Yesterday afternoon President Obama launched into a speech at Carnegie Mellon University in Pittsburgh that attempted to bridge the disaster in the Gulf with the need for Big Government. This has been a theme for Big Government advocates who think states like Louisiana asking for approvals and manpower is the same thing as adding layer after layer of regulators and red tape to a bureaucracy that missed/allowed the financial meltdown, Bernie Madoff, Toyota (TM) cars with faulty brakes, and the BP oil spill. Of course, we should demand certain things from the federal government, in business terms it’s called return on investment (or ROI). In FY08, the IRS collected $2,745,035,410 from corporations, individuals, employees, estates, and excise taxes. It is silly to give up that kind of money and not expect something in return.
On that note, the White House understands the ideological battle that will ensue this November so there will be many more of these preemptive attacks. I must say the speech itself lacked punch and the audience felt like a late night television show audience responding late to on stage cues. During the speech, the Dow gave up more than 20 points, but eventually regained its footing. I think the reason the market charged into the close were comments from the President that admitted there is a role for fossil fuels that cannot be ignored.
“But we have to acknowledge that there are inherent risks to drilling four miles beneath the surface of the earth, risks that are bound to increase the harder oil extraction becomes.”
“The time has come, once and for all, for this nation to fully embrace a clean energy future.”
From the comments above, which niche fared better, clean energy stocks or fossil fuel stocks? Energy stocks rocketed in part because they were, and are, severely oversold and partly because the White House gave a de facto green light to offshore oil drilling. Solar and wind stocks stunk up the joint even though the grand bargain is in the works. Of course, our economy would collapse in a second without oil, coal, and natural gas. But, the hype is so intense that I bet a large swath of people think we could slap a solar panel on the roof of a car and be off of mean old oil tomorrow. The President understands the real deal, but this is the best conduit for taking giant chunks of money from taxpayers and getting it into the hands of non-taxpayers. This isn’t the highways project; rather it’s a highway robbery project. Billions of dollars will slosh around and manipulate the jobs picture.
The White House will get environmentalists off of its back and still keep the lights on.
The Philly Oil Services Index popped 5.51% during the session, with the bulk of the move coming after Obama’s Carnegie Mellon speech. Action in key names in the BP oil spill may reflect legal liability.
* Halliburton (HAL): +11.96%
* Cameron International (CAM): +7.49%
* Transocean (RIG): -1.69%
President Obama made another curious comment: “the Gulf of Mexico oil spill may prove to be the result of human error or corporations taking dangerous shortcuts that compromised safety.”
Well, if it really was the result of human error all of the harsh rhetoric will be somewhat embarrassing. The ham-fisted approach to this crisis is out of the handbook that says blame and browbeat the other guy at all cost. The cost this time could be limited. Nobody is ever going to feel sorry for BP and its aloof CEO. But, there could be a frayed relationship with the United Kingdom that could fester and threaten allegiances such as NATO if there are further moves toward official nationalization. (Let’s face it, BP is being run by the Administration. Yesterday it was Thad Allen who announced problems with the drilling saw getting stuck.) Back in 1988, the Piper Alpha oil rig, situated 120 miles off of Aberdeen, Scotland in the North Sea, suffered the worst oil rig disaster ever. Of the 226 men on board the rig 167 perished. The rig was owned by American oil giant Occidental Petroleum.
Two years after the incident an investigation found two of the dead workers negligent. Apparently, a pressure safety valve was removed for maintenance and not in place when pumping resumed. The insured loss was $3.5 billion, but the Thatcher government didn’t bring criminal charges against Occidental.
On Tuesday when I was driving home I saw a freshly killed deer right off of the George Washington Bridge. That deer was still there yesterday, and it got me thinking. Are we supposed to hate BP if this horrific oil spill turns out to be human error? Once more pictures are making the rounds of dead fish and birds and everyone is going to be angry. Already, images of oil-drenched pelicans being wiped down rip at the heartstrings. The ecological system will be in tatters for years. You don’t have to be an animal lover to resent the culprit. But, what about us? How many animals do we kill accidentally on American roads each day? I checked with a number of sites and magazines so the numbers vary, but they’re all shocking. In a winter 2004 Conservation Magazine issue it was noted, on an average day in Michigan, a car brings down one deer every eight minutes. In 2002, more than 100 black bears died on North Carolina’s roads.
A piece on Salon.com stated that 1,000,000 animals are killed each day on America’s roads, which equates to one every 12 seconds.
Imagine if we awoke one morning to the front page of our local paper with a full page photo of 350,000 dead deer on a beach. It would be horrific, and yet we wouldn’t stop driving. Let’s face it, 47,000 humans are killed on roads each year and we don’t stop. I’m not saying don’t be angry, but I am saying don’t be manipulated and don’t treat this like everything else where the bad person is always someone other than that person in the mirror. One day we will be able to slap a solar panel on a car and drive, and then oil companies will no longer be able to pollute our waters. But, we will still be accumulating the road kill if there are any animals left to run over.
How refreshing to see good news move the market even if the news was on the dubious side, I’ll take it. Of course, Pending Home Sales were up big-time, and May will reveal a drop not unlike Victoria Falls. Now it’s all about tomorrow’s jobs report. I’m reading between the lines but last year when the President or Vice President spoke before the release of the jobs report the data was better than expected. Yesterday, the President was in that pre-victory lap mode, subdued but confident enough to tout the benefits of Big Government and runaway deficit spending. (It is odd, at first this Administration inherited a $400.0 billion deficit and now it’s approaching $1.5 trillion.)
ADP, as it has done more than once, tossed a monkey wrench into the mix. Its private sector jobs survey says 55,000 jobs were created. The street was looking for 60,000 to 75,000 officially, probably a lot more unofficially.
* Small businesses: +13,000
* Medium businesses: +39,000
* Large businesses: +3,000
* Construction lost 41,000, the thirty-fifth consecutive month of losses in the sector for a total of 2,191,000.
Charles Payne is the CEO and Principal Analyst of Wall Street Strategies . This post was republished, with permission, from his company’s column, WStreet Market Commentary.