The single most common emailed question I’ve gotten — from readers, from clients, from the media — is “Do you buy BP? If so, when, where and how?

Before we proceed, please understand what my thought process is: I want us to consider, weigh and try to determine what the possible risks are versus the potential reward is in this stock.

I suggest those of you who are considering buying or selling BP think about the following ten issues:

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1) BP’s Stock is in Freefall:  As the nearby chart shows, BP is down more than 50% from recent highs. Its 200 day moving average is up ~45% from current prices — near ~55. (click for larger chart)

The current market cap is about $100B, almost 40% below its Enterprise Value of $141.65B.

When making a trade in a stock like this, you want to do more than merely hope for a binary outcome –  i.e., Make money or Lose money. The goal is to understand what the risks and rewards are, predetermine the losses/downside,  and put ion the best risk/reward you can.

There is intelligent speculation and outright gambling. If this trade fits your profile, aim to do the former and avoid the latter.

Research project: In distressed companies, at what levels have we seen ideal entries — in terms of price off of highs, below enterprise value, percentages below 50 and 200 day MA, dividend yields, and P/E ?

~~~

2) Is this a Trade, or an Investment? : There are different rules for Trading than Investing. Before you step into a name in distress, be sure to understand exactly what your goals are, your risk tolerances, and your time horizon.

My guess is the vast majority of the huge volume spike in BP are stat arbitrage (between the common stock and bonds, there are apparently no convertibles) and a mix of day traders and hedgies. If you plan on making BP a long term investment, then you should be thinking in terms of a longer holding period — years, not months.

A universal rule: Never allow a trade to become an investment.

~~~

3) Beware the Value Trap:  There can be no doubt that BP, at a 5 P/E and 10%+ dividend yield looks cheap. The question is, how much cheaper might it get? Cheap stocks can and do get cheaper, just as dear stocks can (and do) get pricier.

Indeed, the early investors in the door after BP first fell — and quite a few people publicly announced their buys at 45, 40 and 35 — are now enormously underwater.

Suggestion:  Investors should not try to bottom tick the stock. Plan on scaling the initial investment in over days or weeks.

Rather than catch the falling knife, plan on adding a good chunk of the position after the stock breaks the 20 and 50 day moving averages to the upside. That way, you are averaging UP rather than DOWN.

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4) Predetermine Your Losses:  I told a client today that rather than buy the $100M of the common stock, i would figure out how much you were willing to lose on the trade.

Lets assume its 10%.

Rather than purchase the common, I would consider buying  $10-15 million in LEAPs and Calls.  A mix of in the money and out of the money strikes and dates a year in advance allows you to match the upside, with far less capital at risk, and a similar loss.

Alternatively, you could buy half of any long position with common stock, filling out the rest of the position with options.

If you go common stock, figure out what your stop loss is, and then stick tot hat discipline.

Advice: Never make a trade or investment where the losses are open ended (ie, 100% or greater).

~~~

5) Take Over Target? We have heard repeated rumors of potential buyers for BP — Sinook China, Exxon Mobil, Shell Sunoco.

Buying a name and then hoping for a takeover is usually a suckers game. In the case of an energy or minerals firm with proven reserves, however, at a certain price a takeover becomes all but inevitable. The trick is determining what that price might be.

Look at past takeovers in the sector — Exxon Mobil, BP Amoco, Conoco Phillips, Chevron Texaco,  etc., to estimate what is a fair purchase price based on reserves and/or earnings versus future liabilities.

Admonition: Make sure your purchase reasons are data driven, rather than merely based upon blind hope.

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6) Will BP Declare Bankruptcy?

I have no idea — but looking at their cash flow, its certainly not a mandatory requirement.If they do a prepackaged bankruptcy, it will be a strategic decision they elect to make — not a mandatory one forced on them by their creditors.

Currently, BP generates global sales of ~$30 billion per year, and profits of about $17 billion.  Note that any payments, penalties and settlements all come off the top — pre-profit.

BP could probably payout $250-500 million dollars per month for 20 years, and still be profitable.

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7) Is Declaring Bankruptcy Fatal to Shareholders?

If history is any guide, a prepackaged strategic bankruptcy it might not be fatal to shareholders.

If memory serves me, various other proactive bankruptcies worked to shareholders’ advantages: — AH Robbins  issues with their purchase of Dalkon Shield led to billions in settlements, an eventual bankruptcy, and a huge sale to Wyeth (formerly AHP). Texaco did something similar after the Pennzoil litigation, as did many of the various Asbestos exposures. And Merck, which did not go chapter 11, seemed to come out OK of the Vioxx problem (if you bought the stock at the right time).

A strategic bankruptcy can “ringfence” losses from the income earning portions of a company. It creates a fixed, known amount, rather than some unknown future sum. Getting rid of that sword of Damocles allows the rest of the company, to (in theory) prosper.

Surprise!: Bankruptcy can actually work too shareholders’ advantages . . .

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8) Will BP CEO Tony Hayward Get Fired?

Of course!

He is a dead man walking.  The bottom line is the accident happened on his watch, as did a huge amount of prior violations and fines. Hayward is also responsible for the firm’s immediate responses, which have for the most part been disastrous.

Advise: But here is some good advise (UK spelling) for BP’s Board of Directors: Never fire your CEO right away. He is a sacrificial lamb whom you can eventually throw to the wolves. But don’t make the mistake of doing so too early!

Sure, he is a one man gaffe machine — but save his execution until it will do the most good. Wait until the political pressure is unbearable — and your succession plan is in place — before you depose your chief executive.

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9) The Politics of BP Are Fluid:  There will be significant political pressure on management: To eliminate the Dividend, for heads to roll, to “make good on all losses” (whethr reasonably proven or not);

Be aware of the impact chatter could have on day-to-day price. However, politics should not have too great an impact on the firm’s actual value.

My best guess is that BP is large enough, protected by the UK, and has enough free cash flow that it will not be too damaged by US political pressure.

Caveat: Unless this thing gets much, much worse. Then all bets are off, and BP may become a teenager.

~~~

10) Why Were You Still Long?

Last, those of you who are long standing BP shareholders should be asking yourselves “Why?”. You should not still be long BP from years or even months ago.

Any long term position must have built into it some form of risk management and capital preservation. I cringe every time I hear someone say “There is nothing that can make me sell this stock.” That is a recipe for disaster.

I obviously am partial to our own model. Fusion IQ went to a neutral around 60, and a sell in the low to mid 50s. The stock broke 30 yesterday. Our system worked well to get shareholders out of BP before the damage was horrific (Same last few years for AIG, C, BSC, FNM LEH, etc.).

But regardless of the tool you use, make sure you have SOME way to prevent any holding from becoming a portfolio destroyer.

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Fusion IQ Neutral and Sell Signals

click for larger chart with buy & sell signals

Category: Energy, Investing, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

43 Responses to “10 Thoughts for Those Buying (or Selling) BP…”

  1. gordongekko00 says:

    Mostly traders seem to be trying to pick the bottom in BP. Traders that should seriously check out a gamblers anonymous meeting for two. BP and RIG, are there 2 stocks out there more toxic? Not.

  2. gloeschi says:

    “Enterprise value” = market cap + net debt. So as long as there is debt, market cap will be below EV. A large difference between market cap and EV just means there is a lot of net debt. Or did you want to say something else?

    Sometimes bonds are even better investment in distressed situations than equity. See the outperformance of JNK vs SPY since market bottom March 2009.

    P/E’s and dividend yields are backwards oriented figures. Remember most banks trading at single digit P/E’s summer 2007? They were sooooo cheap! If something is cheap (or has a high yield) there usually is a reason. You must find and analyse that reason (not too difficult here) and make the conscious decision that you come to a different conclusion than the market (the market is not always right, but so are you). Since you probably cannot envision all of what can go wrong (the “unknown unknowns” in Rummy speak) you have to check your mental capital. EXPECT to be (at least initially) wrong. So your mental capital will not be depleted if the trade moves against you the minute you put it on.

  3. grlampton says:

    One of the problems with trying to place a value on BP here is that the type of risk you are trying to quantify is litigation risk, i.e., the risk that the avalanche of lawsuits now descending on BP will eventually destroy it. One of the problems with trying to quantify litigation risk is that, in addition to evaluating the likely amount of actual damages the company likely will be forced to pay to victims is that you have to try to figure out how much in punitive damages they will have to pay, something that is extremely difficult, if not impossible, to figure out, especially for a company which will end up being hated as much as BP will likely be.

    The closest analogy I can think of is the tobacco companies, Phillip Morris, RJR, etc. Many of these companies did manage to get out alive and are now thriving, but only after YEARS of uncertainty, major restructuring to isolate themselves from the U.S. market and its accompanying litigation risk, etc.

    The one thing I think is very clear is that whatever resolution there is to the BP situation will take years and years to work out. So anyone thinking of buying this stock (and I am not) has plenty of time.

  4. Mannwich says:

    “Investing?” What’s that? Besides the mutual fund rubes, who’s foolish enough to invest in anything in this fraudulent “market”?

  5. destor23 says:

    A takeover might be inevitable but any acquirer of BP is also going to demand a price low enough to protect them from the still difficult to quantify clean-up cost risks and litigation risks. Nobody wants to be Dow Chemical, still paying for the Bhopal disaster caused by Union Carbide, which it acquired. Or one of the many industrial companies that purchased competitors with what they thought were quantifiable asbestos liabilities. Were I a full on acquirer of this company I’d also want to know if criminal charges are going to be brought against its current executives and if I’ll have to pay for their defense 3-5 years down the line, not so much because it’ll cost big money but because it will cost big reputation. Any acquirer will “own the spill.”

  6. Expat says:

    I don’t see how playing BP is anything more than a bet on their ability to cap the well and how much they will have to pay in damages. If some of the serious estimates on flow are accurate (50-100 kbp) then BP is probably toast. Sure, their assets will be purchased by various other oil companies, but BP itself will end up a quagmire of international bankruptcy, civil claims, criminal investigations, and sleeze for the next fifty years.

    My advice is to sell it. The risk/reward for hoping BP will survive and bounce is skewed severely towards total loss.

  7. franklin411 says:

    Actually, I think the best legal analogy for BP is Dow Corning, which went bankrupt after a massive, multi-billion dollar judgment against it regarding “toxic” breast implants. The entire idea of “toxic” implants was later proven to be medically untrue, but by that point it didn’t matter.

    http://en.wikipedia.org/wiki/Dow_Corning#Breast_implant_controversy

    That said, I bought some RIG at $50 and some at $42. The day after I bought my RIG at $50, it shot up to $60+. I thought “I should sell it and then buy it back when the next wave of panic hits.” Of course, I didn’t sell and the day after that a wave of panic knocked it down to $42, where I bought more!

    This is not a trade. This is my Roth IRA, which I expect to cash in sometime around 2060. And it’s only around 8% of my portfolio.

  8. Jack Damn says:

    Losers average losers. Number 1 rule.

  9. JustinTheSkeptic says:

    I wouldn’t touch it with a ten foot pole. Buy some puts on Boston Brew instead! Go three months out.

  10. jjay says:

    Reminds me of an old Wall Street joke.

    Q It’s only a buck a share, how much could I possibly lose?

    A A dollar a share!

  11. genomik says:

    This is the 3rd once in a million years events in the last couple years. As such, and due to it’s overwhelming environmental scale, I feel that investing here is gambling.

  12. franklin411 says:

    OT, but is anyone else watching the Conference Committee speeches on the FinReg bill? I enjoyed Sen. Shelby blaming the coloreds for causing the housing crisis yet again! =)

  13. franklin411 says:

    *enjoyed watching…just want to be clear that that comment is meant to be sarcastic!

  14. mappo says:

    I think Transocean is the more interesting opportunity. Their stock is taking the same pummeling as BP’s, but it is much less clear that they are on the hook for the mess.

  15. DD123 says:

    That was a great post Barry.

  16. Patrick Neid says:

    $20-$22 a share I might have to take a look.

  17. constantnormal says:

    While I whole-heartedly agree with the cautions expressed in this piece, I wonder how this is different from either buying or shorting Bear Stearns, Merrill Lynch, or even Lehman a couple of years ago? In all cases, the potential liabilities exceed the value of the company — and for those pooh-poohing the possibility of BP being bankrupted by this, what happens if the two relief wells being drilled each erupt in a similar manner to the ongoing gusher

    The other side of that coin being that BP successfully plugs the hole by the end of August, and no hurricane smears the millions of gallons of oil awash in the Gulf along the coastline for, oh, a hundred miles inland or so, killing large amounts of flora and fauna in the process. And then BP employs the legal tactics so successfully used by Exxon to diminish and delay penalties for several decades, while they are raking in hundreds of billions of dollars per year.

    I’m pretty sure that there will be no possibility of any sort of takeover until the potential liabilities are known. Why acquire a box of unknown amounts of trouble when you can simply acquire their drilling leases at auction?

    Given that there is no clear understanding of all the things that went wrong, and which ones were the decisive elements of the disaster, I would think that investors and gamblers alike would want to give BP a wide berth.

    “A strange game…. The only winning move is not to play.”

  18. ashpelham2 says:

    Ah, good old Senator Richard Shelby. Here in Alabama, we make it a habit of blaming “bad people and Satan” for any ills that come our way. Certainly the religious Right has no moral or ethical responsibility to try and fix the problems that come along as a result. No sir. We will head back to the old Golden Corral, grab another plate, and bitch about how this country has “lost God” and we are all heading to hell. Well, everyone ELSE is headed to hell.

    Not a lot different from the Taliban I suppose.

    I bought BP three days ago at 35.00 because I”m not too young to remember how much everyone hated Exxon. BP has made more money the Lord Almighty the past several years, and they have the reserves to pay everyone off and tell them to stick it. At the current situation. Now, if this thing keeps leaking until Christmas, well, then that ‘s a game changer.

  19. AGG says:

    Mannwich is exactly right. Meanwhile let’s take a look at GS’s uncanny ability to smell trouble. They dump 44% of their BP stock in April just before the gusher. At the same time, Wells Fargo backs up the truck to by this stuff (boy, did Warren f__k up there). Just look at the BP top ten trades among insiders as reported to the SEC to see who got taken to the cleaners (what doesn’t show, of course, is any dervative action -i.e. cheater hedging- by said parties).

    Fast forward to yesterday. The stock closes about 10% BELOW where it OPENED today. Somebody made an absolute killing. I believe Warren Buffett did some after market dabbling yesterday (yes, I know it’s an ADR and was bought in Europe but I don’t believe that is the full story). Perhaps GS dumped their derivatives on BP and jumped in to buy stock (buying the super dip) after hours as well.

    Now that’s what I called a TRADE (BILLIONS OF DOLLARS made in one freaking night!). Investors need not apply.

    No, I’m not involved. I’m just watching. My take is that this BP “volatility” is a sign of systemic trouble in the pricing mechanisms of the market. This will end badly for pension funds and even many top traders. Years ago, on this forum, I stated that trying to profit in a bear market is like log rolling in rapids. The odds are slightly better than gambling but it’s too nerve wracking for those who want a long life. And for those who think they can “go for it” because of the brass ring (the number), I wish to remind you that medical science has proven conclusively that stress kills (even type A personalities) humans. Our bodies DO NOT discern between good stress (making a million in an hour) or bad stress ( losing it in a day). To our biochemistry, it’s all the same shit.

    But then, some people want to go out in a blaze of glory. I say, fine, don’t pretend you didn’t know the consequences of high stress living when your body craps out.

  20. constantnormal says:

    But then BoA *did* buy Merrill … when they could have picked them up after the weekend for a fraction of the price. It seems that being a giant corporation grants one no more smarts than the average man on the street …

  21. constantnormal says:

    http://xkcd.com/748/

    it seemed appropriate.

  22. I was hearing they could be charged up to 3200 per barrel by the EPA. That would be enough to wipe the ocean floor with them.

  23. J Kraus says:

    If the government excessively penalizes BP (or Transocean, or Haliburton, etc.) for this spill, it will effectively halt deepwater drilling anywhere in U.S. Coastal waters. There is no public company that would be willing to bear the extreme financial risk. That is why the $75 million cap was instituted years ago.

    What we will see instead is more exploration by national oil companies like PetroChina and Petrobras drilling around Cuba and South America. When they have a spill and it arrives at US beaches, they will tell the sitting U.S. President exactly what he (or she) can do with the clean-up costs!

  24. [...] My suggestions on the subject can be found here [...]

  25. vine2wine says:

    Lets wait for Obama’s team to find the person who’ ass needs to be kicked at BP. Once we get the ass kickee, put our money down on how long it will take for BP to become owned wholly by the US govt in a special case bailout. This one will be “more” special than the last bailout. Mwhahahahah.

  26. AGG says:

    @J Kraus,
    Everything you said is true. However, I believe there is a new “cost-benefit analysis” in today’s energy extraction paradigm. The alternate technologies were squashed deliberately through corruption and collusion with bribed authorities throughout the 20th century by the oil corporations (The Tyranny of Oil by Antonia Juhasz). The “oil has more energy in it than anything else” statement is propaganda. Natural gas, for exmple, is superior to crude oil when you figure in the cost of refineries with their cracking towers and manpower costs. Presently there is a plant called Duckweed that can totally substitute oil as an energy source (you can make natural gas and ethanol from it). It is the smallest flowering plant in the world, produces 4 times more starch than corn (for ethanol production) and more protein than soy beans (for livestock feed) and grows much faster (it’s aquatic and grows in shallow ponds). It is sustainable, non-polluting and is even being used to clean up ponds with excess nitrogen (from fertilizer) and ammonia (from pig feces). There is a team of researchers right now working with a $300,000 grant to scale up Duckweed (Lemna minor) production for biomass sustainable energy production.
    Oil crushed the buggy industry for horse drawn vehicles in the early 20th century. Duckweed will do the same to oil. Oil knows about Duckweed and will attempt to crush it. I don’t think it will work.
    Barry:
    I don’t know the name of the US corporation doing the Duckweed work in Maryland but it looks like a wonderful investment if it is public.
    The humble Duckweed grows like what it is (a weed) and may save our bacon yet.

  27. franklin411 says:

    @Kraus
    The liability cap is fundamentally un-American. Essentially, what the cap does is eliminate the corporation’s risk of loss without reducing the corporation’s chances of reward. Now, where have we seen that before… 0 consequences and unlimited reward….and when has that created, oh I dunno, a massive economic crisis? Humm…..

  28. Jay R says:

    In determining punitive damages, courts usually follow the 1:1 rule for maritime cases, meaning that punitive damages must be in a ratio of 1:1 with compensatory damages (i.e., puni’s cannot exceed compensatory damages)

    See also:
    http://lawblog.legalmatch.com/2010/06/10/common-misconceptions-about-punitive-damages/

  29. tawm says:

    Thanks BR for timely thoughts on this subject.
    I am not, and cannot be, a trader (have a day job and don’t have the time or skill to trade actively). I try to take a long-term (3-20+ years) buy and hold strategy of well-managed, blue chip, multinational, dividend-paying equities. For example JNJ, PFE, IBM, PG, HON, EMR, ECO, XOM/CVX, D and others. Unless the economy completely crashes, in what other financial assets should one put long-term savings? (If we need guns and toilet paper for Armagaeddon, then no financial assets will count at all.) Government is seeing to it that inflation will keep somewhat of a floor under housing prices and the stock market.
    Per your discussion about buying on dips — and now BP in distress — it might make sense if I have a high tolerance for gambles (IBM, MO, WM and ADM all came back from hard times) and can stomach some losses. Yes, there are the risks of catching falling knives, but buying low may work out well.
    From a simple-minded approach, the world will need oil, BP is a major player, in the long-run it may still be a good long-term investment. And the current news pummeling BP will only last until the fickle US media, pols and sheeple go on to the next crisis-du-jour. (Sadly, the main “investment” opportunity in this is for the law firms.)
    On a broader scope, why not buy and hold for the non-professional investors? and why not look for beaten-up names?

  30. WallStreetNobody says:

    Barry, not sure if you did this on purpose or not but it’s not “Sinook China”, it is “CNOOC China”. CNOOC = China National Offshore Oil Corporation (and it’s just called CNOOC, though when some people refer to the actual equity they do say CNOOC China).

  31. tawm says:

    re AGG > There is a team of researchers right now working with a $300,000 grant to scale up Duckweed (Lemna minor) production for biomass sustainable energy production.

    It would be wonderful if Duckweed or another alternative energy source actually proves fruitful in replacing fossil fuels, but for the moment please note that the $300k subsidy speaks loudly about the lack of business’s faith in it. If only I could get grants like that for research, I wouldn’t need my day job….

  32. rktbrkr says:

    There are so many significant unknows with this that I don’t know how anyone could make an informed investment decision.

    The rate of the leak and then the duration are two major unknowns.

    Team O’Bama is being pictured as complicit and it’s rapidly approaching career ending magnitude for our first half black president,At some point the full power of the US government will be directed at throwing BP under the bus it will be like a teenage driver getting a raft of citations after he mouths off to a traffic cop.There could be billions of $$ of OSHA violations, who knows! And if criminal charges are brought then all the BP execs will be singing

  33. rktbrkr says:

    The unknowns here remind me of Rumsfelds known knowns, known unknowns, unknown knowns and unknown unknowns, then just weight them to get the present value of BP.

    And how do you value the possibility of an effective boycott of BP stations? Eventually the nightly news coverage of sticky birds will launch a boycott.

  34. constantnormal says:

    I think any consideration of the downsides to BP must attempt to evaluate the likelihood that they could pull an Exxon — check into the initial penalties Exxon was assessed for their drunk captain running the Valdez aground, and how much they have paid to date.

    I know it’s discouraging to see the perps get away with it, but in the corporate world, it happens every day.

    Betting on BP getting what they deserve has to be a long shot, but then again, these are politically charged times, with the Powers That Be desperate for a distraction/scapegoat to direct all the sheeple’s anger toward.

    Again, it’s very, VERY difficult to assess both how events will proceed and what will be the ultimate impact on BP.

    If you want to bet on that, be my guest …

  35. Vermont Trader says:

    “Enterprise value” = market cap + net debt-CASH.

    BR – Enterprise value is the total takeout price to buy the company at the current marketprice, assume all of the companies debt, and keep all the cash in the bank.

    It is the true price of a company at any given time/price and a company can have a stock price of zero and a Enterprise value in billions.

    One wouldcome up with an opinion of what BP’s Enterprise value would be in a given scenario and then decide which part of the capital structure to buy..

    I would also add that an experienced analyst, devoting 60 hours a week to BP, couldn’t answer all those questions.

  36. “A universal rule: Never allow a trade to become an investment.”–BR, above

    that, the above, has to be the, bedrock, Take-away of the scene, extant..
    ~~

    though, w/this:
    “4) Predetermine Your Losses: I told a client today that rather than buy the $100M of the common stock, i would figure out how much you were willing to lose on the trade.

    Lets assume its 10%.

    Rather than purchase the common, I would consider buying $10-15 million in LEAPs and Calls. A mix of in the money and out of the money strikes and dates a year in advance allows you to match the upside, with far less capital at risk, and a similar loss.

    Alternatively, you could buy half of any long position with common stock, filling out the rest of the position with options.

    If you go common stock, figure out what your stop loss is, and then stick to that discipline.

    Advice: Never make a trade or investment where the losses are open ended (ie, 100% or greater).”–from BR

    and, esp., given this: ““Investing?” What’s that? Besides the mutual fund rubes, who’s foolish enough to invest in anything in this fraudulent “market”?”–Jeff, @13:51, above

    BR,

    I’d wish you’d cover such Ideas (options, their Flavors, and their Utilizations) in greater Depth.

    It be a Fantastic Service to provide to those, the great many, that have been “mis-lead”/”Propagandized”/”outright, Lied-to” when it comes to Options, their Validity, their Value, and their ability to Reduce Risk..

  37. ZackAttack says:

    I’m seeing a meme now – such bullshit that one immediately suspects it’s a company plant – that criticizing BP is harming all those poor British widows and orphans. Things like:

    http://www.telegraph.co.uk/news/worldnews/northamerica/usa/barackobama/7815713/Barack-Obamas-attacks-on-BP-hurting-British-pensioners.html

    I got absolutely pilloried yesterday for suggesting that the fault in this cases lies wholly with the pension managers themselves because, you know, who the fuck twisted their arm to buy it in the first place? Since they did, these professional investment managers should have had sell discipline, some form of risk management or hedges on if the position was so critical to them.

    I honestly don’t see how I’m in the wrong here.

  38. rktbrkr says:

    New estimates double the amount of oil leaked…
    http://www.nytimes.com/2010/06/11/us/11spill.html?th&emc=th

  39. rktbrkr says:

    UK reaction to BP bashing

    http://www.nytimes.com/2010/06/11/business/11bp.html?th&emc=th

    an effective boycott would hit them right in the cash flow

  40. AHodge says:

    its a trade
    i am trying
    calendar multo spread
    sell 32 strike jan 11 leap calls,
    buy 30 strike jan 2012 leaps leg in with the buy first, debit spread uses no line in my IRA
    the vols are insane at shorter end so it only costs $3
    AND i pick up $2 if it above 32 at yr end AND i get a year 2011 leap starting jan 2011 now for cheap? if it goes bankrupt i out $3?
    how about they let the US subsidiary go bankrpt?

  41. Juno says:

    How long can BP tie this up in court, can anybody say? Look at EXXON, not long ago they made their final payment for the valdez spill in Alaska. (4bil total , 7 bil inflation adjusted). Nobody is talking about the litigation BP will likely take against the valve manufacturer, it was supposed to stop a leak in case of a blowout just like this. What percentage of liability will the manufacturer take at the end of the day? At least one other owner has a 30% + stake in this well. At worst, BP will only be liable for about 60% of the total cleanup. Even if this spill costs 100 billion and BP is 100% liable, what is that to a firm like this, spread out over 15 years, and pre-tax? – (6.67billion/year). Hardly an issue with pretax profit last year at 30 billion. – AND they can still pay their dividend every year. If the US closes offshore in the gulf what happens to unemployment then? good luck Obama, tight wire you’re walking buddy, having to deal with the idiots in your country wanting blood from thy own neighbors (Transocean being american, and 40% of BP stock held by US citizens, mostly retirees depending on the dividend). Oh yes, lets not forget those idiots boycotting BP outlets, only to buy BP oil at the station down the street under a different name. I guess if it makes them feel better… Also, good luck on that “special relationship” in the future if Obama tries to screw over BP, the US will be left without a friend in the world. Don’t think Canadians like you either, they only tolerate you because you buy their things, until China overtakes you that is… … … … … … … … … … … … … … Still trying to think of any other friends out there, hmm Japanese? Nope, nuked them, French? hahaha ils pensent que vous êtes stupide! Germans? mmmmaybe, only if you can keep affording their cars, Middle East? Asia? (all of it), Ya-right! , The Swiss? Nope, took money from their banks, Southern Europe? Nope, their broke and impotent, Russia and China? come now,… Oh there is one!! Australier mate! Yes!!! with all their nuclear and armed forces might,… wait.. no, they tolerate you less than the Canadians do.
    Evidence? Brasil, Russia, China, etc… already talking without inviting you to the pow-wow.
    Basically, screw with BP and you might find no other country ever willing to back you up again, then ya’l be start’n a war on yer own I s’pose, just like every other burned out empire at the end of its reign…

  42. [...] Astute Investor and Trader, Barry Ritholtz, just released a similar breakdown for his readers about … I will try to extrapolate further and go into even greater detail for my analysis. [...]

  43. Juno says:

    RE: Jason Burack

    This is sensationalist drivel. He quotes Simmons who is talking his own book, and he takes an unsubstantiated report about a new leak as fact. WRT his “nuclear option”, please…..if you believe that one then I am wasting my time replying, but since I guess I have to spell it out, here goes. Nuclear = radiation = more pollution, especially if (which is likely) the top of the very fragile gulf seabed overlying the oil reserves pops open like a cork and spews a billion barrels of radioactive oil into the gulf. He himself believes that another leak opened up because of the well explosion, but he thinks another (much larger) explosion won’t cause MORE leaks? YEE-HAA…. that’ll fix it, yankee style! He contradicts himself!! Simmons is gonna buy BP stock at some point in the next three months, mark my words. Next year, Americans will be asking, ” BP? was that something about a gulf between the ‘Inglush’ and ‘merika’? ” , and Iran will be the new target on the radar. To quote a well played song, “all my life, panic in america, whoa oh oh, trouble in america” . Funny watching all these politicians trying to bleed BP like it is the reason for the US debt. At some point BP will put up its hands and say, “fine, its a spill, we f***ed up,we’ll clean it up, but enough is enough, bu**er off now”