THE FOUR POLITICAL DISASTERS

As I look back over my long life, I notice four major disastrous actions since WW-II.

The first happened under President Eisenhower when the CIA helped overthrew a duly elected democratic government in Iran* and our relations with Iran have gone downhill ever since.  At the behest of the forerunner of BP (Anglo-Persian Oil Company), the British government requested that the U.S. overthrow the government of Mohammod Mosaddegh   Defenders of Eisenhower say that the CIA went rogue in doing so and Eisenhower didn't know about it.

The second was when President Reagan failed to react militarily to the embassy attacks in Lebanon and Kuwait plus the Beirut Marine base bombing.**  Instead he cut and ran which emboldened terrorists who concluded that the U.S. wouldn't react to their machinations which eventually led to the U.S. getting involved militarily in the quagmire of the Middle Eastern politics.

The third involved President George W. Bush (Bush-43) who got us involved militarily in the middle eastern quagmire in Iraq.***  I think that it was appropriate for the U.S. to get involved militarily in Afghanistan after the World Trade Center airplane attacks killing nearly 3,000 people.

The fourth also involved President Bush (Bush-43).  His opposition to regulation of the financial industry**** resulted in a financial collapse of the economy from which we are still digging out although the stock markets and corporate profits have been very good

You might ask what about Vietnam and President Johnson?  At the time of the Vietnam war, I would have included it as a major disaster and in terms of lives lost it is.  Today, however, we have friendly relations with Vietnam, and they are an important trading partner with which we have diplomatic ties.  President Bush (Bush-43) went to Vietnam twice and wanted to sign a trade agreement with them, but the Senate disagreed.  We may have to wait for my generation to die out before full economic relations are achieved with them.  Korea was another major problem at the time, but, since the Korean War, South Korea has developed into an economic power, and, in spite of the hostile nature of North Korea, the area seems stable with South Korea being an ally of ours.  President Eisenhower did us a favor by ending the Korean War.  In contrast, I don't see the Middle East countries becoming important U.S. allies within say the next 30 yrs, but I won't be around to see if I am right.

Even WW-II resulted in Japan and Germany curiously becoming important allies of the U.S. and major economic powers.  Because of problems involving religions and former colonization, I don't see that happening with the Middle East.

* http://en.wikipedia.org/wiki/1953_Iranian_coup_d'état
** http://www.dailykos.com/story/2012/10/19/1147106/-Breaking-Ronald-Reagan-refuses-to-call-embassy-attack-an-act-of-terror; http://www.state.gov/documents/organization/176699.pdf
*** http://www.britannica.com/EBchecked/topic/870845/Iraq-War
****http://en.wikipedia.org/wiki/Financial_crisis_of_2007–08; http://www.umsl.edu/~dibooglus/personal/financial%20crisis_revised.pdf

BP DOES IT AGAIN

The reason that things are so messed up in Iran is due to BP's (then the Anglo-Iranian Oil Company) lobbying the British government to get the U.S. to overthrow Prime Minister Mossadeq of a duly elected Iranian parliamentarian government, which the CIA did. (http://en.wikipedia.org/wiki/BP) Relations with Iran and the U.S. have gone downhill ever since.

Now it is alleged that BP lobbied for the exchange of parishioners in the Lockerbee bombing over Scotland (http://www.aolnews.com/politics/article/bp-lobbied-brits-ahead-of-lockerbie-bomber-release/19555218) where the bomber Abdel Baset al-Megrahi of Pan Am Flight 103 was released because he supposedly had terminal cancer. BP is said to have stated that the slowness of the prisoner exchange was endangering an offshore drilling agreement with Libya (http://www.cbsnews.com/video/watch/?id=6698475n).

Isn't it strange how BP keeps hopping up in connection with so many disasters, such as the Texas refinery explosion of 2005 where 15 were killed and 170 injured, and, of course, the mega environmental disaster of the Deepwater Horizon explosion and major oil spill problem which is still ongoing.

President Obama wants a six month moratorium on new deep water drilling. It seems to me only reasonable for the Deepwater Horizon out-of-control well be solved before more deep water drilling is undertaken. Should President Obama allow more drilling at this time and another such oil spill occur, he no doubt would be not only politically damaged but his administration would be over. My understanding is that a group of oil companies have gotten together to make plans for a rapid response to another deep water oil well spill and is setting rules on the types of drill mud and casing to be used. This is exactly what is needed and is to be applauded, and it may not take a full six months to expedite it.

Snip: "Critically, the new system is expected to be deployed within 24 hours of an offshore spill, and to be able to fully contain the oil spilled within weeks, said Sara Ortwein, a vice president of engineering at Exxon, which has taken the lead in setting up the spill plan.
A new nonprofit entity, called the Marine Well Containment Company, will be created and be in charge of operating and maintaining this emergency capability. The entity, modeled in part after the Marine Spill Response Corporation, which was set up after the 1989Exxon Valdez oil spill in Alaska, will also finance research to look into new ways of tackling an underwater spill." (http://www.nytimes.com/2010/07/22/business/energy-environment/22response.html?_r=1)

IF IT WASN'T SO TRAGIC, IT WOULD BE FUNNY

The BP Deepwater Horizon oil well disaster has brought out some of the contradictions of life that would be funny if the situation wasn't so tragic. In Louisiana, Alabama and Mississippi, you have three very conservative states where people believe in small government; yet, with the BP oil spill these people can't seem to get enough of the Federal government (http://www.whitehouse.gov/deepwater-bp-oil-spill/). They want more from the Federal government, and they want it faster, though in the Exxon Valdez oil spill in Alaska, the Federal government did not get involved at all. After eight years of an administration engaged in dismantling Federal government regulatory functions, there are now cries that the government regulatory bodies involved in the BP spill didn't do their jobs. So you may believe in a minimal Federal government, but, it turns out that when disaster strikes, you want your Federal government to have regulated it and then to fix it.

And then when it was said that President Obama wanted BP to put up a $20 billion fund* run by an independent manager and to discontinue their dividend out of respect for the disaster, first people said he can't do that. But, when BP did do these things voluntarily, there was an outcry against our president being a strong president, rather than admiration for his strength. I don't recall any outcry when President Truman sized the railroads in 1946, although this was to break some unions and not regulate a company. Again in 1952, President Truman nationalized the steel industry, once more to break a union strike. In this case, the Supreme Court ruled he did not have the authority to do so. However, in President Obama's case, BP voluntarily complied. The person to oversee the dispersal of the $20 billion fund - Kenneth Feinberg - is the same man who oversaw the 9/11 Victims Compensation Fund and is highly regarded (http://www.nola.com/news/t-p/frontpage/index.ssf?/base/news-14/1276756264251880.xml&coll=1).

*This fund will not be filled all at once, but at $5 billion/yr for four years so the company will not be seriously impacted.

IS BP TOO BIG TO FAIL OR CUT ITS DIVIDEND?

From a post on Motley Fool about the BP Deepwater Horizon spill: ...it's only a matter of time before we hear the refrain "well, we can't let BP fail, they're too big and would collapse the global economy". In fact, we're already hearing rumblings of that, if you read the reports about BP alone representing 13% of all FTSE dividend income.

I'm sputtering. I'm aghast. I really don't know what to say. The above comment only summarizes what I was hearing yesterday about how a company that has caused the hugest (words fail me) environmental disaster in our countries history shouldn't even lower its dividend because it would hurt too many people. And the disaster is still going on. It shouldn't even be in business.

Where was the outcry, for example, when GE cut its dividend? It too is a huge company, and I presume it paid dividends to lots of widows and orphans. Whatever may happen to GE in the future, I believe it has yet to have a negative quarter for earnings. When I sold my GE stock, I took one of the largest losses of my investing career, and I had bought the stock many years ago between $20 and $25/share, which hardly seemed exorbitant.

Standard Oil was broken up. ATT was broken up. What has happened to us that BP is too big to be broken up. Here is a company that kills its employees (15 with something like 170 injured in 2005 and 11 more this year which is 26 within five years).

I just can't believe what I am hearing. I have never bought BP stock because I believe they are a rogue company.

Maybe I should have done all the above in caps! I'm screaming!

...............................................................................................

Turns out that on June 3, 1979 the Ixtoc I exploratory well blew out 600 miles south of Texas in (where else) the Gulf Mexico. The spill is rated as the third largest ever (http://en.wikipedia.org/wiki/Ixtoc_I_oil_spill). It spilled 10s of thousands of gallons per day for 9 months and was finally capped on March 23rd of 1980. In the case of Ixtoc, most of the oil stayed far out to sea although there were major bird kills. Texas did take large precautionary measures.

Note this well was being drilled in water only 50 m deep, and it still took more than 9 mo to cap it. Also note that the famed Red Adair was involved in trying to stop the well flow. And note that the well continued to flow for three months even after the relief well made contact. No one knows where all this will end. Considering the Itex well experience, I wouldn't bank too much on the relief well stopping the flowage from Deepwater Horizon. So I wouldn't get my hopes up too much for Deepwater Horizon oil flow stoppage in the foreseeable future.

I would like to think that modern technology has improved so a better job will be done on Deepwater Horizon than on the Itex spill, but I don't know. The sequence going on in the Deepwater Horizon spill sounds awfully similar to the Itex spill, and you have to deal with a mile deeper water situation. Also the environmental damage from the Itex spill was very minor compared to Deepwater Horizon. I think that BP is in lawsuit city.

(The above is based on several posts on Motley Fool. These post are #330577 and #33076 in the Industrial Analysis Clubs/Macro Economic Trends and Risks; post 6365 in the Investment Analysis clubs/Dividend Growth Investing.)

SOMETIMES YOU GET ONLY ONE ACCIDENT

Just how many accidents will BP be permitted? Look, if you run your car into a telephone pole at 60 mph, you are probably permitted only one accident, in spite of air bags and seat belts. Or you might be driving safely on a interstate when a semi-truck trailer comes over the median strip smashing into you. Though it was not your fault, you were permitted only one accident.

But consider BP. Perhaps their worst "accident" was when they had their previous name of The Anglo-Iranian Oil Company which arranged for our CIA (Hard as that may be to believe.) to eliminate the duly elected Prime Minister of Iran. What did that Prime Minister (Mossadeq) want? He wanted the same deal that BP had signed with Egypt, i.e. 50% of the profits. Yes, at one time, within the lifetime of many of us, Iran had a democratic government. But BP (current name) managed to get us to do away with a democratic (parliamentarian) government and reinstitute the Shah and a regime more "amenable" to BP. Of course the rest is history. The Shah was eventually replaced by the ayatollahs and a government hostile to the U.S. with countless deaths and several times more serious injuries. See: http://en.wikipedia.org/wiki/BP for a more complete but still brief history.

I don't know just how many serious accidents BP has had, but another disastrous one was the 2005 Texas City refinery disaster in which 15 people were killed and 170 injured (http://en.wikipedia.org/wiki/Texas_City_Refinery_explosion). This was at the third largest refinery in the U.S. Actually, the refinery was a part of Amoco before BP bought Amoco.

And then there are small accidents like the recent Trans Alaskan Pipeline accident that shut off oil transport for 10% of the U.S. oil consumption for more than 3 days. Well, no one lost their lives or were seriously injured in this accident. Though this is the longest accident to fix on the pipline, it is just one of a number of ongoing accidents.(http://www.usatoday.com/news/nation/2010-05-29-alaska-oil-spill_N.htm?csp=24&RM_Exclud e=Juno) But if spills of the Alaskan pipeline were the only problems BP faces, perhaps we could live with it, but they add to the list.

Then of course, there is the BIG ONE in the deep water of the Gulf of Mexico. This accident smells. Again there was loss of life (11 killed), a mounting and broad ecological disaster to both the sea food (shrimp, fish, crabs, etc.), tourist industry, and, last but not least, the loss of millions of barrels of oil. This disaster is still developing.

One has to think, hasn't BP had enough accidents? How many lives have to be lost? How many serious accidents have to be incurred? How much oil has to be wasted? How many global political problems are they to be permitted to create? Haven't they caused enough trouble? Isn't it time that BP be disbanded? It may be too bad that the BP Amoco deal didn't go the other way, i.e. Amoco acquiring BP. But it didn't. How much longer is BP going to be allowed to mess up society?