Don't Let Bulk Shippers Sink Your Portfolio... For Now 38 comments
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If you have been an active investor in the markets, chances are you have come across the insane volatility surrounding the bulk shipping companies of the world. As an industrial-minded investor myself, it’s hard to look away when you see a fundamentally strong company 60% off its highs, and offering a 25% dividend yield (or more!). It might come as a bit of a shock when I say: stay away from the bulk shippers!
Expect Third Quarter Earnings to be a Mixed Bag
Most of the (formerly) big shipping companies release earnings later this month, and I fully expect there to be some positives. However, these are companies that just don’t pop on good tidings… and playing a bulk shipper could perhaps be one of the worst ideas for the defensive trader. From a second quarter that had many big names like Diana Shipping (DSX) producing doubles in net income and revenues year over year, things simply can’t look as bright heading forward.
The shipping industry, particularly bulk shippers, are driven by volume. In a recessionary environment you need to almost completely disregard the constant bickering among corporate CEOs claiming that fleet utilization is still up around 100%. The bottom line is: companies like DryShips (DRYS) and Genco (GNK) are not in a very safe spot as the global economy weakens and people are, when it gets down to it, shipping less goods and materials.
The Baltic Dry Index
In this market, a lot of emphasis is placed on the Baltic Dry Index for tracking the actual dry bulk shipping rates over time. This is a daily survey that is literally given out to Baltic brokers every morning, asking how much it would cost for them to ship various raw materials across different routes. A bit rudimentary, but it seems to get the job done. In particular, this Baltic Dry Index follows commodities like coal, iron ore and grain.
Let’s have a look at how the 5-year chart looks:
Obviously, things haven’t been too pretty as of late. The shippers were all over the news this summer, as things collapsed and the shippers took off along with energy, a sector they are highly correlated to for obvious reasons (see raw materials the BDI is tracking). Does anyone really expect a massive rebound in energy? Not especially. Following along with this thesis, the shippers are actually getting hit twice on bad commodity ties and poor volume in a deteriorating macroeconomic environment.
The Dividend Yield May be a Trap
After reading through a write up from Charles Petredis entitled “What’s Next For The Bulk Shippers?“, I can’t help but question how he is certain that dividends will stay where they are. While I can’t throw a hard-hitting statistic at you on investor sentiment toward dividends (nobody actually measures this), I believe that it is fairly safe to say that somewhere around 85% of investors don’t consider dividend cuts an actual possibility when placing bets in the market. But when you look at a bulk shipping company like Frontline (FRO), currently offering a 31.20% dividend yield, or Eagle Bulk (EGLE), with an 18.20% yield, this is not something that is sustainable in the real world.
These companies aren’t REITs, get real!
As a slew of downgrades have come in, many multi-billion dollar companies are now multi-million dollar companies. Don’t expect a company that claims to be re-investing in new carriers, expanding its contracts and reinvesting in efficiency improvements to hold its dividend up high enough to give you those kinds of gains forever. It is much safer to stick to a shipper that understands reality, and has a dividend closer to 5%. Any shipper with a yield over 10%… I just don’t trust. Be fearful of a dividend cut that could wreck havoc on your portfolio.
Solid Companies, Stuck in the Mud
Before you consider me the arch-enemy of all things shipping, understand that I actually adore the business model driving these transportation companies. Heck, I almost bought up a few long positions in my two favorite names (DryShips and Genco) when things looked like they couldn’t get worse about a month ago. Lo and behold, things got worse.
If you are an experienced (and aggressively-focused) investor that can handle the risk, I wouldn’t have a horrendous objection to investing at these ultra-low levels. Let’s face it, many of these companies have substantial cash positions that they have been using to expand their fleets and isolate themselves from a bad macro environment. However, never underestimate the trend in volumes… which may have a considerable amount of room to fall, especially in the short term (Q408 and Q109).
I’d love to see how things look after earnings roll through, but before then I cannot advise any activity in the sector, which is clearly “hands off” at this point in time. Stay cautious, and keep your eyes on the future prospects of this high-flying industry… but don’t let a bulk shipper sink your portfolio.
Disclosure: None
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This article has 38 comments:
Rates have not collapsed in this area.
A better arguement would have been to advise against the shippers with high debt and having trouble paying back the loans. Look at DRYS who just filed to sell 25million shares, on top of the 45mil currently outstanding.
I happen to like EGLE and have been long since the IPO. I am happy to be paid a nice dividend while waiting for stock price to improve when the sector recovers.
Shipping is always a very volatile sector.
So, the question to me is this: not where DSX has been, but where is it going? And, frankly, this article does not answer that at all.
No matter what happens things will have to be shipped and stock pile will run low.
SKRUMMY
I'm not saying I can see the future, but it would not surprise me to see many stocks of various industries go UP as news gets worse, which in fact has been happening since the Oct 10 DOW low. Then again, maybe we fall into the abyss and the whole world goes to hell in a hand-basket. Who knows? But I think I know which bet is going to make more money. I also know that as global population continues to climb (which has never been in doubt) longer term we are going to need MORE not LESS shipping services.
"If you want to buy low and sell high, first you have to buy low!" --Steven Jon Kaplan
"NOW IS THE TIME TO BUY LOW, ESPECIALLY COMMODITY SHARES (November 9, 2008): It is ironic that the investing public talks about buying low and selling high--but everyone instead likes to buy at multi-decade peaks and is afraid to buy at multi-decade lows. No wonder the vast majority of investors lose money in the stock market even with the strong long-term upward bias for global equities. Meanwhile, corporate insiders were heavy sellers a year ago, and have been equally aggressive buyers in recent weeks. It's hardly surprising that the rich get richer and the poor get poorer.
"The following statement is cynical but true: the financial markets exist to transfer money from the middle classes to the upper classes. Wealthy people train themselves to buy when the media and the public are most gloomy, and to sell when the prevailing sentiment is either euphoric (as in early 2000) or irrationally complacent (as in late 2007)."
Further, comments about ALL the bad news already being priced in seems premature. How do you know? Forget the "E" in PE; academic studies show Wall Street analysts underestimate on the upside and overestimate on the downside. In other words, "E" goes down faster than WS analysts anticipate. These stocks could get a low cheaper, especially where there is heavy debt.
I've bought a small position in TBSI around $9, but had I done it the first time it was $9 (2005), I would have lost 40% at one point. How many people hold on to those type of losses? Some, but many eventually "throw in the towel". What if I had waited to $18? Well, sure I would have missed the first double, BUT I still would have experienced a quadruple (the same ratios exist on, say, DRYS). SO you can wait.
Also, I'm writing calls against my TBSI as a way to produce additional income. If it gets called away, fine - the return would be 20% annualized. If it doesn't, I'll keep selling calls. And I can keep doing this UNTIL a bottom seems a higher probability. (TBSI doesn't pay a dividend, but you could do this with DRYS, which pays a "realistic" dividend....)
Lastly, buying any stock for "unrealistic dividends" is a losers game. Trust me, I've played it often (and finally learned). Unrealistic dividends GET CUT. STOCKS GAP DOWN when dividends get cut. Like I said earlier, I don't know a lot about shippers fundamentals, but I would almost be willing to guess that you buy them when dividends STINK (?). THAT is when fundamentals are truly crappy (and bottoming).
On Nov 10 05:10 AM antwillant wrote:
> An article like this might have been worth reading several months
> ago when stock prices were still high. In other words, its a bit
> late and using only hindsight as a measure of the value of the industry.
> As usual.
The author of this article is spot on. The rest of you can keep doubling, tripling, quadrupling down on your holdings all the way to zero. The bulls don't have this industry, and by the way.. the author DID say that he actually liked the shippers... just not short term.
Learn to read please, great article Jim.
DSX Nov $15 is giving you almost 10%.
(MY COMMENT BELOW)
On Nov 10 11:30 AM MILESCFA wrote:
> I don't know much fundamentally about shippers, but the bullish comments
> here are a negative contrarian signal. Obviously not everyone has
> thrown in the towel yet, so I am hesitant to invest.
>
> Further, comments about ALL the bad news already being priced in
> seems premature. How do you know? Forget the "E" in PE; academic
> studies show Wall Street analysts underestimate on the upside and
> overestimate on the downside. In other words, "E" goes down faster
> than WS analysts anticipate. These stocks could get a low cheaper,
> especially where there is heavy debt.
>
> I've bought a small position in TBSI around $9, but had I done it
> the first time it was $9 (2005), I would have lost 40% at one point.
> How many people hold on to those type of losses? Some, but many eventually
> "throw in the towel". What if I had waited to $18? Well, sure I would
> have missed the first double, BUT I still would have experienced
> a quadruple (the same ratios exist on, say, DRYS). SO you can wait.
>
>
> Also, I'm writing calls against my TBSI as a way to produce additional
> income. If it gets called away, fine - the return would be 20% annualized.
> If it doesn't, I'll keep selling calls. And I can keep doing this
> UNTIL a bottom seems a higher probability. (TBSI doesn't pay a dividend,
> but you could do this with DRYS, which pays a "realistic" dividend....)
>
>
> Lastly, buying any stock for "unrealistic dividends" is a losers
> game. Trust me, I've played it often (and finally learned). Unrealistic
> dividends GET CUT. STOCKS GAP DOWN when dividends get cut. Like I
> said earlier, I don't know a lot about shippers fundamentals, but
> I would almost be willing to guess that you buy them when dividends
> STINK (?). THAT is when fundamentals are truly crappy (and bottoming).
______________MY COMMENT BELOW____________
You my friend are so very very correct! If this is not a bottom it is close, first one must figure if the company is solvent and will survive, then sell calls each month for 5%, 8%, someimes 10% income each month. Either you get the stock at a reduced price or pocket the option premium, or, you sold it as a profit. win win or win
The up-down-up-down saw tooth market allows you to sell the option as its time value and market position erodes and sell another option at higher value or better positioned strike price.
I also bought TBSI at 9$, a few weeks ago, I have bought and sold covered call options until my cost of the stock is now $6.86, I just sold Dec7.50 strike call for $1.50, so on Dec22, I have either 40% profit in less than a quarter, or the stock is mine at the new low cost of $5.36. This is a great way to manuver this market in everything...even GLD, which can't go bankrupt. The choppier and more volitile the stock the better, it makes for richer premiums. You just give up huge profits on the tremendous upside swings. In CHK I made 47% on my money in 6 weeks instead of 85% in two days....thats OK, I felt safer, and my profit rate is 500% annualized.
Look I am very new at this, I am a sculptor, not a trader...the way I see it this is like shifting pieces on a chess board, you just constantly adjust the coast basis of your stock lower and lower and then can sell richer and richer in-the-money calls. if your stock gets sold you win, if you own the stock way lower, you are well positioned to sell call options at even lower valuation than others who own it at a higher price. The only way you can lose is if TBSI goes belly up, so look at debt and book value and truth in balance sheet reporting (remember Enron) forget dividends for now but they are perhaps a little bonus. right now in this market, this is the safer surer way to win 80% of your trades and end up with a basket of good stocks in hand when the next bull ralley occurs 5 or 6 years from now.
Another good idea is to keep diversified globally, stick to essential necessity comodity transport energy etc and park profits in gold or commodity holdings because one can win high #s in currency, but end up with a pile of Zimbabway bucks if the world wide print presses keep humming.
billhopen.com
On Nov 10 12:17 PM Rick69 wrote:
> When I retired 5 years ago I stopped investing in individual stocks
> and instead bought mutual funds and individual bonds. Conservation
> of capital was key. Last month I sold my whole portfolio and am investing
> in stocks again. Coal, fertilizer, oil, natural gas, utilities and
> shipping are all going to be needed, even if things get a lot worse.
> There will be need to be companies to provide them. I agree that
> there may be dividend cuts and some share price reduction, but I
> don't really care. Even if all of my companies divvies are reduced
> by more than 50%, I can still live off of the revenue stream. The
> biggest risk is finding the companies that have the lowest chance
> of going out of business. Companies with low debt like DSX have the
> best chance of surviving. There has never been a dividend buying
> opportunity like this.
CHINA IS NOT GOING AWAY
The Chinese are about three to five years away from a self sustainable ecomomy, if that long. With their major interstructure programs the need for bulk shippers and oil will continue to grow, no matter what the America economy does. In fact, if you view on NAT.BM the CNBC interview you might take a similar view. I have owned NAT for over three years and that CEO has never been wrong on his assessment of the economy. In fact he cautions against putting too much creedence on reported rates from brokers.
BULL SHIT IS BULL SHIT, BUT DIVIDENDS ARE CASH RETURNED
Low debt companies that pay out a sustainable dividend, SBLK pays out 50% of earned income are never a bad buy. They may not become a wall street darling with high P/E ratios but 10-20% cash in hand is better than projected 15-25% growth, which can turn into a bull shit story.
I had a similar situation in the late 80's with untilities that were expected to crash because of 3 mile island, and similar nuke scares. CES, which is now NST was as low as 3.00 a share and stock I bought at that price is now paying me returns of almost 45% on cost basis. I fully expect a similar situation to occur within the next five years with tankers and bulk shippers who have low debt.
TANKERS ARE LIKE OWNING A TOLL ROAD
80-90% of the world's crude moves via tanker, how are they going to get product to market without tankers? The last time I checked camels are not an aquatic mammal, and even if they could swim how much oil could you put on the back of a camel?
I could go on and bore you with my lack of intelligence, but suffice it to say in my over 40 years of investing I've never seen a better total return opportunity than exists in bulk shippers and tankers than exist today.
Allan Weagle
On Nov 10 05:10 AM antwillant wrote:
> An article like this might have been worth reading several months
> ago when stock prices were still high. In other words, its a bit
> late and using only hindsight as a measure of the value of the industry.
> As usual.
EXM $9 recession low $0.90, or 90% downside !!!!!! (dry shipper)
NAT $31 recession low $10 or 70% downside (tanker)
FRO $31 rec.low $1.84 or 94% downside !!!!!!! (tanker)
NOTE: I looked at 50 shippers. Most are "recently" public (05-06... and I've read 90% are STILL private). AXB, TK are the only ones with a long enough history to see that they are CURRENTLY NEAR the '02 recession lows (ie, near a sustainable bottom?). Importantly, AXB is "HARDLY" volatile at all and carries a lower debt load; however, the trade off is a lower dividend and a lower "rebound".
What am I doing? Probably nothing (besides sitting on my buy-write).
The BDI is a wonderful thing but it is only a record. It is not something that professionals hang their hat on. Rather they are amused at how investor types have fallen in love with newly found index. It is meaningless, it only tells me what the competition got for his wares yesterday and how much I should ask for today.
The things that matter in shipping are the volumes of cargo being shipped, the distance the cargo has to go (Ton/Mile) and how many ships are available to do this.
In the mid 90's it was common knowledge in the business that there would be a shortage of ships, especially bulk carriers, because the fleet was old. According to the BDI, the sages were right, because the BDI went to absurb levels.
Although we are at this moment in a period of lower than normal cargo amounts, this is not important. Tomorrow is another day. What pros are looking at is the age of the fleet and the addition of new ships coming in. There is great fear that there will be too many ships.
Now mind you, as much as shipowners like to tell you they are experts at transporting cargo, they are really just as much, if not more, investors. Ships being the object. Right now they are adding and subttracting number of ships in the future and speculating wildly how large the fleet will end up being.
As for cargo being shipped, one must remember that the world's ports and mines etc are running close to full capacity. So any major increase in cargo is not expected. What is expected is that trade will pick up because the credit crunch is temporary, the world is developing and the appetite for goods is still there, so this will get back to normal in less than a year.
If in the next 4 years, every ship over 20-22 years of age gets scrapped, the fleet's carrying capacity will remain the same when the last ship currently on order is delivered in the summer of 2012.
18-22 years is normally considered the life span of a ship because after that, the investment in repairs/maintenance will not be worth it. That of course is a function of how much can be earned in the market. So, high BDI, more old ships, low BDI less old ships.
Although, I have started myself picking out shipping stocks because there are great opportunities. But only carefully. Picks are based on my knowledge of the companies and how strong they really are. Do not let 3rd quarters fool you. Wait for the 4th quarter results to roll in, then see what happens.
My shipping portfolio includes SSW and RCKMF because of their business plan. It includes TK and TNK but not FRO and NAT, because FRO and NAT are in the VLCC sector, whereas TK and TNK are in the much more stable Suezmax and Aframax sectors of the tank market.
On the bulker side I am waiting for 4Q results. DRYS is out. Mr. Economou unloaded a Caper from his own company, Cardiff, to DRYS and thus onloaded a white elephant on his stock holders. - SB is a candidate because of their long terms contracts but only after I see 4Q freight marklet development and how their contract partners are faring.
SEA (Mutual Fund) is fairly well balanced in the various sectors and it couid very well be agood time to buy them.
Henari suggests that if I think the world economy is going to totally crash I might as well retire to my bunker......and that a true investor doesnt allow his vision to be fogged by such considerations. Well I am referring only to Dry Bulk shipping stocks because certain companies have sailed up s**t creek without a paddle (steamer). And that it would seem wise to consider other investment opportunities and not be blinded by the expectation that shipping stocks, having been the darling of the market, must surely bounce back. Some will and some wont - the trick is in the pick and shibroker seems to be on the right track.
BTW --- Not all the shipping companies are owned by Greeks. NAT has a happy Norseman at the helm.
You buy or own the stock at say 45.00
You write a call with a strike of 35.00. This would give the writer the option to buy at 35.00? Or having written the call option, if it get excercised the writer then has to purchase the stock at 35.00 from someone excercising their option? Wait I've got it backwards don't I? Owning the stock at 45.00, then the stock owner would write a call for a higher strike price. 55.00. So when someone buys the call option, the stock owner first gets the premium and if someone exercises that 55.00 call, then the owner/call writer has to sell his stock he paid 45.00 for to the option buyer for 55.00. A profit in premium received and on the appreciation (22%) in the stocks price? Although the stock probably will not change hands. The option will just expire worthless and the writer still has the premium he got for writing the call.
Now one other thing, does the call writer write those calls close to expiration? Or I guess that is dependent on what amount of time you are willing to tie you money up for. Closer expirations will sell for less and further ones more but there is the chance the further out, the stock price could actually go above the writers call of 55.00. He would lose the stock and any gains it has. But still gets the option premium plus gets the price he paid for the stock to begin with plus the extra he wrote the call above his price (22%)? How can you lose in this type of trade? Is there any way? Most important though, do I have this right? Please correct me where wrong. And thanks in advance.
You have it basically right. As long as you write the call at a higher strike price than your basis in the stock, and YOU ARE COVERED, its a fairly safe risk/ reward set-up. You can "lose" money if the stock appreciates more than the amount of the premium above the strike price, but it is only opportunity lost, not realized. If the company goes belly up of course you lose your basis in the stock. Generally, the farther out the better, having time decay on your side, but lately, with such high volatility, short term has yielded nice premium returns
On Nov 12 02:22 PM Little M wrote:
> How does the covered call options and long in the stock work? Can
> someone explain it thoroughly? Just not too thoroughly. I don't want
> info overload. First let me see if I have it right though.
> You buy or own the stock at say 45.00
> You write a call with a strike of 35.00. This would give the writer
> the option to buy at 35.00? Or having written the call option, if
> it get excercised the writer then has to purchase the stock at 35.00
> from someone excercising their option? Wait I've got it backwards
> don't I? Owning the stock at 45.00, then the stock owner would write
> a call for a higher strike price. 55.00. So when someone buys the
> call option, the stock owner first gets the premium and if someone
> exercises that 55.00 call, then the owner/call writer has to sell
> his stock he paid 45.00 for to the option buyer for 55.00. A profit
> in premium received and on the appreciation (22%) in the stocks price?
> Although the stock probably will not change hands. The option will
> just expire worthless and the writer still has the premium he got
> for writing the call.
> Now one other thing, does the call writer write those calls close
> to expiration? Or I guess that is dependent on what amount of time
> you are willing to tie you money up for. Closer expirations will
> sell for less and further ones more but there is the chance the further
> out, the stock price could actually go above the writers call of
> 55.00. He would lose the stock and any gains it has. But still gets
> the option premium plus gets the price he paid for the stock to begin
> with plus the extra he wrote the call above his price (22%)? How
> can you lose in this type of trade? Is there any way? Most important
> though, do I have this right? Please correct me where wrong. And
> thanks in advance.
Shipbroker:
Plese keep writing. Your comments and ideas on shippers to study are most helpful
On Nov 11 07:38 PM Shipbroker wrote:
> In the eyes of a professional, anyone who talks about "Shippers"
> do not know what they are talking about. Folks who own ships are
> shipowners. Shippers are the people who ship cargo on the ship.
>
>
> The BDI is a wonderful thing but it is only a record. It is not something
> that professionals hang their hat on. Rather they are amused at how
> investor types have fallen in love with newly found index. It is
> meaningless, it only tells me what the competition got for his wares
> yesterday and how much I should ask for today.
>
> The things that matter in shipping are the volumes of cargo being
> shipped, the distance the cargo has to go (Ton/Mile) and how many
> ships are available to do this.
>
> In the mid 90's it was common knowledge in the business that there
> would be a shortage of ships, especially bulk carriers, because the
> fleet was old. According to the BDI, the sages were right, because
> the BDI went to absurb levels.
>
> Although we are at this moment in a period of lower than normal cargo
> amounts, this is not important. Tomorrow is another day. What pros
> are looking at is the age of the fleet and the addition of new ships
> coming in. There is great fear that there will be too many ships.
>
>
> Now mind you, as much as shipowners like to tell you they are experts
> at transporting cargo, they are really just as much, if not more,
> investors. Ships being the object. Right now they are adding and
> subttracting number of ships in the future and speculating wildly
> how large the fleet will end up being.
>
> As for cargo being shipped, one must remember that the world's ports
> and mines etc are running close to full capacity. So any major increase
> in cargo is not expected. What is expected is that trade will pick
> up because the credit crunch is temporary, the world is developing
> and the appetite for goods is still there, so this will get back
> to normal in less than a year.
>
> If in the next 4 years, every ship over 20-22 years of age gets scrapped,
> the fleet's carrying capacity will remain the same when the last
> ship currently on order is delivered in the summer of 2012.
>
> 18-22 years is normally considered the life span of a ship because
> after that, the investment in repairs/maintenance will not be worth
> it. That of course is a function of how much can be earned in the
> market. So, high BDI, more old ships, low BDI less old ships. <br/>
>
> Although, I have started myself picking out shipping stocks because
> there are great opportunities. But only carefully. Picks are based
> on my knowledge of the companies and how strong they really are.
> Do not let 3rd quarters fool you. Wait for the 4th quarter results
> to roll in, then see what happens.
>
> My shipping portfolio includes SSW and RCKMF because of their business
> plan. It includes TK and TNK but not FRO and NAT, because FRO and
> NAT are in the VLCC sector, whereas TK and TNK are in the much more
> stable Suezmax and Aframax sectors of the tank market.
>
> On the bulker side I am waiting for 4Q results. DRYS is out. Mr.
> Economou unloaded a Caper from his own company, Cardiff, to DRYS
> and thus onloaded a white elephant on his stock holders. - SB is
> a candidate because of their long terms contracts but only after
> I see 4Q freight marklet development and how their contract partners
> are faring.
>
> SEA (Mutual Fund) is fairly well balanced in the various sectors
> and it couid very well be agood time to buy them.
>
>
>
>
>
>
>
>
>
ALL of NAT's ships are Suezmax. About 50% I think of FRO's ships are Suezmax. Go into their sites and look at "The Fleet"
Other than that a good post!
Boy, there was a lot of negativity back in Nov of 2008!
Things seem to be picking up now in the last few days of May albeit slowly.
On 2008 Nov 11 07:38 PM Shipbroker wrote:
> In the eyes of a professional, anyone who talks about "Shippers"
> do not know what they are talking about. Folks who own ships are
> shipowners. Shippers are the people who ship cargo on the ship.<br/>
>
> The BDI is a wonderful thing but it is only a record. It is not something
> that professionals hang their hat on. Rather they are amused at how
> investor types have fallen in love with newly found index. It is
> meaningless, it only tells me what the competition got for his wares
> yesterday and how much I should ask for today.
>
> The things that matter in shipping are the volumes of cargo being
> shipped, the distance the cargo has to go (Ton/Mile) and how many
> ships are available to do this.
>
> In the mid 90's it was common knowledge in the business that there
> would be a shortage of ships, especially bulk carriers, because the
> fleet was old. According to the BDI, the sages were right, because
> the BDI went to absurb levels.
>
> Although we are at this moment in a period of lower than normal cargo
> amounts, this is not important. Tomorrow is another day. What pros
> are looking at is the age of the fleet and the addition of new ships
> coming in. There is great fear that there will be too many ships.
>
>
> Now mind you, as much as shipowners like to tell you they are experts
> at transporting cargo, they are really just as much, if not more,
> investors. Ships being the object. Right now they are adding and
> subttracting number of ships in the future and speculating wildly
> how large the fleet will end up being.
>
> As for cargo being shipped, one must remember that the world's ports
> and mines etc are running close to full capacity. So any major increase
> in cargo is not expected. What is expected is that trade will pick
> up because the credit crunch is temporary, the world is developing
> and the appetite for goods is still there, so this will get back
> to normal in less than a year.
>
> If in the next 4 years, every ship over 20-22 years of age gets scrapped,
> the fleet's carrying capacity will remain the same when the last
> ship currently on order is delivered in the summer of 2012.
>
> 18-22 years is normally considered the life span of a ship because
> after that, the investment in repairs/maintenance will not be worth
> it. That of course is a function of how much can be earned in the
> market. So, high BDI, more old ships, low BDI less old ships.
>
> Although, I have started myself picking out shipping stocks because
> there are great opportunities. But only carefully. Picks are based
> on my knowledge of the companies and how strong they really are.
> Do not let 3rd quarters fool you. Wait for the 4th quarter results
> to roll in, then see what happens.
>
> My shipping portfolio includes SSW and RCKMF because of their business
> plan. It includes TK and TNK but not FRO and NAT, because FRO and
> NAT are in the VLCC sector, whereas TK and TNK are in the much more
> stable Suezmax and Aframax sectors of the tank market.
>
> On the bulker side I am waiting for 4Q results. DRYS is out. Mr.
> Economou unloaded a Caper from his own company, Cardiff, to DRYS
> and thus onloaded a white elephant on his stock holders. - SB is
> a candidate because of their long terms contracts but only after
> I see 4Q freight marklet development and how their contract partners
> are faring.
>
> SEA (Mutual Fund) is fairly well balanced in the various sectors
> and it couid very well be agood time to buy them.
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