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  Tuesday September 2nd, 2014    

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The Alchemist (06/20/2010)
By Al Thomas

BRITISH PETROLEUM—A GREAT LESSON FOR INVESTORS

On April 15 BP stock was selling for more than $60 per share. This past week on June 9 it was below $30. The chance of its ever recovering to 60 is less than having go to zero.

There are tens of thousands of these rigs all over the world that have been drilling successfully in the oceans for more years than I can recall. This is the first accident of this size. BP will fix it. Leave them alone.

Stopping the drilling on other successful sites will do nothing more than raise gas and other petroleum prices in the U.S. The rigs are at a premium and will be taken by other countries who will drill wells that we will have to pay for.

Makes no sense. But that is Washington. Russia and China are continuing to drill in the Gulf.

No, our inept politicians have to get into it and have made it a political football or should I say a greased pig that no one has been able to catch.

Anyone who has followed my recommendations would not have lost money owning BP shares. Why? Do you remember I constantly berate readers to use trailing stop loss orders? A simple 10% trailing stop or something similar would have had them out with cash in their hand at $50 per share or better. Brokers won’t do it; the investor has to do it.

If you have a money manager who has not protected your account it is time to get rid of this bum and find a financial planner that understands risk management. I hate to say this, but it is true. Most of them don’t. If you can’t locate a proper manager you must manage your own money.

Any broker who allows a stock to fall 50% is totally inept and should be fired immediately. What he has shown is he does not know his business. The first concern of every money manager should be protection of clients’ assets.

Those who own stock in any company should have stop loss orders in place to protect their assets. If you don’t know what your financial manager is doing it is time to find out. BP is a great lesson to investors – and brokers.

The “safe stock that pays a good dividend every year” (BP and similar) is in big trouble for a long time. The little old ladies with blue hair are going to miss many hairdresser appointments if they didn’t have a smart money manager. Not once have I heard the cheerleaders on CNBC-TV or any of the experts being interviewed mention selling. Of course, the words “stop loss” are not in their vocabulary.

BP is a double tragedy. One for those who live in the region of the accident and, two, for those who do not understand how to manage stock market risk. This will happen again.

Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy It!” has helped thousand make and keep their stock market profits. A limited subscription to his advisory letter is available on the web site www.mutualfundmagic.com Copyright 2010 Williamsburg Investment Co. All rights reserved.

 

 

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