Euro Debt Crisis - A New Hope?

UK's emergency budget was well received by the markets and the rating agencies. The latter have more confidence that the country will bring down it's borrowing within a reasonable time frame. Therefore, they decided to leave the country's AAA credit rating alone. However, this good news has been overshadowed by fears that the euro debt crisis may result in slower economic growth with some believing that it may lead the eurozone economy back into recession. The crisis may have an impact on the global economy which may lead to a double dip recession. This and worse than expected US home sales figures has spooked the markets sending share prices downwards. Lets hope that the G20 Summit will sort the problem out for once and all.

My portfolio went down more than the market in general, since the banks and oil companies were affected the most by the bad news. This shows that I am heavily exposed to the financial sector and that my portfolio needs rebalancing. This will take me quite a while to achieve equal exposure to each sector I choose to invest in. Taking a neutral view, the financial shares will eventually recover and I will receive dividends again. These dividends will aid my aim of portfolio rebalancing.

BP is still being affected by the oil spill and some US politicians want the company to file Chapter 11 so that the company can compensate the victims of the disaster. I believe that BP going bust is a hawkish US politician's dream because of the following:

• even though the company's credit rating has been downgraded, it can still raise funds whenever it needs to
• the company will still be very profitable after reduced investment and divestment of non-core assets
• bankruptcy will lead to serious consequences in the economies where the firm has significant operations such as higher unemployment, slower economic growth and lower tax revenue [especially for the US regarding the latter], and
• it still has the support of Goldman Sachs, important law firms and influential lobbyists, which will definitely, in my opinion, help it through the problems it faces such as Anadarko refusing to accept responsibility [it owns 25% of the site of the former Deepwater Horizon rig], publicity and legal costs.

I have published this article on Seeking Alpha. This is about my opinions on the article I have recently read on the This is Money website.

Note that I will only post portfolio reviews on the last Friday of each month because I want to dedicate more time to self development, conducting more research on potential investment gems and comment on various worthy articles I read.

Full disclosure: Long BP