Jim Cramer posted the following on his blog yesterday on RealMoney. Click here for a free trial, and enjoy incisive commentary all day, every day.
Oil inventories? Nope, no worries. Cold weather? Nope, nothing to do with it. GDP growth? Nada.
Just the mechanics of commodity investing and the price of a commodity that can be manipulated with ease by simply chartering
Nordic American Tanker
and the like.
That sums up oil perfectly, yet the only place you are ever going to read about this and the contango behind it is with our own
Dan Dicker. I find it fascinating how few people really get this and cling to the old ways of analyzing oil. It's like the years when you thought gold only went up on inflation or world chaos. Oil's going up because we don't have enough near term to stop the manipulation and because of the popularity of ETFs and portfolio interest in oil.
That's why Dan's so right about his analysis of what to buy. The drillers are fantastic in this environment, even as the companies themselves, including a man I have long admired, Andrew Gould, the chairman and CEO of
, seem oblivious to this obviously
I like Schlumberger and
, too, but
much cheaper and the new
more exciting to the Street. The
Oil Service HOLDRs
will suffice for those unwilling to pick stocks.
I continue to like Nordic American Tanker for the physical play and
, because it is one of the few that is actually growing reserves.
And I stand by the natural gas plays. Oil, not natural gas, has become more unreliable because of the contango, as it simply isn't plentiful enough and is controlled by forces that are not controlled by us -- unlike cheap, plentiful natural gas. An announcement like the one from
, talking about a deal and a pipeline to bring more natural gas to New York City from the Marcellus shale gets ignored, but believe me, those who haven't converted to natural will soon do so, if only for its incredible cheapness vs. oil.
Funny thing, if our much-revered and impossible-to-criticize-and-live-to-tell-the-story president would simply announce that natural gas will be our bridge fuel to energy independence and job creation -- with cleaner air to boot -- these stocks would double (even though the price of natural gas wouldn't) simply because it would mean that the use of natural gas would be an imbalance with what we produce. Believe me, Chesapeake has the ability to produce 10 times the natural gas it produces now at $5 if it knew that the use would be steady. Ten times $5 consistently and long term is much better than one times $5, which is what it is forced to do now because we don't have the long-term contracts that utilities should be lapping up.
The economics of Chesapeake work best when the fuel is widely used by many, because of its consistency, not spartanly used by some because of its inconsistency -- even that point is as lost on people as Dicker's contango analysis.
So, fret on every inventory number. Think oil is going to $50 when it takes out $70 on the downside, but remember that this commodity was never supposed to see $79 again, and here it is in a nanosecond, simply because it is not plentiful enough and the big producers don't have spare production or are withholding it.
What a joy it would be if we could forget the whole thing and do it with natural gas. But not with this president.
stays here, the more likely I believe it could really blow out to the upside, as the yield curve is made in heaven as far as it's concerned and the cost of employees has gone down. It is amazing that just one analyst, Meredith Whitney, really controls this one. The company can report anything it wants in this environment, but she has it down to the pennies. I would be a big buyer of in-the-money calls a couple of months out to ride this one back up. ... Perhaps the most underrated tech story is
, upgraded today by Kaufman. Graphic chips are a two-man race,
Advanced Micro Devices
and Nvidia, and I don't understand why
, with all of its cash, doesn't just buy the darned thing. Most analysts hate it.
At the time of publication, Cramer was long Chevron, Goldman Sachs and Intel.
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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