Jim Cramer - making money on ethanol when he doesn't want to
I was just watching Jim Cramer at 6pm on Tuesday. The stocks Cramer had been discussing included Monsanto, Potash and Deere. The subject was the increase in cost of food, international famine, and the glut of ethanol expected to be reported over the next several days.
The focus of the review of the potential for these stocks was primarily famine and the fact that because 35% of the grain production in America is being mandated to use for the creation of ethanol. There were in fact 5 stocks in the agricultural industry that were Cramer picks. Of note was the fact that Cramer mentioned that
“If I were a politician I would vote for ending using corn and grain, our food, for the production of ethanol… But I’m a broker so instead I will buy these stocks. If you want to help the world famine then buy these stocks and donate the profits to the U.N. world famine relief…” Paraphrased from the Mad Money program (if you have a video of this please let me know)
The argument is powerful and dramatic. Ethanol is a less effective means of fuel. That is a fact. And compounding that inefficiency by burning our food is in one point of view illogical. Especially when we have the example of Brazil where ethanol is created from sugar, thus not affecting the food supply or cost.
In watching this monologue from Jim Cramer I was struck by 2 things. I felt he really would rather that the world famine was being resolved by these companies as opposed to creating the roughly 164% aggregate increase in stock price since 2005 he noted. The other point was why other forms of renewable energy are not focused on.
In Florida nuclear plants shutdown and caused over 3 million to be without power mid-day. The price of corn is rising in commodity markets and supermarkets, as is beef. Ethanol is being mandated by the government even though it is more expensive and there is a glut of supply as it’s virtually impossible to find outside of the Midwest (mostly in 2 states).
Why then when all this is considered is the U.S. not seeking to promote wind energy, or solar, or any of a half dozen other ideas? Nuclear power is not green (due to the resultant waste) and problematic. Ethanol, as is currently being implemented, is counter-productive in multiple manners. What motivates the blind eye to all other forms of renewable green energy?
It doesn’t make sense to me. Ending corn as an ethanol base will not end world famine, but it may help deal with the problem. Wind energy does not harm anyone. Solar is plentiful and consistent. Biomass fuel is turning waste into a productive product. Shouldn’t we focus more on these answers?
I have to believe that when brokers, like Jim Cramer, are highlighting the fact that they would prefer to not make money in a stock or industry the public and government should take notice. When he, and others, would prefer to work harder to make money – which is his job – because of the international benefit then I have to say good for him and shame on the rest of us.
The options are there, and we need to take advantage of them.