- a bullish sign for steel;
- an end of the Wall Street madness; and
- how natural gas is floating to the top.
Bullish Sign for Steel
Posted Wednesday, June 2, 9:38 a.m. EDT Do you sell all of your steel stocks when the smartest steel company in the Southern Hemisphere, Gerdau, goes and buys Gerdau Ameristeel ( GNA), its U.S. affiliate, for $1.7 billion? It already owned 66.3% -- why bother, unless you know that the stub is cheap? The Tampa-based company is at the heart of the worst construction market in the country -- Florida -- and the Brazilians are making their move. We have seen endless articles about how the steel markets in the West are contracting and pricing is not holding up (from the bulls) or pricing is crashing (the bears). The stories have driven U.S. Steel ( X - Get Report) down 25 straight points from $69 to $44 and at one point cut AK Steel ( AKS - Get Report) in half. Nucor ( NUE - Get Report), one of my absolute favorites and an Action Alerts PLUS name, has been hurt much less, but it has been dinged all the same. > > Bull or Bear? Vote in Our Poll I think that Gerdau, which has a great call on the growth region in Latin America -- it dominates the continent -- has a cooler head than they analysts. It is taking advantage of the negativity and the pessimism to scoop this one up at a 20% discount to its high -- not all that far from the top, again, but still off sharply lately -- at a hefty premium, something that you could argue it didn't need to do because it owns two-thirds of the company. It is a bullish sign in a sea of steel negativity and worth thinking about as the stock trades through $11 on the bid. Random musings: Vegas may be hurt but the preliminary May numbers from Macau remain very strong. Great for Wynn ( WYNN - Get Report) and a reminder that Steve's tirade against our government may have resonance. At the time of publication, Cramer was long Nucor.
Time to Call a Halt to New Financial Products
Posted Thursday, June 3, 4:20 p.m. EDT How about a moratorium, a moratorium on financial innovation until we figure out what the heck the Bush people approved during the reckless years of the Securities and Exchange Commission? We are hearing once again about a whole new group of products, ETFs that mimic exotic hedge-fund strategies -- last week's nightmare revelation -- and I am sure it will go right into the queue of the SEC and be approved lickety-split because of some ill-found principles ginned up under the anything-goes Bush SEC. Here's my suggestion. Just like we need to halt any new drilling in the Gulf until we figure out how to prevent the greatest ecological disaster, perhaps ever, we need to halt financial innovation until we figure out what the heck went wrong in the "flash crash" and the role of the ETFs and the other derivatives related to the super quickness of the new world. We keep hearing analogies to race cars that can go 160 mph that still have to obey a 65 mile an hour speed limit when driving in civilian traffic. All well and good, except that the people behind the machines don't believe there should be speed limits, and the exchanges themselves are so eager and greedy for market share that they cannot self-regulate. They will lose. I think the better analogy is to World War I, where the technology of weaponry vastly overrode the ability of humans to deal with the newfound firepower. The financial markets, however, are not like wars. We need to protect soldiers, the regular investors, and we can do it. We aren't engaged in a titanic struggle between nations. We are trying to figure out how to get more regular players into the markets, not trying to figure out how to kill as many soldiers as possible with our fabulous new machine guns. The financial innovation is like battlefield innovation, though. The innovators claim that they are providing liquidity, but they have turned the playing field into a battlefield, so the players are, justifiably, leaving.
Nat Gas Floats to the Top
Posted Friday, June 4, 10:23 a.m. EDT I see only one island of green on my screen, and that's natural gas. I think the Gulf disaster has put a floor under the fuel, and that's reflected in this rally. Some of the rally has been caused by the president's mention of tapping natural gas reserves. But he is a fickle friend; he just spoke from a Navistar ( NAV - Get Report) plant that just made its first electric truck! I interviewed Westport Innovations' ( WPRT - Get Report) CEO last night, and they expect to make 100,000 nat-gas trucks, including a ton with Cummins ( CMI - Get Report) that would have made a dynamite photo opportunity. Obama's flying in the face of that one. Still, I think the Gulf disaster is going to make it so that, at last, utilities and nat gas users will want to lock into long-term nat gas contracts because they see the writing on the wall. That, too, is driving the futures. To me, the sea change is here. The president is no longer fighting the cause, even if his heart is in electric everything (and even though these trucks and cars will plug into a coal-based utility system that will spew more noxious gas than ever). But I think nat gas stocks are going to turn first here -- they are already starting -- and I like Chesapeake ( CHK - Get Report), Devon ( DVN - Get Report), National Fuel Gas ( NFG - Get Report), Southwestern ( SWN - Get Report), Range Resources ( RRC - Get Report), EQT ( EQT - Get Report) and Atlas ( ATLS). I like Conoco ( COP - Get Report) too. Remember, it is important to note that Chesapeake is the most levered to the demand. That's the play for those who believe lock, stock and barrel that things really have changed. Devon got out of the Gulf and is heavily nat gas, so that's a huge play too. Random musings: The market beginning to price in some big bank failures in Europe. BEGINNING being the operative word. At the time of publication, Cramer was long Cummins and ConocoPhillips.