Nordic American (NAT), Statoil (STO), Apple (AAPL), Visa (V), Google (GOOG),

The Baltic Dry Index is closely followed as an indicator of global economic activity with good reason; it captures the movement of iron, coal, and grains across oceans. For some reason, another index, the Baltic Dirty Tanker Index is ignored. This index maps the prices for shipping crude oil (think FRO, NAT, TK). I introduced this index earlier this year when it was at 485. I predicted the index would rise. It did to 720 before crashing down to a low of 469 where it is today.

Today I'm highlighting the index as a means of gauging the demand and supply of oil. Clearly the index is heavily influenced by the number of ships competing for transporting oil. However, the number of vessels doesn't change drastically month to month. Therefore, the index gives a rough idea of what the oil market is doing absent speculative pressures.

As the Baltic Dry Index (a global shipping "price" mechanism) scuffles back to early May levels despite a "recovering global economy," one must ask what are the drivers? We were raising the question nearly a month ago [Aug 7, 2009: Baltic Dry Index has Worst Week Since October 2008 - Blame China. Prescursor to Slowing Loan Growth?], but as always with the stock market, news does not matter until it matters - hence the cheap headlines of "US markets down on China" are comical, considering the Chinese market has been down many days this month and it did not matter all those days. But suddenly it matters today.

China has simply been the world's driver of all things trade this year - especially of the commodity sort. When the Baltic Dry Index started rallying early this year, we were asking what was the real cause? [Feb 9, 2009: China and the Baltic Dry Index - What's Really Going On?] We opined it was the Alan Greenspan / Ben Bernanke effect on steroids [Feb 16 2009: Is China Pulling an Alan Greenspan?] and in retrospect we appear to have been dead right. When China turned on the spigots, commodities and asset values began to fly higher. The "markets" saw these moves up and attached them to organic recovery signals. Pundits climbed on, and green shoots were shot out from cannons.

Over the past few months, I have made several successful calls and have earned an 80%+ return on my simulated portfolio; not to mention, my real life portfolio. Back in March, I began buying into quality REITs that could be had for bargain-basement prices. I have continued to research more companies in the REIT sector, most recently writing about DCT Industrial Trust (DCT) in late July. I recommended buying into Discover Financial Service (DFS) under $7 in late April; it now trades near the $14 mark. I even argued that microcap boat and yacht dealer MarineMax (HZO) could be a great buy under $3.50. HZO now trades over $7.50.

Given the market’s run-up, however, my views have shifted a bit. Once we tipped over Dow 9000, I felt as if we were entering a “change of seasons” and that it was time to start shifting my portfolios a bit. Marine Max might’ve been attractive at $3.50 and Discover might’ve looked good at $7, but at the current prices, I believe risk exceeds reward potential, so they are not great buys any more. The market changes quickly and you have to stay ahead.

Bullish Calls:

Vector Group (VGR): "This stock is a good stock… it yields 10%. I am dividend hungry."

Bullish Calls:

Apple (AAPL): "I think AAPL's data for the smart phones is so explosive, I am going to continue to say buy, buy, buy"

Bullish Calls:

El Paso (EP): "I loved that quarter… I saw the quarter come out and I said 'oh man I have got to recommend that stock'… you have got horse sense… that stock is headed up big."

Bernanke The Actor: Caterpillar (CAT), Apple (AAPL)

Bullish Calls:

Peabody (BTU): "The only one (coal stock) that I am still endorsing is Peabody Energy Corp., and that is because the Communist Chinese are not as air quality conscious as we are."

The immortal words of John Templeton "invest at the point of maximum pessimism" guide us when we are looking for value globally. We know a number of "conventional" fund managers and recently posed the question to them regarding whether or not they would include shipping stocks in their portfolios. Their response was a resounding no. That got us thinking that, based on this response alone, significant value probably lay with shipping stocks.

As far as fundamental valuations go, shipping stocks are up there with the most unwanted stocks in world stock markets. The median P/B ratio of shipping companies listed in the US is a mere 0.785. You may want to check out this valuation screen at FINVIZ.com. This is more or less the cheapest P/B valuations that shipping stocks have traded at since the 1970s (sorry, our data does not go back prior to 1970).

Bullish Calls:

Nordic American Tanker (NAT): "I have been in constant contact with the Nordic American Tanker people (who have by the way have helped me to understand the manipulation of the oil market) that yield is safe… NAT is better… I want you to make that swap."

The Google of Healthcare: Medco Health (MHS) with CEO David Snow

Capital Link Shipping, a New York based investor relations and advisory firm, this week announced the launching of a set of indices to track the different classes of shipping stocks. Here is a listing of the new indices:

• Capital Link Maritime Index
• Capital Link Tanker Index
• Capital Link Drybulk Index
• Capital Link Container Index
• Capital Link LNG/LPG Index
• Capital Link Mixed Fleet Index
• Capital Link MLP Index

The components of the indices all trade on the U.S. stock exchanges. Component values in the indices will be market cap weighted and updated at the end of each trading day.

Bullish Calls:

Nordic American (NAT), Frontline (FRO)

As previously posted in my blog about crude oil, I am still anticipating a peak in mid July (around options expiration July 18). Below is a chart showing where crude peaked last year.

Bullish Calls:

Nordic American Tankers (NAT): "I continue to think that this is my favorite way to play the oil tanker market… I am not deviating."

by Skymist

The Baltic Dry Index has now fallen significantly for two days in a row, putting us down more than 10% from its high last week. BDI is a streaky index, almost behaving more like an integral of a boolean function than a quantitive measure.

As posted in my blog, historically oil and gas both peak in the summer months. As we can see from last year's chart, oil peaked in mid July.

In this article I will talk about some option plays I have been / will be using to capture a potential large upside with a limited downside. I’ve been very bullish on commodities lately which will explain some of the equities I've used early in this article.

In this article I'll be talking about Bull Call Option Spreads, to understand this you must be familiar with stock options. To learn more about stock options visit my BLOG.

With the UK's credit getting downgraded Thursday, it gave serious speculation that a US credit downgrade could soon follow. The reason for this speculation is because the US and UK have had similar policies, ie. spending too much money!

If the U.S. credit gets downgraded I imagine the dollar will become much weaker. I believe it will sink lower than the lows set in summer of 2008. Some ways to take advantage of a weak dollar are outlined below. I have been implementing various option strategies to take advantage of some of the moves I expect [if the US credit gets downgraded]. To see a list of option strategies I have been using check out my blog.