January 15, 2008
Last year I selected one shipping stock in the 2007 portfolios (DSX). It went from $16+ in February to $45+ in October. Today it's back down to $22+. So what happened? A look at the chart below tells the story. Every shipper has gotten hit and it all relates to the fears that the U.S. is headed into a recession and the slowdown will decrease demand for a whole range of goods. Soon the prices will be so low that they will become excellent income stocks again. The world economies will continue to grow with or without us. We are no longer the 800 pound gorilla but emotions are hard to shake.
The Baltic Dry Index, which is a measure of freight costs for shipping dry goods like coal and grains, just recorded its biggest two-day drop since its inception back in 1985. It’s now down about 30% from its all-time high in November.
“The slowdown in freight has devastated the shippers,” comments Chris Mayer.“Take Excel Maritime, which was $80 in October… It’s about $30 today. That’s pretty typical. Most shipping stocks have been cut in half. Just another point of evidence that a recession is hitting the U.S.”
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