Baltic Dry Index and dry bulk shippers update

The BDI went back down briefly in late December, 2008, to a low of 771 on Jan 4th, 2009. Since then it has risen twice, with a small drop between Jan 16th and the 20th, and then it took off at an accelerating rate from 871, reaching 980 on Friday, Jan 23, with the spot Cape rates nearing $18,000 per day! The last 2 days the BDI has risen by 80 points, nearly 10%, from 900 to 980.

On December 4th the BDI hit a record low of 663. The spot rate for the Cape ships, the largest, and most cost effective, has essentially doubled since then. Somewhere I read that the Cape ships would be the first to show a serious recovery if the BDI had truly bottomed. It looks to me as if they have.

Add to that the fact that EXM announced a few days ago that they took delivery of their new Cape ship late in November, and also announced that it was immediately put on a 5 year long term lease at $39,000/day, which is way over the spot market for the last 4 months. I am beginning to realize that the spot market does not include the daily rates being paid on long term leases. It seems like the major shippers, giants like Cargil are grabbing up the new Cape vessels as soon as they hit the water (Cargil has taken very long lease positions on some recent new build Cape ships as (or even before) they hit the water, and at rates 5 times to 8 times the spot market rates we have recently seen in the BDI. This makes me think they know something we don't know, as the Cargil company is one of the oldest and largest in the commodity business, and they seem to like brand new Cape ships).

While I have recently dumped my Dry Ships stock and its CEO, I am still holding, and even buying EXM, PRGN, and SB dry bulk shipper stocks. They are some of the few who seem to have enough stable long term leases on their ships at great rates, and have so far kept their very high dividends. If they don't cut their very attractive 20 to 35% dividends this time, and with the currently increasing BDI and BCI rates, their stocks should soar over 100% from these incredibly cheap levels.

My only concern this week is that the ship companies seem to also follow the wider market which seems to be following the oil and gas inventory reports and also seems to be hyper worried about banks again, and the pending quarterly reports and jobs reports. The monthly natural gas and oil futures just expired last week, and the energy futures seem to be running a monthly cycle which is in the early rebound stage right now which should put some upward pressure on the market, along with an increasing BDI, but this week's earnings reports may set the ultimate market direction.

I was encouraged by the recent IBM quarterly report last week which seemed to say that the world is not coming to an end after all. I had previously written IBM off as a GE like, bloated, over sized, no where left to grow company, especially when they sold their laptop company to China. Surprise! IBM is back.

I have done a lot of exhaustive research on most of the US stock market traded dry bulk shippers. So far I have picked EXM , PRGN and SB as the best bets for continued large dividends, large because their stocks nose dived in recent waves of panic and fear, and they are likely to be big winners in the next month, and beyond. My next post will include comparisons of the PE ratios, book values, debt, debt ratios, details on the ship fleets and leases, and other relevant facts I have located. I have found a lot of information on various webs sites, recent online articles making comparisons between the dry bulk shippers, and some of the reports and articles I have run across seem to be posting data that is out of date, and or miss leading in various ways. Several are still showing companies with dividends that have already been dry docked.