Where angels fear to tread…

Rocky’s Daughter called the office and said,  ”Dad, I want to buy some BP stock.”

Rocky: “I see that it’s down 15% today on their continued failure to stem the catastrophic leak. And it’s lost about $65 Billion since the story began. What are you thinking?”

Daughter: “I’m thinking that they will eventually get this thing under control, and while the damage may run into the billions, you taught me to be brave when others are fearful — and to be fearful when others are brave.”

Rocky: “Yes. I did teach you that. But sometimes it’s RIGHT to be fearful. Why not buy some Apple stock? It just keeps going up…”

Daughter: “No!!! I don’t want to go near Apple. It’s a fad. It’s a cult. “

Rocky: “But BP really could go bankrupt on this situation. How do we analyze that? And, why should today be THE low?”

Daughter: “I want to  buy 10 shares ($370) right now. And we’ll revisit it in a few weeks. If the stock goes a lot lower with no new developments, I might buy a little bit more. But it’s hard to imagine how the news could be worse. Please also buy some Chevron stock for diversification in the sector.”

Rocky: “Ok. You are brave!”

[Disclosure: Rocky has no position in BP shares. However, his daughter now owns 10 shares of BP at a cost of $37.  Since May 1st, BP's share price has lost about $65 Billion (27%) in value, and during the same period, Chevron's share price has lost about 12%. It is not entirely crazy to think the market may be close to discounting the possibility that the leak will continue until the relief wells are finished at the end of the summer. However, there is also the possibility that the leak could continue for years;  the government taxes the oil companies into oblivion; and BP faces criminal/civil penalties.]