NEW YORK (
fills his blog on
every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- bad-news banks and
- the oil stock price crash
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, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Bad-News Banks Breaking Training
Posted at 11:07 a.m. EDT on Friday, Nov. 15
It's been a long time since the banks have been able to shake off bad news and go higher. Today's one of those days.
They got these ridiculous Moody's downgrades and, at last, they meant nothing. You have the Attorney General of the United States talking about coming down on the currency manipulators, which could lead to all new investigations of money centers -- will they ever cease? -- and they meant nothing.
These stocks are all trading higher, in part, I think, because we are going to get a little inflection in the yield curve and in part because they are just too cheap relative to other stocks. It's very in vogue to talk about bubbles, but is it a bubble to mention that
Bank of America
(BAC - Get Report)
isn't back to where it was in May 2010? Isn't that a little nuts? How about
(C - Get Report)
unable to take out its 2009 top?
So, when I look at this group I can truly say it is a bargain vs. other times and that's spurring real interest.
This group can provide fabulous leadership and it has been through hell and back. If they catch fire, then many more can catch fire, too. We are holding on to
(WFC - Get Report)
Action Alerts PLUS
and would buy more
(JPM - Get Report)
, if it would come down.
Meanwhile, there is some research on
(KEY - Get Report)
, raising the price target to $15. Seems like a reasonable stretch given the turn we are seeing in bad loans, in the yield curve and the return of growth in the Midwest.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long JPM, WFC and KEY.
Oil Stocks Getting Killed
Posted at 2:40 p.m. EDT on Tuesday, Nov. 12
Can the decline in oil kill the American oil renaissance?
In a word, no.
It will just kill the stocks.
The market is a little asymmetrical right now. The winners from the lower oil price, which include not just the disposable-income plays but also the consumer packaged-goods companies, aren't really getting much of a lift. But the losers, the oil companies, have been clobbered.
Take the stock of
(EOG - Get Report)
, which is perhaps the best pure domestic oil play. (I like
(NBL - Get Report)
more, but that's in part because of a gigantic field off the coast of Israel.) EOG is a company that's coining money in the Eagle Ford, both with its west and its eastern holdings, and has just reinvigorated its Bakken holdings with new techniques to bring out oil. It's about to turn the technology loose on the Permian, where its Delaware basin could be another home run.
All in, the costs from these wells can be as little $14 a barrel. It's pretty ridiculous to think a $93 price is somehow bad. Even an $83 price isn't that bad, as the company's forecasting mid-$80s oil and does a great deal of hedging.
Plus, don't forget that a lot of these oil drillers, including EOG, had to deal with a West Texas price that was well below Brent crude, and their stocks were still doing terrifically. Now, EOG is growing oil at almost a 40% rate, and that growth rate will be maintained should oil drop to the mid-$80s -- meaning the company will drill aggressively at that level. In light of this, it shouldn't be damaged much at all by a $93 price.
But people look at where oil has come from, and they presume that the big drilling programs are in jeopardy and that the money won't be there. Plus, the stocks always overshoot the commodity, and I have to think that the sellers are petrified that oil is going to the low $80s, at which point all bets would be off.
Now, the Action Alerts PLUS trust is underweight in oil-related names, and I personally don't want to do any more buying in the group
the analysts cut estimates. Only then will the group be de-risked, because estimates should not be cut yet. True, the estimates weren't set at $100. But we should still expect some downgrades, because when stocks head down as precipitously as they are doing, analysts do break ranks and downgrade even if their numbers do not indicate they should. They cannot take the pain, basically.
I believe those downgrades could be imminent if oil doesn't reverse off Wednesday's inventories. Let's take a look then to see if they can find a floor.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long EOG.