Jim Cramer knows that when someone is stuck at the bottom of a deep hole, the best thing to do is to stop digging. Yet some companies cannot seem to grasp this idea, and continue to make things worse.
“That is how I feel right now about three giant minerals and mining outfits that happen to be the world’s largest suppliers of iron ore,” the “Mad Money” host said.
Iron ore is a commodity that has been in free-fall recently and is trading close to its 10-year lows. There are three companies specifically that have proven themselves as total morons to Cramer, to which he has anointed them the three stooges of iron ore: BHP Billiton, Rio Tintoand Vale.
“It doesn’t take a rocket scientist to figure out that when the market is glutted with iron, you should mine less of the stuff”
All three stocks have been brutally punished in the past two years, with BHP down 56 percent, Rio Tinto down 29 percent and Vale dropping a stunning 75 percent.
However, Cramer recognizes that a large portion of this isn’t their fault. The entire commodity space has collapsed, as demand has reduced from places like Brazil, China and Russia. But they could have done better than they did.
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“They could have cut production. It doesn’t take a rocket scientist to figure out that when the market is glutted with iron, you should mine less of the stuff,” Cramer said. (Tweet This)
BHP, Rio Tinto and Vale all failed to recognize the severity of the problems and continued to produce. Cramer thinks they all have a mutually assured destruction scenario, where if nobody blinks, everyone will be in serious trouble. In short, they’re in the bottom of a hole and continuing to dig.
To make matters worse, there was the Samarco disaster a few weeks ago. This was a joint venture between Vale and BHP where a dam broke, and ended in tragedy with 11 miners dead and 12 still missing. The companies just cannot catch a break.
“When times are tough, some companies try to do whatever they can to survive and even thrive. But some just behave like morons, and I’d say that is the case with BHP, Rio Tinto and Vale,” Cramer said.