Tea Party Victory in NV Primary, The Geopolitics of BP, EPA Carbon Regulation

Another Tea Party Nomination
The tea party gained its second significant candidate for statewide office this past Tuesday, when tea party loyalist Sharron Angle absolutely obliterated far better known and presumed front runners Danny Tarkanian and Sue Lowden, garnering 40% of the vote in the three-way primary. Angle had been picking up steam the past two weeks after being virtually off the map for most of the campaign season.

This sets up a fascinating showdown, with a weakened and battered Senate Majority Leader Harry Reid facing off in the general election against a little-known former state assemblywoman in what will surely be the most-watched race of the 2010 campaign.

With Rand Paul's earlier victory in Kentucky, this gives the Tea Party two of its own running for statewide office going into the general election. It also shows an interesting schism in the Republican Party, with some state parties, such as Illinois and Delaware opting for old-school moderates, some states, such as Indiana, going with establishment conservatives, some states, such as Florida, going with upstart conservatives not affiliated wit the Tea Party, and at least two states going with outright Tea Party members. Assembling all of these factions into a united, winning combination in November is no small task, even running against an unpopular incumbent and a Democratic Party that seems to be in a fair amount of disarray going into the mid-terms.

My personal view is that every Tea Party candidate that wins a Republican primary in a competitive race helps the Democrats retain control of the Senate. Kentucky shouldn't have been a competitive race, but certainly now will be with Rand Paul in the mix, although it is still probably more likely than not that he will win in November. Nevada is another case...the early polling is split to slightly favoring Angle, but my gut is that this race will probably settle down as a pure toss-up.

The sub-plots in November are getting more and more fascinating. What are the core principles of the GOP? What is the agenda of the Democratic Party? Is President Obama going to help or hurt the DEMs? Will the jobs picture look any better by November? Lots of questions to answer and a lot of campaigning to cover.

Remember, It Is BRITISH Petroleum
The chum has been almost as plentiful in the water and the oil gushing from the rig in the Gulf of Mexico for the past week, with every politician and talking head, including the President, taking shots at BP. Around their liability, around their response, their safety practices, their dividend. It has caused a huge plummet in the share price of BP, destroying almost $80 billion in value in the company, at least in the near term.

Yesterday, newly elected British Prime Minister David Cameroon appeared to jump to the defense of BP, communicating through aids his view of the importance of BP to the British economy and suggesting that the British government could, perhaps, be willing to shoulder some of the bill. Cameroon is slated to speak with President Obama this weekend and it would be safe to assume that talk of BP will consume the discussion.

BP appears slated to announce the suspension of its dividend next week, a move that may partially pacify the circling sharks, but which is very bad news for British pension funds, where BP dividend represent over 1/7th of all dividends earned in those funds.

Two thoughts from my perspective. First, I think a fair amount of the criticism against BP is quite unwarranted at this stage. It is not at all clear to me at this point how to apportion blame for the incident between BP, the construction company that built the well, the company that built the relief valve (our old friends Halliburton) and government regulators. The actual facts of the case seem to be secondary to finding someone to string up and that is a shame if we are going to learn from this incident and prevent another incident from happening in the future.

My second thought is that BP will survive and will not go bankrupt. A bankruptcy would be a disaster for the British economy, British retirees and investors and world relations. It won't happen. BP has a business that spits off tons of cash and billions will be available for clean-up. This will calm down in a few months, although the lawsuits will go on for years. But expect BP to live on, just as Phillip Morris and R.J. Reynolds survived the massive lawsuits of the 1990s. Full disclosure -- I purchased a stock position in BP this week.

EPA Carbon Regulation Lives On
An attempt by Sen. Lisa Murkowski (R-AK) to eliminate the capability of the EPA to regulate carbon emissions failed this week on a procedural vote with 53-47 voting against consideration of her proposal. All the 41 Senate Republicans voted for the proposal along with 6 moderate Democrats, including both Democrats from Arkansas (Pryor and Linclon), Nelson of Nebraska, Landrieu of Louisiana and Bayh of Indiana.

This vote essentially means that the EPA, under President Obama's guidance, will continue to have the authority to regulate carbon at its discretion. The President has said that he would prefer to have Congress act on a comprehensive bill including Cap and Trade but that the EPA would act under existing law, if needed.

Next up....latest updates on the 2010 ratings including Nevada.

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