NEW YORK (Real Money) -- The short side's been a nightmare this year even when you have everything going for you. Thursday's session typified the difficulties. What was the lay-up trade? I think it had to be the shorting of anything oil and gas.
It made a ton of sense, right? Oil started trading down pretty much from the get go. The group's been in a house of pain with all of the charts pretty much broken.
Plus you had a conference call Friday from Helmerich & Payne (HP) - Get Helmerich & Payne, Inc. (HP) Report that was pretty much made to order for the short sellers, because the management of this scrupulously honest company didn't mince words. John Lindsay, the recently appointed CEO, said that in the previous quarter when oil was hovering between $90 and $100 he was asked "what type of pricing level would it have to get to in order to see a change in behavior or see less activity -- and of course the answer was $75 to $80, where it is today."
It didn't matter that this terrific company reported amazing earnings. Nor did it matter that the company went on to say that there had not been a change in behavior as yet, even though it was ready for one. Nope, with that one comment this stock, which had already been falling from $84, accelerated in its decline and crashed to $77.
That decline triggered a wave of selling in all of the companies that have anything to do with contract drilling or oil services and that, plus the continual selling in the oil pits, made for some super aggressive shorting.
Until 3:33 p.m. That's when Dow Jones broke the story that Halliburton (HAL) - Get Halliburton Company (HAL) Report is in advanced talks to buy chief rivalBaker Hughes (BHI) at an undisclosed price but at a substantial premium to the $48 dollar price at the moment, down three from where it started trading.
Suddenly the stock starts climbing and then gets halted as the news comes out. Next thing you know, the whole group starts turning. Helmerich & Payne, which had been trading at $77, beelines right to $81. The Market Vectors Oil Services ETF (OIH) - Get VanEck Vectors Oil Services ETF Report soars from $42 almost right to $45.
There's chaos everywhere.
And all at once, you could hear the collective thoughts echoing everywhere: this group is so far down that the mergers are going to come fast and furious. We went from thinking at 3:32 p.m. that these were the shorts of a lifetime to 3:33 p.m. when everyone en masse wanted to cover these life-time shorts, to 3:34 p.m., when people were beginning to think of other combinations that would make sense.
How much would Schlumberger (SLB) - Get Schlumberger NV Report pay for Weatherford (WFT) - Get Weatherford International plc Report ? Will Statoil (STO) buy a struggling young Bakken independent? Is this when Anadarko (APC) - Get Anadarko Petroleum Corporation Report will at last be acquired? Will Ensco (ESV) consolidate the offshore drillers?
By the end of the day, the fear was too palpable and the covering went on right into the close.
Now I have no idea if this merger can ever pass Justice Department muster. It seems ridiculous, given how they compete against each other in pretty much every line of work. The overlap is, in fact, outrageous, but other than telecommunications this Justice Department hasn't much negative to say about consolidations, so who can blame two competitors who might want to hook up?
But the most important consideration is simple: even the best of short ideas can kill you in this market if you overstay your welcome, and as of yesterday that might be exactly what has happened.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long ESV.