BP Update: All downside risk

The BP share price is down to £3.30 today, another new low. This is the level that two weeks ago I thought would be a a good buy in point.

But the news is no better, the flow of oil continues, mistakes are still being made. The US Government thinks even the relief wells may only have a 50% chance of success.

Until the newsflow is going to improve why buy this share, sentiment is going to take it down. if anything, I am considering a short position from here, looking at £3.00 for a close - a psychological level.

BP may not survive this crisis, too many US lawsuits to fight and if the oil keeps flowing into September then I expect the US Government will stat talking conservatorship again.

Who would have thought the UK's biggest company could end up in this state so quickly?

England should lose to Algeria to secure gas supplies

Not very patriotic for our football team, but few int his country probably know about the vast Algerian Gas reserves. These are real too, not like the fantasy oil reserves in Saudi or the expensive and yet to be tested shale gas.

The prospect of shale gas has in Europe has kept gas prices in the UK low. Despite our total lack of investment in new Gas fired powerstations we are a high gas consuming nation. The LNG platform means that the UK can rely on Gas to keep help keep the lights on when we crazily switch of our Nuclear capacity.

But the UK's own dwindling supplies of gas are not enough and in future we have often been told we will need to rely on Russia for supplies. We can't bully Russia or trust it to act fairly. Luckily Algeria is much closer and has supplies that can reach Europe easily.

All we need to do is strengthen relations now and play the long game. The first step could be allowing them to progress in the World Cup. Perhaps we should lend them our goalkeeper as their's is accident prone?

UPDATE: DO YOU BELIVE ME NOW?!

BP Update: Time to buy yet?

Tony Hayward announced this morning on the UK Andrew Marr TV show that the new cap put in place by the company is bringing up 10,00 of barrels of oil per day. This is most likely the majority of the oil and BP are working to optimize the rest over the next few days.

This is the first piece of good news for BP for weeks. Although the terrible catastrophe that was unleashed will remain as an environmental challenge for years to come.

Also there are now some good contrarian indicators coming into place. The US President has been talking about taking every penny from BP and stopping dividends. The UK bank analysts have been talking up the prospect of a take-over. When things get this bad you are normally at the nadir of a crisis.

Earlier in the week I said I would buy BP at under £4.00, but with this news and the price at £4.33 now may be a good chance to pile in. I don't doubt the dividend is going to get cut for political purposes if nothing else. just like Tony Hayward will get sacked.

This will mean the long-term share price of BP is not going to recover towards £6.00, however, at £5.00 with an 8-10% dividend that will be a pretty good investment.

Dead Tree Press Post Election Update

All change in the UK Media already. On Thursday the Daily Mail and General Trust announced a return to profit after a poor couple of years. Advertising has recovered a little, the expensive jaunt that was London Lite has been stopped and the website has lots of hits with its solid concentration on celebrity lite news. There were also 680 redundancies. Still, at least the future look stable.

Meanwhile the Guardian, so long the darling of the left, is in rather a lot of trouble. Not only are losses expected to be bad this year, but they backed the Liberal Democrats into the Government. Their repayment seems to be the Liberal acquiescing to the Tory plan of setting up an in-house Government jobs website. This will be catastrophic for the ad revenue of the Guardian as many of its ads are purely for Government work. And those that are not often publish Government advice and Quango self-justification adverts.

All in all, another victory for the Right wing over the Left. Shame in some ways, even as a right winger I know which paper I would rather read (if forced). Still, onward march market forces, at last.

Monday stories to puzzle the Parties

Three stories break this morning, all of which could be taken up by the Politicians with the election on their mind:

First up is that Emerson, long a suitor has put in an offer for Chloride Group. Now last year I owned share sin Chloride as it was a very safe bet in the recession.. A strong UK company with a great manufacturing business, great products and global reach. No surprise that it has finally been snaffled up. But where is Lord Mandelson and his 'Cadbury' law. Chloride really is a UK success story, why not save if you are in the Red team?

Next up is the bid battle erupting for Crest Nicholson, the UK Housebuilder. It must surely be a sign of the times that this market, long dormant and the amongst the worst performers in the recession, is getting glances for Private Equity. The theme for the Politicians can either be robust growth or top of the bounce froth depending on you optimism/fear quotient needed for the day.

Finally, there is UK Coal, another disastrous set of numbers and more poor performance in its business. This is the Coal business that emerged after the strikes of the 1980's. With coal prices quite strong one would imagine a better future for this company, but no, it is not to be. A great example of why a privatisation can save the taxpayer a fortune.

Jarvis into administration - seeing the future

Jarvis, best known as a rail maintenance company and for being chaired by Steve Norris the fomer Tory transport secretary has gone into administation.

It's a recession and we expect companies to struggle and jarvis has been in the 'difficult' category ever since its plunge into PFI contracts which it never managed to make profitable.

However, now administration has been driven by a fall off in work from network rail. Network Rail had begun some major cuts last year; indeed these have led to strike action  - which are on quite strong ground about safety rather than pay for once from Bob Crow!

There are many threads here that we will see over again in the next few years in the UK:

1) State body makes random cuts (Network Rail is responsible to no one, even though it is state owned, in effect it is its own Quango), roundly condemned as the wrong choices.
2) Private sector contractors get first hit as they don't strike
3) Public sector workers then go on strike.
4) Services fall and economic loss is suffered all round.

We have to have cuts and less spending becuase we have run out of money, but it is all going to get very messy and interestingly the private sector will suffer more do to the logic of Government spending (i.e. the last to go are the actual civil service jobs which have the best perks like pensions)

What is Unite getting out of the BA strikes?

How patriotic are Labour really?

As this Telegraph article points out, Lord mandelson was more than happy to speak out about the Kraft take-over - subject of a Unite union campaign. Yet there is silence on the BA strikes which threaten that UK owned and based company. Ian Martin as the WSJ blog has been trying to get a comment from Unite's Charlie Wheelan, but the usually locacious spin merchant is oddly silent. He is also now advising Gordon Brown on the election.

At a time of recession the contradictions for Labour could not be worse. In hock to Unite for money and funding and so staying quiet, and therefore encouraging by default, a ludicrous strike that will affect millions of voters.

The Union are way out on a limb with BA ready to break the strike and the expected numbers of particpants at 50%. Perhaps the staff are realising with nearly 3 million on the dole queue in the UK, thiss perhaps not the way forward?

Prospect of Labour Government sinks Football

This is an unlikley title, but nonetheless has some truth to it. Yesterday saw a huge fall in the pound for a single days trading, on the back of that we can expect further medium term weakness; partly cause by the Pru's need for dollars to make the huge AIG acuiqsition and partly by the markets wilting at the thought of 5 more year of Gordon Brown.

However, somewhat aligned to this is the Deloitte Annual Football money survey which was released today. Real Madrid come top and Barclenon second, the days of Man U. being top have been over for 5 years now.(how long ago was the last election?)  Although the big English clubs dominate the top ten of the table, they are no longer top of the tree and it shows on the pitch in that the really world class players like Ronaldo leave the Premier League for Spain. None of the top 3 players in the world plays in the Premier League.

In sterling terms though, the clubs have been powering ahead generating more income. In fact if the Pound was more like .80 to the Euro than .90 then the UK clubs would still be top.

 A weak Government has given us a weak currency and bequeathed a weakened premier leauge. Labour, they can even ruin your football!