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BP vs Exxon Mobil

The BP Cap holds over the weekend! Now if the cap can hold a couple of weeks more, until one of the two new wells can kill this monster for good, the nightmare might finally come to an end. I'm sure it's a great relief for everyone who lives around the gulf. And I'd say it's also a great relief for the millions of people who own BP stock (directly and indirectly), if the market hadn't decided otherwise.

Mr. Market Humbles us All
I'm a global indexer, but this doesn't mean I always resist the urge to speculate. I have yet to buy any BP stock, though I've been considering it for my gambling portfolio for quite some time. I'm fascinated with the $100 billion loss in market capitalization vs. the ultimate cost to its shareholders.

Admittedly, if I had a working crystal ball or a psychic friend, and knew how good the news was going to be over the weekend, you can bet I'd have bought some BP at Friday's close. I may even have bought a lot of it.

So what happened the next Monday? How did BP do vs. Exxon Mobil?

Stock Performance - Monday, July 19, 2010
British Petroleum (BP) DOWN 3.64%
ExxonMobil (XOM) UP 0.81%
Vanguard Total Stock Index (VTI) UP 0.57%
Vanguard FTSE All World Ex US (VEU) Up 0.79%

BP stock underperformed ExxonMobil, U.S. stock markets, and international stock markets by over four percent. Listening to that crystal ball or psychic friend would have cost me a bundle.

According to this same AP article, BP shares fell because "investors remain worried about the mounting costs and whether the latest fix will hold until a relief well is in place." I've got to say that neither the mounting costs nor the worrying was exactly a surprise to investors.

I actually know I don't have a clue why BP shares went down today in an overall up market. I do know that it wasn't the late breaking news of possible leaks because the stock was down before the news came out.

Lessons from the unexplainable
The stock market is very rational in the long-run and very unexplainable in the short-run. Just because I understand my human urge to gamble, doesn't mean I can change my thinking. Inside my dull indexing exterior beats the heart of a gambler.

Luckily for me, I don't have to control my gambling thoughts. I only have to control my actions. To me, the fact that BP declined while ExxonMobil shares rose makes no sense. Yet, this doesn't mean I think BP is a better buy than ExxonMobil, so I can resist my gambling urges to buy it today. More importantly, I can resist my urges to believe the media has any clue why BP shares fell after a weekend of great news, or why stock markets rose.

And if the media poorly explains the past, what makes you want to bet your portfolio on their forecasts of the future?

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