Seaspan Corp (SSW)

Dry Bulk Shipping Valuations Approach Bubble Proportions
http://biz.yahoo.com/seekingalpha/070720/41712_id.html?.v=1

The Highlights:
The demand for commodities from China and India combined with the shortage of dry bulk ships, is leading to an enormous increase in dry bulk rates.

The world’s shipyards are backlogged with orders and the earliest deliveries available for new orders are in 2009.

As energy hungry China has increased consumption of its own coal at the cost of exports, Japan and Korea have had to get supplies from Australia, resulting in extreme port congestion and tying up dry bulk capacity for weeks on end, thus leading to a further increase in dry rates.

In the long term for this industry, there are no barriers to entry, no pricing power, and this sector should not trade at much above Net Asset Value.

This sector is notorious for reneging on contracts. All those fixed time charters at today’s stratospheric rates? Once rates fall, the long term contracts will sink along with the sector! So it comes down to this: If you believe that the supply and demand imbalance fueled by the growth of world trade and especially the rise of India and China, will continue, then by all means go long. But if you believe, as I do, that human ingenuity combined with capitalistic greed, leads to efficient pricing, then this is a wonderful opportunity to short the entire sector.

Even as you read this- Australia is taking measures to relieve port congestion, China has 14 yards under construction and another 9 due for completion by 2010 which are already taking orders, shipyards are doubling shifts to meet orders, old tankers are being converted into dry bulk carriers, insiders are looking to sell you their shares and the smart money is going short even as analysts raise estimates.