Since natural disasters struck Japan in March, the market shifted out of the industrials and into the staples. These kinds of rotations are to be expected, but this one went too far. The staples were overextended to the upside.
It now seems as though Japan as identified all of the nuclear issues that held up the country's reconstruction, Cramer said. Japan is ready to get back to work. The turnaround was evidenced by Toyota Motors shares having popped on Wednesday. The Baltic Freight Index, which measures global trade, also started to climb. In turn, the industrials started to pick-up steam while the staples started to fizzle. Procter & Gamble saw shares fall Wednesday as Caterpillar's stock climbed.
Cramer thinks the market is finally starting to listen to the companies.
Several weeks ago, Cramer spoke with Pete Miller, CEO of National Oilwell Varco . At the time, Miller joked about how ridiculous the stock's slide had become versus the fundamentals, as people projected it wouldn’t be building nearly as many rigs because oil had been down a few dollars for a couple days. But Miller noted the business didn't work like that. National oil companies don't pay attention to the short-term oil future fluctuations. As oil fell on Wednesday, NOV rallied roughly 6 percent.
"The CEO’s of the industrials in this country are the best business people in the world," Cramer said. "The vast majority of them saw there was a slowdown coming in 2007 and took drastic action. They are saying that it is not happening [now] and the slowdown's just a blip in a longer-term up-trend."
Cramer doesn't want to overstate the industrials, though. He recommends having a diversified portfolio.
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