Loading...
Symbols:
Authors:

The Price of Oil - Cramer's Mad Money (8/18/08)

by: SA Editor Joan Wickham August 18, 2008 | about stocks: APC / CHK / DIS / FNM / FRE / LOW / M / RDC / UPL / XTO    

SA Editor
Joan Wickham

About this author:
Become a Contributor Submit an Article
  • Font Size:
  • Print

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday, August 18.

Freddie Mac (FRE) and Fannie Mae (FNM)

“What we have today is just some serious profit taking,” Jim Cramer told viewers. He described today's market action as simply giving up some gains. Cramer explained that while the market considers the repercussions of a possible government takeover of Freddie Mac and Fannie Mae, he cares more about the true underpinnings of the market, mainly the price of oil and natural gas.

The Price of Oil - Anadarko Petroleum (APC)

Jim Hackett, CEO of Anadarko Petroleum, discussed just how big an impact the declining cost of natural gas is having on his company. Hackett said there will be continued strong demand for natural gas until a viable alternative fuel is developed. He described the decline in his company's stock as normal market volatility and felt it was nothing to be concerned in the long term. Hackett confirmed that raw costs are indeed up 50% since the beginning of the year, but said that his company has minimized those effects by hedging and what he called “smart drilling.” The effect to Anadarko's bottom line has been on the order of just 5% to 7%. Cramer and Hackett agreed that the price of many oil and natural gas stocks are trading at a big discount to the price of the commodity itself. Cramer reiterated his buy on Anadarko and the sector as a whole.

Outrage of the Day - Transocean (RIG), Rowen Drilling (RDC), Chesapeake Energy (CHK), XTO Energy (XTO), Ultra Petroleum (UPL)

Cramer cautioned viewers not to take their eyes off what's important in the market. While the media may be focused on Iran, the events in Georgia and the looming tropical storm in the Gulf of Mexico, Cramer said it's the supply and demand for oil that controls the market. In the past, said Cramer, any one of these events would have instantly taken oil to $150 a barrel. Yet today, oil remains at $110 a barrel and is likely to fall even further. This only confirms that supply and demand rules the day and at $4.50 a gallon, the demand for oil and gas just isn't there. Cramer cautioned investors to scale out of the oil stocks that are directly affected by the decline in oil prices. They include companies such as Transocean, Rowen Drilling, Chesapeake Energy, XTO Energy and Ultra Petroleum. He said while it may be tempting to buy into these names ahead of the media events, the market is indicating there is more pain to come.

The Magical Kingdom's Formula – Disney (DIS)

Bob Iger, president and CEO of Walt Disney (DIS), talked about the effects of a slowing economy on his company's business. Iger said that Walt Disney should not be viewed as a media company, since only 20% of the company's revenues come from advertising. He said that Disney has made an intentional decision to continually lower that number as the company diversifies its assets. “We are in the media business, but that's not what we're all about,” he said. Iger said that Disney is in the business of creating and building great, long-term brands that can be leveraged around the globe. Disney, he said, is the No. 1 brand in its space because of the high quality it offers. Iger said the company fares well in tough economic times because the company's business is not as cyclical as analysts believe. He said that Disney offers a great, affordable product and flourishes from its global reach.

Final Thoughts – Lowe (LOW), Macy (M)

Cramer told viewers to consider some of the beaten-down bank stocks. He suggested looking into Lowe's and Macy's, both of which recently reported better-than- expected numbers.

Seeking Alpha publishes a summary of Jim Cramer's stock picks every day including: Mad Money Recap, Lightning Round and Stop Trading!

Get Cramer's Picks by e-mail -- it's free and takes only a few seconds to sign up.

Seeking Alpha is not affiliated with Jim Cramer, CNBC or TheStreet.com

Related Articles

This article has 12 comments:

  •  
    Aug 19 09:09 AM
    I could be really wrong, and I'll feel the pain if I am, but it will take years for us to come up with a good replacement for oil, and with the prices falling, it sure seems like a great time to buy. Whether it's shipping or the oil/gas itself, we haven't stopped needing it, and since Nancy Pelosi is sitting around with her thumb up her..., we're going to still need it. I've been wrong before, and may be wrong now, but I think we still have time.
    Reply
  •  
    Aug 19 09:37 AM
    I could be wrong also, but did Cramer say buy APC and sell all stocks related to the decline of oil in the same show? Then he says sell CHK, XTO, which are primarily gas. I wonder what he's up to.
    Reply
  •  
    Aug 19 10:54 AM
    You caught that, too. Curious, but Cramer didn't get his reputation by making many mistakes.
    Reply
  •  
    Aug 19 10:55 AM
    shark1001 is 100% right.i have heard countless times cramer flip flop on certain stocks&the market as a whole.he should go into politics.he would fit in just fine.
    Reply
  •  
    Aug 19 12:57 PM
    i know that cramer flip flops! i bought CHK on his recommendation, also XTO. lucky for me i got out of XTO with a small profit, but i am losing big time in CHK. it is too late for me to sell, so i guess i will just keep CHK and hope cramer is wrong again.
    Reply
  •  
    Aug 19 01:11 PM
    Cramer is like the rest. They only tell you when they are right and never talk about the bad calls they make. Do you remember when Iraq set the oil wells on fire. If the U.S. did not put out fires they would have burned for 100 years. Yes, there's plenty of oil and if the price gets too high our Gov't would be forced to develope alternative means of energy and that my friends would be bad for the oil producing countries. That is the reason the price of oil is backing off a little. Even Iran wants to make sure we keep buying oil.
    Reply
  •  
    Aug 19 01:29 PM
    I am also stuck in CHK. Now that it down, I hear Cramer's advice to sell. What happened to buy low and sell high? And why is natural gas tied to the oil price?
    Reply
  •  
    Aug 19 06:44 PM
    User 183508, you should do a bit more work on Cramers' advice. What are the odds of success if Cramer says buy, and are they the same if Cramer says sell ?

    Sometimes I do a trade and immediately get the feeling it was wrong, and it stays that way. On that basis it feels like I also am flip flopping for myself, but once you get uncomfortable with a position, its best to liquidate.
    Reply
  •  
    Aug 20 02:39 AM
    So much info comes flying out of Cramer that it is not possible to be well researched. He has good market intuition that may be invalid seconds after leaving his mouth. Day trade with his info.
    Reply
  •  
    Aug 20 05:11 AM
    zman said recently natural gas produced in usa up over 5 percent , if i recall correctly. could be reason gas is weak, also its been a cool summer.
    Reply
  •  
    Sep 07 10:03 PM
    I think you can't trust anything you hear on the tube these days. When oil was moving up at the start of spring and summer in was globle demand. Demand form China and India would suely drive oil to $200 a barrel. Demand was up and the supply was not there. We also blamed speculator in the market. Suddenly out of no where we have excess supply. Supposedly the globle demand dropped because of high price enough to creat a surplus that would effect the price by nearly $40 a barrel in 3-4 weeks. We are getting screwed. Recently SEC and congress are looking into this matter related to invetory reporting. I hope they lock up all the wallstreet crooks...
    Reply
  •  
    Sep 07 10:09 PM
    Then two weeks ago oil and gas price continue to drop after GUSTAV did not hit as hard as anticipated. My problem with that is that gas and oil never went up in anticipation of huricane damage in the first place...SO WHY WOULD IT GO DOWN FOR THAT REASON... SOMEONE HELP ME WITH THIS...
    Reply
More Comments on FRE ยป
More by SA Editor Joan Wickham
Investment Resources
Money Managment
Research
Seeking Alpha provides these ads as a service to its leading contributors
Articles on related themes
Cramer's Picks
Today's Market
Bonds
Dollar/Currencies