Re: Drillers. This is an excerpt from today's TheStreet.com automatic e-mail:
Wrong! Dispatches from the Front: Cramer Says Recent Driller Debacle is
Bullish
By James J. Cramer
Who is Paul Chambers and why is he saying all of these horrible things
about my favorite stocks?
That question rifled through the minds of at least one thousand managers of
mutual funds Thursday, as everyone's beloved group, the oil service
stocks, got laid to waste, in a tumultuous, endless session.
Until this week the drillers seemed immune from just about every contagion
out there, including foreign nightmares, lower oil prices, and the Saddam
scourge. But things started to fall apart Tuesday, and by Thursday, Paul
Chambers, the Lehman Brothers oil-service analyst, was able to knock out
the now-glassy-jawed group with just a hint of a rumor of a downgrade. The
decline was so vicious that he said in today's Journal interview, "I'm
basically the fall guy for declining prices."
What really went on? First, in the interests of the thought police, I am
long the group so you can either dismiss me and click to the next story, or
say, "hey, he must have done some homework before he penned this piece."
Non-purists, it's the latter. In every cycle there are specific patterns
available to the naked eye. In this one, the drillers stand out as the
beacon, the virtual safe harbor of the market. Wow, is that a turnabout
from the 1980s when only Robert Torray, a mutual fund guy, made a lonely,
Custer-like-stand in the group, and Global Marine went through a ton of
restructurings and recapitalizations. This group took no prisoners in the
brutal 1984-86 period.
In the horrendo sell-off that was October 97, the sector weathered things
swimmingly, with only a panic seller of a couple of the big names mucking
things up in the last hour of Down 550 Monday. The group was the first to
snap back on Bounce-back Tuesday, confirming everything we know about the
concept of relative strength.
But in this brutal retest period, the period where in-boxes go flying off
peoples desks and the guys in Motley Fool chats start harassing me -- let
alone the corpses in the ASND thread at Silicon Investor -- everything must
be taken out and shot. That this group was the last to retest again is
actually bullish. That the decline was as sharp as it was, can be
attributed to the mutual funds taking lumps elsewhere and then frantically
cashing in on the drillers to book some gains for pending distribution.
Lord knows, there are gains to be had in this group.
Like every sell-off, this one finally reached crescendo proportions. That's
when brokers don't even want to go out with their "re-it buys" or buy
recommendation reiterations, for fear that their clients will pull the wire
at the sheer mention of Smith International and Baker Hughes. We had that
telltale sign by midday Thursday when the group started to lift.
My partner, Jeff Berkowitz, commented that these stocks are exhibiting
signs of technology-like gyrations, to which I retorted that the holders,
the mo-mos, simply never learned how to trade. These guys, '90s creations
who are new to the game, tend to keep feeding 50,000 share orders to
different brokers, burying one after another with merchandise. (How should
they do it? As the Trading Goddess taught me: you go into DLJ or Merrill or
Goldman, firms with their own capital to facilitate, and you say "Bid
wanted, 1,000,000 Global Marine" and you hit that bid when you get it. That
way the rest of your portfolio doesn't do a death rattle as you
systematically mow down every trading floor in sight with 50,000 shares of
Global. Before you e-mail about "facilitate," "bid," and "capital" I
promise to do a series on what it means to trade in size within the next
few weeks.)
Anyway, by 4:00 p.m. this group looked technically knocked out and I found
myself waiting for CNBC's ex-technical guru, John Murphy, to pronounce them
dead so I could guarantee you that they would come roaring back.
But without my favorite contrarian -- meaning a guy who is wrong at every
single large inflection point -- on the tube, I will have to settle for
various brokers of mine saying that the group is done for the year. They
all think the group has had it. So, of course, I am a buyer. |
