Plausible Sounding Stock Tips from a Cartoonist

Katherine Mangu-Ward | May 12, 2010

Scott Adams, of Dilbert fame, on why now is a good time to buy BP stock—which he has just done:

The financial wonks will tell you that the cost of the clean up and settlements are "already baked into the stock price." That's probably true(ish). Still, no one can really predict how much this thing will cost BP in the end. The stock could still go much lower. And I remind you as always, don't take your financial advice from cartoonists....

I assume some of the best engineers in the solar system are working on this. So what we have here is a pure case of brains against oil spill. It's the Manhattan Project for natural disasters.

The Scott Adams Theory of Predictable Disasters states that any catastrophe that society at large can predict far in advance won't happen, usually because scientists and engineers figure a way to head it off. So while an oil spill of this size wasn't predicted by the general public, the slow motion ecological disaster from this point forward is predictable. Admittedly, this is a grey area for the theory because this particular disaster is happening on a relatively fast schedule. It will be a good test of the robustness of the Scott Adams Theory of Predictable Disasters.

This is an interesting variation on the Julian Simon theme of placing bets on human ingenuity. Would you buy BP stock today?

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&|5.12.10 @ 12:40PM|#

If I bought individual stocks, I might pick up BP, but not until they cap that gushing hole. And speaking of gushing holes, isn't it time for another Kagan post?

highnumber|5.12.10 @ 12:43PM|#

Does this make Adams a "Disaster Capitalist"?

I will take his advice to not take his advice.

preston|5.12.10 @ 12:45PM|#

I wouldn't buy BP today, but would instead wait until they thing is more-or-less cleaned up and the cost of the whole thing comes out, scares the bejesus out of investors, and brings the stock price down even more. Waiting until then also removes the risk of the spill taking some disasterous unforeseen turn in the next few weeks.

|5.12.10 @ 1:37PM|#

I think the cost is going to be a rolling number with the only surprises being the court cases that will take years to resolve. Scott's theory is sound IMVHO, but there's plenty of other factors that play into stock price, namely the performance of BP unrelated to the spill.

Brian Defferding|5.12.10 @ 12:52PM|#

I'll just keep buying gold. I'll dump when Congress stops bleeding money like oil from a Transocean well.

|5.12.10 @ 12:55PM|#

If you want to have some fun, buy PPLT/PALL but be careful, you have to get out before it crashes. Should be a leading indicator for the market crash. Then you short the market with MZZ.

At the bottom buy back in with physical precious metals.

This is my strategy.

|5.12.10 @ 12:53PM|#

Yes. I would. If we actually had a responsible government that passed over the cost of the US Navy's cleanup efforts, then I would not. But we have a welfare-for-big-companies administration, so yes. I would. But there are better bets than BP.

Jeff P|5.12.10 @ 12:59PM|#

Was it me, or did "cover the hole with a giant dome" sound like an episode of Thunderbirds?

Jeff P|5.12.10 @ 1:02PM|#

Answering my own question
http://www.fanderson.org.uk/ep.....ml#Episode One

|5.12.10 @ 1:02PM|#

I thought it was more of a G.I.Joe style episode fix.
I'm just not sure if it would be COBRA or Joe with that kind of a plan.

¢|5.12.10 @ 1:14PM|#

I'll sell the stock on the day I hear that engineers capped the leak and the new technology for cleaning oil spills is working better than most people expected. In other words, I'm betting on the engineers and scientists.

That's fucking stupid.

Hold until the "carbon" reg that permanently shields BP from competition comes into effect. They pulled their support for the last U.S. push to create a new energy "market" when they found out they weren't getting the guaranteed share of it they'd anted up for. Now cap-and-trade is being implemented piecemeal, with everyone in Big Energy getting a cut to match their political contributions. Watch for theirs, and cash out on its (probably delayed) bump.

"Engineers and scientists" ain't shit.

|5.12.10 @ 2:22PM|#

"Engineers and scientists" ain't shit."

As a scientist, I endorse this comment.

|5.12.10 @ 1:20PM|#

Many people get their stock tips from people that are cartoonish. Shouldn't be much of an issue to get tips from a cartoonist.

|5.12.10 @ 2:31PM|#

Really just removing a degree of separation by going right to the source, right?

|5.12.10 @ 1:33PM|#

I'll keep on buying highly diversified low annual cost mutual funds, rather than taking a highly speculative gamble on a single stock that has the potential to get beat down quite a bit more if they can't get that puppy capped.

Oh, and WWDD (What Would Dogbert Do)? Cynically offer incredibly bad advice to naive investors to buy, thus temporarily driving up the price, and claiming to be buying when he is in fact selling?

That sounds more like what Scott Adams would do.

kinnath|5.12.10 @ 1:51PM|#

I live my life as an engineer by asking What Would Wally Do?

Discounted CashFlows|5.12.10 @ 1:46PM|#

Think of it this way, Exxon had to pay $3.5B back in 1989 for a worse spill. BP stock has lost over $30B in market cap. Think of the worst case you can imagine where Obama personally forces BP's CEO to visit every resident of both Louisiana and Florida to grovel before them and hand over a $1,000 check. That comes to roughly $30B. Even in the worst case, you do better than break even because the $30B future payment is discounted the five years of litigation this scenario would require. Meanwhile you're earning a 7% dividend yield. So yes, I own BP stock.

Citizen Nothing|5.12.10 @ 1:49PM|#

That 7% divvy is certainly a nice incentive.

Invisible Finger|5.12.10 @ 2:30PM|#

As oil spills go, this one ranks around #37.

|5.12.10 @ 2:40PM|#

I'm not calling my broker until I hear what stocks are in Chip Bok's portfolio.

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