A closer look at oil's slide
The issue may be supply, not demand, and a painful buy could be your best play.
"I am not stupid. I don't own any oils. I don't own any oil futures. I don't own any natural gas stocks. I don't own any oil-service stocks. I saw this decline coming, and I sidestepped it. I am brilliant."
That's the litany that's going on as the quarter winds down. A whole complex, a whole segment of this market is being thrown out without any thought of value or any thought of a reversal, and it is breathtaking.
It deserves some analysis.
First, what's driving the oil and natural gas futures lower, although the latter has had a tad of a lift of late? The perception is that there is a dramatic slowing in demand. We believe that China's economy is ratcheting back so fast that they simply aren't using all of those gas guzzlers that they just bought.
Europe? Despite the fact that economic activity hasn't ceased and that parts of the Continent are robust, it's been taken as a given that oil use has been curtailed rather dramatically. We have no signs of this being the case, but with Brent at $90, down from $125, the conclusion is taken as gospel.
And then there is the United States. We have an amazing transformation going on in this country. We have found much more oil than we ever expected even two years ago. If I had told you in 2009 that North Dakota would surpass California and Alaska in oil production to become No. 2 after Texas, you would have laughed at me. The reason it hasn't passed Texas is that as great as the Bakken has been as a place for light sweet crude discovery, Texas is even better.
Yet I don't know a soul who says, "Look, one of the major reasons why our oil market has fallen so much is that we have too much of it in the pipe."
In other words, that demand, or the lack thereof, isn't nearly as important as the excess of supply.
It's not just the U.S. that might have a production glut. The Saudis have always been determined to make it so that we don't develop our oil and gas reserves. They have done it by putting pressure on prices when they reach levels that allow us to be more economic in our drilling. In the last few years, the floor on where we will still drill aggressively is about $80, because if the oil companies can't get more than that, it really isn't worth it.
When you add in that Iraq and Libya are now pumping a great deal more than we thought, we can come up with a mosaic that says it isn't the demand side that's at fault, it is the supply side.
So let's go full circle. The people who say it is demand at this point have a vested interest. They have eschewed the group or thrown it away, and we are in the waning days of the quarter when they will have to reveal their holdings. This is a quarter where if you owned these stocks, you were revealed as a stock charlatan. It doesn't matter that we could be on the verge of something big going the other way, big Chinese rate cuts and a potential growth initiative or initiatives in Europe. It's the dynamics of money management that are in play.
My take: They are way too depressed to sell. My instinct is to buy them into the end of the miserable oil and gas quarter, and that's what we are attempting to do for Action Alerts PLUS, as painful as it is, and boy is it ever painful.
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.
More from TheStreet.com
we all know the supply and demand theory has been blown out of the water. it used to be if a hurricane was in the gulf that would be the reason, one of the pipelines being worked on we would see higher increase, China using more cars, etc. then the Arabs say we're not the ones, big oil gets called in. we're not the ones. so now its the speculators that get the blame. Look at the timing people. Its political!!!! prices drop right after Obama get s going on his campaign.
Just like russia and the nukes, "i'm only gonna have one more term, lets talk about things after the election"
never forget the facts:
this hack said buy oil at 105 because it was going to 150
he also recommended gold at 1900
LOOK IT UP...DON'T TAKE MY WORD FOR IT
this guy is a crook
Natural gas is holding at the economic equivalent of the cheapest coal out there, which I believe is Wyoming strip mined. If fracked wells continue to produce and glut the market, then at these prices more users will choose natural gas over other energy sources. Considering that you can have both natural gas and diesel for heavy duty vehicles, coal or natural gas possibly for trains, coal or natural gas for power generation; then what is to stop both from being used allowing greater flexiblility. Something to consider when major decisions are being made.
if you think he is credible try following his recommendations
before cramer came on and screwed up my enjoyment of watching the msnbc ticker
i wasn't even aware of his scam
as i was watching the ticker i observed more and more how crooked this arrogant hack was
now i point out his horrible picks everyday on this site hoping to save anyone who is unaware of his scam......i HATE to see hacks make money at other's expense
WakeUpNow07 = Jim Cramer stalker.
socialist 1 = Cramer's ex-wife or a spurned girlfriend.
If you hate the guy so much, why do you read every column he writes and take the time to make comments. Like you're going to hurt his feelings or something.
this chump called for 150 dollar oil when it was at 105
how does he keep sucking people in?
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.
The company has made at least 4 acquisitions in the space, and few people have paid any attention.
VIDEO ON MSN MONEY
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.