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Randoms: Shippers On a Frothy Sea


Excel Maritime a possible play in shaky sector.

  • A couple of thoughts about Dryships (DRYS) to go with Prof. Curtis' article: (i) DRYS plays mostly in the "spot" rate market which for Capesize ships today hit the $216,000/day mark (as a point of reference, rates were $110,000/day a year ago, and $189,000/day... last week). Seems a bit frothy to me. (ii) This company has more sizable "related party transactions" than your friendly neighborhood polygamist ranch. It might be able to explain them away, but those are nose-scrunchers.

  • If I absolutely had to buy drybulk shippers at these levels, my first candidate would be Excel Maritime (EXM): the Quintana Marine acquisition gives the company cash flow from long term contracts, while the EXM fleet can still benefit from the "spot" rates and has the flexibility to lock in peak long-term rates if they choose to. It also has relatively little leverage.

  • Why do I keep having this "fatal attraction" of going long Barnes & Noble (BKS)?

  • That was then, this is now. And my rule of thumb is "no piggies, no Hoofy".

  • My bottled water delivery service has changed its "fuel surcharge" from $2 to "whatever it actually costs us to drive our trucks". The surcharge will remain in place until crude falls back below $50/barrel, or "forever", whichever comes first. Meanwhile, the garage door repairman charged me a "fuel surcharge" of $5 for his trip out, and the computer service guy charged me $4 for the same. Perhaps asset prices will spiral into deflation, but I'm pretty confident all-in prices for "goods and services" will keep going the other way.

  • Which brings me to my seemingly permanent state of confusion over precious metals: are they a financial asset? Or are they the recipient of "goods and services" inflation?

  • My near term technical trading guides.

  • Can you say, Cypress Semi's (CY) WestBridge technology?

  • Am I short enough Capital One (COF)?

  • Am I long enough Harris (HRS)?

  • Is this the environment where I'm better off being smaller both?

  • Gambling Days

    Penn National Gaming (PENN) is the object of a $67 cash-buyout offer by two private equity firms. The deal is supposed to close at the end of June. The stock currently trades just over $43. That's a $24 profit in 6 weeks IF the deal does close.

    Of course it's all about the IF. I raise this because today there's heavy call activity in the July 50 and 55's and the October 50's. With the credit markets beginning to fund companies again - at least for now - this action looks intriguing.

  • I'm gonna boli you!!

    According to Bloomberg, Credit Default Swaps of MBIA (MBI) and Ambac (ABK) are blowing out after a downgrade to junk of cousin CIFG Guaranty.

    Something I've been pondering is whether ABK and maybe even MBI can be left to die a silent, inconspicuous death, now that they are seemingly out of the headlines. Bigger picture, I wonder if this fits the Fed playbook of throwing the kitchen sink at the scary headlines to prevent sudden implosions, while deep down they realize that there is nothing substantive they can do to remedy the debt orgy.

    In other words, if they boil us, we won't notice.

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Positions in XLF, CY, COF, HRS
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