October 16, 2008
– Comments (11)
Yves has a post...
Well, these shipping companies are heading out of business when they end up having revenue down 86% and most likely with over supply a further reduction from more unbooked days....
You are such a doom and gloomer...don't you have anything positive to say?????
Wow, amazing! I did not know it was that bad.
Demand for shipping is WAY down because demand for commodities is WAY down. Anyone out there who still maintains we did NOT have a commodities bubble?
This has much more to do with physical deliveries than financial instruments.
It has a lot to do with China and India playing hardball and living off their large stock piles. The fact is eventually shipping has to resume, its a cyclical thing.
Shipping won't be at an all time high, but look for shipping rates to go to levels seen around early 2000.
I dunno, but just because oil got bubbly doesn't mean it the bull run is over.
Oil has declined 40-50% on several occassions since the bull run started in 1999. Was the bull market over? No. This is what Jim Rogers says anyways. Now we are facing a worldwide recession and anything could happen. If China and everyone else would just stop buying the US bonds, which in my opinion are in a massive bubble, the commodities could inflate again. It's hard to have a good commodity bubble when the currency is strong.
Personally I think the US projected budget deficit of $482 billion will turn out quite low, it could be $750 billion. Taxes will crumble more than they expected, and either McCain or Obama will try to spend our way out of recession. More bonds for you foreigners to buy. How big is this freaking credit line? I don't know. But it has to run out sometime. When it does, then the party is really over.
Alstry, I don't think it looks good and I know you don't think so either...
Leohaas, I think it is far, far more serious. The finanical crisis is litterally halting the international trade. I think it is about fears about getting paid. Certainly a commodity bubble. How much is this fear of delivery related to the middleman hedge funds that are going bust?
Of more concern to me is how the BDI shows that none of the precursors to economic recovery are being shipped anywhere...
Don't forget, though, that the BDI only tracks spot (daily) rates. Some shipping companies have locked in several long term contracts but have been beaten down w/ the whole shipping sector. Opportunity there? Or just false hope for my pick ESEA?
Only two ships are being currently effected by the spot rate.
Way you can track BDI at home:
Many use the BDI as an advanced indicator of the world economy. The BDI is still in a downfall. Personnaly I trak this indicator very closely. This indicates that the basic material sector is still bearish. There is no demande right now for basic materials. I think that this is a clear sign that the economy is slowing.
Just take a look at stocks like DRYS, TBSI and EXM, all dry bulk shippers. Those stocks have been killed in the last few months! I sold DRYS at 90$ one year ago.... and it is around 20$ right now! ouch!
You mean I might get out of drys yet? I was so way too early on this one...
The market overreacted, and also the shippers were in the early wave of hedge fund liquidations. Currently all I see is a lot of price manipulation. Plus panic swept container carriers as well, and this is plain silly.
Back to business - it depends on the company. Lots of dry bulk carriers have very long contracts with fixed price. Some are very well diversified globally. the earnings may suffer a little bit, but not a heck of a lot.
One has to do some preliminary research, for sure - look at the ships, contracts, geography, what the carry, etc. then panic or not...
I bought a motherload of NM (NYSE) at the low and am happy as hell with my decision. Waiting for solid earnings reports and positive guidance. no-brainer at p/e of under 2 and as an aftermath of massive hedge funds liquidations (thank you fools at Sigma Capital Management, etc.). EXM is another fairly decent choice, but I like what NM's business team and model a lot better.
Don't be a gloomy bear. The world will keep shipping. There's also lots of old fleet that nears the end of its life. If China's growth at puny 9% is tragic - you gotta be kidding me...Financing is not a very large problem. Chinese banks (from first-hand experience) were always rather strict.
Anyhow, shorting the whole load of stocks and getting a high score is too easy.
Try to pick long winners.
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