...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 believe in, I don't see how this system can do anything but fail in the long run.
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 of the market.
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 ;).
It has always been very American to love the underdog (maybe it's human, not American, but I myself am not in a position to vouch for the rest of the globe). So, the companies that we like and want to succeed are almost invariably the smaller companies, and the companies we hate are the successful ones.
I think some of that isn't just hating the successful companies, but the big/boring ones. Betting that the huge firm dominating a market will continue to dominate the market in basically the same way, with minor variants of their current products, probably is often the smart bet, but it's a really boring possibility to root for. Some innovative company shaking up the market is a lot more interesting!
Suppose you want to invest in a company you truly believe in. Where will you get the shares from? Unless someone else thinks it's crap and wants to unload it, there will be no one to buy it from.
Luckily, there is a machine out there willing to sell it to you. An evil evil machine.
Suppose you want to invest in a company you truly believe in. Where will you get the shares from? Unless someone else thinks it's crap and wants to unload it, there will be no one to buy it from.
There are a reasons to sell a shares besides thinking that a company is bad. Sells are also sold to raise capital, this may of course be done by the company itself to raise capital for expansion or in lieu of a loan. This is precisely what an IPO is and companies will also do it post IPO if the cirumstances are right.
But individual or institutional stock holders may also sell it to raise capital even while thinking that the company is doing fine and will likely go up over the long run. If the money was invested specifically for retirement or college for instance, it will be withdrawn (the shares sold) for that reason. An individual or instution may also sell some shares to support diversification or to move to a lower risk investment class while believing the company is most likely to prosper. And of course its perfectly rational to sell your shares if you believe an overall market decline is coming, even if the intention is to rebuy those shares when you believe it is near the bottom
There will be plenty of people to buy stock in any major company without anyone necessarily believing the stock is bad.
Smart, greedy people are never going to let emotion get in the way of making money. That's just the way it is. We're never going to return to an era where a significant amount of people make investment choices with a significant basis on how they feel about the company. It's not a rational way to meet the end goal of making money.
I thought "I admire them in the same way I admire the work ethic of serial killers" was pretty funny. That probably says more about me than the article though ...
If they stop all of the oil immediately, they've already done damage that we'll be cleaning up for decades. They've probably destroyed about 100 billion worth of revenue in the fishing business alone over the next 10 years.
And will they be held liable? For causing 100s of billions of economic damage over the medium-long term, let alone the environmental damage? Of course not, because they have good lobbyists and 65% of congress is either corrupt or an idiot who thinks "drill baby drill" is all you need to know about energy policy.
Yeah, that's admirable. It used to be we cared about justice in this country, and now we just admire those who evade it the best while they're screwing us.
> If they stop all of the oil immediately, they've already done damage that we'll be cleaning up for decades. They've probably destroyed about 100 billion worth of revenue in the fishing business alone over the next 10 years.
Does the Exxon Valdez experience support this theory? How about the IXTOC blowout in 1979, which lasted for 9 months and dumped way more oil into the Gulf of Mexico.
I ask because both of these were the roughly the same size (EV) or significantly larger (IXTOC) and their impact was much smaller than you've claimed. If their not relevant, why not?
So, what's the basis for your claim about the amount of damage?
Hey, a reasonable response. I was under the impression this is bigger than the Valdex spill, but the fact that IXTOC was bigger means this might not be as big a deal as I thought.
It's still just offshore from the Mississippi delta, which will hopefully not be ruined. And I still think it's a little perverse to be cheering them on for the fact that our corrupt system won't hold them accountable.
Come on - you haven't seen Dexter? That's an ethical serial killer show.
Your points are all well stated but he is quite funny ("nerdgasm"...come on). Otherwise - just add healthcare reform and Wallstreet debacle to your list and then build a bunker and never come out.
> a company rips us off to the tune of hundreds of billions that don't even feed any children and he admires it
You seem to think only the 'good guys' are worthy of admiration. Ethics and self-interest aside, I think it's perfectly acceptable to admire an impressive feat or trait, regardless whether it negatively or positively impacts you. Notice, he was not admiring the theft of billions of dollars, but the character trait behind the action.
My favorite quote on the subject is funnily enough thanks to J.K. Rowling;
"He-Who-Must-Not-Be-Named did great things. Terrible! Yes. But great" -Ollivander
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 comic strip and the vegetarianism and the belief in affirmation and the whoa-hoy and the glaven.
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.
One might quibble that the long term outlook of an oil company are perhaps not the best.
Of course, they've got the alternative energy division, which had $5 billion in sales in 2008. Pity it operated at a net loss, costing BP one and a quarter billion dollars.
That's just it, though: the long-term outlook is irrelevant. The relevant part is the difference between the long-term outlook and what actually happens in the long-term. This is what speculative investment (which is what he's doing here) is all about: capitalizing on the difference between what is expected and what actually happens.
This is also why non-professionals (like myself) should not make purely speculative investments. You really need to have a finger on the pulse of expectations, in addition to what's actually going on.
Your definition of long term is "the next few years"?
Even so, the near future prospects of BP aren't terribly good either, what with the crashing price of oil, (good for us, bad for oil companies) the numerous civil lawsuits and (singular) criminal investigation resulting from the oil spill, and the prospect of a moratorium on offshore drilling, coupled with additional regulation.
He's also just told everyone of his millions of readers to by BP, even at a small percentage uptake the prices should lift a little now? Once they start rising then people will think it's for a good reason.
Basically I think he's gaming the market ;0)
At least for today he won 3.5-5% on his gamble depending on the exchange.
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.
But if you're really smart, you buy when they've just been curb-stomped but not killed, then sell after they recover and return to their prior growth curve. (This presupposes that the company does not die and has an upward sales curve.)
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.
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 couple of years ago and Exxon got away with paying a very minimal sum considering the scope of the disaster.
>> 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.
Bet on engineers? Do that one better and bet on something even more powerful and absolutely amoral: Bet on basic physics, biology, and math. (Yes, there are ways you can do this in the stock market.)
Why would you admire them? This is one of the problems with our culture. For some reason, it's acceptable to admire and respect someone's behaviour even if it is bad behaviour and unjust behaviour. Why is that acceptable?? We don't admire Hitler for being so efficient at invading countries and killing millions of people, and we don't admire or respect the way that racists or fundamentalists insult and attempt to destroy other people.
Do you also admire the Wall St jerks and bankers for screwing people over with bad loans? Do you admire how 'clever' they were?
It is one thing to hate someone or their ethics, but an entirely different thing to respect their methods. Do not let emotions cloud your (engineering) judgment.
Note to self : don't take anyone who makes throwaway comments about the "liberal media" seriously.
It didn't add to his argument at all, and subtracted by implying that he's doing this more as an "f you" to liberals than out of any rational thought process.
EDIT: /me watches the downvotes prove his point about how some people's thought process can be entirely hijacked. Yes guys, the apparent devastation of the Gulf is entirely a product of liberal propaganda -- things are actually perfectly fine.
You're probably unfamiliar with Scott Adams. From reading his comic and his blog, I think he's actually liberal. His comment was probably tongue-in-cheek. It's also worth remembering that he loves pushing people's buttons. Remember that this guy makes jokes for a living.
I dunno, I just know that the liberal media is really screwing up the "drill baby drill" rhetoric with their incessant propaganda about a minor accident.
They're talking like there's hundreds of thousands of gallons of oil in the Gulf or something.
>It's a catastrophe, no doubt, but even catastrophes have levels. I'm betting the financial damage will be very, very, very bad and not very, very, very, very bad.
Where do you get "minor accident" from "very, very, very bad"? He is just saying that the liberal media is, as it usually does (ratings anyone?) exaggerating the situation. It doesn't help either that mass media types covering this kind of problem are usually the sorts that have orgasms from hugging trees.
This is almost exactly the opposite sentiment as was voiced by Bill Joy just yesterday about Sun's downfall:
> As for Sun's downfall, Joy traces it back to the fact that the company's business changed, leaving much of its research in areas where Sun no longer had products.
He also blamed the business side for not doing a better job of selling what the technologists at Sun created.
"I think if you wound the clock back, I'd like to think that we invented stuff in engineering that could have been marketed better," he said.
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 believe in, I don't see how this system can do anything but fail in the long run.