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  • Will BP Go Bust?  [View article]
    "A clause buried deep in the U.S. Clean Water Act may expose BP and others to civil fines that aren't limited to any finite cap -- unlike a $75 million limit on compensation for economic damages. The Act allows the government to seek civil penalties in court for every drop of oil that spills into U.S. navigable waters, including the area of BP's leaking well.

    As a result, the U.S. government could seek to fine BP or others up to $4,300 for every barrel leaked into the U.S. Gulf, according to legal experts and official documents.

    So far, analysts and experts calculating potential oil spill liabilities have mostly concentrated on the cost of the clean-up and compensation for economic damages to affected parties. Some have also discussed criminal liabilities.

    But the potential for civil fines has received scant attention -- and they could add up very quickly, depending on how aggressive the U.S. government is in pursuing them."
    Jun 3, 2010. 03:58 PM | 2 Likes Like |Link to Comment
  • Following the Smart Money Into General Electric  [View article]

    GE is "mischaracterized" as being chiefly a financial company, because the use of leverage distorts comparrison with GE's other business units. At its peak, GE Capital generated about 50% of GE's profits--a level that is not likely to be matched in the foreseeable future. GE Capital currently contributes about a third of parent sales and 10% of profits although those numbers should change dramatically as GECC loan losses recede.
    May 31, 2010. 10:46 PM | 2 Likes Like |Link to Comment
  • Following the Smart Money Into General Electric  [View article]
    Having watched GE advance to the high nineteens and then retreat to the mid-sixteens, my finger itches to pull the trigger, but I can't bring myself to do it for a couple reasons. First, GE is in so many businesses and operating in so many countries, it is hard if not impossible for the individual investor to understand this multi-tentacled conglomerate. Second, GE Capital, like most other complex financial companies is overwhelmingly opaque and difficult to analyze.

    The title of this article says it all. If you follow "the smart money," you might do well. I listen to what the smart money says, but I've learned that smart money isn't always right and how they feel about a particular investment today doesn't necessarily mirror what they will think or do tomorrow. Betting on GE has to be a bet on the wider economy. To add to that I'm not convinced that "the smart money" is diving into financials, but disagree when someone calls GE a financial stock. It's a conglomerate with a very large financial arm. For now, I'll stick to equities that are more easily understood.
    May 31, 2010. 08:28 PM | 4 Likes Like |Link to Comment
  • Cramer's Stop Trading! Hot Town, Summer in the Citi (5/27/10)  [View article]
    Meredith Whitney is predicting a double dip in the housing market, and states that “a vast majority of last year’s profits for the banks were government-induced. The government is putting a life guard on duty so that people will play in the pool.” Whitney has also suggested that there could be another dip in the consumer credit market.

    Whitney could be wrong and Cramer could be right. I'd put my money on Whitney in this argument. Even if banks muddle through, I doubt their profits will head skyward any time soon. The real question is how many retail investors actually understand bank financials, knowing that bank auditors don't even understand bank financials themselves. Prior to the crash, banks were fat on profits that aren't coming back any time in the foreseeable future. Bottom lines were bolstered by credit card and mortgage related profits that probably won't be seen again for years. We all should know that those profits will not return in the foreseeable future. If anything, the fact that these assets are not marked to market and that red flags are going up all over the place regarding huge amounts of commercial real estate exposure--then throw in uncertainty about how things will sort out in Europe and your odds of being right on the direction of bank stocks are about the same as picking red or black on a roulette wheel.

    Banks will probably muddle through because it's in the national interest for them to do so. That doesn't mean that happier days are just around the corner.
    May 29, 2010. 04:57 PM | 1 Like Like |Link to Comment
  • Cramer's Mad Money - 12 Stocks to Buy at Their 52-Week Highs (5/26/10)  [View article]
    As entertaining as Jim Cramer is to watch, I'd like to introduce a new term to discussions relating to Cramer and Mad Money. That term being 'Cramernesia.' I'd define the term to refer to the host or one of his viewers as suffering from a form of amnesia. How many Mad Money fans have been broadsided when finding that somewhere in between hearing BUYBUYBUY!!! and "DON'T BUY DON'T BUY DON'T BUY or worse, SELL SELL SELL, that Cramer's trust has bailed on long term recommendations?

    The advantage to being an individual investor is that when you're wrong on the market or a particular stock, only you know about it. We have the luxury of making a bad decision and bailing the next day. Cramer has to stand there with a straight face and pretend he what he said today doesn't completely contradict what he said last week or last month. Unfortunately it happens on such a regular basis that his recommendations become meaningless

    I've often wondered why no one has created a site--call it Cramerneisa--where Cramer can be called out on his frequent boneheaded recommendations and his fawning adoration of guest CEO's who as often as not should change their names to 'Rosey Scenario."
    May 28, 2010. 08:29 PM | 1 Like Like |Link to Comment
  • 'Top Kill' 1.0 Has Failed. BP Is Now Trying Version 2.0  [View article]
    The problem with your "bad news is already out" theme is that oil is still gushing into the gulf and no one knows how long it will continue. Eventually the pressure in the reservoir will subside, even without intervention, but when that might happen is unknown. The fact that this accident appears to have been caused by negligence on BP's part makes the actual cost when all is said and done, much harder to estimate. While the focus has rightly been on the ecological damage being done and the related impact on local fisheries and tourism, we have yet to hear from some of the players being punished by the BP caused government mandated cessation of exploration drilling in the gulf.

    If you add the billions in business lost to the likes of Transocean, Baker Hughes Oceaneering Int'l and whole drilling and supply chain for deepwater drilling, not to mention increased insurance costs, lost opportunity costs to producers, investor losses (the list goes on and on), you can reasonably come to the conclusion that the total losses caused by this disaster are at present incalculable.

    In short, the urge to place a bet on BP after seeing the mauling it has taken in the market is nothing more than that--it's a wager made against unknown odds.
    May 28, 2010. 07:05 PM | 2 Likes Like |Link to Comment