- upside for the dealmakers,
- this dumb market, and
- Obama's newest craziness.
Big Upside for the Dealmakers
Posted at 1:45 p.m. EST, Feb. 22, 2010 The two biggest deals of 2010 -- Air Products' ( APD) attempt to snare Airgas ( ARG) and Schlumberger's ( SLB) takeout of Smith International ( SII) -- make so much sense to the acquirers that you have to own both of them. The easiest is Air Products. Because that bid's hostile, it is likely that Airgas either forces them to buy higher or Airgas finds another suitor. If Air Products walks away, it soars. It another bidder comes in and it loses, it soars. And if it gets its target for not too much money, it soars. Why the latter? Because Air Products would own a huge share of the market, and it is acquiring a better company with faster growth. The competition for pricing will diminish and a nice oligopoly against the other companies that provide industrial gases will allow for better margins. > > Bull or Bear? Vote in Our Poll Schlumberger gives the big national companies one-stop shopping and a turnkey solution -- so important for these political appointees who run national oil companies. Schlumberger has a long-term view and knows that Smith International used to trade at a dramatically higher price. SLB functions as a sort of high-tech general contractor, and the Smith takeout makes it so SLB can get in, survey the land, come up with a great plan to get it out of the ground and now drill it with Smith -- it just makes so much sense. Both are brilliant moves. Airgas rejected the Air Products bid today, which starts a dance of sorts, the end of which is unclear ... except for a higher price for APD. (Put aside my belief that Airgas would do better independently because it is a much better company than APD.) SLB gets knocked back to an appropriate entry point that should be seized, and not just because oil's at $80. That's the lid. That's been the lid. It's where everyone knows to sell the group, so ease in to that one. Home runs for both either way. Random musings: Still trying to process the Millipore ( MIL) bid I'm not sure there's money to be made at these levels. At the time of publication, Cramer had no positions in the stocks mentioned.
What a Dumb Market
Posted at 9:05 a.m. EST, Feb. 23, 2010 We're seeing the micro earnings data vs. the macro oil/gold/dollar complex play out today with the stunning number and dividend boost from Home Depot ( HD) as well as the excellent numbers from Office Depot ( ODP) -- that's a couple of good Depots -- as well as the fine Sears ( SHLD) numbers -- numbers that will be disputed, but that's silly given that Kmart had up comps -- and a better-than-in-line Medtronic ( MDT). I figure it doesn't matter, because once again oil hit a wall at $80 and the process is always the same: The market sells off as oil goes from $80 to $70, and then the market rallies as oil goes from $70 to $80. If you shorted stocks, regardless of the fundamentals, at $80 and bought them, regardless of the fundamentals, at $70, you did better than everyone else. If you shorted oil stocks the whole way, up or down, you did fabulously -- they never rally as much as the futures and go down harder than the futures. It's a predictable dance that will remain predictable until people start taking action. We are in a dumb market and everyone knows it. We see it with tech, where the reports are excellent but the commentary stays subdued because the analysts seem to intuit that the fundamentals don't matter. We see it in the banks, which trade erratically as business improves, but the housing bears just dominate the airwaves no matter what and the president piles on nicely. (How do you like this guy, digging in his heels on health care? You have to admit that he is a disaster for business, and it has to be deliberately -- who else would continue to talk about jobs but focus on what seems only to be health care? He's the health care president and nothing else.) Stocks just all trade with the complex, so there is no enthusiasm for a story unless it is totally exceptional and trounces guidance. Even then, you just buy it because it isn't up enough if oil is going from $80 to $70. At my old hedge fund I would simply be binary. I would think nothing of selling my whole portfolio at $80 and going short then covering as oil pierced $74 and actually starting to build longs from $72 to $70. I would leave room if it magically went below that number to buy on margin, but the pattern is so predictable and the oil buyers so universal that I probably should use margin. I told you it was a dumb market. Looks really dumb today. At the time of publication, Cramer was long Home Depot.
Obama, Are You Kidding Me?
Posted at 6:51 p.m. EST, Feb. 25, 2010 Now President Obama is debating an out-and-out ban on foreclosures until the government can scrutinize the loans and figure out how to ameliorate them? That's the new plan? That's the idea? Unbelievable. The problem isn't the loans. The problem is the jobs. People don't want to default, they want to work. If you help them get jobs, they will stay in their homes. In the meantime, does the president actually think that the banks welcome the foreclosure process? The servicers don't want it either. I am not against amelioration when done responsibly. But, for that to happen, the government needs to figure out how to do it right. I believe that rather than just suggesting courses of action, such as banning foreclosures, the government's people, including the excellent head of HUD, Shaun Donovan, should sit down for a few days with the people from Wells Fargo ( WFC), who have a much better record than every other bank in terms of keeping people in their homes -- and, believe me, that's not just because they are a great lender. Many of their loans were made by other banks they bought, and they are subpar on documentation and loan to value. This government pays a lot of lip service to industry and then bashes it. Perhaps if HUD and WFC got together, they can figure out a better plan than a ban, which would only keep the problem alive forever and ever. If WFC has a way to do it, show the other banks how. But to ban foreclosures while a government inspector comes around to see what's up? You have to be kidding me. At the time of publication, Cramer had no positions in the stocks mentioned.