, as someone who has to talk about stocks all of the time and has an innate bias -- because I am not a hedge fund operator -- for stocks to go higher, I want this scenario to play out.

But let's take a look at it, because it is what I think the vast majority secretly believes in, and when you get a week where oil falls hard (albeit from really high levels) and the dollar rallies it seems like everyone believes in it out loud and the consensus pops out of the closet.

First, oil. Once again the consensus REFUSES to take into account how little oil is being discovered and how much is being pumped. We just sent oil man Dick Cheney over to Saudi Arabia in an attempt, no doubt, to get them to pump more. Believe me, they want to pump more too. It doesn't matter. Iraq is supposedly more pacified, and while all we hear about is the inevitable stealing of all the money coming from the fields -- typical of the incompetence and corruption that is endlessly worth banking on -- they are pumping more than they have and it doesn't matter. No areas right now are out of commission because of natural disasters or terrorism. Still doesn't matter. The hedge funds have had to unwind their 30-to-1 leveraged hoarding of oil and it STILL doesn't matter.

So what if a few million more people carpool. So what if we keep taking our food supply and shoving it into our tank. It doesn't matter. Don't you think that Exxon (XOM - commentary - Cramer's Take), Chevron (CVX - commentary - Cramer's Take), Conoco (COP - commentary - Cramer's Take), BP (BP - commentary - Cramer's Take) and Royal Dutch (RDS.A - commentary - Cramer's Take) are pumping all they can, because no one believes oil is sustainable at these prices save perhaps Jim Mulva from Conoco?

That's why I think the $80 is a fantasy. It's just too bullish for everything but oil. You believe it? Go buy AMR (AMR - commentary - Cramer's Take). Your money.

Next, the dollar. I think the dollar will rise when the economy gets stronger, but I think the issue with the dollar is how many we print and how little we save and how little we tax and how much we spend both as people and as a nation. Look around at the countries with strong currencies and you will see good growth and self-control, which under this administration has become a joke. I know I can barely contain my contempt for their decision to debase the dollar. They figure no one goes away, I guess.

This is the inevitable result of a plan to dismantle the federal government by starving it: you can't dismantle it and you can't starve it, you just get someone else to pay for it and they are pretty fed up with paying, knowing that there's a lot more supply ahead. I think the dollar will rally when we get some self-control or when we are so cheap that the Europeans come and snatch up our assets with their euros and that -- something I have been completely wrong on because I guess I, too, have been too bullish on the dollar -- hasn't happened yet. Or, the dollar will rally when we get a new administration that isn't as contemptible around the world, and that is viewed as having some self-control. Oh, an aside ... boy, are we hated.

Finally, GDP growth in China. Here's one we have been hearing about for about 10 years. I think there will be a cyclicality to China's growth. The fact that more than half the people in the country have cell phones means, let's say, that there are fewer people who need cell phones than two years ago. That's the kind of undefeatable logic that always prevails.

I point out that what people are really implying is that China will have a bust to go with its boom, which presumes the kind of bust that happened even as this country expanded across the continent. Moments got out of control but it was a really bad bet to believe that there wasn't, at any one time, secular noninflationary growth in this country for more than 100 years. That feels like China to me.

So, while I am a guy who likes a consensus, I see all of the takeaways of this consensus -- short Schlumberger (SLB - commentary - Cramer's Take) and XOM, sell Deere (DE - commentary - Cramer's Take) and Chevron, Halliburton (HAL - commentary - Cramer's Take) and Fluor (FLR - commentary - Cramer's Take) and Bunge (BG - commentary - Cramer's Take) -- having some short-term power to them. I understand the propensity to roll back gold -- the logical extension of a strong dollar.

But I simply don't see the structural side of this bull case -- more oil supply, a better administration, the end of industrialization of China -- playing out in a way that you can do anything but make a trade on it.

The investment side of the anti-consensus just seems a better bet to me.


At the time of publication, Cramer was long ConocoPhillips and BP. "

(in www.realmoney.com)