Indeed, yesterday's selling (and maybe today's so far in RIG) indicate the market is beginning to factor in a much worse case scenario. The trouble here is that the hysteria may be somewhat founded. Playing the 'what if' card, what happens if they cannot cap the well shortly or with a relief well and oil continues to leak indefinitely, eventually making its way to Florida's beaches and/or into the gulf stream towards Europe? Plus, hurricane season is fast approaching and no one knows what may happen with that. And what if the temporary ban on new deep water drilling becomes permanent, which is likely if this well isn't capped?
Someone please tell me where I'm all wrong to think this is possible, and I'll sleep much better.
" oil continues to leak indefinitely, eventually making its way to Florida's beaches and/or into the gulf stream towards Europe?"
Do you know how much oil seeps out of the ocean floor naturally every year? Two Exxon Valdez's per year in the gulf alone?
How much between here and Europe? In other words, do not worry about it going to Europe.
The selling of Rig may be founded if they are found liable. But NE? Except for a possible 10% haircut at most from when it was trading near 45, I cannot fathom why it would be down any more than that. Based on fundamentals, it was even low when it was at 45. But trading at 40% down! This is a gift if you have the money. This window of opportunity will be shut quickly as soon as shorts start to cover.