King Coal Gets Dethroned

As far as coal prices have fallen, right along with oil, the commodity’s corresponding stocks have dropped still further.

Appalachian coal is down 49% from its July 1 level, while Powder River Basin coal is down 32%. KOL, a coal stock exchange-traded fund, is down over 75% over the same period.

Cramer blames the fall on the hedge funds that went all in on commodity stocks, suffered as a result, and are now scrambling to raise money as clients demand their money back. The likelihood of an Obama win on Nov. 4 also could have fed into the decline. But until the hedge-fund selling stops, Cramer doubts any of the coal stocks should be bought.

Arch Coalreported earnings Wednesday, lowering 2008 guidance. That didn’t keep CEO Steven Leer from pointing to strength in export sales, though. Cramer didn’t necessarily disagree – the company’s demand base seems to be there – but the way that China and its voracious demand for commodities such as coal has all but disappeared makes Leer’s statements hard to reconcile.

Outside of a McCain win next week, Cramer can’t recommend coal stocks right now. And again, even then pressure from hedge funds make them all but impossible to own. The closest he’d get to coal, he said, is a bag of Kingsfords, made by Clorox . At least CLX has a nice 3.4% yield.

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