bartenis

OceanFreight: Why It's Now a Must Buy

ocnf: A BUST BUY

Based on Ramisle's valuations the OCNF's net worth drops by 200-250 million to between zero and 50 million. When the deluge of new ships hits the water, the values of old ships will drop more.

OCNF's older ships will have to seek charters at a discount. When the 70% of OCNF's charters expire at the end of 2010, the charter market will be a bloodbath due to overcapacity --an additional 60% of the dry bulk fleet is to be delivered in 2010, 2011. Additional overcapacity in the crude carrier market is expected too. The BDI and BDTI are headed down in 2010-11 after a brief run-up in 2009.

Already OCNF is only breaking even in "good" times while their bigger competitors make modest money.

Weak operators without deep pocketed owners and little cash-- like OCNF-- will be the first to have the banks call their loans as they start losing money in 2010.

It will be a survival of the fittest. Way too risky a play on a minnow in the game with the sharks.

OceanFreight: Why It's Now a Must Buy

SELL this stock:

Book value is way overinflated because vessel prices have plunged.

Earnings may drop because charters are frequently broken and re-negotiated on the 70% "sure" revenues.

On the 30% spot revenues for 2010 they will lose money.

Baltic dry index is plunging!!

BEWARE.

What About Citigroup and BofA's Billions in Deferred Tax Assets?

"On the tax books, they pay fewer taxes upfront than we see in its public accounts (I know it sounds dodgy but I am sure a tax accountant can explain).... By deferring the tax liability, companies reduce the net present value of the tax charges. the tax books, they pay fewer taxes upfront than we see in its public accounts (I know it sounds dodgy but I am sure a tax accountant can explain). By deferring the tax liability, companies reduce the net present value of the tax charges."

That is wrong.

When you pay more tax than you show on your P and L, you show a deferred tax asset. When you pay less tax than you show on your P and L, you show a deferred tax liability.

In Citi's case, the deferred tax asset--not a deferred tax liability-- means they have already paid out the tax and hope to recover it.

It's hard to say what the recovery prospects are without knowing what Citi did in the first place. They might have bypassed the P and L completely and taken a direct uplift to their equity on some NOLs and and recorded it the uplift as a deferred tax asset.

The writer needs to do some specific research on Citi before publishing such unfounded innuendo.

He does raise a key issue though, to his credit.

The Hedge Fund of America, LP

cjct

Problem is many MBS and CDO have tranches that do not get even the 20% recoveries. Those go to higher ranked tranches --which of course will not be offered. The toxic subordinated tranches will of course be offered for sale to Paulson.

The Hedge Fund of America, LP

linguistics

Huh? 15% is annual coupon. 3.75% is an annual funding cost. After 3 years you get 3 x 15 = 45 less 3 x 3.75 = 11.25. or a gain of 33.75. And now you lose 100% of your purchase price on the toxic asset that yielded 15% on that purchase price.

back to math class, please.

The Hedge Fund of America, LP

"Even if the government bought the most toxic debt and collected a couple of interest payments, they'd be in the money."

How does getting two interest payments of even 15%, less funding cost of 3.75%, less capital loss of 100%, get to be a good deal "in the money"?

Fuzzy math.