Desparate to buy oil stocks -
From The Street.com - (excerpt)
Don't Get Burned in Bonfire of the Oils
By James J. Cramer
RealMoney.com Columnist
2/25/2005 1:05 PM EST
URL: thestreet.com
Oils
# The bears have lost their last hope for keeping oil prices down in the Saudis.
# The extent to which institutions are willing to reach (and hedgies to short) is behind this conflagration.
# Cramer doesn't like these panics but respects and sells into them, which is really all you can do.
The underowned frenzy continues. Oil's now at 8.6% of the S&P 500's market cap as it heads to 10%. The trigger this time is that institution after institution, both buy side and sell side, is recognizing that even the Saudis, the last hope to get oil down, tacitly are recognizing that $40 to $50 is the range. That recognition, voiced Thursday, was really the last hope of the oil bears for keeping prices down.
Understand, though, that this is not revelatory to anyone other than the bears. It's been pretty obvious that the Saudis don't have enough oil to offset the demand. It's also obvious that the infrastructure in the Middle East is so messed up because of terrorism -- and the inability of these countries to create a risk/reward ratio that justifies more drilling and more foreign investment -- that $40 might be wishful.
This blowoff is one of the more violent I have ever seen, in part because nobody other than the sector funds and maybe, of the big funds, Contrafund, at Fidelity, has a 10% position in oil. That's pretty much what you will need if you are going to beat the S&P 500. The extent to which institutions are willing to reach, plus the extent that the hedge funds are short oil stocks, creates the conflagration that you are witnessing.
Put simply, there isn't enough stock to go around and the companies aren't issuing stock to meet the demand. Can you imagine how a spot secondary by an Ultra (UPL:Amex) or a Quicksilver (KWK:NYSE) would be devoured right now? I wish that some of the companies that have borrowed money to buy other properties were active and issuing stock; it would be a godsend. |
