SoCalsurfbum

Digging into Shipping

Shabba,

You are missing the bigger picture. Ships are expensive capital intensive machines that require a certain utilization rate and pricing in order to cover their "mortgage" with positive cash flow. If they don't get the capacity utilization or pricing, the companies start burning equity at a very rapid rate. Having a ship sitting idle exacerbates this problem. Combine that with the massive amount of new capacity that has come online and is coming, while demand is dropping... and you have a lot of shipping companies with negative cash flow from operations.

I would wait and see who buys the ships when shipping lines go bankrupt (as they always do in these cycles) and buy their stock then. These lines have about as much transparency as Lehman Bros. but with a lot higher fixed costs.

By the way, the fact that they need the cash flow to try to cover some of their loan payments/cash flow problem is why you know that what Forbes rumor about ships being anchored intentionally is wrong. That would be very counter-productive for the companies.