Around the World With Balestra's Melcher

What's your take on energy?

We've been long energy for three years, but primarily concentrated in oil field services. Currently, for instance, we own Halliburton(HAL Quote - Cramer on HAL - Stock Picks), Lone Star(LSS Quote - Cramer on LSS - Stock Picks) and Maverick Tube(MVK Quote - Cramer on MVK - Stock Picks). We are offsetting that by being short oil futures. And here again, we have high volatility on both sides but we're comfortable with our positions. In fact, in the past weeks and months, it's worked well as oil field services have outperformed the actual price of oil because there is a shortage of oil field services and there is very limited supply. If oil goes higher -- we short oil so we lose money on that -- but the services stocks will also go even higher, so it will be offset. On the other hand, if oil drops substantially, the earnings of the oil field services companies will still be the same, there will not drop and the stock will drop temporarily maybe but in a limited way.

What sectors do you short?

We've been short the automotive industry: General Motors(GM Quote - Cramer on GM - Stock Picks), Ford(F Quote - Cramer on F - Stock Picks) and also Visteon(VC Quote - Cramer on VC - Stock Picks). We shorted the homebuilders and the mortgage companies. For instance, we were short Hovnanian Enterprises(HOV Quote - Cramer on HOV - Stock Picks) and Toll Brothers(TOL Quote - Cramer on TOL - Stock Picks). We covered those several weeks ago, fortunately, right around the bottom. We did very well with that.

What about gold?

We have a heavy position in gold and it does two things for us. It offsets what we believe is a trend toward rapidly depreciating paper currencies in the world, including the dollar. We see paper currencies being debased. And secondly, it gives us a form of insurance against financial distress, not limited to inflation. Gold did very well in the 1930s. We continue to hold significant amount of gold.

Any thoughts on the dollar rally?

We're long the dollar right now. The dollar is the least of evils relative to other currencies. There is only one country in the world that absorbs vast amounts of liquidity and that's the U.S. market. OPEC got $350 billion more in revenues in the past 18 months. It's not going to build new hospitals in Algeria. It's going to buy U.S. Treasuries, U.S. agencies and U.S. corporate bonds. They get dollars and recycle it. If you have a 4% interest rate in the U.S. with a rising dollar versus a 1% rate in Japan with a falling yen, it's a no-brainer.

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