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How to Play the Recovery

Demand is up for the economy’s building blocks, Cramer said Wednesday, and that means, “The recovery is at hand.” While this is bad news for the doom-and-gloom pundits who predict the worst, it’s great for the rest of us.

Right now, the real economy matters most, not intangible investment vehicles and insurance policies. We need to see order increases in chemicals, plastics, textiles, paper, industrial machinery and computers. First, though, manufacturers must have the polys, the ethyls – polyvinyl chloride, ethylene glycol, among others – and caustic soda that lie at the heart of these products. Recently these building blocks have been “in motion,” Cramer said, and that’s why he’s feeling so bullish. The sudden demand means that the real economy is revving up.

More specifically, Cramer has kept a close eye on the three most important tells for a recovery: corrugated boxes for shipping goods, polyvinyl chloride plastic for building houses and buildings, and bricks for new infrastructure and developments.

In the past month, the companies in these industries – International Paper and Temple-Inland for corrugated boxes, PPG Industries and Dow Chemical for PVC and Martin Marietta Materials for the aggregates used in bricks – have reported a bump in business. Cramer wasn’t surprised, though, because the stock market usually predicts the economy’s movements six months ahead of time, and we’d hit a low in early March.

“That tells me it’s a true bottom and the rally we’ve had since then is for real,” Cramer said, “not some so-called bear-market rally.”

As for the three key building blocks, Cramer said to buy PPG for PVC, IP and Temple Inland for corrugated boxes and Martin Marietta and Vulcan Materials for bricks.

Lastly, there’s a play in commercial real estate as well. A change in the tax code should help a good number of troubled contracts in the industry, removing the worst-case scenario that both the pundits and the press have predicted. Cramer endorsed the iShares Dow Jones US Real Estate ETF to investors who want to ride this market back up.

The bottom line, though, is that “we’re in great shape,” Cramer said. Ignore the naysayers, and prepare for a recovery.

“Let’s laugh at the doom-and-gloomers,” he said, “all the way to the bank.”

Cramer's charitable trust owns PPG Industries and Wells Fargo.

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