A pathetic, deranged view of the oil slide

Somehow it's considered a bad thing, because we take it as a sign of European weakness. What about all the upsides for the US economy?

By Jim Cramer Jun 8, 2012 9:47AM

It's not just that we are intertwined. It's that we're intertwined in such a way that everything is considered bad even when it should be good.

 

I'm talking about the price of oil, which had its worst week in 30 years. Somehow, this is considered to be terrible news when it comes to U.S. equities, because it shows the underlying weakness in our economy and in economies worldwide.

 

This is a pathetic, deranged view of things.

 

The ratio of companies that benefit from this to those that don't could be near 10 to 1. The ratio of people who benefit -- even with a severe refinery shortage -- is about 100 to 1, with the one being the marginal player who might otherwise be looking for a job in the oil patch that may now be deferred.

 

But it will provide no lift to the stock market. I have seen so many other instances when you could have expected a gigantic upside move simply because this tax on American consumers is so dastardly. I have seen monster rallies based solely on the renewed purchasing power that comes from having not pennies but nickels and quarters left over from the pump.

 

Not this time.

 

That's because we know declining oil is a sign of European weakness and we have been conditioned to believe that a collapse of this magnitude means Spain or Italy may be going under soon, taking with it the finances of the Western world.

 

In other words, something that's very good for us is, well, bad for us. The only positive factor we might hear about from this is that the Chinese will now have plenty of room to cut rates. You won't hear about purchasing power and the ability to go to the mall and spend more money at Macy's (M) or Nordstrom (JWN) or Limited (LTD). You won't hear about how Gap (GPS) benefits or about food and beverages that are sold in convenience stores. You won't learn that airlines or food companies or industrial makers of glasses, boxes and aluminum are going to do better. You won't get the estimate increases that come from this decline in energy.

 

If anything, you will hear that the rally in the 10% of the market that is oil and gas is now kaput and that those losses will have to be taken. The big oil-and-gas-related ETFs will come crashing down, taking with them some large-cap Dow Jones Industrial Average ($INDU) stocks such as Chevron (CVX) and Exxon Mobil (XOM). The same will go for huge oil-service concerns like Schlumberger (SLB), Halliburton (HAL) -- where Goldman Sachs just tried to call a bottom -- and Baker Hughes (BHI).

 

All of this is, well, nonsense. But it is nonsense based on the endless "Spain is Lehman Bros. times 10" chatter that can't ever be defeated, because we know Wall Street can destroy anything in this country after what happened in 2008 to 2009.

 

So we take what perhaps could be the biggest positive in 30 years -- the collapse of the most dastardly commodity on earth -- and we sell stocks that are most affected positively. Somehow, we accept as gospel that such sales are the smartest things we can do.

 

Is all this too stupid for words? It isn't if the only people who buy and sell stocks don't view them as companies but, rather, as just playthings to toss around in order to make the quarter. It isn't if U.S. banks truly are on the hook to Europe, meaning they have learned nothing from the Great Recession -- and, from the looks of stocks, they have learned nothing at all.

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust, and has no positions in stocks mentioned.

 

 


More from TheStreet.com

15Comments
Jun 8, 2012 1:01PM
avatar
socialist 1

It is called yield PROTECTION not yield guarantee. Obviously if a stock falls more than the yield, you will lose money and the yield will be nothing but a band-aide for the loses. That said, yield protection would reduce your losses and can swing SMALL loses to breaking even or possibly gains. Sure you can find examples (McDonalds) where over a specific time, the yield was all but worthless given the loss in stock price but I can do the reverse. Right now I am sitting on a 1% loss on my JNJ stock price. Thanks to those dividends though, I am sitting on a 1.75% gain. It isn't a guarantee. No one is saying it is. But it does provide some level of protection. And yes companies can cut or stop paying dividends but that is rare if you go with large, solid companies that have a deep history of offering and/or raising their dividends.

Stop being so dramatic and understand the meaning before you go spouting off your uneducated comments.

Jun 8, 2012 1:44PM
avatar
Who exactly is Bobo talking about in this article?  I can't think of anyone that thinks lower oil prices are a bad thing.
Jun 8, 2012 11:41AM
avatar
BTW... if you agreed with Peter Schiff and attempted to get your financier employer to realize the danger... you got fired for some obscure reason. Anyone who doesn't believe all of our troubles are predicated on adverse agenda still has their head in the sand. Our BEST aren't paid salaries, our worst are. Our BEST have had to re-invent themselves and have both the superior experience of the past and cutting-edge of today's requirement needs. It's only about job recovery and getting back to competence and ability. There is no "app" for that.
Jun 8, 2012 2:30PM
avatar

THNKBTT2

1....if you own an individual stock you are gambling because you can't possibly know if the books are legimate.....you can't know what boner the CEO  is going to pull.....you can't know if the dividend is safe...............and even if you could know all that ........many stocks go down anyway because the market trades on perception not fundamentals

2...a properly hedged etf gives you the protection of diversification plus hedge protection plus

a dividend so why would you and cramer gamble on individual stocks(can you say mens warehouse?)

3....a huge majority of wall streeters can't beat the market so if you own the market properly hedged you are beating all the fools who gamble on individual stocks

4...when some J&J drug kills somebody remember me telling you that the dividend protection

won't help you very much

5...just track the next 5 cramer stock picks to prove i am right

Jun 8, 2012 3:24PM
avatar
pathetic and deranged .......... just add criminal and you have the unfunny clown cramer
Jun 8, 2012 1:19PM
avatar
With the Dukes of Moral Hazard behind the wheel, being intertwined is bad indeed.
Jun 8, 2012 1:00PM
avatar
Education isn't an "app" it's a journey. You can't imagine being the babysitter for all those degrees in business that corporate America slipped into middle management. By the time 2008 rolled around experience and ability were fully worn-out by all the book-learned life-stupid people that became our peers and bosses. They took our jobs and gave YOU this economy. Folks, there is a quadrillion in derivatives outstanding. That's $1,000,000,000,000,000. If they are REALLY as incredible as they tell themselves they are-- then why aren't they out here starting and running their OWN businesses instead of grandpa's? It's because they don't know how. There's no APP for ability, either. 
Jun 8, 2012 7:40PM
avatar
with regards to the AAPL comment: if there was a stock available that was guaranteed to double in 1 year but their process involved mutilating infants, 50% of the investors out there would look the other way and plunk their money down.   It is just the sad reality of the world today.  Maybe it has always been that way, but it definitely is today
Jun 8, 2012 10:34AM
avatar
This article is too stupid for words
Jun 8, 2012 11:40AM
avatar
The article premise is flawed.  As recently as 10 years ago oil traded in the 20-30 dollar barrel range.  The price of energy is extremely high and choking any chance for growth.  Politicians and Obama zombies think restriction is best for growth.  Freedom is the way to growth. 
Jun 8, 2012 10:45AM
avatar

when oil was 105 he said it was going to 150 and gasoline was going to5 dollars.........

he got his cramericans slaughtered in mens warehouse which gapped down 6 dollars yesterday ...another cramer gap down pump and dump..........today he said amARcuns will

do better with lower oil prices............what a genuis.....amARcuns?

 

Jun 8, 2012 12:15PM
avatar

so mcdonalds yields 3% per YEAR and it is down 12% in a month and that's called yield protection

by cramer..........cmon there is no santa and there is no such thing as yield protection..........companies cut their dividends without notice

BEWARE THE SHYSTER

Jun 8, 2012 11:26AM
avatar

furthermore if you owned properly hedged etf's which cramer hates you lost one third what

stocks lost in 2008 and participated in a nice recovery as long as you avoided disaaterous cramer

individual stocks like aa chk,shld,nyx.............the list is too big to post entirely

 

how is that YIELD PROTECTION working for mcdonalds ?

how did your RIGOR not get you out of mens warehouse before it gapped down 6?

you may get up at 3 AM but that just means you are sleep deprived which may account for your

terrible picks

Jun 8, 2012 11:35AM
avatar
Since we can't comment on the real relevant articles, I thought I'd talk about Obama's urging of a quick Euro resolution. Huh? 2/3 of our currency is buried in it and a quadrillion in derivatives are on top of the real currency. We don't "resolve" that, we "dissolve" that and start a new currency sans a ridiculous Wall Street crowd and puppet Congress. It's CURRENCY, folks, it's supposed to course through healthy economies filled with people who do work, get paid and spend it on life, liberty and the pursuit of happiness. Complex financial instruments, my !@#$. Main Streets need to be full up with local enterprises, voices and choices. If you read the article about Apple and the sweat shop workers still waiting for decent pay and benefits, you should be wondering why we are still using handheld devices that suppress labor, opportunity and variety. the Dow is rising again today. That's people who don't support America buying stock to undermine it.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

104
104 rated 1
252
252 rated 2
457
457 rated 3
639
639 rated 4
495
495 rated 5
538
538 rated 6
704
704 rated 7
503
503 rated 8
350
350 rated 9
140
140 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
EOGEOG RESOURCES Inc10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.