HAB

Looking Good: Genco in Particular, Shipping in General

Your "theory" is off base for a few reasons. First, at the U.S. just now recognized it's in recession, the rest of the world will follow. Global recession is a very bad thing for shippers of all kinds. Why? During the boom a lot of ships were brought online, and more are under construction due in 2009 & 2010. This causes over-supply and you might have mentioned in your article the BDI is down nearly 95% as a result. Now, not all shippers are tied to spot rates - but you didn't go into that in your article either. Next, those that have contracts are soon to be renewing some/all over the next year at very depressed levels.

A major financial magazine (can't remember which of the ones I read had it) mentioned the shippers (many of them) are violating their loan covenants due to the asset values of their ships dropping - again due to over supply. This creates the problem where in order to get their value ratios back in line per their loan covenants, they sell ships - yup, you guessed it, that brings asset values down more, and the cycle has begun. Now throw in the fact that most ships operating at spot rates are doing so below cost and you have a real problem. Investors are pricing these companies as though they can't make their payments and keep their covenants in good standing - something that only a few will do. As one person commented, Diana is in the best position to survive with it's low debt. The other may be TBSI since they have a unique niche of smaller ships.

Still, you just didn't address any of this critical material in your blog/article which is why more than a few have flamed you for it. Next time, take the time to research the sector you write about and what is influencing it beyond the fact that the stock prices are down to ridiculous levels.

I for one won't buy ANY of these stocks until the carnage is over - and that means 1, probably 2, will bite the dust. My bet is DRYS could be the first, but with $1B in debt, GNK isn't looking all that great either.