Follow Shipping Stocks?

[slouch]

i'm using the poster kids of the last bull market as examples for any buying. after i run my screens and find stocks i check the charts and compare them to the charts of AAPL, SNDK, WDC, ADBE from 2002-2003. APPL being the best example

correlation is not causation.

AAPL released their first ipod at the end of 2001. It took several years of revisions for them to hit mass market appeal. Fundamentals drove the initial stock take off, not an inverted hammer or doji on the chart.

 

[al_bundy]

steve jobs came back to apple several years before that and shortly afterwards is when the current style came out along with a lot of improvements. The ipod was just the right product at the right time to get apple to take off. but if you look at what steve jobs did, it wasn't an accident.

i'm going by the Bill O'Neill defintion of a technical base breakout. New bull market started and by his theory is that the new leaders had to break out of bases at that time or in the months afterward. Apple broke out of a huge cup and handle around the time we crossed the border into iraq or toppled saddam's statue. SNDK and ADBE were around the same time, GOOG came public in 2004.

 

[al_bundy]

IBD is free till 9/28 including the website

so i go there to check out NM since the market seems to be rallying after the Senate Banking hearings finished.

NM gets a nice score of 45 out 100 and it's not in the top 5 of it's industry group. i think i'll pass for now

 

[Running_Man]

BDI is continuing an absolute collapse in rates

 

[brewer12345]

Interesting:

Business Feed Article | Business | guardian.co.uk

CHICAGO, Sept 26 (Reuters) - The credit crunch is sucking liquidity out of global trade and the shipping business, leaving cargoes stranded on docks and threatening to bring down shipyards and ship owners alike, the top executive of Excel Maritime Carriers Ltd said on Friday.
"The banks have ceased lending and a lack of liquidity affects trade," Stamatis Molaris told Reuters in a telephone interview. "The demand for goods is there; there is just not enough liquidity to move those goods around."

 

[Dawg52]

Interesting:

Business Feed Article | Business | guardian.co.uk

CHICAGO, Sept 26 (Reuters) - The credit crunch is sucking liquidity out of global trade and the shipping business, leaving cargoes stranded on docks and threatening to bring down shipyards and ship owners alike, the top executive of Excel Maritime Carriers Ltd said on Friday.
"The banks have ceased lending and a lack of liquidity affects trade," Stamatis Molaris told Reuters in a telephone interview. "The demand for goods is there; there is just not enough liquidity to move those goods around."

Hopefully after a bailout package is done(assuming it does get done), maybe some relief will come to the shipping industry. You can tell I'm a stockholder.

 

[brewer12345]

A lack of financing/letters of credit to even get goods on board is ridiculous. Simply cannot go on for long or the global economy will grind to a halt and stay that way. But we can let the banking system implode, right Audrey?

 

[al_bundy]

looking at the NM chart and I think I agree, looks like the most recent selling is panic selling

 

[Gumby]

Smells like panic selling too me as well. I may sell at year end for a tax loss, but I am not getting out of the sector.

 

[Running_Man]

Well the BDI just keeps dropping 7 percent perday, has done that for about 3 weeks straight. The last few days the panamax index has been dropping 10-15 percent per day. Both are at 5 year lows now down about 80 percent in 4 months.

I view this as the canary in the cage.....................

 

[haha]

Well the BDI just keeps dropping 7 percent perday, has done that for about 3 weeks straight. The last few days the panamax index has been dropping 10-15 percent per day. Both are at 5 year lows now down about 80 percent in 4 months.

I view this as the canary in the cage.....................

Could you translate that for the metaphorically challenged like me?

 

[unclemick]

Ah ha - so that means I buy a bunch more EGLE - right?

Now that it's on sale.



heh heh heh - BTW we did did notice the Saint's won. Ok ok so it was the niners - but they did win.

 

[Running_Man]

Could you translate that for the metaphorically challenged like me?

Day ship rates, even more for boats that are crossing through the panama canal for some reason are dropping like a stone. I have been watching the BDI index since Brewer posted the link for the site, as I find it a sensitive and very responsive economic activity indicator. It is not foolproof by any means, but a healthy economy would not have shipping rates fall 80%. It shows a drop in orders, which will eventually show up in the economic number down the road. It does not necessarily indicate that the shipping stocks are in concert with the BDI index, since much freight has been contracted for by multi-year contracts but it shows direction pretty well and the shipping stocks tend to follow. Don't see how the BDI could fall much further, but I started to think that when it hit 5000 and it's fallen 38 percent since then in a couple weeks.

 

[Dawg52]

Well the BDI just keeps dropping 7 percent perday, has done that for about 3 weeks straight. The last few days the panamax index has been dropping 10-15 percent per day. Both are at 5 year lows now down about 80 percent in 4 months.

I view this as the canary in the cage.....................

So you the cat that's gonna eat the canary?

 

[haha]

Thnx Running_Man. You were suggesting that the BDI is miner's canary for world trade and hence the level of world economic activity.

Perhaps might presage further weakness in crude and other commodity prices too.

Ha

 

[Dawg52]

Here is one review of the sector.

Marine Transportation Industry Examined in Wall Street Transcript Report: Financial News - Yahoo! Finance

 

[Gumby]

Might it not be that part of the drop is attributable to the game of high stakes "chicken" that China is playing with its iron ore suppliers, notably Vale?

 

[dm]

I'm starting to think about adding some at this point. The dividends look good if they can keep paying. Anyone worry about any of them going bankrupt? Any choice picks?

 

[brewer12345]

I think NM and EGLE are among the most stable in terms of time charter coverage, management, etc. DSX is low leverage, but because they are a full payout structure I would expect to see the dividend fall with a few quarters if day rates do not shoot back up. GNK might also be worth a look, although I do not follow them closely.

 

[unclemick]

Right - if the Saint's edge Minnesota in the Superdome my tech analysis/greed meter says buy a tad more EGLE.



Mad money only.

heh heh heh - good old balanced index on full auto lets me be be a wild and crazy guy in retirement. Of course I 'could take' the money and drive down, buy some tickets and spend a wild weekend or so in New Orleans but I was just in the area(Diamondhead) for a wedding. Go EGLE/I mean Saint's.

 

[al_bundy]

was watching Cramer yesterday and he said the BRIC trade is dead. Brazil, Russia, India, China and with it any stock that is commodity related.

will watch NM, but it doesn't look good

 

[Running_Man]

BDI index just continues to collapse down another 16 percent this week to 2500

 

[haha]

My question about shipping stocks is this-when they are not capital constrained there really is no limit on how many ships can be built, right? So inherently this will be a market timing situation for people who buy these stocks. It is like buying big homebuilders, or REITs in low barrier-to-entry markets.

If this is true, and one still is interested in this sector, at least now if there were to be a rebound in demand it would take a while for ship supply to respond and over-respond, so these securities could fly once more.

Any comments?

Ha

 

[73ss454]

I guess it's like buying any sector in the market, there's ups and downs. Just so happens this sector is getting crushed.

I'm holding a bunch of NM and I'm not happy at this point. But with this market pretty much everything is getting hit big time.

 

[brewer12345]

My question about shipping stocks is this-when they are not capital constrained there really is no limit on how many ships can be built, right? So inherently this will be a market timing situation for people who buy these stocks. It is like buying big hombuilders, or REITs in low barrier to entry markets.

If this is true, and one still is interested in this sector, at least now if there were to be a rebound in demand it would take a while for ship supply to respond and over-respond, so these securities could fly once more.

Any comments?

Ha

The story in the dry bulk sector is that there are a lot of elderly ships floating around that normally would have been scrapped some time ago, plus there is a large orderbook stretching out to about 2011. People have been nattering about potential overbuilding for some time, which is always a risk with this sort of industry. Assuming that demand eventually rebounds (hard to imagine China won't continue building infrastructure, especially once the banking system stabilizes), there will be some amount of supply coming on to handle it.

Having said that, the current supply of ships existing and coming in stream is quite likely to be less than the orderbook would suggest. First, the bulk of the newbuild orders out there apparently do not have financing in place, which is a huge problem. There have already been numerous order cancellations and I expect many more to come. Many of the marginal shipyards have either failed or are not looking so good. Second, if day rates stay low for long enough the extremely old tonnage that has been limping around long past its expiration date will start to get scrapped big time. If the industry is oversupplied, there is absolutely no reason for anyone to charter a 30 year old rust bucket.

In the meantime, many companies have a goodly portion of the fleet on long term time charters. Assuming the counterparties do not default, they should be assured of stable cash flows for years to come. And NM has always traded in the FFA (shipping derivatives) market. I hope they shorted the hell out of the market before rates plunged.