Bananas Index – JP Morgan get’s a whole plantation of them

I TRULY HONESTLY CANNOT BELIEVE THIS ARTICLE. LET ME SAY THAT AGAIN. I TRULY HONESTLY CANNOT BELIEVE THIS ARTICLE. IT APPEARED IN TRADEWINDS ONLINE A COUPLE OF DAYS AGO. IN TERMS OF BANANAS, THIS IS RIGHT UP THERE WITH THE BEST EVER. PLEASE READ THIS SLOWLY AND TAKE IN ALL ITS GLORY. I HAVE ADDED NO OPINION OF MY OWN – JUST THE WORDS OF AN ANALYST FROM JP MORGAN.

THE SUMMARY IS THIS: DRY BULK IS KNACKERED (ALTHOUGH JP MORGAN DIDN’T ACTUALLY CORRECTLY EVEN GET CLOSE TO PREDICTING THE MAGNITUDE OF THIS DOWNFALL). IT REMAINS AS HAVING NO CONTROL ON DEMAND (WHICH OPTIMISTIC OUTLOOKS RELY ON CHINA REVERSING ITS CURRENT POLICIES AND HEADING BACK TO THOSE OF NEARLY A DECADE AGO); COAL, ONE OF THE MARKET’S MAIN DRIVERS IS SEEMINGLY ON A TERMINAL SLIDE IN DEMAND AS ALTERNATIVE ENERGY STARTS TO BITE (HEY MR COAL, ARE YOU NOT WATCHING HOW DUMB MR OIL LOOKS IN HIS HOPE OF EVERYTHING GOING BACK TO WHERE IT WAS BEFORE?); OH AND DON’T FORGET MR PARQUETTE’S SOMEWHAT CASUAL WARNING THAT DEMAND IS ACTUALLY SLOWING.

THE SECTOR IS CHRONICALLY OVER-SUPPLIED WITH SHIPS, WITH HUGE CAPACITY TO ADD MORE TONNAGE; AND SCRAPPING IS ACTUALLY SLOWING DOWN (WITH JP MORGAN ADMITTING THAT ITS OWN FORECAST WAS TOO HIGH); AND UTILISATION WILL ‘CREEP’ HIGHER IN 2018. YEP, YOU READ IT, 2018! CREEP HIGHER! OH, AND THE DOWNTURN APPARENTLY HASN’T LASTED LONG ENOUGH TO CUT OUT OVER-CAPACITY QUICKLY ENOUGH.

RETURNS HAVE BEEN ZERO AT BEST FOR A YEAR NOW. WHAT MORE DO YOU WANT? SO WHAT’S THE CONCLUSION? WELL OBVIOUSLY IT IS TO BUY MORE STOCK IN STAR BULK, A COMPANY THAT HAS DIFFICULT DEBT NEGOTIATIONS AHEAD, AND AN UNEXPLAINED ‘POTENTIAL EQUITY ISSUE’. NOW LET ME READ THAT BACK TO YOU SLOWLY. THIS GUY IS SAYING BUY STAR BULK. SLOWLY NOW . . . BUY . . . STAR . . . BULK.

HERE’S YOUR BANANA INDEX RATING MATE:

Bananas as far as the eye can see.
Bananas as far as the eye can see.

FROM TRADEWINDS 19TH JULY 2016:

JP Morgan has upgraded shares in Star Bulk while warning that the dry cargo market is taking the slow road to recovery. Analyst Noah Parquette shifted the Petros Pappas-backed company from neutral to overweight in a second quarter results preview.

While the analyst concedes the stock still carries risks relating to debt negotiations and a potential equity issue, he says potential upsides more than counter the headwinds. It came as JP Morgan told investors the bulk market is in an awkward position between the worst being over and the future looking bright.

“While the dark days of January/February are fading liking a bad dream, we still see serious risks to the story,” he said. “Namely: the over-reliance on China, the uncertain future of coal, and the large amount of dry bulk shipyard capacity in the world. We would have preferred if the hopelessness lasted longer, as that helped cleanse oversupply and was better in the long run, but somebody once said you can’t always get what you want.”

JP Morgan’s numbers show scrapping has slowed and will miss previous forecasts while demand was better than projected in the first half of 2016 but may now pull back.

“The market remains substantially oversupplied, and we think it will stay that way for all of 2016 and 2017, before utilization begins to creep higher in 2018,” he said. “We believe the recovery will be slow and gradual, given the extent of oversupply, and a recovery is still vulnerable to shifts in scrapping levels, new vessel orders and deterioration in demand.”

I’m not sure that the creditors know about these five bad boys!

I am a saddo, of that there can be little doubt, so that explains why I came across a website selling old crap off of ships. It’s address is www.piecesofship.com and if you look carefully in the crockery section you will notice this piece of shipping nostalgia:

Don't tell the creditors!
Don’t tell the creditors!

I might buy these and put them next to my collection of golf balls from Armada, Transfield, Adriatic Tankers and Pioneer Metals!

One Armed Archie and the difference between a warehouse and a race horse

‘What do horses, kids and ships have in common?’ asked One Armed Archie as he gazed out over the Biffa bins strewn outside the Airdrie Working Men’s Club on a rainy summer’s afternoon. The wind whipped a ripped Lidl bag against the UPVC window and stuck it there while Archie sipped his treble vodka and Irn Bru wistfully. I had to admit that I didn’t really know.

‘Well, you spend ages thinking of great original names for them. Then after the bunting is taken down you end up having to pay for the thing forever more. Everybody else just gets to enjoy the parties, you get to enjoy walking round with the black bin bag at the end of it once they have all gone to bed,’ he opined. I did own a ship or two in my lifetime and I have had horses and children, and I can pretty much concur with Archie’s assessment of all three.

The finest working men's club in the whole of Airdrie
The finest working men’s club in the whole of Airdrie

I asked Stinky Derek what he thought. Stinky Derek is probably the richest man in Airdrie, having made his fortune by producing plastic toiled seats in a factory in Albania. ‘Well, I think you do get something back from your children in some sense. And if the horse is no good then at least you can eat it at the end. But a ship? Now that one I really don’t get. Why give it some stupid fancy name which gives you some weird emotional attachment to it? By bog seat factory doesn’t have some fancy name now does it? And I tell you this much, it makes money. Furthermore, when it stops making money I’ll get rid of it!’ he hurrumphed.

The Albanian Centre of Toilet Seat Innovation unveils the new technology to find the seat at night.
The Albanian Centre of Toilet Seat Innovation unveils the new technology to find the seat at night.

‘What’s so romantic about a giant warehouse with an engine on the back? I have a warehouse full of bog seats in Slough. We call it Unit 8, Slough Industrial Estate. If I stuck a massive engine on the back I doubt I would rename it ‘The Pride of The Seas’ now would I?’ he said, jabbing his finger in my general direction. ‘If you stopped naming them and having parties to celebrate them then you might start to actually work out what their true worth is.’

Stinky Derek butted in: ‘Having you heard the one about the dyslexic pimp? He bought a warehouse.’ (I’ll be honest here, he didn’t butt in at all, but I really just wanted to shoe horn in one of my favourite jokes. I’ve done it now, so rest easy, you won’t hear it again.)

There’s also some other odd facts about ship names. I sold a ship called something ‘Ambition’ to an oily sort of fellow. The ship promptly halved in value and he got fired. So much for ambition! Another one that I remember well was called something ‘Integrity’. The ‘owners’ of that particular gem transferred the ‘assets’ into a different company and declared themselves insolvent, thus avoiding $12m worth of creditors. Imagine what would have happened without any ‘Integrity’?

Warehouse
Warehouse

Derek swigged from his plastic bottle of cider and turned to me. ‘Did you ever got to a ship owner’s office?’ ‘Yep I did. Many times. And I’ll tell you one thing. I remember going to see a guy who was really struggling. You went in there and there was oak panelling everywhere. Old bits of ships, secretaries floating around. I went into his massive office, where he was sat all by himself looking miserable. He asked me if I wanted to buy a particular ship from him. He’d named it ‘Lucky Fortune’, but it should have been named ‘Costa Bundle’.

Race horse
Race horse

He told me that it was bleeding him dry and he just wanted shot of it. I said that I wasn’t really interested, but let me have a think. As we left his office and walked back to the reception, right in the middle of the room was an enormous scale model of a ship. Painted on the side was the name ‘Lucky Fortune’. My friend turned to me and said ‘You know what? That model cost me more than the stupid thing earns now’ and promptly burst into tears.’

‘Well’, said Archie, ‘I don’t think I’ll be having a scale model of a toilet seat factory in my reception. You shipping people, you just don’t seem to own a calculator between you and think you own race horses not warehouses.’ Hard not to agree. And if you think dry bulk owners are in a pickle, just wait until you see what is about to happen to tanker owners. My advice is whatever you do, don’t name a ship after somebody you like. It will always end up getting set about by hundreds of men with blow torches. Not a fate any of us would wish upon our loved ones.