Jim Cramer's Best Blogs

The FHA is going to be the RTC, and that might be one big reason we have seen such a big run that now looks like it will have some retracement, based in part on this gloomy existing-home number, and in part from the momentary rise in oil, which is think is doomed (I am using a $110-$120 target for crude). Nat gas? $8.

Before you sell down the banks too hard or give up on them, remember that we had a 50% move and then a muddling and partial retracement off the top in 1990's bank market. I see the same because of the new Mortgage Resolution Trust, the FHA!

At the time of publication, Cramer had no positions in the stocks mentioned.

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Picture Becomes Clearer in Banks and Energy

Originally published on Thursday, July 24, at 1:12 p.m.

Which is more vulnerable here, American International Group(AIG Quote) or Occidental Petroleum(OXY Quote)? Which would you rather sell, ConocoPhillips(COP Quote) or Merrill Lynch(MER Quote)?

I think all of these stocks are going down. But I think that I can put values on OXY and Conoco. I like buying stocks at six times earnings. I like buying companies that are buying back stock and can boost dividends. I don't like companies that have to issue stock or cut dividends including ones that have just been boosted -- recklessly, like AIG did.

It seems to me that we are getting closer to drawing a line in the sand for Big Oil where we want to buy stocks at six times earnings going to five times earnings. At the same time, we want to buy the fortress banks -- Bank of America(BAC Quote), JPMorgan(JPM Quote), Wells Fargo(WFC Quote) and U.S. Bancorp(USB Quote) -- into the weakness, dabble with Wachovia(WB Quote) when it gets to below what Bob Steel paid, and avoid the unquantifiables like Merrill and AIG, both of which I think need more capital.

And I am looking to sell Citigroup(C Quote), which is not a fortress.

I am looking at this AIG and MER roll over and all the other financials with them. I am looking at oil crumble again -- and I don't want to bet on crude, which I think is going $110-$120, but I do believe that these stocks are going to be the ones you want to buy down every few points, along with Devon(DVN Quote), and the cheapest of all, Cabot Oil & Gas(COG Quote). The latter two are nat gas, which is poison now but can't remain so once whoever is long gets out.

There is a pervasive long out there blowing out every second. The only thing I know is that $8.99 is supposed to be the long-term spot where industrial demand is, and we hit that level and bounced, but I am not a technician, and you don't want me to start being one at this age!

Anyway, I think that we can now be selective in what we sell in finance and selective in what we buy in oil. Do not need to scale-sell AIG, I would scale-sell Merrill, and I would scale-buy the major oil companies, lest you wait until they are in buying and miss it.

Random musings: You know it is bad in Japan when they stop buying cancer insurance -- look at that Aflac(AFL Quote), and that's a great company!

At the time of publication, Cramer was long Cabot Oil & Gas and Devon Energy.

 

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