Betting on the Engineers • Hacker News Board

Re: Betting on the Engineers

#51

Post by baguasquirrel » Thu, May 27, 2010, 11:53 PM UTC

Tuna-Fish wrote: post #40

blehn wrote: post #27

...my theory that you should buy stocks in the companies that you hate the most Wow, that's a pretty sad statement. No wonder our economic system is so fucked up. We've got people out there investing in companies they'd otherwise prefer never existed. Then, of course, there are machines making billions of transactions a day in an effort to game the system. Unless people start investing in companies that they truly be…

This reminds me of an investment strategy Iain Banks described in his novel Complicity: Leverage yourself and load up on the most unethical companies you can find. This is because there is a lot of money that seeks to invest only in ethical business, so the prices of unethical companies are permanently depressed from their true value, and in the long term the return from their dividends should thus beat the average o…

And then some people wonder why most of the mainstream seems to like the idea of government intervention into the markets (as long as it's not their industry being regulated ;).

Re: Betting on the Engineers

#52

Post by shalmanese » Fri, May 28, 2010, 1:02 AM UTC

stingraycharles wrote: post #22

brown9-2 wrote: post #5

Earlier quoted context omitted.

Up until today their stock price was down 25% from a month ago. He's pretty clearly betting that the short-term damage to the stock from the media coverage is just a blip in the long-term outlook of a pretty successful company.

Exactly. It's not like BP suddenly is a different company; they're just experiencing some bad publicity, and have some costs for cleaning up an oil leak. Sure, that should make their company less valuable, but there's no way BP has suddenly shrunk 25%. So either they were overvalued before, are currently undervalued, or a combination of both.

A lot of BP's value was tied up in it's brand as the greenest oil company of the lot. Now that that brand value has become significantly eroded, it's not implausible to suggest that BP has indeed lost 25% of it's value.

Re: Betting on the Engineers

#53

Post by miked » Fri, May 28, 2010, 9:31 AM UTC

hristov wrote: post #46

It is depressing to hear Scott Adams trot out the tired old lie about the liberal media. But he is right that BP is a good buy. The sad truth is that after the Bush years the law is so much in favour of oil companies and the federal courts are so packed with conservative judges, that it is doubtful that BP will have to pay much for this disaster. You probably do not remember but the Exxon Valdes case concluded just a…

>> it is doubtful that BP will have to pay much for this disaster

Since Obama has gotten more campaign contributions from BP (also from Fannie Mae and Freddie Mac) that any other politician in the US, at least we'll know who to blame if it happens.

Re: Betting on the Engineers

#54

Post by hristov » Fri, May 28, 2010, 10:35 AM UTC

miked wrote: post #53

hristov wrote: post #46

It is depressing to hear Scott Adams trot out the tired old lie about the liberal media. But he is right that BP is a good buy. The sad truth is that after the Bush years the law is so much in favour of oil companies and the federal courts are so packed with conservative judges, that it is doubtful that BP will have to pay much for this disaster. You probably do not remember but the Exxon Valdes case concluded just a…

>> it is doubtful that BP will have to pay much for this disaster Since Obama has gotten more campaign contributions from BP (also from Fannie Mae and Freddie Mac) that any other politician in the US, at least we'll know who to blame if it happens.

The thing about Obama receiving most money from BP is misleading. He received most money from individual BP employees, but received no money from BP itself for his presidential campaign, as he took no money from corporations or their political action committees and lobbyists. The fact that Obama received most money from BP individual employees is not surprising because he got record donations from individuals in general.

Also, the whole thing will have very little to do with Obama. BP will pay according to the law on the books and the way judges enforce/construe that law.

Obama will probably campaign to change the law, but that will not affect the treatment of the spill because ex post facto laws are usually considered unconstitutional in the US. So the spill will be treated according to the law as it was at the time the spill happened.

Re: Betting on the Engineers

#55

Post by ct » Sat, May 29, 2010, 3:18 AM UTC

patio11 wrote: post #10

sbierwagen wrote: post #3

Christ, Scott actually bought BP stock after the oil spill? I can see how his "buy stock of evil companies" strategy might work, but typically you do that when the company is actually doing well, and not, say, when they're about to be curb stomped by the US government. Also, his complaint about the "liberal media" is somewhat disingenuous, seeing as how he is part of the liberal media, what with the anti-corporate co…

I suppose if one thought both a) it isn't really so bad and b) the government is going to deliver a (self-)righteous spanking to them and spook other investors, one could buy call options for next year.

That's a great idea and I'm going to do just that. I looked at the Jan 2011 50 strike which has an Open Interest of 10k (largest of all the other strike prices) for a current ask of 2.14 a contract. The implied volatility isn't too high (35%) as well so the premium for buying those calls don't have too much time value volatility baked in.

Plugged in some estimates if bought now and sold on August 1st with the same IV (implied volatility) at different price points assuming it goes back to it's normal trading range of 50 - 60. Profit per contract (% gain in parentheses - divided by current ask price of 214) at different stock prices for BP.

50: 187 (87%) 55: 479 (224%) 60: 852 (400%)

The risk of losing the entire premium of 214 per contract by Jan 2011 doesn't seem to likely and the risk/reward ratio seems to be favorable.