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Cramer: When you hear this word—run far away!

Cramer: When you hear this word—run far away!
VIDEO7:2107:21
Cramer: When you hear this word—run far away!

The next time you hear someone call for a supercycle, Jim Cramer wants you to run — not walk — straight for the exit. A little over a year ago, Cramer warned that sand plays were in danger. He wasn't just worried that the price of crude had collapsed; he was worried that the word "supercycle" would take this group down the tubes.

Commodity sand stocks refer to companies that provide sand for hydraulic fracturing, the drilling method that has been essential to unlock oil and gas reserves in the U.S. Cramer's fear was that sand stocks such as Emerge Energy Services, U.S. Silica and Hi-Crush Partners had skyrocketed immensely, and would not be able to withstand the cut in oil prices that has plagued black crude in the past year.

What really alarmed Cramer was when an analyst from Morgan Stanley came out and called for a fracking sand supercycle. His opinion was that there was a prolonged period of production growth and stronger pricing for sand plays as part of a secular shift in the oil industry.




It turns out that I was more right than I knew when I warned you that the fracking sand stocks were going lower
Jim Cramer
Sand and gravel deposits plant.
Markus Matzel | Ulstein bild | Getty Images

"I warned you that, at the end of the day, these fracking sand companies were producing the ultimate commodity — I mean, they make sand for heaven's sake — and that there was no way they could continue to thrive if the price of oil kept going lower," the "Mad Money" host said.

Historically, Cramer has noticed that the dreaded "supercycle" word has been associated with groups that ended up taking a nosedive. In fact, when that word is used it probably means you are closer to a top than a bottom, as was the case with both ethanol and coal.

Sure enough, a year later, things have been far worse for the commodity sand stocks than Cramer would have ever imagined. When he warned of the peak in this group, he did not know that the price of oil would go so low. At these levels, oil has been cut in half since he last warned of the sand plays.

"It turns out that I was more right than I knew when I warned you that the fracking sand stocks were going lower," Cramer said.

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Even some of the stocks that were perceived as being the safest were hammered. Cramer thought that Emerge Energy Services might hold up better than the others because of its 3.8 percent yield. However, the stock is down 93 percent since he warned investors about a year ago.

So any time a commodity group is loved so much by Wall Street that some analysts are calling for an extended bullish supercycle — Cramer wants you to be skeptical.

It happened with ethanol, it happened with oil going into the great recession, it happened with coal and now it has happened with sand.

"The next time you hear some expert call for a commodity supercycle, remember the annihilation of these fracking sand stocks, and do some selling," Cramer said. (Tweet this)

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