Bill Cara’s Blog for June 2, 2010 [See post-close report]

if indeed, the contract between BP and RIG (although we have seen what the admin can do w/contract/bankrupcy law vs GMs bondholders being kicked to the end of line} absolves RIG the stock at $50 gets interesting.....can sell the $40 put for 13 trading days for over $1, can buy the stock (50) and sell the close call for several percent, etc.........DYOD

www.finance.yahoo.com/q/mh?s=BP+Major+Holders

Includes Gates Foundation and State Farm Insurance.

Gold Corp announces sale of 2 mines in the past week:

sale of San Dimas gold-silver mine in Mexico to Mala Noche Resources
http://www.goldcorp.com/news/goldcorp/index.php?&c...

sale of Escobal silver deposit in Guatemala to Tahoe Resources
http://www.goldcorp.com/news/goldcorp/index.php?&c...

this furthers my thesis that everything we have been told about gold miners is essentially wrong. the majors are not looking to add to their reserves by gobbling up jr miners as many had hoped to boost the beaten down sector.

what we are seeing is the opposite, a major selling assets for $$. GG share price is doing better than many other majors.... i wonder if thats got something to do with it.

Well I'm buying. Some PE's around 5 and 6, most of these companies have a lot of cash. SLB is the tell for me, up 6%. Many companies down 40% from yearly highs. Even if drilling is shut down for a time, the drill ships can move elsewhere to work.

long NOV, DO, SLB, RIG, NE.

Taking a haircut! I took a stop out at $7.00. Technical breakdown. Next support, 200 DMA, $6.52, then $6.13 and finally $5.85. A 50% FIB retracement would come in at $5.12. If we get that low, I'll be in long term options for max leverage. It looks like we are in for a long, hot summer!!
You win some, you lose some!! That's the name of the game!

Well aren't their liabilities capped?

If so, they should be changed:
a) uncapped liability
b) penalized $100M per day the oil flows, retroactively
c) any oil profits from the collected oil that is deemed usable becomes property of the impacted states
d) criminal investigation must also include government officials who possibly made it very easy for big oil to overlook safety

Could be a moot point if this is proven to be true.

“They know perfectly well there will be some violation of federal safety regulations, so there will be no cap,” said Jeffrey Rachlinski, an environmental law professor at Cornell University in Ithaca, New York.

NEW YORK (AP) -- The chief executive of Moody's Corp. says his company's inaccurate ratings of mortgage-related investments were "deeply disappointing" but investors shouldn't rely on ratings to buy or sell securities.

http://tiny.cc/y8lmu

Duh!

So he's "disappointed" _ Gosh, I'll bet several others are too.

I notice he doesn't say what use their ratings may be to investors.

manx,

regarding your post,
i have no real idea what you are saying or asking.

1. no one is suggesting GG isnt going to be or doesnt want to be a miner,
im suggesting exactly what i wrote: they are selling assets to Jr. Miners, not buying them up as has been suggested over and over for years now by so many analysts who claim their dwindling reserves will force them to do so. it hasnt happened in the way so many have claimed it would in a $1200 gold environment.

2. they dont sell assets because of a move down in silver, these are deals considered over long periods.

3. GG is selling silver assets. period. when they start to make major aquisitions of jr. miners at inflated prices as so many believe will happen, please post the story.

until such time we have our only real evidence of what is happening with majors: they need cash.

and they are at lower levels today with gold at $1215 than they were in november.

how much more will this have to occur before people realize a paradigm change has occurred in the way PM producers are valued against the metal. its been a multi year change and people still cant seem to accept this reality. crude oil is half the price it was 2 years ago and most miners are reporting increased costs year over year. if energy represents their biggest expenditure, how does this happen?

the share structures of far too many Jr. outfits are rigged to make a select few money and plunder the rest. this is why so many are told that the tide is turning on the jr. sector, its not, its only turning for specific miners taht require lazer like knowledge to actually discover. when we speak of the dot com bust we dont say "well but abc and 123 stocks actually went up", no we say as a whole the sector crashed. this is waht occured, look at a chart of the Venture Exchange.

if someone suggested in 2006 that the TSX-Venture exchange would be 1/3 of its value with gold double the price you would have been laughed off every board in the net. but you would have been right. but somehow its heretical to suggest a natural extension of the actual crash will continue, no no its always on its way back, its always some nonsense about a short period where the miners out performed that gets highlighted.

if people simply had enough sense to pull up a 3 year chart for free from stockcharts you can see what happened, it was a crash that has not been remotely recovered from. it will not go back to that without something so extraordinary occurring in the POG that it makes it a long shot of epic proportions.

miners are in the cross hairs, nation states are upping taxes and looking for ways to make funds, miners are the ideal place to go because its easy to rouse popular support for those big bad miners and all their supposed profits by nationalizing them or charging more taxes. the climate for business is very risky and those risks were never properly factored into the stocks. the great flush and lack of recovery is the natural conclusion of this.

majors along w/ most companies will be looking for Cash during a tighter lending environment. where do you think this cash will come from?

barrick was shorting gold all the way up the ladder until it finally closed down its hedgebook. they are not bullish on gold, only their CEO is when he goes on tv to make baseless claims about how high gold will go the week before a gold sell off.

lets not humour ourselves.

dr. cosa, respectfully,

You've given some interesting comments and I thank you for that. If my earlier response seemed testy, it wasn't meant to be argumentative; rather it was my humble contribution to discussion here. (Though I will admit I sometimes bristle at your posts when they read like you're dictating facts more than offering your thoughts, but I say that as feedback, not to attack.)

If I'm not mistaken, you're saying there's been a fundamental shift in the game and I have a hard time believing that. I'd love to better understand the rationale behind the facts you present, e.g. that juniors stocks are lower now than when the price of gold was lower, but I think that answer is going to be more traditional than revolutionary.

There have always been junior miners that didn't exactly treat their shareholders fairly. I'd love to tell you the stories of the guys I knew personally that basically stopped working the day they were listed on the VSE! All they did was convince everyone they had a story and then spent the IPO money on their exhorbitant salaries and bonuses for the next few years. That's been going on for years and will go on for plenty more, I have no doubt, though they're probably slightly more sophisticated about how they do it now.

The market dictates the prices by reflecting on the past and present, but mostly by looking ahead. It seems that right now, the market is not looking favourably on the future of junior miners at this gold price or what the market thinks the gold price will be. But, that sentiment could change in the blink of an eye. I think the market may just need some more time to lick its wounds from 2008/2009 and at some point there will be a catalyst to swing things back to a frenzy.

I'd be inclined to bet on a swing back to the norm rather than a belief that there's been a "paradigm change". (Or is that just hope that my juniors will eventually recover and treat me as well as my mid-caps?!)

manx928 wrote:

"Though I will admit I sometimes bristle at your posts when they read like you're dictating facts more than offering your thoughts, but I say that as feedback, not to attack"

it reads like that because i AM dictating facts. im very specific about what i post and what i list as a "fact". i welcome all manners of disagreement, but thus far few if anyone has been able to counter my "facts" with any of their "facts" as to why the Jr. sector has suffered so heavily and has yet to return to its former glory despite oil prices being halved and gold prices doubling. what i have seen are some great analysis by several on this board of specific miners that they have vested considerable time into, and i believe this is the only way to make money in jr's. i speak to the sector as a whole which is how most average investors invest via mutual funds and etf's.

my contention remains, that a paradigm change has already taken place and will remain as such, for all the analysts who run mining funds who cant seem to beat the GDX or GDXJ they will eventually be forced to change their approach or simply urge their clients to own gold bullion. these things take time, but they are happening. albeit slowly.

good luck.

April 2010 the median home price dropped to $198,400 since April 2009. Has the fall stopped yet? HELL---OOOOO????

As a coin-ki-dink: folks 'walking away' (according to the Mortgage Banker's Association) could be dinged on their credit for 7-8 years which is their way of trying to discourage you from walking -- even though the MBA SHORT-SOLD THEIR OWN HQ for $34M less than they owed. Nice.

BTW: FHA only requires 3 years grace from a foreclosure/walk away but Fannie and Freddie have not declared their positon on walk aways (yet). Official position with Credit Bureaus is they list a foreclosure for 10 years on your report.

http://tinyurl.com/2fva7nw

It was difficult for this UK writer to put a reassuring spin on the story. I thought she was trying hard to do so. I wouldn't bet that BP will not be forced into bankrupcy. Here are excerpts:

"BP's plummeting share price, although an alarming index of sentiment, poses no immediate danger either for BP or for long-term investors. More worrying are the costs of the catastrophe, for which BP is liable. The $990m price tag for the clean-up and containment attempts so far is easily manageable. And even if costs run as high as $25bn – the top estimate – BP will not go under. The group generated nearly $30bn last year, and oil prices are expected to carry on rising.

"At the present moment these costs can be sustained. The question is what happens if it gets much worse and there is an exponential rise," Malcolm Graham-Wood, an analyst at Westhouse Securities, said.

That oil may continue to gush into the Gulf until August is bad enough in itself. But there are bigger dangers still. The first is the hurricane season, which will start within days. Meteorologists are predicting a tumultuous 2010 after two relatively quiet years. The timing could not be worse. Not only will storms put a stop to clean-up operations, they will also endanger the rigs drilling the relief wells, and, worse still, could spread the slick way beyond its existing extent. Compensation costs for the Louisiana fishing industries may be high. But if the oil interrupts Florida's tourism, BP's bill will go through the roof.

Worse still for BP, President Obama would be forced to take measures against the group. At the moment, BP has more leases in the Gulf of Mexico than any other oil company. While the administration may be loath to confiscate them as a "nationalisation without compensation", it could make a case that BP failed in its "stewardship of the environment", and invite a syndicate of other oil companies to take the leases over in its stead."

"The other major risk for BP is the inquiry into the explosion itself. BP's own initial internal investigation has suggested that warning signs may have been overlooked in the hours before the explosion. The US Attorney General, Eric Holder, yesterday visited the Gulf Coast to talk to federal and state prosecutors, and said a criminal and civil investigation had been opened into the spill, raising the possibility that BP could face a prosecution and a punitive fine.

The good news for Britain's pension holders is that even in the worst-case scenario it is almost unthinkable that BP – until recently the UK's largest company – could cease to exist. It is too big a component of British industry for it to be feasibly forced into bankruptcy by the US government. But the doomsday scenario could see BP forced to split off its US operations to absorb the costs, or even the loss of its Gulf of Mexico operations. Such drastic outcomes are still far from being a reality. But they are real enough risks to have wiped nearly £2bn off the value of the company in a single day."

From Jesse's Cafe:

"WASHINGTON -(Dow Jones)- President Barack Obama, speaking Wednesday at Carnegie Mellon University on the economy, said he expects strong job growth to be reported Friday."

All in. Dumping my TBT.

Note: BP shares are currently trading ex-dividend.

NEW YORK (MarketWatch) -- U.S. Senators Charles Schumer, D., N.Y., and Ron Wyden, D., Ore, on Wednesday spoke out against a reported plan by BP (BP 37.73, +1.21, +3.31%) to pay its dividend despite the mounting costs of its spill in the Gulf of Mexico. "We find it unfathomable that BP would pay out a dividend to shareholders before the total cost of BP's oil spill clean-up is estimated," the senators wrote in a letter to BP CEO Tony Hayward.

what else can he say to a graduating class with a mountain of debt, with parents who are also on the hook, sitting in the audience?

Interesting that in the Northern and Southern extremes of the Americas (Alaska/Northern BC on the one hand, Chile/Argentina on the other) there are HUGE copper/gold deposits which are low-grade and very expensive to extract the metals from.

NovaGold (in part because of their bad cost studies and planning) has for years been unable to raise financing for a mine. Seabridge Gold never did plan to build a mine, but to sell the company, which they have been able to do for several years. Then there is Northern Dynasty, with huge gold and copper resources, whose pebble project has been held up by cost as well as environmental issues.

If Otto (incacolanews) is right, Chile's huge copper/gold deposits are plagued by similar issues. Here's an article I found on Chile's 3 huge deposits:

http://www.im-mining.com/2010/02/05/chile%E2%80%99...

I think that's why Brent Cook - in his evaluation of deposits - always seems to look first to grade, and only secondly to size.

FWIW, DYODD

Amazing feed on video. Who makes them? They demonstrate very good functionality under extreme conditions. Surely they must be tethered to a surface power source. Still, they have amazing sealing capability against extreme pressure and temp as they extend arms and work.

get the list ready !! ... http://www.abovetopsecret.com/forum/thread578352/pg1

http://www.bloomberg.com/apps/news?pid=20601087&si...

bgt some BPOP, large PR bank popular w/hedge funds recently, sold the RIG June 40 puts naked that I mentioned this am, will probably buy more ANDS in 2.40s or sell the 2 1/2 puts a month or two out and will look over the ARRY mentioned by baz22.......still afraid of the downside on the general mkt after a week or two rally.......sold the june 105 SPYs against my July 105s a few days ago to keep down the cost and play time value/decay...........in the oils RDC, NE and NBR look like they have reacted too much, o bgt some PGH (10% annual div paid monthly)in low 9s and sold next months 10 calls....thats a rap .....thanks to everyone for their well-thought out input to bills blog and its nice to know he's hovering out there ref the earlier UXG comments...........

Tobty, I believe rumors are just that... don't know if this will influence your options.. http://www.ibj.com/company-news/PARAMS/article/20270

Gotta love those movers and shakers... someone just made a ton of money, both ways... http://www.nasdaq.com/aspxcontent/ExtendedTradingT...

Kaimu,

That $100,000 lot is 10,000 sq feet of prime water and snow capped mountain views one hour from Vancouver, BC...where I understand you can cruise up by land or sea for your gold maple leafs....last time I checked you can't mint or print land!

Ross, problem with energy is that it's bulky. Its great stuff, always useful, but difficult to put in your pocket and walk across a border with - as you pointed out. I suppose 10 kilos of gold are tough to walk with too, but - lets see, 10 kilos = $316k dollars. Now then, 316k dollars divided by 74 dollars per barrel yields 4270 barrels of oil. At 42 gallons to the barrel, and at 9000 gallons to the tanker truck, thats 19 tanker trucks to take your energy wealth with you! Talk about walking funny!

I daresay natural gas would be even more difficult to flee with! :)

While I recognize it's not always about fleeing the jurisdiction, different wealth storage mechanisms have their advantages and disadvantages. So we've got gold, cows, and now energy.