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Proof Media in Hopeless Moral Hazard When Forbes Compares BP With Goldman

Companies / Oil Companies Jun 01, 2010 - 02:20 AM GMT

By: Static_Chaos

Companies

Best Financial Markets Analysis ArticleWhen a major mainstream media like Forbes compares BP with Goldman Sachs and recommends investors to buy Goldman stocks, you know the world is in total moral hazard and deserved to be doomed as Marc Faber has always been saying.  

Since Forbes is a financial publication, I will refute based on the investment thesis first.  Granted both stocks are high risk plays right now, but I'd venture to say compared to Goldman, BP is obviously oversold and a victim of media hype and Whitehouse populist approach.


This conclusion is based on BP dividend yield (currently close to 7%), a strong average annual compound rate of return of 17.9% since 1977 vs. 10.7% from S&P, the growth prospect of crude oil and low forward P/E ratio of 5.64. 

The in-depth Chart of Day story of BP on May 6 by Bloomberg (Chart below) should more than confirm my conclusion about BP stocks from a technical point of view. 
Throughout its history, Goldman has been shortchanging retail investors by abusing its market position, which by the way, is put in place partly by the taxpayers' money. Sure, there were a few "official investigations" throughout the years, but basically went nowhere most likely due to the Vampire Squid's deep pocket, massive legal team, and far reaching influential tentacles into many related government agencies.

Now, the SEC finally brought a civil suit holding Goldman responsible for misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter. I will not go into the detail here of how Goldman knowingly contribute to the subprime crisis, which is the closet point of origin of the financial crisis leading to the current "Great Recession" and the current 9.5% jobless rate.

This is not to excuse BP for the Gulf oil spill mess. The environmental and economic impact has yet to be fully assessed. But one thing people seem to have chosen to ignore is that BP has paid and will be paying for a long time to come for this mistake ($930 million to date). But where is Goldman on this??

Almost 1,300 vessels are now involved in the response effort. Other oil companies are also helping BP in the Gulf including the world's top supermajor--ExxonMobile--by providing personnel and vessels. The entire oil industry will bear the brunt of the public outrage and is already working together to improve safety and engineering process and procedure to prevent any future similar incidents.

In contrast, posturing aside, Goldman is yet to even formally acknowledge any misdeed.  The entire financial industry, instead of looking into self reform, is fighting tooth and nail with Washington on the proposed financial reform.  Many are talking about setting up offshore shops to avoid the regulatory "burden".

Meanwhile, the swift regulatory backlash is coming down on the oil industry hard as we speak to "reform" the drilling safety standard, while a meaningful financial reform act is yet to materialize in our life time.

So excuse me for being more than outraged when Forbes dares to compare BP with Goldman, and the biased-agenda-motivated moral hazard the mainstream media have been brain-washing upon the public. 

By Static Chaos

http://static-chaos.blogspot.com

© 2010 Copyright Static Chaos- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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