Ghost Fleet

I don’t usually talk about the general economy, for short term trading it really just boils down to idle banter and dinner conversation. No one has a good record of predicting the future, though some are better then others, most money made from macro calls is due to the lopsided risk:return ratios with what I would guess is a 33% batting average.

I found this picture quite amazing from the Daily Mail in the UK:

The full article can be found here. This is a recent picture taken near Singapore of container ships which according to the article are greater then the number of vessels in the British and United States Navy combined. That is a lot of idle capacity. I am not a macro trader but if I were to put on my macro hat my trade idea would not be to short ship builders, cargo lines, etc. Though there will probably be sometime in the future after massive deflation of cargo rates, consolidation, bankruptcy, etc. where a few winners will be amazing value purchases. When the mainstream media finds a story it is sometimes, but not always, the end of the particular cycle. The trade in all this is the next step, where will also this excess capacity (investment) go?

The natural response of reducing supply is to see an increase in price if demand stays constant. Is this ghost fleet a result of collusion on a large scale perhaps? If so, the container companies may expose themselves to the Prisoners Dilemma. Or is it the result of declining availability of credit? These are questions that I don’t know. More importantly to me is what happens to idled container ships? This article sheds some light on the situation and highlights one company that is performing reasonably well.

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~ by largecaptrader on October 1, 2009.

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