[Beginning of Cramer's verbatim comments for this segment...]

Jim:        Today, Vale S.A. (VALE*), the mammoth Brazilian metals and mining company got hit with two dueling pieces of research... HSBC downgraded VALE's stock from neutral to underweight, Wall Street Jibberish for from hold to sell, and at the same time, Morgan Stanley upgraded the stock from Equal weight to overweight... And, by the way, that has nothing to do with obesity...

The analysts are saying the stock is no longer a hold... It's a buy, buy, buy... So, which of these combatants is right?... Which of these to I conscientiously object to?... First, open hand... Full disclosure... I own VALE for my charitable trust, which you can follow along with at ActionAlertsPlus.com... Yep, I tell you what I'm going to do before I do it... And you better believe, I like it... I put my charity money where my mouth is... I think HSBC's downgrade is wrong, and Morgan Stanley's upgrade is very right...

But, even though I'm a fan of all things VALE, including the ski slopes... Jerry Vale... I know where the analyst at HSBC is coming from, as his downgrade is more about the way analysts at big brokerage houses operate, than it actually says about VALE's prospects...

HSBC downgrades VALE on valuation, an expected fall off in Chinese demand for Iron Ore... And the negative effects of a stronger Brazilian Real, combined with a weaker dollar... Morgan Stanley, it upgrades VALE on valuation... Yeah, valuation... Better demand in non-Chinese markets... Like Europe, Brazil and the U.S.... and potentially stronger Iron Ore pricing...

All right... I know it's got to be confusing to you, right?... One guy likes it because of its valuation... The other guy hates it because of its valuation... It may seem crazy that on the same exact day two analysts would come out with diametrically opposing opinions about one stock... But, that's not because it's a mad, mad, mad, mad, mad world... It's because of the way things work behind the curtain, behind the "veil," so to speak...

The HSBC piece really nails the absurdity of the Wall Street analysts... HSBC had had a neutral on VALE since the stock was at $12 this March... Now, the stock is up more than 68% as the analysts just sat in the bleachers... After missing more than $8 of upside, this guy downgrades VALE to underweight... But, at the same time, even more curious, he increases his price target from $17 to $18.50... Of course, the stock is at $20, it's overridden his price target... And he increases his Iron Ore forecast from 2010 from down 10% to flat... Even though the analysts thinks the business will do better than he thought, the guy still kicks the rating down...

I think we're going to start seeing this kind of behavior with a lot of cyclical names, where the analysts downgrade because the stocks have run up to the point where it seems like they're anticipating a v-shaped recovery, one where we bounce back as hard as we collapse... Not just a slower u-shaped recovery, and certainly not an L-shaped non-recovery...

HSBC's main concern about VALE is that China has been restocking its inventories... And that ends, which seems to be happening right now, Iron ore prices will plummet... Even though the analyst expects better demand from the rest of the world, he thinks it's already in the stock... Meaning VALE's share price already reflects a pick up in demand from countries other than China... And it's richly valued, given the drop off in China, which I think is ever so slight, where 66% of VALE's shipments went in the most recent quarter...

I think the guy at HSBC has it all wrong... And I think he's now compounding the error with his sell call... The analysts is looking at VALE's valuation, when he should be looking at the prices of the commodities it produces... A much better measure of raw material stocks... And I think he's nuts to suggest that stock is pricing in stronger demand from non China, when it seems like the market has pretty much given up on the US and Europe, in terms of recovery...

All right... How about Morgan Stanley... How about this upgrade?... Now here's a great piece of research... It sums up pretty perfectly why I've been buying VALE aggressively for ActionAlertsPlus.com, so hopefully I can give away a lot of money at the end of the year with my winnings...

The analyst here says the market is too darn focused on slowing Chinese demand... Too China oriented... And investors are ignoring the fact that VALE's traditional markets, Brazil, Europe and the U.S. are recovering more than expected... Steel output in Europe, Brazil, Asia, ex-China, going up for example... They've now increased with 3 months in a row... Okay, it's still down 28%, but that's better than 40%, where it was 3 months ago... More importantly, steel output is now increasing in Europe, and you need iron ore to make steel, unless you're from NuCor, in which they use scrap...

The kind of high quality iron ore that they need is what VALE supplies... A big comeback in Europe, something I think no one is expecting right now, would be gigantic... In 2007 and 2008 Europe made up 25% of the buying for VALE... It had dwindled to just 7% in the first half of this year...

I think any decline in Chinese steel production, and I don't expect a big one, would be offset by steelmakers in Brazil and Europe, which should allow Iron ore prices to stay firm in 2010...

The analyst at Morgan Stanley expects VALE to get a 10% increase from its iron ore... Frankly, I think it's going to do better than that... He also sees nickel prices, another key mineral for VALE, going higher... And no one seems to care about that at all... Even as it could give the company's earnings some icing on the cake, so to speak...

Morgan Stanley sees VALE as not being richly valued, but as a stock that's underperformed the Brazilian market by 26%, and underperformed the average Brazilian steel stock by 46% so far this year... Believe me, I'd be flying down to Rio to see what the heck is going on down there, but boy, are my arms tired...

Now, here's the thing... I look at the downgrade from HSBC, and the upgrade from Morgan Stanley... I see them both making the same case... What really matters here are Iron ore prices... Morgan Stanley has the base prediction that they'll stay flat, but thinks to that a 10%
price increase is possible... And, if that happens, VALE, with its high grade ore, low costs, and world dominance, that benefits the most of all the mineral stocks... And I think that puts it somewhere in the high $20s or even low $30s...

HSBC, he thinks Iron ore prices will be flat... Which, by my reckoning, will put VALE in the mid $20s, you don't have to lose the heater...

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The Bottom Line!:     This is really important, okay?... The Chi-coms, may be, the greatest capitalist engine of the global economic recovery... More marty-angles that frederick-angles, more Chico Marx than Karl Marx... But the U.S. and Europe are still huge, huge markets... Bigger than the PRC... And, if they come back like the analysts at Morgan Stanley suggest, then Vale S.A. (VALE*) will soar, even if Chinese demand falls off a cliff... Heck, even the guy who downgraded the stock today raised his price target in the report... Can you imagine what he would say if he liked the stock? Now I've peeled back the veil of Wall Street... You know why I think it's time to buy, buy, buy, VALE.

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