BP: How deep is Deepwater Horizon Oil Rig

http://www.ouramazingplanet.com/infographic-tallest-mountain-to-deepest-ocean-trench-0249/

Click on image for full view

What can oil companies do to prevent such reoccurence
Exxonmobile CEO said that it is harder to resolve the situation once the well is blown up, and thus the focus had always been to prevent it in the first place.

This just shows how ill-equipped the industry is in handling such situation, and the lack of contingency plans.

Drilling a relief well takes months, and it is not feasible to pre-drill a relief well for every drilling operations. Think of what happens if the relief well blows up instead of the main well. Then another relief well for the first relief well had to be in place, etc.

The key still lies with the blow out preventer. One suggestion would be to install a secondary blow out preventer, which can be mechanically and manually operated by robotics on the sea floor (in case the control tower got blown up as in this BP case).

Previous post on BP:
http://sgretailinvestor.blogspot.com/2010/05/bp-plc-adr.html

Charles Nenner 2010-2011 Investor Outlook

Reference: http://fxmarketanalysis.wordpress.com/2010/04/03/charles-nenner%E2%80%99s-high-conviction-trends-trades-2010-11-investor%E2%80%99s-roadmap/

Stock's Outlook:

1. Apr 2010: Stocks peak around the third week around 1170
2. May – Jun 2010: Pullback up to 10-20%
3. Aug 2010: Recovery and final peak
4. Sep 2010 - Mid 2011: Down to around March 2009 lows
5. Mid 2011 - 2012: Recover to prior highs peaking in 2012
6. 2013: Long term downtrend for many years. ‘lost decade’ similar to that experienced by Japan. Big military conflicts in 2013.

Other Charles Nenner Posts:

1. http://sgretailinvestor.blogspot.com/2011/01/charles-nenner-2011-updates.html
2. http://sgretailinvestor.blogspot.com/2010/09/charles-nenner-track-record.html
3. http://sgretailinvestor.blogspot.com/2010/08/charles-nenner-updates.html

U.S. Debt as Percentage of GDP

Source: http://www.usgovernmentspending.com/federal_debt_chart.html

Updates on Books

Updated the watchlist section of the recommended books for reading:
http://sgretailinvestor.blogspot.com/2009/09/recommended-books.html

Credit Derivatives

Credit Link Notes

A good explanation can be found here:
http://www.barbicanconsulting.co.uk/cln

Investment Banks - Goldman Sachs

The concern with Goldman Sachs

US Government may pass a law to ensure that Investment Banks are split out from Commerical Banks. What this probably entails is that only Commercial Banks will continue to enjoy protection from the government and thus preserve their AAA, AA ratings.

Investment Banks (the likes of Goldman) may lose the implicit government protection and thus results in a rating drop to A. This will increase their cost of capital by 10-80 basis points (comparing treasury bills with A rated bonds).

Looking at their capital base (total liability) of nearly 800b, an increase of 80 basis points will mean an increase in 6.4b interest expenses.

This will reduce their 13b profits to 7b.

Macro Economics

BRIC

China is the key growth engine of the four, through its investment and spending in its infrastructure and its entry into WTO.

With China's economy powering up, India also started up its own growth engine and positioned itself as the 2nd engine.

Brazil and Russia looks more like a commodity trade, benefiting from the growth of China and India.

Thus, the risk of this emerging market play is the collapse of China, and to a smaller extend, the collapse of India


Alpha vs Beta Trade

During the recovery movement from Mar 2009 till Apr 2010, it is more of a "beta trade", as most stocks rise due to the rebound from the collapse of the world markets. Almost any stock will make money and stock selection is not really important.

However, from May 2010 onwards, it has become more of an "alpha trade" as markets move sideways. Stock selection becomes more important. "Alpha trade" entails active portfolio management, much like hedge funds.

Emerging market plays typically also require "alpha trading" to get higher returns.


Volatitility

Bonds - 4 to 10%
FX - 10-14%
Equity - 20-80%

As such bond plays are susceptible to foreign exchange risks while equity players typically do not concern themselves with foreign exchange rates.


Business Cycle
Possible mappings:

Yield Curve

1. Growth periods last longer than recessionary periods (japan exception)
2. Yield curve becomes steeper upon start of recession. Market priced for recovery already.

Miscellaneous

1. Retail investors should behave more like institutions
1. Go for the long haul -> less trades, stablise the portfolio
2. Have a strategy and stick to it
3. Get rid of the emotions
2. Public views = Winning views!
1. It is the price that public perceive that matters, not what the experts calculated