TheStreet.com's Jim Cramer says these stocks rise because they're doubly blessed. Integrateds fall because they aren't.
So many people have been puzzled why the major integrateds have not moved with the last $30 rally in oil's spot price. The answer?
They can't take advantage of it.
They either didn't believe, and therefore didn't drill, or they have been so in the crosshairs of sovereign lunacy that they haven't been able to. They didn't have the rigs or they judged that the rigs were so expensive that, like 1980, they would look like dopes when oil came back to $40-$50, where many thought it would. (Go back and check even last year's research for price targets, most of which were from the oil companies' themselves.)
Or maybe it didn't matter anyway. So many of the contracts these companies have signed with governments around the world are either being abrogated or just outright confiscated that you have to ask yourself "Who can invest under those scenarios?" Exxon (NYSE: XOM) (Cramer's Take) in Venezuela. Shell (NYSE: RDS.A) (Cramer's Take) and now BP (NYSE: BP) (Cramer's Take) in Russia. You can't continually invest billions and then write it off because the contracts you wrote don't mean anything.
TheStreet.com's Jim Cramer says as crude goes higher, it makes more and more sense to go for other energy options.
Every day that oil goes up, there is a new set of technologies that had formerly been priced out of the market that comes back to life. Let's take wind. Wind, in itself, just seems so stupid. It needs, well, wind. Much of our country doesn't have enough wind to make this economic. There are only certain regions that can really benefit.
But when oil is at $130, SO WHAT! The parts of the country that have a lot of wind are nuts not to do wind. Wind, when properly integrated into the grid, costs 4 cents a kilowatt. The issue has been shortage of everything that goes into a windmill, because nobody in the chain thought it was worthwhile to mass-produce them. So even though the cost is low, no companies felt it was worth it because the market seemed so niche.
In other words, it was the wind supply chain that was the problem, because we only thought in terms of gigantic plants that created energy. But with nuclear not an option -- never will be in this country, if you ask me -- natural gas falling out of favor post-Katrina as being unreliable, and coal simply intolerable because of the climate problems, wind has become the most natural fuel of all.
TheStreet.com's Jim Cramer says lots of companies now thrive with crude up here.
Oil's not a tax on everything -- it's a tax on the consumer. That's what I come down to when I see the charts this weekend and ponder what's happening in so much of industrial America.
Company after company that I examine -- the new techs, as I call them -- actually benefit from higher oil prices. Or they can pass them on with ease, because of the worldwide demand being so strong.
Take all of the companies involved with making a Boeing (NYSE: BA) (Cramer's Take): Boeing itself, Alcoa (NYSE: AA) (Cramer's Take), Honeywell (NYSE: HON) (Cramer's Take) and Precision Castparts (NYSE: PCP) (Cramer's Take) being good examples. Each of these is necessary because the new Dreamliner burns lots less fuel, and with fuel the biggest airline cost, it stands to reason that higher energy prices make the plane more desirable even at a higher price point.
TheStreet.com's Jim Cramer says we should watch them and Apache and Exxon -- these stocks will set the tone.
You can always gauge rotations when some company that really misses, as Colgate (NYSE: CL) (Cramer's Take) did with its gross margins the other day, can still take off after a momentary hit. You can also gauge rotations by how many times an Apache (NYSE: APA) (Cramer's Take) or an Exxon (NYSE: XOM) (Cramer's Take) will get hit on the same margins miss.
Make no mistake about it, the Exxon quarter was ugly, and the Apache quarter, after all the hoopla, was barely a beat. But both of those companies are making a ton of money and will one day work their way back -- APA before XOM, because XOM has underinvested in oil and overinvested in its stock.
But Colgate was just out-and-out pantsed by raw costs. They had good revenue growth but simply got more killed by food and oil ingredients than even Tyson (NYSE: TSN) (Cramer's Take), which was ground zero for ethanol madness.
Yet it snapped right back yesterday as if it didn't miss at all.
After the FOMC tankeroo yesterday, would you have ever guessed that this would be such a great market day? Well it was. Oil falling almost $1.00 to $112.52 and gold back down to almost under $850/ounce are helping. It looks like traders are piling back on the "stuff and money" rather then commodities and a weak dollar. With the huge move today, you have to wonder where it all came from as the calls and the news was lighter than on many days. Below are the unofficial closing prices from 4:00 PM EST:
Apache Corporation (NYSE: APA) fell after a doubled net income failed to meet estimates. They generated a net income of $1.02 billion or $3.03 EPS compared to $492.9 million, or $1.47 EPS first quarter 2007. Average estimates by Thomson expected EPS of $3.06. Outlook for production in 2008 was also more conservative. Shares lost 6% to $126.41.
TheStreet.com's Jim Cramer says it's not a strong-dollar sell -- the story here is still too good.
Why did natural gas go down last week? What was that? Inventories were down. The commodity price was up. The fuel itself is green. It is better than ethanol and it is being used to fuel an increasing numbers of cars and trucks.
The whole move down had to have been triggered by something, right? Yeah, how about the fact that the stocks were up a lot and were due for some profit-taking.
Recall that the real "reason" they went down is that the dollar "got strong," and that was supposed to trigger commodity deflation; natural gas is a commodity and is therefore going to go down. (Barron's made this very case this weekend, oblivious to the facts, but loving the theory.)
This kind of thinking is just so stupid that it shows you can get chance after chance after chance to own the fuel that can take care of the nation if we just let it. Of course, the stocks began to come back later in the week as threats of supply cut-offs of crude -- they came true this weekend -- made natural gas declines virtually impossible, despite the "sense" that it peaked. So the money has came back and I believe will continue to come back.
TheStreet.com's Jim Cramer says that until we have some clarity on the way out, we'll have a tough road ahead.
This is a confusing moment, for the same reason as always -- the darned mortgage market. Dueling plans seem destined to go nowhere while defaults continue to go up. We need something to stabilize the house price depreciation and someone to take the hit: FHA, Fannie Mae (NYSE: FNM) (Cramer's Take), Freddie Mac (NYSE: FRE) (Cramer's Take)? I don't care.
The president's plan sounds like it tries to address who should take the hit -- a little bit bank, a little bit government -- but it is piecemeal, as is everything that has been done about this issue.
I am and have been banking on an expanded FHA plan that would put the onus on that organization to do long, low-interest-rate loan guarantees. It is a simple plan, and I bet the government would make money from it. It would end the madness of trying to figure out how to deal with each one of these stopgappers.
MOST NOTEWORTHY: Energy companies, Regulated and Diversified Utilities and Tailsman Energy were today's noteworthy upgrades:
Bernstein raised its 2008 oil forecast to $92.30/bbl, up 27%, and 2008 natural gas forecast to $8.30/mcf, up 7%. By 2012, the firm expects oil prices to be around $86/bbl and for gas to be $9.2/mcf. The firm upgraded Apache Corp (NYSE: APA) and XTO Energy (NYSE: XTO) to Outperform from Market Perform and EnCana (NYSE: ECA) to Market Perform from Underperform.
Goldman upgraded the Regulated and Diversified Utilities sub-sectors to Attractive from Neutral citing expected economic weakness, positive commodity exposure, and earnings growth. The firm upgraded American Electric Power (NYSE: AEP) to Buy from Neutral.
Citigroup upgraded shares of Tailsman Energy (NYSE: TLM) to Buy from Hold ahead of the company's annual meeting as they believe it will announce a new strategy of low risk resource development on existing acreage and that shares will react positively.
Apache Corp. (NYSE: APA), an oil and gas exploration and development company, is recently trading at $115.10. Crude oil futures are at $104.10, up 4.60% according to Bloomberg. APA over all option implied volatility of 38 is above its 26-week average of 34 according to Track Data, suggesting larger price movements.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
TheStreet.com's Jim Cramer says there are some names that will work here, but they're a small slice of the total market pie.
Can someone, anyone, tell me why we can bank on this Fed? "The Fed has to cut 50 basis points or we are going to Dow 12,500."
Yeah, OK. I get it. Fed panicked and cut 50 last time we were shocked with a weak employment number. Maybe they will do it again.
But I look at it a different way. This Fed thinks it is smarter than all of us. It looks at ways to tinker to bring down the short-rates without attacking them head on. They are clever.
Just call Apache a buying opportunity extraordinaire. Oil/gas exploration and development company Apache (NYSE: APA) has dipped about $10 from 52-week highs around $107.50 to about $97, due to oil's recent pull-back.
As a result, APA's p/e is down to about 15. A p/e of 15 may not seem that cheap, but given Apache's upside potential -- it is. Look for Apache to continue to achieve solid growth through internal investment and acquisitions. Apache has several key exploration discoveries set to enter development stage and will drill nine wells in Canada this winter as part of its oil shale operations.
Overall, analysts see Apache's oil and gas volumes increasing about 10%-12% in 2007 and 2008. Even better: the company believes it can generate double-digit production growth for the next decade. The Reuters F2007/F2008 EPS consensus estimates for APA are $7.54/$8.84.
TheStreet.com's Jim Cramer says you have to be bullish on the commodity when we're using more of it than ever, it's running out and $100 a barrel doesn't even sound crazy anymore.
Can you trust the International Energy Agency to be right about how oil demand will be blunted by high prices and how consumption will decline?
First, let's deal with demand. I haven't seen any slowing in demand in any of the indicators I use, in part because gasoline hasn't kept pace with the commodity. Cars, certainly, haven't made any strides in using less gasoline, and news right now out of Ford (NYSE: F) (Cramer's Take) is that there's really been no progress whatsoever.
How about heating demand? I have seen no switch whatsoever to another fuel because of the rise. Not one bit, or you would see a nat gas rally.
How about power plant demand? I am willing to think that some power plant manufacturers will debate switching, but building a new coal plant is something no one feels comfortable with without new standards. Nothing's happened along these lines, though.
TheStreet.com's Jim Cramer says these stocks rise because they're doubly blessed. Integrateds fall because they aren't.
Here are some highlights from this past week's 
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Apache Corp.
McDonald's continues its coffee crusade
Cramer on BloggingStocks: Paulson and Bernanke step up to the plate
Google's $1.7 billion YouTube deal going down the tubes?
