Selectively Circling the Oil Wagons

This column was originally published on RealMoney on Oct. 11 at 2:25 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.

Trade around the oils. That's what you have to do now. We are no longer in the phase where you can walk around max long oil. It has become too difficult. That's the takeaway of the selloff that wiped out 15% of many of the good oils last week. We are out of the safety zone.

I pressed my bet when oil got to be more than 10% of the S&P, in part because of the once-in-a-lifetime circumstances involving Rita and Katrina. But from here, you are stuck with the prospects of "hoping" for a cold winter, and anyone who knows my stuff from Jim Cramer's Real Money, Sane Investing in an Insane World knows that hope can't be part of the investing equation.

No, you don't want to abandon the oil patch and yes, oil can still go higher. But when I broke my discipline and held onto big oil higher, I ended up not selling any EnCana(ECA Quote) at $60 or Halliburton(HAL Quote) at $69. And in the world that I'm in, that was just a mistake because I couldn't buy them back when they crashed lower. ...