A Doomed Company and A Doomed Presidency

BILL BREAKSTONE, JUNE 16, 2010

If I only had money, I'd be shorting big time, both BP and the Obama Presidency. In my opinion, both are going under.

Joe Scarborough made a very interesting analogy earlier this morning on his show. He compared the Gulf Catastrophe to the Iranian hostage crisis of the 1970s. Living through that previous disaster was like Chinese water torture. Day after day, the unrelenting count went on as Americans became more and more upset with their President's inability to do anything, other than a botched rescue attempt. And it brought Jimmy Carter down.

Joe was right on making the comparison to what we see today. The constant criticism from all sides, left and right; the talking heads ranting and raving as Chris Matthews and Keith Olberman did last night following Obama's Oval Office address [I did not see them, but heard second hand about their harsh criticism of Obama's performance as being too weak, too non-specific, too broad and general]; the repeated images on television, day after day, hour after hour, of dying wildlife and polluted marshes and beaches.

And it seems that every other day, the estimate of the spill grows larger and larger. Yesterday's figure of up to 60,000 barrels of oil leaking daily is just frightening. his will be going on for months, and to be honest, it could be that it will go on forever. The experts say the relief wells that will be completed by late August will finally end the gushing oil. But what good have the experts been so far? Wrong time and again! Why have any faith that the spill will ever be halted? There have been a few articles in the press, totally downplayed, about a nuclear option, literally, not figuratively. No one wants to talk about it, but if all else fails, what will we do? What options will we have left?

In any case, BP is finito! It has already lost some 65% of its market value. Its debt has been downgraded twice over the past three weeks, and will likely be further downgraded by all the rating agencies next week, to a level below investment grade. It faces huge liabilities from claimants throughout the southern states, and if the oil interacts with the Gulf Stream, it will affect the southeast states as well. The debt downgrades will incrementally decrease BP's ability to fund the massive costs of the cleanup and compensation claims. Even with its share price so drastically reduced, and they will be heading far lower after the next ratings downgrade, what company would think about acquiring BP, with those massive liabilities. Bankruptcy will be the only option.

As for Obama, he is stuck, like Carter was, in an impossible situation. As smart as he is, he is not Superman. I truly believe he's doing the best anyone can under the circumstances. But his image has been ruined, and the political vultures are circling the dying corpse. It would surprise the hell out of me if he wins a second term. Camelot was short-lived, and the promise of 2008 seems lost as well.