Energy expert Dr. Kent Moors is angry. And the main target for that anger is BP PLC (NYSE ADR: BP).
At its core, the Deepwater Horizon explosion and oil spill is a human tragedy: 11 workers were killed, others were injured and now many Gulf Coast residents will end up losing their homes and livelihoods.
But that's not all that has Dr. Moors seeing red: The accident that resulted from BP's incomprehensible risk-taking has killed an energy bill that could have set the U.S. economy on a course for energy freedom, and is going to summon the heavy hand of government in a way that will cost American consumers dearly while also keeping regular U.S. investors from reaping green.
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Two Energy Stocks For a Post-Oil-Spill World
With the failure of the BP PLC (NYSE ADR: BP) "top kill" strategy, the Deepwater Horizon oil spill takes on a more serious hue, both for the Gulf of Mexico environment and for BP itself. If it indeed proves impossible to cap the oil flow before August, public anger against BP and against deep-sea drilling in general may put BP out of business and set deep-sea drilling around the United States back for years.
The business fallout from the oil spill could be widespread. As was true of the Three Mile Island nuclear accident of 1979, the Deepwater Horizon oil spill could end up causing massive damage to companies that were in no way involved with the BP tragedy. Risks of different types of operation will be reassessed, new rules will be enacted, and the energy business will change radically.
Smart investors will anticipate these changes.
The business fallout from the oil spill could be widespread. As was true of the Three Mile Island nuclear accident of 1979, the Deepwater Horizon oil spill could end up causing massive damage to companies that were in no way involved with the BP tragedy. Risks of different types of operation will be reassessed, new rules will be enacted, and the energy business will change radically.
Smart investors will anticipate these changes.
To discover two stocks poised to thrive in a post-oil-spill world, please read on...
BP's Sharp Stock Drop Prompts Takeover Rumors as Gulf Oil Spill Disaster Spirals Out of Control
BP PLC's (NYSE ADR: BP) share price has plunged by more than one-third, as the company has struggled to contain the Gulf oil spill. Now, the company is being rumored as a takeover target as its stock has yet to find a floor.
BP shares have tumbled 36% since the company's leased drilling rig Deepwater Horizon exploded on April 20. The company has lost a third of its market value - $75 billion - stirring rumors that there could be acquisition interest. About $17 billion in losses came on Tuesday alone when the stock plunged 15%.
"There is a 10% to 20% chance of BP being taken over," Gudmund Halle Isfeldt, an analyst at DnB NOR ASA, told Bloomberg News. "The only real candidate, in size and with similar operations globally, would be Royal Dutch Shell [PLC (NYSE ADR: RDS.A, RDS.B)]."
BP's drastic market value loss could make it cheap enough to attract buyers, but some analysts say the total cost and implications of the spill are too vague to justify a commitment.
BP shares have tumbled 36% since the company's leased drilling rig Deepwater Horizon exploded on April 20. The company has lost a third of its market value - $75 billion - stirring rumors that there could be acquisition interest. About $17 billion in losses came on Tuesday alone when the stock plunged 15%.
"There is a 10% to 20% chance of BP being taken over," Gudmund Halle Isfeldt, an analyst at DnB NOR ASA, told Bloomberg News. "The only real candidate, in size and with similar operations globally, would be Royal Dutch Shell [PLC (NYSE ADR: RDS.A, RDS.B)]."
BP's drastic market value loss could make it cheap enough to attract buyers, but some analysts say the total cost and implications of the spill are too vague to justify a commitment.
The Tobin Tax: The Fix-It Plan Wall Street Hates ... But Can't Seem to Kill
German Chancellor Angela Merkel recently came out in favor of a "Tobin tax" - a small tax on financial transactions, proportionate to the size of the transaction. The Tobin tax idea also has been proposed by Britain's former prime minister, Gordon Brown, and was proposed in Congress by U.S. Rep. Peter DeFazio, D-OR.
Every time a Tobin tax is proposed, it has failed to gain traction - which isn't surprising: Wall Street, with its international affiliates and legion of lobbyists, hates the idea.
Even so, the Tobin tax idea just refuses to die - which is a good thing, since it is probably the best way of curing some of Wall Street's pathologies.
Every time a Tobin tax is proposed, it has failed to gain traction - which isn't surprising: Wall Street, with its international affiliates and legion of lobbyists, hates the idea.
Even so, the Tobin tax idea just refuses to die - which is a good thing, since it is probably the best way of curing some of Wall Street's pathologies.
To understand how the Tobin tax can benefit investors, please read on...
Taipan Daily: BP Risks Facing Criminal Charges For Oil Spill
Fallout from the BP oil spill is spreading. And far from being "cheap" as some pundits suggest, BP's share price could implode if criminal charges are filed.
It's not looking good for British Petroleum... or the Gulf of Mexico. In fact it's looking like an outright disaster, about as bad as we feared.
And BP's stock - which a number of armchair contrarians quickly dubbed as "cheap" in the aftermath of the Deepwater Horizon spill - is at risk of being massacred.
Don't trust the smart-aleck "buy the dip" viewpoints on this one. Not only would investors be unwise to buy call options on British Petroleum at current levels, they may well be better off buying long-dated put options instead... in anticipation of seeing BP's stock price cut in half. Or worse.
We're talking about $50 billion to $100 billion worth of market cap here... at real risk of being wiped out. (That notion might sound wacky. But a lot of folks thought the concept of a "euro crash" was wacky too, when we started pounding the table for it a number of months ago...)
It's not looking good for British Petroleum... or the Gulf of Mexico. In fact it's looking like an outright disaster, about as bad as we feared.
And BP's stock - which a number of armchair contrarians quickly dubbed as "cheap" in the aftermath of the Deepwater Horizon spill - is at risk of being massacred.
Don't trust the smart-aleck "buy the dip" viewpoints on this one. Not only would investors be unwise to buy call options on British Petroleum at current levels, they may well be better off buying long-dated put options instead... in anticipation of seeing BP's stock price cut in half. Or worse.
We're talking about $50 billion to $100 billion worth of market cap here... at real risk of being wiped out. (That notion might sound wacky. But a lot of folks thought the concept of a "euro crash" was wacky too, when we started pounding the table for it a number of months ago...)
Money Morning Mailbag: Investors Should Steer Clear of Australia's Mining "Super Tax"
Money Morning Contributing Editor Martin Hutchinson last week introduced readers to the Australian mining "super tax" that will disrupt the industry's cyclical nature and threaten mining companies' profitability.
Reader questions and comments poured in immediately, especially from our friends in the land down under. Some criticized the government's greed, others saluted the tax, and many wondered what action to take as investors. The result was a passionate, well-informed, and at times combative, reader dialogue.
Australian Prime Minister Kevin Rudd has proposed an additional 40% tax on mining company earnings and hopes to use the revenue to snag some hefty cash piles from the profitable natural resources industry. But instead he is putting the economy in danger of future funding shortfalls: If the mining industry's revenue stream starts to run thin, the projects the money is supporting will be strapped and funds will have to be squeezed from elsewhere.
Reader questions and comments poured in immediately, especially from our friends in the land down under. Some criticized the government's greed, others saluted the tax, and many wondered what action to take as investors. The result was a passionate, well-informed, and at times combative, reader dialogue.
Australian Prime Minister Kevin Rudd has proposed an additional 40% tax on mining company earnings and hopes to use the revenue to snag some hefty cash piles from the profitable natural resources industry. But instead he is putting the economy in danger of future funding shortfalls: If the mining industry's revenue stream starts to run thin, the projects the money is supporting will be strapped and funds will have to be squeezed from elsewhere.
Question of the Week: Readers Respond to Money Morning's Oil Spill Query
News of BP PLC's (NYSE ADR: BP) Gulf Coast oil spill was only hours old when Money Morning readers first weighed in on the tragedy. The chief concern: U.S. taxpayers will yet again be stuck with the tab for a problem caused by corporate malfeasance and lax governmental oversight.
Stricter government regulation could enforce safety shut off valves with remote control operations - a device that could have prevented the current disaster. The hefty $500,000 price tag on the safety control has been a past deterrent, but hard to argue against in the wake of the billion-dollar Gulf spill.
But investors understand that the long haul is what really matters, meaning that there's perhaps a bigger question here than who's at fault, and what will this cleanup cost....
Washington wants to limit U.S. dependence on foreign oil and create jobs, while also protecting natural resources and preventing future spill disasters. But the United States faces a future in which oil prices are likely to soar as thirsty nations compete for dwindling supplies.
Clearly, our leaders in Washington, the U.S. energy sector and U.S. environmental agencies and interests will have much to debate in the months and years to come.
This prompted last week's installment of Money Morning Question of the Week: Is U.S. offshore oil drilling going to disappear - why or why not? How does the industry affect you as an investor, taxpayer and consumer?
Here is a collection of thoughtful reader responses regarding the future of drilling and the oil spill.
Stricter government regulation could enforce safety shut off valves with remote control operations - a device that could have prevented the current disaster. The hefty $500,000 price tag on the safety control has been a past deterrent, but hard to argue against in the wake of the billion-dollar Gulf spill.
But investors understand that the long haul is what really matters, meaning that there's perhaps a bigger question here than who's at fault, and what will this cleanup cost....
Washington wants to limit U.S. dependence on foreign oil and create jobs, while also protecting natural resources and preventing future spill disasters. But the United States faces a future in which oil prices are likely to soar as thirsty nations compete for dwindling supplies.
Clearly, our leaders in Washington, the U.S. energy sector and U.S. environmental agencies and interests will have much to debate in the months and years to come.
This prompted last week's installment of Money Morning Question of the Week: Is U.S. offshore oil drilling going to disappear - why or why not? How does the industry affect you as an investor, taxpayer and consumer?
Here is a collection of thoughtful reader responses regarding the future of drilling and the oil spill.
Blunder From Down Under: Australia's Mining 'Super Tax' Will Squeeze the Global Recovery
Australia just this week unveiled a mining "super tax" that the country plans to levy against its natural-resources sector starting in 2012.
This is bad news.
It's not just because mining is Australia's most important economic sector: Australia is also an enormously important supplier of resources to the fast-growing economies of East Asia, where so many of the world's products are now manufactured. The mining super tax will cause prices to rise on the raw materials that are the key ingredients in so many of those products. And that means the levy from "down under" truly is bad news for the overall global economy.
With the newly announced mining super tax, Australia has shot itself in the foot. In doing so, unfortunately, it may also have peppered the rest of us with buckshot.
This is bad news.
It's not just because mining is Australia's most important economic sector: Australia is also an enormously important supplier of resources to the fast-growing economies of East Asia, where so many of the world's products are now manufactured. The mining super tax will cause prices to rise on the raw materials that are the key ingredients in so many of those products. And that means the levy from "down under" truly is bad news for the overall global economy.
With the newly announced mining super tax, Australia has shot itself in the foot. In doing so, unfortunately, it may also have peppered the rest of us with buckshot.
We Want to Hear From You: Is U.S. Offshore Oil Drilling Going to Disappear?
News of the Gulf Coast oil spill was only hours old when Money Morning readers first weighed in on the tragedy. The comments and the e-mails haven't stopped since. The chief concern: U.S. taxpayers will yet again be stuck with the tab for a problem caused by corporate malfeasance and lax governmental oversight. Stricter government […]
IMF Proposes "Fat Cat" Taxes on Banks to Pay for Future Financial Crises
The International Monetary Fund (IMF) is proposing that Group-of-20 (G20) nations levy two separate taxes on banks, including a "Fat Cat" tax on profits and compensation to pay for the costs of any bailouts resulting from future financial crises.
"Expecting taxpayers to support the [financial] sector during bad times while allowing owners, managers and/or creditors of financial institutions to enjoy the gains of good times misallocates resources and undermines long-term growth," the IMF wrote in a briefing paper for the G-20 industrialized and developing countries, obtained by The Wall Street Journal.
The report proposes a tax - called the Financial Activities Tax (FAT) or "Fat Cat" tax - that would be levied against financial institution balance sheets, profits and compensation. It would be paid into a nation's treasury to help finance the broader costs of a financial crisis, The Journal reported.
"Expecting taxpayers to support the [financial] sector during bad times while allowing owners, managers and/or creditors of financial institutions to enjoy the gains of good times misallocates resources and undermines long-term growth," the IMF wrote in a briefing paper for the G-20 industrialized and developing countries, obtained by The Wall Street Journal.
The report proposes a tax - called the Financial Activities Tax (FAT) or "Fat Cat" tax - that would be levied against financial institution balance sheets, profits and compensation. It would be paid into a nation's treasury to help finance the broader costs of a financial crisis, The Journal reported.
Money Morning Mailbag: Can Anyone Fix the Fiscal Mess?
As opinions continue to pour in to the Money Morning mailbag, something is becoming quite clear: People are getting fed up with the national and global "fiscal mess." The pessimists outweigh the optimists and are tired of standing idly by watching ineffective financial policies.
As the United States continues to spar with China on currency issues and Greece has yet to make substantial strides toward recovery, U.S. taxpayers and investors fear that our country is headed for worse economic times. Despite the fact there's a financial reform bill on the horizon, there is overwhelming doubt that the government will implement as much of a financial system overhaul that's needed.
Congress May Double Taxes on Private Equity Firms in Search for New Revenues
Democrats in Congress, seeking new sources of revenue after passing President Barack Obama's $940 billion health-care reform measure, may double tax rates on executives at private-equity firms.
The U.S. Senate has taken up a House proposal to levy a new tax on executives who make long-term investments, including venture capitalists, managers of real- estate partnerships, hedge-fund and private-equity managers, Bloomberg News reported.
The proposal, expected to raise $24.6 billion over a decade, eliminates a tax provision which allows money managers at privately held partnerships to treat most of the revenue they bring in as capital gains.
The U.S. Senate has taken up a House proposal to levy a new tax on executives who make long-term investments, including venture capitalists, managers of real- estate partnerships, hedge-fund and private-equity managers, Bloomberg News reported.
The proposal, expected to raise $24.6 billion over a decade, eliminates a tax provision which allows money managers at privately held partnerships to treat most of the revenue they bring in as capital gains.
Question of the Week: Do the Pitfalls Outweigh the Promise For the New Healthcare Reform Program?
When U.S. President Barack Obama signed the new healthcare-reform bill into law yesterday (Tuesday), it ended months of political bickering and maneuvering, and began a new chapter in the nation's healthcare saga - one in which the country will feel the effects of this sweeping, costly and controversial policy overhaul.
The fact is that many Americans will have healthcare for the first time ever. Offsetting that bright spot, however, is the reality that the program could add trillions in debt to the country's already burgeoning national debt, further complicating the matter.
Going forward, it will now be left to the pundits, analysts and the healthcare industry to decipher what these provisions really mean for the industry, for individuals, for taxpayers - and even for investors.
But here at Money Morning, we wanted to know what you think about this new law. That's why we made healthcare reform the inaugural topic in our new "Question of the Week" feature.
Money Morning Question of the Week: U.S. President Barack Obama's controversial healthcare proposal is now law. What do you think? How do you feel? Do you think it's a beneficial or harmful move for you as a consumer, as an investor, and as a taxpayer? What do you think it means for our nation's economy?
What follows is a sampling of the enthusiastic and passionate responses that we received. Make sure to also check out next week's "Question of the Week," a query that seeks your thoughts on the growing levels of U.S. debt.
The fact is that many Americans will have healthcare for the first time ever. Offsetting that bright spot, however, is the reality that the program could add trillions in debt to the country's already burgeoning national debt, further complicating the matter.
Going forward, it will now be left to the pundits, analysts and the healthcare industry to decipher what these provisions really mean for the industry, for individuals, for taxpayers - and even for investors.
But here at Money Morning, we wanted to know what you think about this new law. That's why we made healthcare reform the inaugural topic in our new "Question of the Week" feature.
Money Morning Question of the Week: U.S. President Barack Obama's controversial healthcare proposal is now law. What do you think? How do you feel? Do you think it's a beneficial or harmful move for you as a consumer, as an investor, and as a taxpayer? What do you think it means for our nation's economy?
What follows is a sampling of the enthusiastic and passionate responses that we received. Make sure to also check out next week's "Question of the Week," a query that seeks your thoughts on the growing levels of U.S. debt.
Healthcare Reform Losers: Companies Providing Retiree Benefits Face Multi-Million Dollar Tax Costs
After sending letters of protest to Congress in the months prior to the healthcare law's approval, U.S. companies are now facing multi-million dollar after-tax hits this year due to a tax provision in the new legislation, labeling them healthcare reform losers instead of winners.
Part of the new healthcare law places a federal income tax on government subsidies given to companies that provide retirees and their spouses with drug benefit plans. The 28% subsidy was created as Medicare Part D, adding a prescription plan for senior citizens to the Medicare Act of 2003. To encourage companies to continue offering retirees a drug plan, the tax-free subsidy reduced companies' costs. Fewer senior citizens then went through Medicare's prescription program - which would have cost taxpayers much more than the subsidy price.
Caterpillar Inc (NYSE: CAT) and Deere & Company (NSYE: DE) are just two of the businesses that fought the new stipulations. The manufacturers estimate the tax will cost them $100 million and $150 million this year, respectively. Other companies who will pay handsomely include AK Steel Corp. (NYSE: AKS) with $31 million in charges, and Honeywell International Inc. (NYSE: HON) with an estimated fee of $42 million.
Consulting firm Towers Watson & Co. (NYSE: TW) estimates these taxes could cost companies about $233 per person receiving drug benefits - a hefty price tag when a company gives benefits to 40,000 retirees, like Caterpillar.
Overall, more than 3,500 companies offer drug benefits to 6.3 million retirees. Although the tax won't be effective until 2011, accounting practices force companies to recognize the fees in the period in which the law is signed. That means the tax could nab $14 billion from corporate profits in a year when companies were hoping to recover from huge losses during the recession.
Part of the new healthcare law places a federal income tax on government subsidies given to companies that provide retirees and their spouses with drug benefit plans. The 28% subsidy was created as Medicare Part D, adding a prescription plan for senior citizens to the Medicare Act of 2003. To encourage companies to continue offering retirees a drug plan, the tax-free subsidy reduced companies' costs. Fewer senior citizens then went through Medicare's prescription program - which would have cost taxpayers much more than the subsidy price.
Caterpillar Inc (NYSE: CAT) and Deere & Company (NSYE: DE) are just two of the businesses that fought the new stipulations. The manufacturers estimate the tax will cost them $100 million and $150 million this year, respectively. Other companies who will pay handsomely include AK Steel Corp. (NYSE: AKS) with $31 million in charges, and Honeywell International Inc. (NYSE: HON) with an estimated fee of $42 million.
Consulting firm Towers Watson & Co. (NYSE: TW) estimates these taxes could cost companies about $233 per person receiving drug benefits - a hefty price tag when a company gives benefits to 40,000 retirees, like Caterpillar.
Overall, more than 3,500 companies offer drug benefits to 6.3 million retirees. Although the tax won't be effective until 2011, accounting practices force companies to recognize the fees in the period in which the law is signed. That means the tax could nab $14 billion from corporate profits in a year when companies were hoping to recover from huge losses during the recession.
New Banking Regulations ... Same Old Story
U.S. banks, drunk with greed, drove the nation's economy to the brink of financial Armageddon.
To save U.S. banks from losing their license to dangle the nation's economy over a cliff, the U.S. Federal Reserve and the country's elected elite threw them a bailout party and gifted them with the accounting- world's version of "Transformers. "
Unfortunately, new banking regulations aimed at solving these problems are little more than the same old song and dance that forced the bailout - and stuck U.S. taxpayers with a multi-trillion-dollar tab.
To see how reformers have failed to fix the banking system,
To save U.S. banks from losing their license to dangle the nation's economy over a cliff, the U.S. Federal Reserve and the country's elected elite threw them a bailout party and gifted them with the accounting- world's version of "Transformers. "
Unfortunately, new banking regulations aimed at solving these problems are little more than the same old song and dance that forced the bailout - and stuck U.S. taxpayers with a multi-trillion-dollar tab.
To see how reformers have failed to fix the banking system,