Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- oil's decline,
- the bifurcated banks, and
- the SEC's dangerous ignorance.
Oil's Fall: Econ 101 Originally published on Monday, Aug. 11, at 9:04 a.m. EDT Nigerian rebels, Iranian saber-rattling, potential Israel-Iran war, hurricane warnings, Venezuelan meddling, Turkish pipelines, BP woes in Russia, all of these at one time have allegedly contributed to the strong oil price. Every time we rallied a couple of bucks, the usual suspects were rounded up and given credit for the rally. And then the biggest actual ruckus of all -- a war between major oil producer Russia and Georgia -- rages on, and oil cascades lower into the escalation. LOWER! If this incursion were to rank with the parade of horribles that allegedly spurred oil from $90 to $148, it would be off the charts. It is the real deal that can interrupt pipelines and cause a calamity in the European market. It should have sent natural gas -- the Europeans live off Russian natural gas -- into the stratosphere, as it should have caused hoarding and a spike even here for recognition that no liquefied natural gas could come here because it would be needed so badly in Europe. So why didn't it? From the beginning, I have said this is all economics: Supply wasn't able to meet demand. Supply wasn't constant -- it keeps dropping everywhere except Saudi Arabia -- but more important, demand did not slow down until the peak hit; at that point, which produced gasoline well above $4, we stopped using. We slowed driving incredibly. We carpooled, stopped taking excessive trips, turned in the SUVs and wiped out the most popular category of automobiles -- trucks -- overnight. Since Memorial Day, the wholesale shift has made it so the Valeros ( VLO - Get Report) and the Tesoros ( TSO) have nowhere to put gasoline and little demand.
Bifurcated Banks Originally published on Tuesday, Aug. 12, at 9:31 a.m. EDT Maybe it is time to differentiate the banks. That's what I saw Mike Price do in a fascinating interview on Bloomberg, where he says he doesn't like Wachovia ( WB - Get Report) or Citigroup ( C - Get Report).
SEC Paints a Target on Downey and Its Ilk Originally published on Wednesday, Aug. 13, at 7:341 a.m. EDTMemo to the FDIC: Watch your back. The SEC just flipped its allegiance to the bad guys, the guys who want to break not just certain banks, but your bank! That's right, with the scrapping of the emergency rule that eliminated naked shorting, where you don't have to find the stock, and with the end of the vigilance against bear raiding, the SEC may have just caused a run at the FDIC. I had hoped that the SEC would see that these financials have been manipulated to unreasonable levels, making the confidence in all institutions so low that nobody wanted to give them money. The rule change -- which when you think of it, wasn't much of a rule change as much as an enforcement of the way things are supposed to be, where you actually have to find the stock you sold short first so you don't fail to deliver -- worked! It gave the system some breathing room. I think the rule change might have saved Merrill Lynch ( MER) from being shorted into oblivion so it couldn't have done its deal. Lehman ( LEH) didn't do a deal, those bad boys be back on the griddle now for unknown European exposure. AIG ( AIG - Get Report) wasn't protected in the first place and I believe will need to raise $10 billion to $15 billion in the teens to cover its European exposure. Now there's little hope at all for Fannie ( FNM) or Freddie ( FRE), as their stocks will be blitzed into oblivion and Hank Paulson will have to start the planning of cash infusions as opposed to what he said last Sunday -- why did he say that, for heaven's sake? Maybe he's too close to John "We don't need capital" Thain from their Goldman ( GS - Get Report) days.