The action in BP over the last 3 weeks is typically of what happens when stocks get severely oversold and or over shorted. Just like the companies I mentioned above when bad devastating news come out many stocks don't tend to go down as bad as first as many are either not following the news flow, just listening to the media who by the way are agents of such companies, analysts who are whoring around for the next I-Banking deal, or just cant believe the news. They simply don't know whats going on. On April 20th, the Horizon Deep Water Drill that is owned by Transocean and leased out to BP exploded. Transocean or RIG as we call it in "Trader" land was humming along near its yearly highs. In fact the stock hit 92.67 on that day and closed at 92.03 up all most two points from its close on the 19th. The stock closed at 88.29 on the 19th. Incredibly on the 26th of April (which also happens to be my birthday), a full 6 days after the explosion RIG was trading a full point and half higher (89.54 Intraday High) than its close a day before the explosion. This after the news was already out. What was happening was the media (MSNC, BBG, CNBC, FOX) were covering up for its corporate benefactor's and Wall Street (GS, MS, BAC, JPM, others) were covering up for its clients. They simply didn't know enough so they lied and told everyone that its wasn't such a big deal. There is nothing wrong with saying "I Don't Know" or "Let Me Do Some Research", it is all about the spin. This was a serious explosion that everyone in the media missed and badly botched up. Thank god we have blogs and real investigative journalism. Twitter was first on this story the day it happened. People from the Gulf were "Live" Tweeting this story but many of the Sheep that make up the vast majority of our country simply didn't listen or pay attention to the real media which are blogs and Twitter. After the media had badly under reported this story they got in hyper gear and started doing their jobs. That is when both BP, RIG, the entire energy sector, and the broader market started to cascade down. The same stock analysts and media outlets who were telling you that the spill was only 1-5K barrels a day were now telling you its 25K or 50K a day. The only number that was going up was the estimates for the damage. BP themselves stated that the damage was contained and that the spill rate was 1-5K a day. This is the same kind of rhetoric that Lehman and Bear Stearns used to make their companies stock from going down. They wanted to stabilize the losses bu plainly lying. How many times leading to the crisis did we have stock analysts and the media tell us that Sub Prime was not a problem? That potential losses were contained? We don't have that much exposure? Derivatives? What are they? We don't have many bad mortgages. We have sufficient capital to cover losses. Well at the end of the day all the banks had were bad mortgages and even worse losses. This was the story that was told by the bank executives. This was then spoon fed to the sheep by CNBC, Bloomberg, and other corporate owned media outlets.
The BP fiasco is 100% no different. Analysts from Goldman Sachs, Morgan Stanley, Deutsche Bank, and BAC firstly all said that the spill was not a problem. The spill was contained. After we found out that the spill was not contained the real lying and spin began. This is no different from finding out that sub prime and housing was indeed a problem. Generally what happens is that the powers that be firstly flat out deny that a problem exists. After they can't deny that there is a problem, the same original problem that didn't exist is not as big as its being portrayed. This is just like housing/sub prime if you remember. After there is no denying the extent of the problem is when it really gets interesting. Interesting in the sense that the lies get bigger and more out of control, all done to keep a rotten to the core system, a system that now has been exposed for being a fraud upright. The entire BP scandal is no different than what happened with housing, or the dot com meltdown, or even the savings and loan mess of the late 80's. Once the Tasmanian Devil is out of the cage everyone is in the mode of letting everyone know that its not a Tasmanian Devil but a cute little kitten. Its a total disgrace that the sheep keep falling for. I can only hope that with the advent of Twitter and the many real investigative blogs that the media will wake up and start reporting the real news. Hope is a dangerous word in a democracy that has been over taken by lobbyists and corporate media.
But the bigger picture here is that even after BP has capped the well there are numerous potential issues that BP and the public has not taken into account. How about this story?
http://www.google.com/hostednews/ap/article/ALeqM5gIXWYBTpLtSayJtg41LKXpxSxVPAD9H1N4B05
Or this....
http://uk.reuters.com/article/idUKTRE66H0X820100718?feedType=RSS&feedName=businessNews&utm_source=twitterfeed&utm_medium=twitter&utm_campaign=DTN+Financial:
BP is following the same deadly script that many companies have followed. That script always lead to bankruptcy.
How many times did we hear that Lehman or WAMU was out of danger? How many times that Lehman will survive if they can raise some cash or better yet receive a take over? We heard that WAMU was saved when PE firm TPG bought a huge stake in the company. WAMU subsequently doubled after this announcement. TPG was wiped out when the FDIC heisted the company and handed it over to JPM. BP is following this lead. All the information that is "Flowing" out about BP is just a way for long term investors and insiders to dump stock before the inevitable happens. Just like WAMU and Lehman. Use every opportunity to dump BP at higher levels. This company is absolutely finished and has no future. Obama might have been lax in his early handling of the BP affair, but he has done a very good job of making BP accountable since. Being President is a thankless job. For every action Obama does there are 25 counter actions that say he was wrong. You simply cant do that job in a vacuum. Obama was unable to act on BP and the spill earlier because everyone on the right would have blistered him for over reacting and not letting the free markets handle it. Every one on the right has been on the Socialist tilt since the day we found out who Barack Obama is. He simply had to wait it out a few days. There was no option for him.
Like a "free" market actually exists. That in itself is a myth. There is only one market and its hardly free by the way.
Again the bigger picture is this. The way Lehman was handled was devastating for the global capital markets. Lehman should have been allowed to go into liquidation and bankruptcy in an orderly fashion. The way Lehman went into bankruptcy was in itself a preposterous situation. There were simply too many moving parts and too many unknowns for it to simply file for bankruptcy on that Monday morning.
BP is a potential Lehman in the works. In fact its going to rock the world. Rock the capital markets. Rock the banking establishment. BP as an energy company has direct access to hundreds of billions in cash at its disposal. Energy companies are cash havens. They are huge players in the OTC swap markets. Huge players in the Libor/Euribor/SONIA funding markets. Trillions in counter party exposure is tied up in BP paper. Most of this counter party risk is centered around the big multi national banks. The potential counter party dislocations are site unseen. You heard it hear first. When BP goes and its going the carnage that will be felt will make Lehman seem like a walk in Central Park on a sunny day.
I surely hope that regulators, policy makers, bankruptcy lawyers/judges, and most importantly central bankers are ready for this earth shattering event. My guess is that all of these entities that are supposed to know what is going on are simply acting like ostrich's with their heads in the sand. You can't keep printing money. There are not many trees left in this world and the electronic digits will just throw back a Visual C++ error when the next round of global QE begins.
Heck! These guys still don't believe we have a global sovereign debt crisis so why would a potential BP bankruptcy surprise them.
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