Myth465

I think this is a plan which will lead to disaster. I don't know what this free market you guys speak of is? What's free about the energy markets? You have massive government regulation. (much of it needed). Huge areas off limits to producers. (many of these should be off limits). Many areas of production controlled by other Governments which dont believe in your beloved free markets (Nigeria, Brazil, the Middle East). A cartel which has massive pricing powers. (OPEC) Subsidized consumers around the world. (World Governments tend to subsidize fuel) And massive externalities. The first thing that has too happen for any discussion on energy to be successful, is dropping the free market mantra. The markets are a tool to be used when useful.

Yes Peak cheap oil. The easy stick a stick in the ground 1950s oil gusher stuff is long gone. Now we deal with Deep Water, Tar Sands, Shale, and other complex ways of getting it. I think this is a bit short sighted. The inventor of a technology generally wins the game for a while. Once you invent or master something you inherent the expertise and basically own the industry. Then you get the Corporate offices and all the Corporate jobs / departments (CEO, CIO, CFO, Accounting, Ect). Its why the Oil capital of the world is in Houston (mastery / major source for a while), Finance in NY (mastery), and Tech is in Cali. If China gets the early patents then the major alt energy companies will be headquartered there, and the US will be the China of Alt Energy. Reverse engineering and taking the scraps. This is fairly simply, don't copy Spain but use the free market to come up with something. Fund research via Universities and Venture Cap similar to what was done with the Internet, and put a price / floor on fossil fuels which captures the externalities. If oil was guaranteed to never dip below $100 a barrel. Then people would have a target to beat. Right now OPEC can flood the market when the chatter gets to be to much and drop the price to $40 where no alternatives are profitable. Making anyone serious about making money unlikely to do much in this space. Tax it, dividend out some of that tax for consumers, and use some of it to fund alternative research / Capex upgrades. Also switch cars to nat gas, and give rebates for converting old cars. We are swimming in that stuff. The free market alone has rarely solved the nations problems or invented something trans-formative. The US Government (funding and taxing), US Universities (brain child), and US Army (main driver) working together has invented most of the high tech over the last 50 years. The free market makes things marketable, consumable, and viable once they have been invented and is great at improving things.

I cant believe their legal counsel is allowing this. It just looks weird. How do you get around the question of why not just do a buyback?

I dont know how anyone can invest in RIG or BP after watching this 60 minutes piece. http://www.youtube.com/watch?v=cLJHTTOSkpg I would hate to be that company man. He may very well be the most hated man in the US when the investigation is over. I think 40,000 wells have been drilled successfully. The company with the worst record in the industry blows that, and its not even a US company. Why when the dust is cleared would they be given another chance with more leases? Unless the deal is extremely lucrative why would other governments deal with said company. It seems like they will always have a competitive disadvantage.

Sine want BP to put an initial downpayment of $20 billion in escrow today. I dont think anything thinks thats all they would need, but many want it up front today with more cash calls further down the road.

Thats the scariest thing I have seen all week. If he is right, I can see deep water drilling be banned. I like Matt Simmons, but hope he is dead wrong. I wonder how Obama's speech goes.

The more I learn, the more I realize I don't know much and more importantly most people don't know much. Buy Low, Sell High. Hedge with cash or puts. Owning stocks basically means you don't think Armageddon is going to come and that things will eventually sort themselves out, with that said today was a great day. Hopefully it continues for a bit.

I never really hold it against a CEO for not owning stock. They have enough risk being in charge. The worst thing is to have a black swan event effect both your Job and your Net Worth. He should own a bit though, but thats how I look at it.

Well I think everyone is talking about 2 very different things. The economy is slowly recovering and the sky isn't falling, like the talking heads claim. But the markets are very jittery and anything / everything seems to set them off. The 2 over the short term are disconnected in my opinion and have been for quite a while. If I had to guess, the Economy is recovering but we are in for 8% + unemployment for a number of years. This thread is however about the markets, which are dominated by Fear and Greed. I see Fear very slowly taking hold. The dumb money at work (which likely includes me) seems to see this as a good buying opportunity. That tells me we are 1 major news story away from them being scared out. I think everyone feels fairly smart for getting in at 6k or 8k, but folks will want to lock in gains if it continues to drift down.

Many think Act 2 will be a Sovereign Debt crisis now that private losses have been socialized. The markets are very interest now because I can already hear the chatter. Its like we are 1 failed Treasury auction away from mass hysteria. Positive news sends the markets up 3 points and negative down 3 points. Anything remotely serious on the negative side will in my opinion cause a stampede.

I see the market trading side ways or range bound over the next few years. Short term depends on the news cycle, we have alot of events which are on the edge. Greece, Hungary, Europe, Oil Spill, Turkey, Israel, North & South Korea, Hurricanes, Iran, Double Dip Recession Fears. If any of these tipped over then the markets would correct hard in key sectors. My plan is to hold cash and buy on the pull backs in the affected sector. Sell when anything non core moves up fast and hard.

I would say we are / have been in a big contraction in Commercial realty construction for a while. I used to own URI and RRR, and they have been hit hard by the slow down in construction both commercial and housing. Projects were literally stopped over 2009 and 2010. You can google and see pictures of commercial properties mothballed right in the middle of construction. I sold RRR because they moved from repaying debt to refleeting because they saw a pick up in the market. The things you listed could destroy any business though. Severe slowdowns and the like. Even now we have been discussing what will likely be a very active hurricane season which could cripple insurers and turn on a hard market. Either way I dont think there is a why to compensate for these risks. You either feel that the price overcomes them or you dont. Thanks for the devils advocate though, its always useful.

Isnt every Insurance Business / Every Business in General exposed to black swans?

The only thing that can save them is the relationship between Obama and David Cameron. Notice that they are trying to get BP to pay for everything. Literally everything. They were talking about having BP pay for the offshore workers who cant work due to the Moratorium (some 150,000 workers). Then backed away. Now they want to reverse engineer a river and want BP to pick up the tab. Call me crazy, but that cash flow really gets used up with projects like these. Anyone who doesnt think the feds can spent BPs cash, hasnt been watching government in action. They will bleed BPs cashflow for years for this or will simply take the assets if people get pissed off enough. Americans dont love corporations that much to let this one go. I agree that People are silly or have no idea what they are getting into when they talk about BPs strong BS. Its oil millions of gallon of oil, floating in the water, and literally attacking one of America's coast. A coast that provides 40% of America's seafood and thousands if not millions of jobs across the impacted states. Every drop of news over the last few weeks has been negative. I dont think BP will get a break, even when they are actually capturing oil its negative because people figure out that the flow rate claims were too low. We have the difficulties with the relief wells, hurricane season, then various stages of the spill. The stock will drop when it moves deeper into the marshes, hits Florida beaches, gets into the gulf stream, hurricanes begin to spawn, dividend is cut, or when Tony Hayward opens his mouth. The time to buy if there is a time to buy is after all that comes out and we have a basic idea of the flow rate and costs per barrel. Then its a basic calculation and you have a picture of the balance sheet because you will ahve the potential liability charges. I agree, that offshore deep water drilling always will be a bet the company type of prospect. I respect Ken Peaks but think he is too close to this. Imagine if a Nuclear company CEO said he didnt want 1 reactor to be a bet the company type of deal and wanted a cap of liability. The existing cap is far too low, but goes out the door with criminal liability which I think is fair.

Auctually I meant Amex, they had a confirmed liability. I think this is closer to Amex and salad oil than Coke. Coke was just a no brainier. Also the article in that video is shocking, again why would anyone want exposure to this? As you can see Rig was mentioned as well. Buy the baby, and leave the bathwater.

I am going to have to agree with Harry, this seems like the best deal in the space. Plus one doesnt have to worry about hurricane risks. I plan to look into it a bit more over the weekend, but thanks for the link, and the lesson. Do you know what caused the losses from a reserve perspective in 2001 and 2002?

Its very interesting to me, that everyone seems to be saying the same thing. What CEO is growing top line by reducing rates and writing bad business. I think we are going to have to wait till the tide comes in. Everyone seems to be having panel decisions and investor presentations. Here are some others that I plan on listening to. http://irsolutions.snl.com/corporateprofile.aspx?iid=4078260 Webcast M&A Panel: M&A in 2010: Is It Too Early or Too Late? Tuesday, June 8, 2010 10:40 AM ET Webcast Professional Liability Panel: How Has the Pricing Dynamic Changed Post-Credit Crisis? Tuesday, June 8, 2010 2:40 PM ET http://phx.corporate-ir.net/phoenix.zhtml?c=148827&p=irol-IRHome Aspen Had an Investors day today as well.

Rabbit you bring up some good points. Payments over a period of time really only makes sense on structured products, but even then the raters shouldnt have to deal with the risks that the economy turns down and what not. I will have to throw his ideas out, but Roubini does have some great ideas concerning this in his new book. I feel as though you need some sort of rating systems for pension funds, and insurance companies. Perhaps it shouldnt be as relied on as it is now though, but that could be just to a basis for what we have in place.

It seems like any company which writes insurance related to natural disasters or catastrophes will naturally be excluded from your consideration. Your list includes 2 auto insurers and from what I see 2 specialty type insurers. The other insurers listed by others in the thread were hit with Chilean claims from Property Insurance in Q1 and may be hit with Horizon / Hurricane related claims for Q2, Q3, and Q4. Many predict an extremely active hurricane season with plumes of oil floating in the gulf. They would naturally be excluded because these large cats would push ratios above 100% from time to time. FFH would also be excluded even though many made a gigantic amount of money owning them over the last few years. TWA alluded to this when he discussed lumpy returns. Thanks for the list, I was more interested in the angle than the names. Now I have a better understanding of your rationale. I guess everyone has to pick their poison.

Here is a good site for actual research. http://www.rigzone.com/ They explain alot of the industry jargon (Cold Stacked, Warm Stacked, Ready Stacked, ect. ) and give you a good idea of what rig count numbers look like, where the major rigs are, and who the major drillers are. You can also get utilization by rigs and day rate information. Very useful if you like the detail side of things. http://www.rigzone.com/data/utilization_trends.asp http://www.rigzone.com/data/dayrates/ http://www.rigzone.com/data/rig_report.asp?rpt=op Let me know if you find anything really useful.

What I found interesting was your comment about the potential Career aspects of this move. Its fairly brilliant, especially if hedged. If wrong he says he was hedged and got 1 or 2 divs (everyone would forget the call in a few weeks) and if he turns out to be right he gets a similar legacy to Buffett and Coke. He would have to put 25% of his fund into it though, which wouldnt make sense because Coke had a confirmed liability, BP doesnt. Interesting stuff. Somehow I dont think Tilson is hedged though.

Not your fault. After some thinking I figured someone would say that so I edited my post. I tend to think its 1999, so 30 years back feels like someone is talking about the 70s, which was a horrible time. Even still I doubt most minorities yearn for the 80s. My girlfriend's dad (he lives in the Caribbean and went to college in the US in the 80s) and my dad both say the US is a paradise now compared to then, both aren't from the US. As I think about it more even groups such as Gays and the like would never want to go back based purely on the freedom and acceptance available now. You bring up a very good point, technology these days is especially new consumer goods and inst anything earth shattering baring the internet. MP3 players vs 8tracks and the like.

Very interesting Manual of ideas. I am planning on reading Stiglitz one of these days who talks more about what you posted. Also thanks for the Teledyne info, it was very helpful. --- In terms of being better off. I think it depends on context. Thats an easy yes for me, because I am a black male. Being able to drive freely around the country, eat at lunch counters, and generally enjoy life makes you simply feel better about things. Though 30 years may be a bit too close - 40 to 50 years is easily a no brainier. Given my circumstances. I am sure women would also very quickly say yes. The reasons would not be items that people typical quantify as standard of living though, and have nothing to do with economics. I would also argue that for the typical suburban American family in the 70s the standard / quality of life has actually gone down interestingly enough. They now need 2 incomes to afford a life which required 1 in the past. This is what makes test like this completely retarded. Zarley's comments were quite provocative but he has a point. You are especially calling for a Poll Test which has a very interesting history in America, which again wouldn't benefit someone like myself. I think you have a thesis and are trying to make it fit a problem vs. looking at the problem and coming up with fixes. I dont hold the American people in extremely high regard from an intellectual standpoint but believe we are hardworking and honest people who tend to pick capable leaders (probably with the exclusion of GW). Our officials very clearly understand whats going on and are fairly sharp (youtube moments aside). They are just highly incentivized to make the wrong decisions. I think they use ideology to justify these decisions. Remove the incentives (campaign finance reform, and laws disallowing the movement from Government to industry for a period of time) and you will get better quality decisions. Poll tests will do what they are designed to do. Disenfranchise people. ----- As Siglitz's would say about the only thing just about every economist from all ideologies agree on is that incentives matter. I would spend more time working on that vs ideology or Econ 101.

I wish I was a short seller. BP was pounded today. Down 18%. I was talking to a friend who worked their over the weekend who put a good chunk of 401k money into them, because of the balance sheet. He too thought they wouldnt cut the div. If they are down this far without the cut then what happens with it. This is the best analysis I have seen to date regarding BP. http://seekingalpha.com/article/209166-bp-spill-size-estimates-keep-growing-along-with-potential-costs?source=hp_wc There is now official recognition of the existence of vast submerged clouds of deep sea oil droplets ("plumes"). The existence of these were denied just ten days ago by BP CEO Tony Hayward. An article by Justin Gillis, Campbell Robertson and John Broder in The New York Times points out that there has not been an official connection of these dispersed oil clouds to the Deepwater Horizon well head. But no one has suggested any other source, either. http://money.cnn.com/2010/06/09/news/companies/simmons_gulf_oil_spill.fortune/ Simmons calls for a zero. What do you think is in store for the future of BP? They have about a month before they declare Chapter 11. They're going to run out of cash from lawsuits, cleanup and other expenses. One really smart thing that Obama did was about three weeks ago he forced BP CEO Tony Hayward to put in writing that BP would pay for every dollar of the cleanup. But there isn't enough money in the world to clean up the Gulf of Mexico. Once BP realizes the extent of this my guess is that they'll panic and go into Chapter 11. ----- Anadarko is interesting as well, they dont have deep pockets and may be on the hook as well. The interesting thing about the articles is I dont think you will see take overs without some sort of limit on the liability. Why would another company want a piece of this with so many known unknowns. Size of leak, plumes of oil, long term impact on the US's second best seafood source, criminal charges....

I was looking towards reading Friedman, but opted not to. I watched probably 8 hours of video with him or about him instead and understand the basic idea of what he was getting at. In one CSPAN interview he talked about license requirements and said he believed prices would come down for things like Taxis and Accounting services if we removed the certification requirements and let the market work. He believed people who did bad jobs would develop a reputation and be shunned by the market. People who did well would thrive, and more people would come to the industry due to the lack of certifications. The false sense of security is interesting though and is something I see everyday in the accounting world. Continuing education helps a bit, but its always tough to gauge the quality of the options. With that said, I am very much apposed to re-certification from a purely selfish perspective. 1 set of tests is more enough.