Why am I so hung up on the price of oil being stymied around $50? Because of contra-indicators like Harold Hamm, the chairman and CEO of Continental Resources (CLR).
Hamm was on CNBC yesterday talking about oil at a turning point and how it was ready to go from $49 to $69-$72.
Oh boy, I said to myself. That's why oil's going nowhere. As my writing colleague Matt Horween pointed out to me, Hamm is the ultimate contra-indicator.
When oil was at $80 going to $25, Hamm came on Mad Money and predicted that oil was about to go right back to $100. I remember it because I had Charif Souki, the now deposed former CEO of Cheniere Energy (LNG) saying the exact opposite and that oil belonged substantially lower, perhaps $60 or lower.
Charif talked about how traditional oil people do not have marketing departments. They don't say "you know what, we can't really market that product right now." Instead, they keep pumping and pumping.
That's exactly what Hamm did and it was totally wrong. His company was among the biggest losers during the downturn, losing hundreds of millions of dollars.
He is the last guy I would follow on this issue.
Not only that, but he indicated that he was ready to start pumping again. With oil at $50 "we will complete wells that have not been completed," he told CNBC, meaning that this price is where the company has a chance to make money on the new oil, although he did say that he isn't going to start using new rigs to drill.
That's cold comfort. Hamm's doing what a lot of other oil execs are doing: starting production again which, in itself, is self-fulfilling. You can't get oil to go higher from here if that's the mindset.
More important, it shows that these guys never learn. What the heck is Hamm doing still predicting the price of oil, given that he's been so unbelievably off base? He has been so optimistic that you simply have to bet against him.
Given that oil is all that matters in this market and oil's down, we can rest assured that it's going down because of comments like Hamm that the U.S. is about to turn on the spigot again. That will encourage the Saudis to pump more to stop the price, and we can begin to see oil go back to the lower forties if this madness continues.
That means we have to be very careful, as oil is what the algorithms are set on. Lower oil means lower stock prices. Harold, my advice, if you turn on the spigot, start the stock selling.
You won't regret it. Forty-three, up from $13 back in January is a nice move for this stock, regardless where it started. Ka-ching, ka-ching.
