trading range

The market is still in a trading range. 1000-1100 for S&P500 and 10800 to 11800 for TSX. Energy stocks are due for a rebound (not BP). Chinese property market is cooling off dramatically. Major cities are seeing 60-80% down in sales.

Gold is becomging a new reserve among developing countries. It will trade between 1050-1300 this year.

BP in the news again

Finally, the news media and the market started to think the possibility of BP bankruptcy. New York times published an article about BP today to speculate the worst case scenario. I actually pointed this possibility in my blog on May 1 and May 21st. I would like to discuss the the most likely outcome. Since BP is a UK company and the failure of BP will cause panic and market crash in U.K., U.K government probably will negotiate a deal with U.S. on behalf of BP. It will be structured like a tobacco liability deal. BP will pay 10-20 billion dollar a year for next 5-10 years. BP will avoid bankruptcy and U.S. government and legal compensations will be paid.

wealth impact

The stock market decline will have a negative impact on economy. I would be very cautions on Canadian market because of exposure to commodities. I read that Chinese steel companies for the first time this year lowered their steel prices. This is not a good sign for mining companies. U.S. Market may perform better in short term because of lower energy price, low interest rates and continuous of deficit spending. But over long term, there are many negatives: higher taxes, higher energy prices because of supply situation in deep sea drilling, and higher interest rates due to budget pressure.

The market is in deep trouble

The employment number is not good. Europe problem is spreading and oil spill is not contained. The market is in trouble today. I will not be surprised if the market goes down 250 points. I will put an order in for 100 TCK.b @30 and 200 BAC@14.80

BP's attemp

BP has put the cap on. But from the live feed, I can see the oil spill has increased at least 50%. The cap is not tightly fit and oil is coming out from sides. I do not think BP can contain more than 50% of the oil.

a critical day for BP and the market

Today BP is going to try cap the leak. If successful, BP probably will survive and the market will have a relief rally. (There will still be problem if the hurricane season is active. Oil can not be collected if a hurricane forces out collecting ship).

If the cap fails. I doubt BP can survive. BP is spending 30 million dollars a day right now. It will be 3 billion dollars for 100 days. The additional cleaning cost will be at least 10 billion dollars. The legal and economic compensation costs will not be cheap. My guess the total cost will be at least 40 billion dollar.

Take some profit if the market goes up today.

BP and The market is in trouble

Just as I predicted, BP is in deep trouble. I will not be surprised that BP goes to bankruptcy protection if the new cap method fails. It will have a huge impact on U.K banks and the whole market.

I sold 100 TCK.B @35.50 today. (bought @31.50 2 weeks ago).