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Have ETFs Made Stocks Irrelevant?

Tuesday, 20 Jul 2010 | 7:16 PM ET

"Does picking individual stocks even matter anymore?" Cramer asked Tuesday. "Does all the homework that I am constantly urging you to do, the research, the listening to conference calls, count for anything in this market?"

Off the Charts
Cramer reveals a key obstacle that lies ahead with the new financial regulation getting signed into law.

Maybe not.

The Mad Money host was expressing his discontent for the "commodization of stocks," where equities trade in lockstep like baskets of corn or lumber, instead of as shares of distinct, individual companies. Differences between companies in the same sector, he said, seems to matter less to the performance of their stocks. This is thanks to the proliferation of exchange-traded funds, Cramer said, especially the ultra ETFs that give traders up to three-times the buying and selling power.

To illustrate his point, Cramer sought the help of technical analyst Tim Collins. They examined the charts of the Financial Select Sector SPDR ETF , which tracks all major bank stocks, and two banks—one that's doing well, JPMorgan Chase , and one that's doing poorly, Bank of America. What they found, Cramer said, is "chilling."

"These charts say that in this market the homework's worthless," Cramer said. "It doesn’t matter if you buy a high-quality bank stock like JPMorgan or one that’s seen as being much more risky and speculative like Bank of America. Or an ETF that lets you own all the banks, for that matter. Their stocks are going to move together, like synchronized swimmers, regardless of what’s happening at the individual companies."

So what’s going on here? Watch the videoas Cramer goes Off the Charts to explain.

Cramer's charitable trust owns JPMorgan Chase and Bank of America.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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