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  • Great Entrepreneurs Break The Law [View instapost]
    Thanks ;-) Your comaparison to the cannbis business is quite relevant. I believe that those who are in the right place at the right time when legalization becomes a reality, will make a fortune.
    Ex,Microsoft, Jamen Shively, have obviously reached the same conclution.
    But until then, mariuana growers will remain outlawed.
    Jun 7, 2013. 12:12 PM | Likes Like |Link to Comment
  • Yara: A Cheap, Healthy, Growing And Overlooked Agriculture Pick [View article]
    and here's some more:
    http://bit.ly/wI3Ds1
    Jan 22, 2012. 09:47 AM | 1 Like Like |Link to Comment
  • Yara: A Cheap, Healthy, Growing And Overlooked Agriculture Pick [View article]
    makes fertilizers
    Jan 21, 2012. 02:05 PM | Likes Like |Link to Comment
  • Yara: A Cheap, Healthy, Growing And Overlooked Agriculture Pick [View article]
    A well-run company in my experience...
    Jan 21, 2012. 10:24 AM | Likes Like |Link to Comment
  • The Absurdity of the French-German Euro Summit [View instapost]
    Thanks !
    Interesting details.
    Sep 13, 2011. 05:50 AM | Likes Like |Link to Comment
  • “European Leaders Have Failed” [View instapost]
    That pretty much sums it up..
    Aug 15, 2011. 03:11 PM | Likes Like |Link to Comment
  • And you thought BP was just an oil company? It is interconnected with the larger economy in many ways, but its role as a major player in the derivatives market could prove particularly destructive if it defaults, Econotwist says - even worse than Lehman Brothers.  [View news story]
    I salute you - and respect your serious comments.
    However, I'm not out of ammuntion, yet:

    Reuters:
    "There are some notable positions particularly among the large commercial hedgers like oil companies, that pose a moderate risk though not an alarmingly large one," said Darrell Duffie, professor of finance at Stanford University in California.
    "If a large industrial company fails and its counterparty was depending on their performance, the counterparty would be harmed unless they provided collateral," he said.

    BP is one of the largest corporate users of derivatives and enters into commodity and other private derivatives, in addition to exchange traded contacts. The company reported around USD 10 billion in derivatives assets and over USD 9 billion in liabilities at the end of the first quarter.

    And here's the case of point:
    Royal Dutch Shell also reported USD 20.45 billion in derivatives assets and USD 18.74 billion in derivatives liabilities at the end of 2009. Derivatives assets at the company had been as high as USD 40.62 billion at the end of 2008, while liabilities stood at USD 38.87 billion.
    Do you really think there's that much of a difference in the two companies derivatives holdings?

    Knight's Yelvington:
    "Ultimately the risk posed by industrial companies will depend on how effective hedging strategies employed by their bank counterparties are."
    Do you know who BP's bank counterparties are? Or how effective their hedging strategies are?

    You keep going on about BP's physical assets: in my experience the true value of the assets don't matter much when the market loose its confidence in company's ability to honor their liabilities.

    BP Group has total assets of $236bn - net worth is $102bn. - share capital 5,2bn (now; about 3bn).

    Total liabilities per December 31. 2009: $134 billion - than you can add the recent clean up costs, the skyrocketing funding/financial costs and a number of billions in settlements, law suit related expenses and new fines.

    Sounds reassuring to you?


    By the way; of estimated net proved reserves of liquids (10,5bn barrels) 5,6bn comes from BP subsidiaries, 4,8bn is equity-accounted entities.

    Estimated net proved reserves of natural gas (45,1bn cubic feet), 40,4 from subsidiaries, 4,8bn is equity-accounted entities.

    Net proved reserves on an oil equivalent basis (18,3mn barrels), 12,6 subsidiaries, 6,7bn equity-accounted entities.

    No paper assets?

    What's your definition of a SPE?

    Need to know before I continue....
    Jul 8, 2010. 09:58 PM | Likes Like |Link to Comment
  • And you thought BP was just an oil company? It is interconnected with the larger economy in many ways, but its role as a major player in the derivatives market could prove particularly destructive if it defaults, Econotwist says - even worse than Lehman Brothers.  [View news story]
    Well. I’m the idiot/moron/fool who wrote the article in question.
    This idiot has in fact read several of BP’s annual reports, and let me quote from the 2009 annual:

    Derivatives:
    “Gas and power marketing and trading activity is undertaken market both BP production and third-part natural gas, support LNG activities and manage market price risk as well as to create incremental trading opportunities through the use of commodity derivative contracts. Additionally, this activity generates fee income and enhanced margins from sources such as the management of price risk on behalf of third-party customers. These markets are large, liquid and volatile.”
    “In connection with the above activities, the group uses a range of commodity derivative contracts and storage and transport contracts. These include commodity derivatives such as futures, swaps and options to manage price risk and forward contracts used to buy and sell gas and power in the marketplace. Using these contracts, in combination with rights to access storage and transportation capacity, allows the group to access advantageous pricing differences between locations, time periods and arbitrage between markets.”

    BP has been able borrow with AAA yield anywhere on the curve and lend to less credit worthy entities at attractive spreads. These lending differentials are the fuel of the $430 trillion Interest Rate Swap OTC market.
    BP has been able to spin off $20 billion of earnings for the last 5 years, and $15 billion in cash last year.

    Accounting
    “Natural gas futures and options are traded through exchanges, while over-the-counter (OTC) options and swaps are used for both gas and power transactions through bilateral and/or centrally cleared arrangements.”
    “These contracts (OTC) are typically in the form of forwards, swaps and options. Some of these contracts are traded bilaterally between counterparties; others may be cleared by a central clearing counterparty. These contracts can be used for both trading and risk management activities. Realized and unrealized gains and losses on OTC contracts are included in sales and other operating revenues for accounting purposes.”

    This moron does in fact know the difference between mark-to-market and accrual accounting, and why the OTC contracts are included in “sales and other operating revenues for accounting purposes,” which totaled $213 billion in 2009, in where sale of crude oil through spot and term contracts amounted to $35, 6 billion.

    Off-Balance Sheet
    “BP uses derivative instruments to manage the economic exposure relating to inventories above normal operating requirements of crude oil, natural gas and petroleum products as well as certain contracts to supply physical volumes at future dates. Under IFRS, these inventories and contracts are recorded at historic cost and on an accruals basis respectively. The related derivative instruments, however, are required to be recorded at fair value with gains and losses recognized in income because hedge accounting is either not permitted or not followed, principally due to the impracticality of effectiveness testing requirements.”
    “Gains and losses on these inventories and contracts are not recognized until the commodity is sold in a subsequent accounting period.”

    According to the 09 annual statements, financing agreements of $6, 48 billion is held off balance sheet. Additionally, the BP group has issued third-party guarantees with amounts outstanding at $319 million of liabilities of jointly controlled entities and associates, and $667 million in respect of other third parties - also off balance sheet.

    Contagion
    BP’s subsidiaries in the Gulf – Arosa Funding Limited, Halliburton, Anadarko Petroleum, Transocean Inc., and Cameron International – are all placed under credit watch with negative outlook.

    BP own (fully or partly) 3.689 refineries around the word, and 22.400 retail sites. These retail sites are not just gas stations, but increasingly expanding into new areas like food and clothing.

    This fool does in fact understand the difference between Enron, Lehman, Bear Stearns and BP. But he also sees the similarities; these companies failed because their primary assets deteriorated rapidly, which in turn triggered materialization of their exposure to the derivative market, resulting in insolvency and finally default.

    Liquidity
    BP borrowed $11 billion in 2009, and have (as of January 2010) $34, 6 billion in debt – most of it cut in pieces and sold worldwide through their banking network as a mighty fine collection of collateralized, securitized, synthesized and highly leveraged fixed income assets.

    BP’s issue of CSOs equals 18% of the global total rated by Moody’s.

    BP’s credit rating has been cut to junk by Fitch, to BBB from AA. As a result, the price of BP’s Credit-default Swaps has jumped to nearly 600 bps, up from 44.

    One of BP’s 5-year bond series, maturing in 2012, was recently trading with a yield of 9, 48%.

    And on top of this, BP is supposed to come up with another $50 billion to clean up the oil spill, as public pension funds are preparing to sue the company for the money they’ve lost by investing in BP shares.

    Now, before you call someone an “idiot”, a “moron” or “fool”, be sure you know what you’re talking about, or you will be the one ending up looking stupid….


    SOURCES:
    (1) 06-21-10 BP's Bankruptcy Would Impair 117 (18% Of Total) Collateralized Synthetic Obligations, Lead To Pervasive Losses Zero Hedge
    (2) 06-16-10 BP CDS Curve Goes Nuts, 1 Year Passes 1,000 Bps, No Offers In Market Zero Hedge
    (3) 06-25-10 BP Getting Crushed: What Does its ‘Yield Inversion’ Mean? WSJ
    (4) 06-28-20 Interactive timeline: BP oil spill disaster Financial Times
    (6) 06-25-10 BP reassures on cash pile as shares plunge Financial Times
    (7) 06-18-10 Macondo, in historical Hollywood context FT Alphaville
    (8) 06-10-10 BP short interest, other facts and stuff (updated) FT Alphaville
    (9) 06-24-10 BP Bankruptcy in U.K. Is Obama’s Worst Nightmare Caroline Baum Bloomberg
    (10) 06-21-10 BP and Anadarko turn on each other FT Alphaville
    (11) 06-20-10 Internal BP Document Confirms Matt Simmons' Worst Case Prediction Of Spill Rate Of 100,000+ Barrels Per Day Zero Hedge
    (12) 07-01-10 ”Sultans Of Swap” Tipping Point
    Jul 3, 2010. 05:31 PM | 1 Like Like |Link to Comment
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