Author Topic: Jim Cramer: Oil and Bank Stocks Are a Toxic Mix and Uninvestable  (Read 2051 times)

kab60

  • Hero Member
  • *****
  • Posts: 1355
Re: Jim Cramer: Oil and Bank Stocks Are a Toxic Mix and Uninvestable
« Reply #10 on: September 16, 2020, 11:44:30 PM »
I agree pipes like Williams' are cheap in a zirp world, but terminal value is a bit trickier. EIA and BP expect, I believe, natural gas demand to grow to 2035 before starting to decline. But there will obviously be major regional differences, and 15 year energy forecasts are mostly crap. Look at something like offshore wind - demand is increasing rapidly and making forecasts done 2 years ago look ridicilous. Since financing is a big part of the total cost of renewables, low rates should be a major tailwind.

Unless they have published something new, they expect natural gas to start to decline around 2045-2050 timeframe.  In fact, worldwide natural gas use is still expected to grow 50% from 2020-2030.
Yep, I went from memory and it seems like I was wrong. I think this is one of the most recent forecasts from EIA: https://www.eia.gov/outlooks/aeo/pdf/AEO2020%20Natural%20Gas.pdf

They've been far off before though, but I agree pipes look interesting and bought a lot of Williams myself in March (sold most but still have a chunk in an account with low dividend taxes). There's just such a huge disconnect between public market valuations and what private infrastructure funds are willing to pay for these kinds of assets today.


mattee2264

  • Full Member
  • ***
  • Posts: 111
Re: Jim Cramer: Oil and Bank Stocks Are a Toxic Mix and Uninvestable
« Reply #11 on: September 17, 2020, 04:00:19 AM »

 Yeah I think he is just echoing the consensus view that the short term and long term outlook isn't good. But that can often create good opportunities for patient investors with say a 3-5 year investment horizon by creating attractive prices.

 Take oil. Short term demand is going to remain weak and enough oil is economic at today's prices to keep a lid on prices. Longer term alternative energies will take a lot more share. But in the medium term prospects are quite interesting. Demand will recover and while alternative energy will continue to take share it will be a much more gradual process than the market is expecting. Capital constraints and lack of confidence about the future is going to limit investment and European oil majors are already reallocating a lot of their budgets towards long cycle and uncertain alternative energy projects. And shale productivity is already showing signs of declining and has a natural high decline rate and it will take much higher prices to bring a lot of other production back online. So there seems to be a nice set up for higher prices in the medium term and much more rational competition. And so long as supply is reasonably balanced with demand and adjusts for declining demand over time then companies should earn reasonable returns especially in relation to today's prices.

 I'm less optimistic on banks. US banks are trading at similar levels to a year ago when interest rates were higher and there were very little worries about credit losses and a soft landing expected.

muscleman

  • Hero Member
  • *****
  • Posts: 3497
Re: Jim Cramer: Oil and Bank Stocks Are a Toxic Mix and Uninvestable
« Reply #12 on: September 17, 2020, 07:11:01 AM »
His view is
- oil / nat gas / pipelines are uninvestable
- banks are close to being called uninvestable

The article is a good read because it likely summarizes why these sectors and stocks are so hated right now.

The surprise for me is the pipelines. Yes, some have way too much debt. And some will be impacted should the economy slow further. But some of pipelines should get through the current recession just fine with dividends intact.

- https://finance.yahoo.com/m/752765ae-4c54-3d0c-b3f9-d2ebe39404eb/jim-cramer-oil-and-bank.html

Jim Cramer’s show is toxic and unwatchable
I am muslceman. I have more muscle than brain!