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Oil Behaving Like Bubble


Speculation behind major moves.


Greetings from New York, where the sun is shining, the fleet is in Manhattan and all is right with the world. With even my generally cynical self having little to grouse about, here's what I'm watching as I brace myself for what should be the Mother of All Reverse Commutes when I head into the city in an hour or so:

  • I've been IM'ing this morning with a long time energy bull who's taking off a good chunk o' his positions ahead of the weekend. As he put it "I'm not saying your network doing a 'CNBC Special Report: The Crude Crisis' marks an exact top in crude; but it certainly doesn't mark the bottom for energy." I'll tell him what I told you: I wouldn't talk anyone out of taking gains but shorting against the type of trend you see in crude is making money the very, very hard way. For what it's worth, I'm a buyer of the USO in scale at 105 and in earnest at $100 (if and when).

  • I've been asked if I think Dick's Sporting Goods (DKS) is a trading buy here. The (admittedly hedged) answer is "No but it might be an investment play." In other words, the stock got upgraded a couple times in the 20% downdraft yesterday and the supply swamped the bulls. At the moment Dick's is "bouncing" all of a nickel. From where I'm sitting, I'd rather give DKS some time to right the ship before getting long. Looking better in the sporting space is Hibbett Sports (HIBB). Hibbett plays small to mid-sized markets and is benefiting, as a stock, from the fact that Dicks had the entire planet lacing up their shoes and sprinting away from sporting goods stocks yesterday. I like the HIBB quarter but it's going to take one good Q to get me to violate my "Wal-Mart (WMT), Costco (COST) and maybe Home Depot (HD) only" stance on retail stocks in this environment.

  • Top Three Reasons I'm Not Walking the Talk on Buying the Dip Today: 1) "Markets don't bottom on Fridays", 2) "The Best Bottoms are functions of both time and price; It feels too soon, given that we started selling about three days ago" and 3) I'm a sissy. Of those three reasons, only #3 is a good argument to grab some wontons and Citigroup (C) (to name one name beaten senseless this week).

  • Indiana Jones and the Legend of the Shattered Hip opens this weekend. Suffice it to say that if I thought Hasbro (HAS) was dependent on kids everywhere demanding Indy tie-in toys I wouldn't be long a single share.

  • If you're financially wonky and are seeking some spine-tingling reading for the weekend, get your hands on Michael Masters' testimony to the Senate regarding the impact of large scale, long-only investments (pension funds via banks, to give an example) on the price of commodities. While obviously "making a point" (as Dennis Gartman put it on Fast Money), Masters walks through the mechanics of how, exactly, the price of commodities can wildly outstrip the growth of demand.

  • I'll cop to being part of the hyperbole on the price of oil. I hope my screeching about it marks the top in oil. All I know is crude (which is simply a proxy for any number of commodities) is behaving like a textbook bubble. There's a nice idea for an uptrend ("global demand") but no logic to 5% per day moves beyond speculation. The Internet bubble was bad but you didn't have to buy Yahoo (YHOO) at $220. To avoid the current pending bubble you have to either pay the rising price or stay at home and not eat. For my money, I think people stay home in droves. And when they do travel, they do it in the states where the dollar is less of an utter debacle.

  • Speaking of Yahoo; yesterday the company had a board member quit and postponed the shareholders meeting. Suffice it to say I'm rather dubious that delaying a shareholder meeting is going to assuage YHOO shareholders about turning down Microsoft's (MSFT) $33 per share in favor of nothing but the abstract feeling of Yahoo insiders that the company is worth more.

With that I'm off to make my way to the Big City for the final Fast Money of the week. Make it a safe and fantastic long weekend, Good Minyans. I'll see you back here on Tuesday!

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Position in WMT.

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