Banks and drillers are buys here
Don't let the overreaction to the downside dissuade you from buying these great companies.
If you didn't know any better, you would think that all drilling in the world is being done in the Gulf, that the Gulf is finished as a place to drill -- a la California after the huge Santa Barbara Unocal spill of a different generation -- and that all the drillers should therefore be sold.
If you looked at the bank stocks, you would presume that the Senate is going to run roughshod over the group and trash all but the smaller regionals, when I think the opposite is true. Sen. Chris Dodd is well aware of the anger in America, and yet he wants to be constructive, and the declines this morning are totally out of sync with what's happening in Washington, as there is some negative analyst chatter that I think does not read Congress correctly.
Goldman (GS) is helping to pull down the banking group because of newfound conviction that the firm could be put out of business by the Justice Department.
I do not think that is the case. These are emotionally charged issues, and I think that the worst cases for all drillers and all banks are just ridiculous. We are going to have to drill around the world to keep up with demand; these companies will simply move their operations another place and do quite well after a time. I think oil is going to $100, and Andrew Gould, CEO of Schlumberger (SLB), made it clear on his last call that the Gulf is not a major focus of growth.
As for the banks, you know that clarity is going to cause a substantial rally. The clarity is so close that I think that people are nuts to sell right now.
I am going against the grain on both of these and doing so quite willingly. Put simply: We will look back at this moment and think, "What the heck were we doing selling these when we should have been buying?"
Random musings: We covered the troubles at Goldman and BP -- and how we'd play the downside -- Frriday in Action Alerts PLUS.
At the time of publication, Cramer was long BP and Goldman Sachs.
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The idea of US crude being a shelter from turmoil abroad may not be as far fetched as it seems.
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