Baltic Dry Index. 3354 -05
LIR Gold Target by 2019: $3,000.
Over 2,500 personnel are now involved in the response to the oil spill in the Gulf of Mexico. The response includes efforts to protect the Gulf coast, to contain the spill offshore at the surface and to stem the flow of oil into the water from the sub-sea well. The onshore activity is focused on locations including: Venice, Louisiana; Pascagoula and Biloxi, Mississippi; Mobile, Alabama; and Pensacola, Florida. BP Group Chief Executive Tony Hayward said: "BP is fully committed to taking all possible steps to contain the spread of the oil spill."http://www.bp.com/bodycopyarticle.do?categoryId=1&contentId=7052055
More on tigers later and we aren’t talking about Esso, predecessor name for Exxon’s 1970s advertising campaign promoting branded petrol sales. This tiger was a Squid that slipped out of its cage and set about devouring the clients. For more on Wall Street pussycats gobbling up their clients scroll down to Crooks and Scoundrels Corner.
We open this morning with the good news that for now, an ecological disaster has still not occurred in the Gulf of Mexico, though the oil well is still spewing an unknown quantity of oil into the Gulf each day. Below the Washington Post covers the beat as BP’s hapless CEO heads into town to face the bear pit.
Oil spill crisis a setback for BP and its chief executive
By Steven Mufson
Washington Post Staff Writer Monday, May 3, 2010
On the day he got news that the Deepwater Horizon drilling rig caught fire in the Gulf of Mexico, BP chief executive Tony Hayward received a series of crisis updates in his London offices. The rig belonged to Transocean, but BP had leased it to drill an exploration well and BP bore legal responsibility for any consequences.
The grim updates were interspersed with long silences. One person there said that on several occasions, Hayward asked, "What did we do to deserve this?"
Twelve days later, Hayward is grappling with the widening oil slick from the damaged well -- an environmental crisis for the Gulf Coast states, a political crisis for U.S. offshore drilling and a corporate crisis for one of the world's biggest oil giants.
"This accident not only sets back BP, but could hurt it for years," said Fadel Gheit, an oil analyst at Oppenheimer.
On Sunday, the third anniversary of his becoming BP's chief executive, Hayward began his day in Houma, La., flew to a convention center in Mobile, Ala., where a new oil spill command center has been set up, and then went on to Venice, La. There, he planned to meet with local officials and others worried about the slick menacing the shore.
On Monday, he will be in Washington, running the gantlet of federal officials and members of Congress, many of whom are eager to tar BP with blame for the incident. Before the accident, he had expected to be in the United States giving a speech and promoting a climate change bill. Now, he will face questions about whether BP underestimated the risk and consequences of a well failure.
"Whatever else this is, it's a massive blow to confidence," said a senior BP insider who spoke on the condition of anonymity because he wasn't authorized to talk publicly.
The price tag for the disaster increases day by day. The company says it is spending $6 million a day on response efforts. Drilling a relief well will probably cost more than $100 million. The Defense Department says it will hand BP the bill for paying Louisiana National Guard troops, and the Environmental Protection Agency says it will charge BP for air monitoring. Covering damages to coastal fishermen, tourism businesses and residents could cost billions more. BP will pay 65 percent of these costs; its lease partners Anadarko Petroleum and Mitsui will pay 25 and 10 percent.
BP's share will come straight from its own pocket. "We are self-insured as a matter of policy -- you cannot insure these kinds of risks," a BP spokesman said.
Alabama Attorney General Troy King said Sunday night that he told BP representatives to stop circulating agreements offering coastal Alabamians $5,000 if they give up the right to sue the company. A BP official said the offer was part of a "standard waiver" to fishermen that was "inappropriate" and was "swiftly discontinued."
-----But when Hayward became chief executive, he wanted to make changes. A geologist who made his career on the oil exploration and production side of the business, Hayward didn't seem to share Browne's passion for greening the company image. Browne spruced up BP's logo and said that it stood for "beyond petroleum" not "British Petroleum." Hayward, who recently closed a BP Solar manufacturing facility in Frederick, said alternative energy projects had to make economic sense.
"The bit about 'beyond petroleum' being dead and buried is nonsense," he said. But, he added, "it's a business as opposed to an advertising slogan."
He wanted to change the corporate culture, in part by cleaning house. Hayward inherited 650 senior executives, but he pared that to 490, half of whom are new to their jobs and one third of whom are new to the company.
-------Last year, a BP well was drilled in 4,130 feet of water to a record depth of more than 35,000 feet by the same Deepwater Horizon rig that caught fire April 20 and sank. At a London meeting five days before the accident, Hayward had noted that the giant reservoir it discovered "lies further below the Earth's surface than the summit of Mount Everest does above it."
Hayward's initiatives were starting to yield results. Last week, BP's earnings far surpassed analysts' expectations.
But the good news was blotted out by the oil slick. Over five days, the price of BP shares tumbled about 13 percent, erasing about $20 billion in market value.
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/02/AR2010050203651_2.html?hpid=topnews
Below, the official Deepwater update site.
Gulf of Mexico - Deepwater Horizon Incident http://www.deepwaterhorizonresponse.com/go/site/2931/
We end for today on the Deepwater disaster, it’s an ill wind for the lawyers on all sides. There’s limitless money for some, I suspect.AGs for 5 states talk legal strategy for oil spill
By MELISSA NELSON Associated Press Writer © 2010 The Associated Press May 2, 2010, 4:31PM
MOBILE, Ala. — The attorneys general from Alabama, Florida, Mississippi, Louisiana and Texas want BP PLC to sign an agreement spelling out exactly what "legitimate expenses" they'll cover from the spill.Florida AG Bill McCollum said after Sunday's meeting in Mobile, Ala., that he doesn't know if expenses include business losses, protecting environmental areas and lost wages for restaurant workers.
The men say BP executives told them the company would review their request.
The men aren't going to file a lawsuit yet, but they say they want Gulf Coast residents to know that they will work together to hold BP and other responsible parties accountable.
The AGs also want tap an entire federal oil spill response fund, which is capped at $1 billion per incident.
http://www.chron.com/disp/story.mpl/ap/nation/6986467.html
In other news, the tax and work shy Greeks were signed up by their government to indentured service to Germany. The unions immediately responded by calling another general strike. Below, the Telegraph covers the latest developments in this never ending soap.
Greece faces ‘big sacrifices' as £95bn bail-out agreed
Greece committed to make swingeing budget cuts as it clinched support from eurozone finance ministers for a €110bn (£95bn) bail-out.
By Richard Fletcher, City Editor Published: 7:36PM BST 02 May 2010Having secured the backing of the finance ministers, the three-year loan package needs to be approved by a number of European legislatures - including Germany and France - before a full meeting of the eurozone leaders next week.
George Papandreou, the Greek prime minister, said the austerity measures agreed at an emergency meeting of the cabinet were the "only road to save the country".
The plan agreed by the cabinet includes new budgets cuts of €30bn, which Mr Papandreou hopes will slash the public deficit to less than 3pc by 2014. "With our decision today our citizens will have to make big sacrifices," he said.
The additional austerity measures include:
- Scrapping bonus 13th and 14th month wages for public sector workers as well as for retired people from both the public and private sectors.
- Raising the retirement age for women from 60 to 65, bringing it in line with that for men;
- Raising the sales tax from 21pc to 23pc this year.
Unions immediately voiced their dismay and vowed to step up their campaign against the cuts. Yannis Panagopoulos, president of the million-member strong GSEE union: "They are going to worsen the recession and plunge the economy into a deep coma. It's time to step up the social battle.
The package was welcomed by Angela Merkel, German Chancellor, who argued that it justified her demand for the IMF to be involved in the Greek bail-out over the objections of her European peers.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7669963/Greece-faces-big-sacrifices-as-95bn-bail-out-agreed.html
What follows next is likely to a fractious parallel economy operating on a “they pretend to pay us, we pretend to work” domestic ethic, with an underground economy functioning on settlement in Cyprus and Switzerland. While the first payment to Greece will get there in time for this month’s May 19, deadline, now follows a 3 year game of chicken and egg. “Give us the money.” “Make some more cuts first.” My money is still on an eventual Greek default. Bring on Portugal and Spain.
EU Bets $146 Billion Greek Bailout to Avert Contagion
May 3 (Bloomberg) -- Euro-region governments are betting 110 billion euros ($146 billion) in economic medicine for Greece will be enough to inoculate the rest of their region from contagion.Finance ministers yesterday approved the unprecedented bailout for Greece after a week that saw the country’s fiscal crisis spread to Portugal and Spain. At the same time, they refused to say how they would help other indebted nations if the need arose, calling Greece a “special case.”
The risk is that investors will shift attention to other euro nations in the absence of a clear aid plan for the 16- nation bloc’s weakest members. The extra yield investors demand to buy Portuguese debt over German bunds surged to the highest since at least 1997 and Spain’s IBEX 35 stock index fell the most in three months last week. The euro slid in Asia after the Greece announcement.
“It is far from assured that this program will forcefully counter contagion risk,” said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Co. in Newport Beach, California, which runs the world’s biggest bond fund. “Heavily exposed creditors” may try to head off potential losses and sell bonds, “increasing the pressure on core European governments to also provide a backstop for Portugal and Spain.”
Greece yesterday pledged to push through 30 billion euros ($40 billion) of budget cuts, equivalent to 13 percent of gross domestic product, in return for loans at a rate of around 5 percent for three years. The EU and the International Monetary Fund, which is co-financing the bailout, also agreed to set up a bank stabilization fund. Greece’s federation of civil servants responded by calling a 48-hour strike starting tomorrow.
European officials rushed to draw a distinction between Greece, whose misstated budget figures first roiled markets last year, and other countries.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZCN79mdB86s&pos=7
At the Comex silver depositories Friday, final figures were: Registered 50.25 Moz, Eligible 65.92 Moz, Total 116.17 Moz.
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Crooks & Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.”
Warren Buffett.
At the weekend, ignoring his own previous business advice, Warren Buffett, the sage of Omaha came out in favour of the great vampire squid, presumably boosted by last week’s performance of the great Chief Squid himself, Ebenezer Squid, in his epic clash with the loathsome Senators in Washington. I had the opportunity over the weekend to watch Ebenezer’s complete testimony at leisure on BBC Parliament. All I saw was a highly confused, conflicted amoral man, manically digging a hole, but then I don’t have $5 billion bet on Goldman. However, I certainly wouldn’t want to step into that hole and help Ebenezer dig. Below the journal covers Warren and Charlie, blaming the regulators and the victims, for what happened everywhere once Wall Street’s “tiger” got loose. Who knew Wall Street's banksters had become tigers with all of the ethics of the big cat. It looks like the Squids are closing ranks. Putting a Wall Street trader in charge of running an investment bank, was never a very good idea it seems to me, very quickly gaming the clients for cash bonuses, seems to have become an acceptable part of everyday life. In the months ahead we will all too likely find out if the unethical crossed into the illegal. Does a bear ...., comes to mind.
“We must all hang together, or assuredly we shall all hang separately"
Benjamin Franklin.
MAY 2, 2010
Mr. Buffett Goes to Bat for Goldman, Moody's
OMAHA, Neb.— Warren Buffett, long a critic of the excesses of Wall Street and the risks of derivatives, is emerging as a stalwart defender of the financial system.At Berkshire Hathaway Inc.'s annual meeting here this weekend, the legendary investor mounted a vigorous defense of Goldman Sachs Group Inc., sued for civil fraud by regulators and under assault by Congress for its business dealings. And he praised the business model of Moody's Corp., whose ratings agency has been lambasted as too cozy with bankers.
Though he acknowledged that banks and other financial firms had engaged in excesses in the years leading up to the crisis, he didn't lay blame at their feet. Wall Street was caught up in a "mania that prevailed throughout the investment world," he said.
"I haven't seen anything in Goldman's behavior that makes it any more subject to criticism than Wall Street generally," Mr. Buffett said at a news conference Sunday, the day after Berkshire's annual meeting.
Mr. Buffett's remarks contrasted with his long-standing mantra against what's he has called the self-serving ways of Wall Street and, to an extent, the ethos of his shareholder meeting generally.
----Mr. Buffett's long-time partner, Berkshire vice chairman Charlie Munger, was blunter in his criticisms of Wall Street. The financial industry is "a very defective system," he said at a press conference Sunday. "When systems are defective, very good people will start doing things...that are counterproductive."
Mr. Munger placed the blame on lax or dysfunctional government regulations, comparing the relationship between banks and regulators to that between a tiger and a tiger keeper.
"When the tiger gets out and starts creating damage, it's insane to blame the tiger, it's the idiot tiger keeper" that deserves the blame, he said.
To some extent, Mr. Buffett's defense of Goldman and Moody's could be expected: Berkshire has invested billions in financial firms including Goldman, a close partner for decades. It is also an investor Moody's, though it has been selling the firm's stock in recent months.
Mr. Buffett addressed in detail the Securities and Exchange Commission's fraud charges against Goldman, which allege the bank defrauded investors when it created a mortgage investment, dubbed Abacus, with the help of a bearish hedge fund and failed to disclose the fund's role and position. Goldman says it did nothing wrong.
"I have no problem with that Abacus transaction. If there were other things that were hugely troublesome, I haven't seen them," Mr. Buffett said. He referred to his experience nearly 20 years ago helping to save Wall Street firm Salomon Brothers, then a big holding of his, from a scandal. "That was my big fear at Salomon—that is always the worry, that you haven't really found the problem yet," he said
Mr. Buffett said parties to the deal, which plunged in value when the housing market fell apart in 2007, should be responsible for their own actions. "It's a little hard for me to get terribly sympathetic for a bank that made a bad credit deal," he said.
http://online.wsj.com/article/SB10001424052748704608104575218071029226354.html?mod=WSJ_hp_us_mostpop_read
On why he loves Berkshire's big investment in Goldman
"Our preferred shares are paying $15 a second, so as we sit here, 'tick, tick, tick, tick,' that's $15 every second... Recent developments have probably delayed the calling of our preferred for some time, so 'tick, tick, tick' will go on, and we'll be getting $500 million a year... We love the investment."
Warren Buffett.
Why A UK Hung Parliament is Likely. Stay long precious Metals. http://www.ukpollingreport.co.uk/blog/
The monthly Coppock Indicators finished April:
DJIA: +245 UP. NASDAQ: +448 UP. SP500: +276 UP. The great Bull market goes on with the all three continuing higher in positive numbers.
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