Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: Czechsinthemail who wrote (24191)	6/15/1998 10:39:00 PM
From: Grommit	Read Replies (1) of 95453

a bit of history ---- I just found this in my disk drive and thought I would repost. Notice how the stocks were dropping in November and no one knew why. Oil was not tanking at the time. We were confused. Institution were selling prior to the oil price declines!!! I will have to mark some of their timing to superior luck in that case. If they moved only as oil was dropping, I would in retrospect have thought them totally brilliant (or experienced enough to have been thru this before) to move with the obvious. ...................... Dispatches from the Front: Cramer Hangs On as Drillers Dive By James J. Cramer of thestreet.com 11/18/97 5:06 PM ET Are these oil-service stock selloffs brutal or what? This one is perhaps the most insidious because oil ain't doing a thing. I've been pretty vocal about why I like the drillers: They have the numbers. Rather than having to deal with tech companies blowing up left and right, I have the luxury of being in a group that gets numbers bumped up after each reporting period. But sometimes we have to pay the price of that luxury. The price tag? Massive profit-taking. Nobody ever believes that profit-taking can bring a group down. People want to hear that somebody downgraded the group, or that one of the group's players blew up. They want to hear number cuts. They want to hear Mobil saying they won't pay these rates. They want to hear that too many rigs are being built. They want to believe that there is a reason for the pain. Forget it. When you are riding winners, winners get poleaxed by profit-taking. As I have said many times before, and will say many times again, the profit-taking gets exacerbated by November capital gains season. Now that 22% of all stocks are owned by mutual funds, and mutual funds have plenty of losses, what a great idea to offset those losses with sales of Smith International. It gets worse. This year hedge funds, piggybacking off of our pain, are piling into the Philly Stock Exchange to buy puts and sell calls on the OSX, the oil service index. With the usual common stock buyers turning sellers to lock in profits, the pressure from all of those put buys -- the market makers have to short the stocks to hedge their own positions -- gets wildly overblown. James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. His fund is long Chase and Citicorp at time of publication.

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