Buy British Petroleum

British Petroleum (ticker symbol: BP) has had 20 billion dollars shaved off its market cap since the gulf oil spill. They face huge financial obligations and law suits, but let’s say they end up paying out 10 billion total to cover legal claims, that’s way off 20 billion that got lopped off their market cap. You can argue what you wish morally, but there is VALUE here.
It’s like Rosthchild said, “Buy when there is blood in the streets.”

BP also pays a hefty dividend, in excess of 6% of the current share price.

In a related note, I believe we are going to have inflation here in the US. I see prices going up everywhere, NOT down. Oil has risen well off its lows, and is currently trading over $80 a barrel. I went to one of my favorite restaurants recently and noted the price of my favorite omelet had risen to $12.95 from $9.95 a couple years ago. “Well, we have to pay more now for the eggs and everything else. Sorry, not much we can do,” explained the waitress I had known for years.

Sadly, here in the US the rise in wages has not kept up with the rise in prices. I know almost no one that is making more money now than they did a few years ago, in fact, almost all friends I know who own businesses complain that they everything has tightened dramatically, and they are in fact making far LESS.

Part of the challenge facing the American work force is that due to globalization, improvements in communications (the internet etc), jobs that used to be done almost solely in the United States, have been outsourced. Whether it be engineering or customer service, it costs about 75% less to have hard working, educated people from India perform the same tasks.

Does that mean I am bearish on America? Well, in terms of stocks, most big corporations today derive huge amounts of their profits overseas, and with cheaper labor costs, that means bigger profits, thus supporting higher stock prices.

Additionally, America remains the center of world innovation, though other countries like China are catching up, and the brain drain to the United States is not as extensive as it was twenty years ago. It is through innovation, whether it be Henry Ford’s assembly line, refrigeration, the Internet, Google’s wonderful search engine, that our economy TRULY grows. As long as we continue to innovate scientifically, (and hopefully spiritually) the standard of living throughout the world will continue to rise.

In the near term, yeah, the average American is going to feel a pinch. We, as a government and people can only borrow for so long before debasing our currency. I subsequent blogs I will be recommending overseas investments (specifically Brazil and India, though having been to India personally I am by no means anxious to go back there …) … but we’ll talk about that later. In the meantime, there is value in buying British Petroleum.

Recommendation: Buy British Petroleum (BP) at a 6% + yield and the market's recent overreaction, the stock is a value buy.

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