The ongoing financial turmoil and financial discussion thread

[DementedReality]

Originally Posted by Nancy

A. It's so bad that charter rates have fallen from $200,000 a day to $2,800, or so claimed the other. Translation: Chinese exporters must be hurting like heck.

?

as a senior person in the shipping industry with many ties to China, I can tell you that shipping may have dropped off, but those #'s are ridiculas.

the company i work for is owned by the 5th largets vessel operator in the world, so i speak with some knowledge.

if the market rate to charter a vessel was only $2800, then they would simply stop operating. think about it. a vessel not only requires a crew and fuel, but also ground operators to load and unload the cargo. 2800 wouldnt even pay for the captains time, never mind everything else.

that being said, the shipping lines are hungry. a 20' container from Shanghai to Vancouver would cost about $2000.00 usd all things considered.

[DementedReality]

Originally Posted by Claeren

I would suspect though that the big players are using this time of quiet, and the resulting rally, to sell off their own positions to all of those lucky little guys who will be left holding the bag when the REAL (bad) news starts coming again.

Claeren.

so ... what is your personal strategy right now?

[Draug]

Originally Posted by DementedReality

so ... what is your personal strategy right now?

That is a good question for Claeren. For one, I appreciate his view on these issues. I appreciate seeing all sides of any one situation.

But, Claeren, what is your plan? You're against buying stocks or mutual funds. You are against using realestate as an investment tool. You've also said in the past you are against privately managed investments.

The only other option I can think of is to work really hard and not spend any money at all.

Do you have any better ideas than that?

[Slava]

Clearly the only thing that Claeren could advocate here is holding your money between the mattresses?

[Incinerator]

Originally Posted by Slava

Clearly the only thing that Claeren could advocate here is holding your money between the mattresses?

I think he's hiding gold bullions under his mattress...remember fiat currency is worthless! buy gold!

[Nancy]

Originally Posted by DementedReality

as a senior person in the shipping industry with many ties to China, I can tell you that shipping may have dropped off, but those #'s are ridiculas.

the company i work for is owned by the 5th largets vessel operator in the world, so i speak with some knowledge.

if the market rate to charter a vessel was only $2800, then they would simply stop operating. think about it. a vessel not only requires a crew and fuel, but also ground operators to load and unload the cargo. 2800 wouldnt even pay for the captains time, never mind everything else.

that being said, the shipping lines are hungry. a 20' container from Shanghai to Vancouver would cost about $2000.00 usd all things considered.

The numbers didn't make sense to me either, but here is a quote from another source...

http://www.businessweek.com/globalbi...ound+the+globe

Last week, you and your friends could have rented one of those ships for a weekend bachelor party and football game for less than $4,000, according to data collected by the London-based Baltic Exchange.

Low Shipping Costs

What happened? And what does it mean for the world economy? Not good news. Let's start with shipping rates. They are the lowest they have been in six years, as measured by a relatively obscure indicator called the Baltic Dry Index. The index, which measures the cost of shipping most commodities other than oil, has been in free fall since the middle of the year, down 93% from its peak of 11,793 in May 2008. As a result, daily rates for chartering a merchant ship are still down by as much as 98% from just six months ago.

[DementedReality]

Originally Posted by Nancy

The numbers didn't make sense to me either, but here is a quote from another source...

http://www.businessweek.com/globalbi...ound+the+globe

Last week, you and your friends could have rented one of those ships for a weekend bachelor party and football game for less than $4,000, according to data collected by the London-based Baltic Exchange.

Low Shipping Costs

What happened? And what does it mean for the world economy? Not good news. Let's start with shipping rates. They are the lowest they have been in six years, as measured by a relatively obscure indicator called the Baltic Dry Index. The index, which measures the cost of shipping most commodities other than oil, has been in free fall since the middle of the year, down 93% from its peak of 11,793 in May 2008. As a result, daily rates for chartering a merchant ship are still down by as much as 98% from just six months ago.

im not disputing the article was written, but i deal with this stuff on a daily basis. maybe there are charters out there for 2000, but certainly not trans pacific. maybe the equivelent of going from Vancouver to Seattle? lol, who knows but no chance those rates are being seen anywhre other than in theory (BDI).

[Flames in 07]

Originally Posted by DementedReality

im not disputing the article was written, but i deal with this stuff on a daily basis. maybe there are charters out there for 2000, but certainly not trans pacific. maybe the equivelent of going from Vancouver to Seattle? lol, who knows but no chance those rates are being seen anywhre other than in theory (BDI).

I work a fair bit with shipping rates as well, and one thing I'll add is that in the very short term, shipping costs are extremely volatile.

Shipping costs can wiggle violently, double over a period of 2 weeks, then be cut in half the next week. Even in 06 and 07 rates for ships I use tripled vs say 05 but the economy wasn't 3x as hot, just that shipping is a closed market with a fixed amount of supply. Small changes in demand can move prices significantly and quickly.

[DementedReality]

Originally Posted by Flames in 07

I work a fair bit with shipping rates as well, and one thing I'll add is that in the very short term, shipping costs are extremely volatile.

Shipping costs can wiggle violently, double over a period of 2 weeks, then be cut in half the next week. Even in 06 and 07 rates for ships I use tripled vs say 05 but the economy wasn't 3x as hot, just that shipping is a closed market with a fixed amount of supply. Small changes in demand can move prices significantly and quickly.

yup, i agree ...

what sector of the business are you in? a forwarder or carrier?

[SeeGeeWhy]

Originally Posted by Slava

Quite a few companies offer High Interest Accounts that will pay you about 3% or more. There is virtually no risk there, but you get three times the rate.

Excellent point, but you cannot fill those accounts with registered dollars.

I have bought bonds and money market funds with registered dollars to balance out the risk in my "registered portfolio" - which honestly, is not my primary focus at all.

If I could get a guaranteed 3% after fees with that money, I would gladly take it and forget that it ever existed.

Honestly, I wish there was a way that I could set up a company that sells RRSP eligible shares and then buys land with the funds.

[Boblobla]

Originally Posted by fotze

What about Nexen who is now rumored to be taken over by Total. Look at its stock the past few days.

Look at it today

[Slava]

Originally Posted by SeeGeeWhy

Excellent point, but you cannot fill those accounts with registered dollars.

I have bought bonds and money market funds with registered dollars to balance out the risk in my "registered portfolio" - which honestly, is not my primary focus at all.

If I could get a guaranteed 3% after fees with that money, I would gladly take it and forget that it ever existed.

Yes you can. In fact sometimes these accounts pay you more money because they are registered.

[MoneyGuy]

Originally Posted by SeeGeeWhy

Excellent point, but you cannot fill those accounts with registered dollars.

I have bought bonds and money market funds with registered dollars to balance out the risk in my "registered portfolio" - which honestly, is not my primary focus at all.

If I could get a guaranteed 3% after fees with that money, I would gladly take it and forget that it ever existed.

Honestly, I wish there was a way that I could set up a company that sells RRSP eligible shares and then buys land with the funds.

Of course these accounts can be registered money.

Edit: I see that Slava beat me to it.

[SeeGeeWhy]

Excellent, thanks guys!

[Claeren]

I have already said what I am doing -- saving cash.

I paid off all of my debts almost 2 years ago (school, car, visa, etc) and just save what I can each month. As my friends would be the first to tell you, I am far better at feeling what the market will do next than I am at saving money, but I do what I can....

I have also said that if i was wealthy enough I WOULD be selectively investing in equities, especially when we hit 7500, because there ARE good companies out there.

I am not wealthy enough to do both so I am hording cash (in a bank account, I am not worried about any bank right now other than CIBC - although i do think we will see more pressure on Canadian banks next year as the Canadian home market/equity collapses) in the hopes that over the next 2 years some excellent opportunities will arise for people in such a position.

I still think cash/liquidity will net you a larger total profit medium term than equities (due to how quickly you can capitalize on opportunities when people are really desperate) -- especially when you factor in risk, which is a lot higher than what I think people might be able to understand right now. Equities are better than real estate obviously, they are liquid comparatively, but they are not liquid if/when things really start to show how fragile they are. And I am not convinced there is ANY underlying strength in the American market right now.




On a side note, here are predictions that credit card companies in the USA will reduce credit lines by 45% next year.
http://biz.yahoo.com/rb/081201/busin...penheimer.html

So the number one source of consumer liquidity is monthly salary - but tens of thousands of Americans lose their jobs each month.

The number two source is credit cards - which are statistically maxed out and where not maxed out will be when the lines are reduced.

The number three source is home equity - where home prices have fallen 20%-40% across the US and are expected to fall another 20% in the next 2 years.

(Retirement savings, which have shrunk significantly but are so important to an entire mega-generation on the verge of retirement, will also take huge money out of consumption.)



Yet consumer spending accounts for 66% of all american economic activity.



But yeah, I am just a senseless paranoid bear!


lol

I am just doing the math here people. People are in debt to their eye balls, companies are largely in debt up to their eye balls, and governments are in debt up to their eye balls.

That cannot continue indefinitely. You can mask it (like they did in 2001 to deal with the dotcom bust and 9/11) but eventually, whether this year or in 10 years, you HAVE to pay the consequences of taking on all that debt.




Claeren.

[Claeren]

Originally Posted by Incinerator

I think he's hiding gold bullions under his mattress...remember fiat currency is worthless! buy gold!

haha, nice man, I mean I am not a gold-freak at ALL but you do know that if you had been entirely in gold the last 6-12 months you would have outperformed virtually any other main stream investment, right?

And if hyperinflation hits after this deflationary spiral, gold will perform even better (likely doubling your money while most lose 50% in value on theirs).

So while I agree the fiat-money guys are hilarious and over the top, making fun of anyone who is not a bull on equities like that could come around and bite you in the ass? Even if gold never rallies I am not a gold-guy so the insult/joke is meaningless, and if it does rally you have opened yourself up needlessly to looking stupid?


If I was in the US I would probably own some gold though? But it is a different scenario when it is priced in your home currency. As a Canadian I can play against the American dollar just by saving Canadian dollars.....

Like that article I posted a while ago pointed out though, with the amount of debt being converted/socialized into new currency by world governments, currency valuation will be the new way to play the markets going forward. The DOW might surge 50% but the USD could collapse -- meaning the rally is an illusion.




Claeren.

[Incinerator]

Originally Posted by Claeren

If I was in the US I would probably own some gold though? But it is a different scenario when it is priced in your home currency. As a Canadian I can play against the American dollar just by saving Canadian dollars.....

While I do not actually have any gold bullions under my mattress unlike some of my Asian clients, I do own some mining equities. That said, I am not optimistic on gold's prospects of rallying anytime soon.

As much as you don't believe in the USD's long term prospects, if I were you I'd convert the CAD savings into USD for the short term, the loonie could take a deep plunge after next Monday when the Bloc and their puppets take over this country in these times of political instability.

On another note, I do agree with your overall bearish outlook on the USD, I just think you're way ahead of your time, I would not expect the USD to tank for at least another 10 to 12 months, let alone before Obama takes office in January. All this talk of hyperinflation is way ahead of the curve IMO. Given crude's performance lately and the political storm coming up, I would worry more about the loonie turning into pesos first and foremost.

[Claeren]

^ I actually agree with all of that.

I think deflation will be a theme for a while (could even be a long while), I think the Canadian dollar is very exposed to downside risk as well, and I am not thinking gold is about to spike (thus why I don't buy any) although I don't think it has as many downside risks as many equities do.

I am not sold on the idea that the USD is any better than the Loonie right now, both have huge downside risks, and my inability to decide which is better over the next 2 years is largely the reason I am still in Loonies (with a few hundred USD, but that is nothing obviously). I feel like worst case they both tank in real value, medium case only the USD does long term (even if the Loonie dips interim), and best case they both moderate with Canada re-closing half of the gap between them as America inflates their currency to shrink their debts and trade deficit and buy our commodities with those ever inflating dollars.

If/when I see a clear signal in the market I would certainly be open to moving that currency into something else.



Claeren.

[SeeGeeWhy]

Claeren, you raise some very interesting arguments! Thanks for sharing your insight.

I believe that investment strategies should be in line with a person's goals and their risk tolerance. Yet, when I discuss investing with people, I am finding that their actions are usually driven more by the desire to either follow instruction of "authority" or to "be right", and less so by the desire generated by personal goals.

If you would be willing, could you share some of your financial goals with us (short vs long) and what you feel your risk tolerance is (along with some of your strategies for mitigating different types of risk)?

[Claeren]

Originally Posted by SeeGeeWhy

Claeren, you raise some very interesting arguments! Thanks for sharing your insight.

I believe that investment strategies should be in line with a person's goals and their risk tolerance. Yet, when I discuss investing with people, I am finding that their actions are usually driven more by the desire to either follow instruction of "authority" or to "be right", and less so by the desire generated by personal goals.

If you would be willing, could you share some of your financial goals with us (short vs long) and what you feel your risk tolerance is (along with some of your strategies for mitigating different types of risk)?

No offense, but I have already been pretty forthcoming with my own situation -- more so than perhaps anyone else in this thread?

More importantly, this thread is about what the market is doing, why the market is doing what it is doing and what it will do in the future.

Breaking down my (or anyones) financial life goals is beyond that scope IMO.


Further, regardless of what anyone does with any of the information or debates in this thread, how we personally do or do not capitalize on this discussion has little to do with what we predicted the market will do. I would rather hear a very thought out and well formed idea on the market from a poor person than a totally biased and industry centered view from a rich person.

Even if I am not all right -- which I never will be -- and even if I am not some fund manager I think I have a DAMN good record both on real estate and on financial market performance at CPuck? And not just random guesses either, but things based on solid market perspective.



Taking that a step further (and this will be the thing that will most answer your question), I am a big believer in the 'Black Swan Theory'
http://en.wikipedia.org/wiki/Black_swan_theory
http://en.wikipedia.org/wiki/The_Black_Swan_(book)

In short, the important moments where fortunes are made or lost are the big events, the ones few people saw coming but then in hindsight all thought were obvious (and thus convinces them that future events will also be predictable by the majority, even though they too are equally unpredictable, thus allowing them to ignore/dismiss the small number of naysayers.). Following the majority works 90% of the time really well so people assume the really important 10% of the time it can/does wipe them out to follow the majority, that the majority really did see it coming and thus it is still a good strategy in life. Thus it does not matter that the entire financial services sector, along with all of the mindless bank advisors, financial advisors and mutual fund salesman who spew the company lines, make lots of money during the majority of days if it is all wiped out in a much smaller period. Equilibrium is always restored and thus risk mitigation is actually about betting against the majority, not going along with it. (And as I have said numerous times, as much as this bear market has hit people, MOST people I know who are actually invested are STILL saying 'it is just about to bounce and it will go up and now now now is the time to buy buy buy! IT is all on sale! Buy and hold long term, you can't lose! etc etc.' Which indicates to me that the market has still not bottomed out. Equilibrium is truly restored when even these people think equities (or real estate) are not a good investment.)





Lastly, faaaar too many people know who I am here (like from 'real life') and while I have been upfront to a degree I do not feel comfortable telling my entire story anymore so than you would want to tell everyone at your work or gym or whatever your entire story.



Claeren.