Why BP should deny everything and brace for impact
Baltimore, Maryland 鈥� Sittin鈥� on the dock of the bay鈥�
Watchin鈥� the tide roll away鈥�
鈥� 鈥�(Sittin鈥� On) The Dock of the Bay鈥�, Otis Reading
We鈥檙e glad we鈥檙e not sitting on the dock of the bay in Biloxi or St. Petersburg. There鈥檚 oil coming that way鈥nd it鈥檚 not the kind you can burn in your lamp.
The newspapers say there are huge globs of oil beneath the surface鈥r floating on the top. You鈥檇 think you could just pump it up. At $70 a barrel, you鈥檇 think you could make money scooping up the 鈥渟ea oil鈥� in the gulf. Probably better than shrimping.
Instead, everyone is complaining about it鈥nd threatening to put BP executives in jail. Yesterday鈥檚 cover story in The Financial Times told us that the head man at BP has admitted error.
鈥淏P 鈥榥ot prepared鈥� for spill鈥�
We hope he had a good talk with his lawyers. 鈥淣ot prepared鈥� sounds like an admission of negligence. Maybe criminal negligence.
There are billions in lawsuits coming up鈥nd the attorneys around the Gulf are slicker than an oil spill. The English don鈥檛 realize what they鈥檙e up against鈥n Alabama lawyer in a seersucker suit鈥alking to an Alabama jury鈥bout how a British billion-dollar company destroyed their lives and livelihood.
They鈥檙e going to use every word Tony Hayward says against him.
Nobody is going to thank him for keeping his auto running. No one is going to think about where the oil comes from that he uses to heat his house鈥r how he draws electricity from an oil-fired power plant. No one in the entire state of Alabama is going to stand up for BP鈥ertainly not an elected official.
鈥淵ou have no idea how this works,鈥� said a Washington friend. 鈥淭he shyster lawyers are all in tight with the lawmakers. Many of them are shysters too. That鈥檚 why Obamacare is so tilted towards the lawyers and the pharmaceutical companies. They鈥檙e all in cahoots.
鈥淎nd now this oil spill is going to set off a feeding frenzy on BP. The shyster lawyers are drawing up their class action strategies now. And you鈥檒l see public interest groups get into the action. These guys are smart. And they鈥檙e very well funded. They鈥檙e going to short BP shares鈥nd then announce a $20 billion lawsuit. And every pseudo environmental group鈥nd trade organization鈥nd labor union鈥nd city council鈥nd cracker-jack collection of meddlers anywhere within 100 miles of the coast鈥hey鈥檙e all going to be looking at that pay day鈥hen BP settles for鈥hat?鈥�$100 million鈥�$1 billion鈥ho knows. But they can invest millions in the case, because they know the payoff will be huge. They鈥檙e just fighting for position now鈥eeing who can put together the winning jackpot case鈥� It鈥檚 sickening.鈥�
Legal advice to BP: deny everything. You weren鈥檛 there. Deepwater what? Then, tell litigants that you will never settle any case, no matter how big or how rich. That will vastly increase the investment capital the shysters need to raise.
BP鈥檚 share price has plummeted. Some people think it is time to buy. Might be a little too soon. Our guess is that estimates of the damage are going to balloon even higher as more and more lawyers begin to see that thanks to BP they can win the lottery without buying a ticket.
Also, we suspect that a downturn is coming in the entire energy sector. Why? Because energy use grows with GDP growth. And we suspect we鈥檙e in Deep Doo-Doo there too.
Savings rates are rising all over the world 鈥� in developed economies and in emerging economies. That means GDP growth should turn down.
From Yahoo Finance:
Americans pulled back on their spending in May after a tepid April, underscoring how fragile the consumer spending recovery remains, new data released Thursday show.
Cool weather and a quirk in the calendar 鈥� a late Memorial Day weekend that hurt May鈥檚 business but should boost June鈥檚 figures 鈥� dampened spending on almost everything from clothing to major appliances. The figures, from MasterCard Advisors鈥� SpendingPulse, include spending in all forms including cash from May 2 through Saturday.
But weakness in the past six weeks is due to more than thermostat and calendar flukes, analysts said. They cited unemployment, stock market jitters and the end of government funded rebates on energy-efficient appliances.
鈥淚 don鈥檛 think you can explain away all the weakness just based on the calendar shift,鈥� said Michael McNamara, vice president of research and analysis for SpendingPulse.
People are reluctant to spend for all the usual reasons鈥nd some new ones. In the past, people have feared losing jobs. Never before in recent history have they feared that the government would go broke.
Just ask young people what they expect to get from Social Security or the new Medicare program. They know the score. The old folks stacked the deck against them. All the aces come up first 鈥� while the boomers are still in the game. Then, nothing but low cards.
鈥溾�楽ittin鈥� on the dock of the bay鈥� was a protest song,鈥� a communist friend once explained. 鈥淚t鈥檚 about blacks who came to look for work in San Francisco and then couldn鈥檛 find a job.鈥�
Maybe so.
Another report tells us that the corporate bond market is practically dead. Corporations can鈥檛 raise money for expansion鈥nd don鈥檛 seem to want to. They鈥檙e being shut out of the credit market by government 鈥� particularly the US government. Bond rates are so low buyers don鈥檛 have much to look forward to 鈥� whether they buy the corporates or the Treasuries. They figure they might as well go for Treasuries. At least they鈥檒l be sure to get paid back.
This year, the US government is expected to borrow an additional $3 trillion. That doesn鈥檛 leave much money for the private sector. Which is why The Wall Street Journal report is surely correct; more and more people are going to be sitting on the dock of the bay鈥r watching TV. Unemployment is still increasing in most cities.
China Daily seemed to capture the underlying trend better than anyone. It鈥檚 headline:
鈥淲est moving towards deeper financial abyss.鈥�
Into the Deep Doo Doo, in other words.
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