Follow Shipping Stocks?

[REWahoo]

You did see "just kidding of course".

Of course...

 

[Dawg52]

I need a drink.

 

[brewer12345]

In at 16 with my go-go mo-mo adrenaline dough.

You mean you bought today?

I thought the quarter was great and even if rates slack off a bit they will print money. Big question is the stuff they just bought that isn't chartered yet, but they've got a while to figure it out since the ships won't be delivered for a while.

 

[brewer12345]

I need a drink.

Well, before you sit down with Al K. Hall, how about a bit of perspective? Nm is higher than where it was at the close on Thursday.

 

[twaddle]

You mean you bought today?

I thought the quarter was great and even if rates slack off a bit they will print money. Big question is the stuff they just bought that isn't chartered yet, but they've got a while to figure it out since the ships won't be delivered for a while.

Yes, bought today. The fundamentals do look pretty good, and the sector has plenty of momentum. I like that combination. Obviously, it's a cyclical sector, so I just hope I can get out before the bad news starts coming in.

 

[brewer12345]

Yes, bought today. The fundamentals do look pretty good, and the sector has plenty of momentum. I like that combination. Obviously, it's a cyclical sector, so I just hope I can get out before the bad news starts coming in.

One of the reasons I prefer names like NM and EGLE to DRYS and EXM is that the former have chosen to go with longer term charters to shield themselves from a downturn in day rates. The distinction doesn't seem to be made by the market today, unfortunately, but EGLE and NM are essentially "sold out" through 2008 with charters locked at good rates, while DRYS and EXM have most of their fleet on spot.

 

[73ss454]

I kept buying as it kept going down. Just hope it's over now.

 

[twaddle]

Hmm, that cape index hockey stick does look a bit scary:

 

[brewer12345]

Sure does, which is why I'm not interested in the guys who borrow money, go buy a cape, and put it on spot.

 

[brewer12345]

Aha! Maybe the root cause. China posturing ahead of iron ore price negotiations. Can't see them not buying ore (and paying higher prices), so maybe this really is a tempest in a teapot:

Oct. 30 (Bloomberg) -- DryShips Inc. and competitors that
that carry raw materials fell from record levels after The
Australian newspaper reported Chinese steel producers are taking
a tough negotiating line to fix next year's iron ore price.
DryShips fell $22.97, or 18 percent, to $108 in Nasdaq
composite trading. Genco Shipping & Trading Ltd. fell $10.89, or
14 percent, to $67.05, and Diana Shipping Inc. fell $5.57, or 12
percent, to $39.25. The Bloomberg Dry Ships Index , which rose
to a record yesterday, has almost tripled this year. DryShips
has surged fivefold.
``China is trying to spook the market,'' Natasha Boyden, a
Cantor Fitzgerald analyst, said. ``They did a good job.''
Dry-bulk companies have profited from China's demand for
iron ore and other commodities. The newspaper reported today
that Zhang Jingang, deputy secretary general of the China Iron
and Steel Association, said profitability in the Chinese
steelmaking industry is falling and that there would be no
increase in the price China pays for Australian iron ore.

 

[clifp]

Aha! Maybe the root cause. China posturing ahead of iron ore price negotiations. Can't see them not buying ore (and paying higher prices), so maybe this really is a tempest in a teapot:

The newspaper reported today
that Zhang Jingang, deputy secretary general of the China Iron
and Steel Association, said profitability in the Chinese
steelmaking industry is falling and that there would be no
increase in the price China pays for Australian iron ore.

I got back from a 18 day trip to China recently, my first. Everywhere you look they are throwing up skyscrapers 50 60 100 stories, and in China they don't build one condo or hotel they tend to build 2-4 identical units.

As far as I can determine, that aren't using bamboo to make these things...
So not paying more for ore means less steel --> less building. I think this will have a huge ripple effect for the Chinese and world economy, nteresting to see.

 

[brewer12345]

As far as I can determine, that aren't using bamboo to make these things...
So not paying more for ore means less steel --> less building. I think this will have a huge ripple effect for the Chinese and world economy, nteresting to see.

Heh, its not that they will make less steel. China isn't going to stop expanding and exporting, and they aren't going to find a magical source of iron ore (or coal). This is posturing ahead of the critical negotiations that set iron ore prices for the coming Asian fiscal year starting 4/01/08. The iron ore prices are making similarly aggressive noises, and things will settle out as they always do. I think the Chinese are blustering because they are in a weak bargaining position.

Its not a lock that this is the reason for teh dry bulk slump, but if this is the reason, then it means this is a massive buying opportunity. Time will tell which is the case. I plan on holding for the moment. Getting into NM at $5 means that fluctuations in the upper teens are a little easier to take, pschologically.

 

[vvsonikvv]

up up up, down down, up, down.... roller coaster...O0

 

[brewer12345]

Hey, its the stock market.

Actually, I have decided to harvest some of the volatility. Sold calls against my DSX shares ($8 plus for June 45s) and against 20% of my NM shares ($2.55 for March 20s). Also blasted out my appreciated EGLE calls.

 

[vvsonikvv]

what roller coasters are no fun if it only goes up up up... you need some downs and then back up up up down down... as long as it finishs up up up.


I've never done options before. Sounds interesting to hear you talk about them all the time... I'm curious to learn more.

 

[brewer12345]

If you have a background in math, you can read any standard text on opptions and the Black Scholes model and get it pretty easily. If not, ask and I can pound out the short version. But if you start dabbling in these things, there a couple of rules to keep in mind:

- Write calls only on stock you already own. Write puts on stuff you want to buy at the strike price.
- Its OK to buy calls and puts on a speculative basis, but mentally kis every dollar you spend on these things goodbye as you do so because they are high risk speculations.

 

[Art G]

Actually, Uraguay is considered the next China, and NM is shipping to that area. The benefits to Uraguay are that they are on the same time zone as the US and have cheap labor. I've been looking for some Uraguay plays recently.

 

[Art G]

what roller coasters are no fun if it only goes up up up... you need some downs and then back up up up down down... as long as it finishs up up up.


I've never done options before. Sounds interesting to hear you talk about them all the time... I'm curious to learn more.

Think in terms of playing Craps. Buying puts and calls is like playing the come line. Writing puts and calls is like playing the don't come.
If you are looking to dabble more safely with buying options, consider option spreads. Just my opinion.

 

[brewer12345]

Actually, Uraguay is considered the next China, and NM is shipping to that area. The benefits to Uraguay are that they are on the same time zone as the US and have cheap labor. I've been looking for some Uraguay plays recently.

OK, but the Uruguayan port operations are maybe 5% of the total company.

 

[vvsonikvv]

How does NMM's IPO affect NM? Are they splitting up their "work" between the two companies?

The IPO expects to have prices between $19- $21. I wonder what happens to prices of NM shares.

...

The Black Scholes model seems very mathematical. I'm going to have to do some learning to figure it out.

 

[brewer12345]

How does NMM's IPO affect NM? Are they splitting up their "work" between the two companies?

The IPO expects to have prices between $19- $21. I wonder what happens to prices of NM shares.

I view NMM as very beneficial to NM, assuming they sell the deal at the expected price and NMM trades well. What they are doing is setting up an MLP structure. NMM will be the LP interest in an entity that owns Panamax and Capesize ships on 3+ year charters. NM will be the GP and own a chunk of the LP interest as well.

Effectively, this allows NM to raise cheap capital to expand the fleet while still retaining much of the upside taht the fleet generates. It also means that if they need to raise equity capital they can do so without diluting NM holders.

I would expect that NM will trade up if the deal goes well, although it is hard to tell how much or over what time period.

 

[brewer12345]

EGLE is starting to look quite cheap as it cruises towards 25-26. I'd love to buy some options, but the premia are still quite high. Might even buy some of the equity of it gets down to 25.

DSX is getting cheap again, too. If these idiots hammer it down to 25-26, it will be a huge bargain.

NM appears to be trading well below liquidation value.

 

[Art G]

I own GNK, VLCCF, and NAT. Only GNK has held up thus far. I sure don't like the charts on the other two.

 

[brewer12345]

Can't help you on the tankers because I would never forgive myself if I owned a ship that spilt its guts into the ocean. The bulkers (including GNK) have been sold down totally irrationally. I am just waiting for option premia to calm down a bit before buying a big wad of calls on DSX and EGLE. I covered my short calls on NM today and I am looking to cover my DSX calls as well.

 

[twaddle]

Brew, why not sell naked puts when the premia are high? I'm sure you wouldn't mind owning some shares at a lower price.