If you ask me what company to invest in, on the stock market, I'd normally tell you none of them.

Back when Forbes magazine was worth paying a lot of money for - I got an ad today, begging me to subscribe for $10, and I discarded it - Malcolm used to talk a story about the new hire at the investment house.

The New Hire

It just so happened that the annual company outing fell on his starting day, so the boss grabbed the tyro and headed for the yacht club.

The boss introduced him to everybody, then took him for a walk, pointing to large yachts owned by various analysts, huge yachts owned by various brokers, and the largest yacht of all, belonging to the chairman.

"But where," asked the beginner, "are the yachts of all the customers?"

Steve Forbes Isn't Malcolm

Steve Forbes isn't Malcolm Forbes, his father, and Malcolm wasn't B.C. Forbes, his father. If you are familiar with Pearl Buck, it's like The Good Earth.

If you're not, it's like the epigram one used to hear half a century ago: dirt to dirt in three generations. The first generation gets something started, the second generation builds it, and the third or fourth generation enjoys blowing all the money that previous generations have earned.

James Michaels Was Never Replaced

Malcolm hired James Michaels, perhaps the finest magazine editor of his era, and gave him a loose rein. It was OK to nail someone, as long as you were fair and accurate; Malcolm knew that having a reputation for being the magazine readers could rely on would result in advertisers lining up to buy advertising.

Steve Forbes, on the other hand, has brought a point of view to the magazine. Forbes Magazine now is a whore, coasting downhill as second-rate editors and third-rate writers destroy what first-rate editors and first-rate writers built. On the other hand, Steve Forbes isn't going to miss any meals, and he'd rather whore around, editorially, than be virtuous.

In Any Case

In any case, stockbrokers have always screwed the investor, if they could get away with it. The criticism of financial publications has always been a more effective tool for getting them to practice restraint than the SEC - but with the Steveification of Forbes and the Murdochization of The Wall Street Journal, there's nobody calling out the foxes in the henhouse.

So I would advise, in general, avoiding the stock market. It's a dumb idea, as well, to invest in capitalism. Don't misunderstand me; free markets are still a powerful and effective tool, but the notion that capital is the limiting factor in the profitability of a business seems to be rapidly becoming untrue.

Why Capital No Longer Rules

Small, nimble companies are far more competitive than stodgy behemoths. You used to need a factory employing 5000 workers to make things because each machine only performed one operation on one part; it simply cost too much to reconfigure machines to do multiple tasks on multiple parts.

With today's computer controlled lathes, milling machines, and other such tools, though, you can switch from one operation to another in virtually no time. Instead of needing 5000 people operating 2500 machines on two shifts, you can have 12 people operating 6 machines, making better products than the first factory. By "better", of course, I'm talking about products customized to the customer's order, so that they're worth more.

And big outfits like Bethlehem Steel have sunken into the grayfields, while the new mini-mills are competitive with foreign steel manufacturers.

Grab Your Ass With Both Hands

Right now, however, there seems to be a short-range opportunity to cash in. I'm suggesting that you might want to invest in BP.

Am I crazy? Don't I know that they have an ecological disaster in the Gulf of Mexico? Of course, I do. And so does everybody else. That's why the current stock price is about $50 a share, versus about $62 last January.

The reason to invest is that all the bad news is out there and the price of the stock reflects that.

Up To The Engineers Now

Before this oil spill, decisions were being made by managers, and managers tend to - and should - try to avoid wasting money.

Now, though, decisions are being made by engineers. BP knows that they have a huge public-relations problem, and while engineers aren't free to stuff Franklins in their undershorts and head for Vegas, they've got a relatively free hand.

An Apollo Program

And when engineers have a relatively free hand, they tend to deliver. The Big Dig has been going on forever, and it keeps getting more and more expensive because the managers are in control. When the engineers are in control, you end up with the Apollo Program. It won't be cheap, but it will be effective, and in a situation like this, that's the smartest way to go.

It doesn't take much to figure the worst case scenario, and traders will be all over that. The only news that would really surprise us would be GOOD news, and engineers, given a free hand, tend to surprise us with good news. We brought home Apollo 13, didn't we?

You Need An Exit Strategy

The folks at BP have a fairly profitable business, and this accident in the Gulf doesn't interfere with that. If government burdens their ongoing business, it will equally burden their competitors, which means the profits ought to remain about the same.

So what you're looking for is an announcement that they've made a breakthrough, that it's good news. At that point, the stock will jump in price - and that's when you want to sell.

And Don't Fall In Love

If they don't make a breakthrough, your stock will do all right, and if they do, you make a substantial profit. The only real question is how long do you hold your breath, waiting for an announcement that may never come? Well, I figure they're going to make some kind of announcement, saying that they've solved the problem, even if turns out to be as bad as everyone fears.

The greatest thing about this stock pick is that you won't fall in love with BP. The biggest mistake individual investors make is keeping a stock long after the reason for buying it has vanished. If it's lost money, you want to wait until the price climbs. If it's made money, you don't want to give up a profitable investment. If it's not moved, you want to wait a little longer.

Buy and hold only makes sense if you are in charge. It works if you own your own company, and not if you're paying some guy to buy himself a yacht with your money.

Other Bloggers On Related Topics:
Apollo 13 - Bethlehem Steel - BP - capitalism - engineers - free enterprise - James Michaels - Malcolm Forbes - Pearl Buck - Rupert Murdoch - Steve Forbes - yachts