Crow's Nest

Pirate Tales

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Greetings Marketocracy Mariners,

May those frightened cease to be afraid, and may those bound be free.

My Crow's Nest portfolio of maritime shipping stocks has been slapped silly the last five days with the NAV dropping from $13.95 to $12.32. Just today (11-05-07) I lost 5.44%.

Why? The news has been good news and the fundamentals haven't changed. No ships have gone down in storms, hurricanes, typhoons, or tsunamis. The only ship captured by pirates was a North Korean vessel off the coast of Somalia on Friday. The North Korean crew regained control of their ship and the U.S. Navy destroyed the two pirate skiffs so they would not be used again. Business is good.

Seems like the panic is due to the Chinese trying to manipulate prices for shipping iron ore, investors not being able to stomach the volatility that has always been part of this sector, and lots of profit taking after a great year.

I expect to finish out the year OK. In a few weeks the iron ore shipping soap opera will have run it's course. In the end, the Chinese will pay the going market rates if they want to or not. They need raw materials. The dragon must be fed. The sector is better off not having too many investors who get sea sick watching the ups and downs of stock prices. And it's alright to take profits, just don't fret too much when the stock you sold rebounds and continues it's upward climb.

Some changes were made last week in hopes of helping the portfolio do better in the next two months. They were:

Selling Omega Navigation Enterprises, Inc. (ONAV), Danaos Corporation (DAC), and Seaspan Corp. (SSW), all at a loss. All great companies, I just don't see them moving much by the end of December.

Decreased position in Euroseas, Ltd. (ESEA) to 6% of the portofolio.

Increased positions in Diana Shipping Inc. (DSX) to 11%, Quintana Maritime Limited (QMAR) to 11%, Golar LNG Ltd. (GLNG) to 9%, and StealthGas, Inc. (GASS) to 6%.

Happy sailing and good luck too all.

Robert

The Liner she's a lady, an' she never looks nor 'eeds--
The Man-o'-War's 'er 'usband an' 'e gives 'er all she needs;
But, oh, the little cargo-boats, that sail the wet seas roun',
They're just the same as you an' me, a'-plyin' up an' down.
- Rudyard Kipling, The Liner She's a Lady

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Viking Warriors, Greek Shippers, & the Canadian Coast Guard

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Ahoy there!

May peace be with you.

This is a open reply to the open reply from VikingWarrior in regards to my last blog, Pirate Tales.

#1. Why don't I have more Tsakos Energy Navigation (TNP) in the Crow's Nest portfolio of maritime shipping companies? The fact is I did have a larger position but decreased it a month or so ago because of my short-term thinking.

It's recent large gains, I believe, were due to a better than expected third quarter earnings report. Barring insider knowledge or a working crystal ball there was no way for me to foretell this.

I agree with you on the advantages of Tsakos having ice class ships in the fleet. About half of it's young, diversified fleet is ice class. All told, I think Tsakos is the best tanker company out there. It's an excellent long term investment.

#2. The Northwest Passage isn't being used by commercial shipping yet. There are many problems to be dealt with first, political and environmental. Canada believes that much of the passage lies within it's territorial waters and therefore wants to control, regulate, and tax traffic passing thru. Look at a map of the Northwest Passage and it is easy to see why they believe this.

I am astounded, astonished, and ashamed that the United States is ganging up with the Russians and others in asserting that the passage is an international waterway and therefore freely open to all ships of all nations. The only reason I can see for this is undue influence on our government by a few short-sighted corporations who stand to profit from it without regard for safety or the environment.

One example of thousands of possible scenarios: Suppose that because of the lack of regulation, an old, poorly maintained, half-crewed super oil tanker belonging to private individuals or some third world government spills it's cargo in the passage, forever destroying part of the fragile ecosystem. Will that be an "international" problem? No, it would be a Canadian problem. They know it, and we know it.

And what about their national security? Canada allowing the Northwest Passage to be open international waters would be akin to the U.S. allowing Russian or Chinese submarines in our Intracoastal Waterway or Iranian destroyers on the Great Lakes.

If the Northwest Passage continues to open up due to a warming climate allowing vessels to pass through freely, everyone wanting to use it would be best served to have it well regulated and protected by the Canadians. They are our best friends and closest allies. Rather than ruin our relationship (and the Northwest Passage), we ought to be helping the Canadians and supporting their efforts.

My recommendations: buy Tsakos Energy Navigation (TNP), it is the best of the tanker companies, and help make commercial navigation through the Northwest Passage a reality and safe for all by supporting Canada's sovereignty.

"A Mari usque ad Mare" (From sea to sea)
Canada's motto.

Robert

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Plummeting into the Ocean Depths.

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Ahoy Matey,

May your mind and the ocean upon which you sail be calm and peaceful.

My Crow's Nest portfolio of maritime shipping companies is falling faster than the dollar tied to an anchor. In 22 days it's NAV has dropped from $13.95 (Oct 29) to $9.92 today (Nov 20).

Arrrrrrr. "Shiver me timbers" "Blow Me Down"

What in the seven seas is going on?

I keep checking the companies. Earnings are up. Fleets are getting bigger and younger. Dividends are increasing. New charters are at all time highs. There's more demand than supply. All of the company news is good news.

Great companies, terrible stocks (this past month!).

Why? I don't know, but I'll an educated guess.

The average company in the Crow's Nest listed on the U.S. stock exchanges in 2005. They're foreign and new. This past year they've made astronomical gains. DryShips (DRYS), for example, this year went from a share price of 13 dollars to over 130 dollars at the end of October. That kind of movement attracts a lot of attention. Traders, speculators, and other scurvy sea-dogs jumped on board. Once the market started turning south, they abandoned ship. I don't blame them for taking profits, it's the way of the world. Meanwhile, investors in shipping companies can only watch and shake their heads. DryShips is on sale right now for $79.24, with a P/E of nine and a half, a net profit margin of 73.8%, and an income growth of 2,847%. Diana Shipping (DSX) has dropped from over $45 at the end of October to $28.83 today. It reported triple 3Q profits last week, a new cape-size ship delivered and chartered to BHP Billiton for 4 years, an increased dividend, etc., and is on sale with a P/E of 15.3, no debt, and paying a 7.69% dividend. It's similar throughout the portfolio.

What will I do? Nothing, just watch and wait. I'll let the shake out continue for a while before I rebalance the portfolio. If I could get Marketocracy to give me another million bucks, I'd invest it in the same place.

I believe the maritime sector is in good order and shipshape. The stock market, on the other hand, is wild & crazy.

Good luck to everyone.

Robert

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