Archive for November, 2009

“Maersk’s Economic Bruise”

In the first nine months of two-thousand and eight everything was smooth sailing for the big shipping companies, especially for the largest shipping firm in the world—Maersk. But, the storm was brewing the last quarter of the year and since the beginning of 2009 it hasn’t been smooth sailing for them or any other shipping company.

The shipping giant reported 3rd quarter losses of $778 million and expects losses to exceed $1 billion for the year. This shipping news doesn’t raise enthusiasm for a recovering economy.

In a recent article by John W. Miller in the Wall Street Journal, “Maersk Signals Slow Sailing Ahead,” Maersk CEO, Nils Smedegaard Andersen sees rough sailing through 2010. Paraphrasing Mr. Andersen, “the shipping industry in general will remain under pressure in 2010.”

Maersk is not the only shipping company with “The Shipping Blues.” Neptune Orient Lines Ltd expects losses of $636 million this year. HHLA AG said its 2009 container revenue would fall 30%. And the bankruptcy of Eastwind Maritime a few months ago reduces global fleet size, but still exposes the fragility of shipping companies under current economic conditions.

Under the pressures of a trade boom bubble that could possibly burst, shipping companies stand to lose billions more through the next couple of years. The industry bet heavily on a fervent global economy and many placed orders for new ships during the height of the economic growth. Now they are scrambling to cancel orders, delay deliveries, or negotiate drastically lower prices.

There is at least some slightly positive shipping news. After the worst September at the Port complex of Los Angeles and Long Beach in 9 years, exports were up in October at the Port of Los Angeles. Ronald D. White who has been covering the West Coast ports, reported the increase in exports in his Los Angeles Times article, “Tide may be changing at Port of L.A.

Despite the increase in exports at L.A., exports were down at Long Beach 10.1 % and imports were down at the 5 biggest West Coast ports by 14.2% in October compared to a year ago. It will difficult to see a ‘real’ recovery until shipping recovers.

Maersk and other shipping companies have been badly bruised by the economic slowdown and it appears it may take a long time for that bruise to heal. As shipping goes, so goes the economy.

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“UnAmerican Activities”

Americans are more divisive, more destructive, more cynical, and less trusting than at any time I can remember.

In a time of turmoil voices raise, anger festers, tempers flair, fingers point, and accusations abound. Blame is the easiest way to deflect responsibility, but there is a lot of blame to go around for the problems we face.

The American people are facing more unrest, in more areas, than ever in my lifetime.

There are so many positives to being “American.” Freedoms and protections have been lavished on the people, at great sacrifice, by our forefathers; men of incredible foresight.

We breathe rarified air, dream remarkable dreams, accomplish unbelievable things, and in the past shared our wealth, knowledge, freedoms, and experiences with the rest of the world; with those less fortunate than us.

Democracy, capitalism, freedom, fairness, integrity, and opportunity were always synonymous with living in America; with being American. The Constitution provided for the welfare ‘of the people,’ destiny was overseen ‘by the people,’ and outcomes would ultimately be ‘for the people.’ An incredible working model, but, the intentions of the Constitution have eroded over the last 233 years, and that erosion has accelerated over the last 30 years.

The ‘people’ have lost control.

We’ve lost control in all areas of our lives: politics, finances, religion, media, and family. The new series “UnAmerican Activities” will address financial, political, social, industrial, global, intellectual, and yes, religious issues.

As an independent, a free thinker with common-sense, I have witnessed the destruction and chaos that has been unleashed by the zealots who have taken over this country. It’s disturbing. Stuck between the weakness of the left and the vitriolic right, definitely misrepresented, if not unrepresented, despair and anger bubble below the surface.

With little voice in the discourse, writing has become therapy that, for a time, prevents me from striking all of them down: politicians; bankers; religious ideologues; charlatans and CEO’s, with the jawbone of an ass.

So what can one voice do? Read the rest of this entry »

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“Britain’s Shipping Fuse”

Just when you thought there could not be any more bad shipping news, there’s more.

What I failed to discuss in the previous 3 shipping articles was the potential demise of the world’s shipping companies and the damage these failures could do to the banks that make the loans that buy the ships that ship the goods all over the world.

The collapse of Eastwind Maritime in the late summer sent shivers throughout the maritime financial sector. The problems the industry faces are covered in an interesting piece by Landon Thomas Jr. in the New York Times entitled, “As Shipping Slows, Banks and Carriers Fear Loan Defaults.”

Shipping companies and banks, in the UK, Germany, and Sweden, are concerned by the 25% drop in global trade; the affects it will have on shipping rates, and the over abundance of new ships ordered by these companies from the nation’s shipbuilders during the height of the economic boom. This shipbuilding problem was addressed in “The Shipping Blues,” the first article in The Cutting Edge shipping series.

But the problem now extends to the banks. Two of the already troubled banks in England, Royal Bank of Scotland, and Lloyd’s, are heavily vested in financing the shipping industry and failure here will add to their already insurmountable problems. The Bank of England infused the two banks with another $43 billion british pounds ($73 billion U.S.) just last week to stabilize them.

At the current decline in shipments some foresee a future oversupply of container ships by as much as 50%. To prevent that shipping companies are beginning to cancel or delay the delivery of the newly order vessels in an effort to reduce the size of their fleets.

The implication is that the perfect storm is forming for the shipping industry and their over-zealous lenders. That sinking feeling is real and could destroy any chance of a global economic recovery.

The fuse is lit. Now we’re just waiting for the explosion hoping that somehow we can avert disaster.

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“Falling to New Levels”

Last Friday five (5) more banks were taken over by the FDIC at a cost of approximately $1.55 billion. That brings the total number of failures to 120 in 2009.

There were a few significant points in this week’s seizures that should be made. Georgia lost another bank, this one in Sparta, bringing the total number of bank failures to 21 in the peach state.

In California another large bank failed. United Commercial Bank headquartered in San Francisco succumbed to the economic conditions at a cost of $1.4 billion to the Federal Deposit Insurance Fund. It was the 15th bank failure in California this year. It was assumed by Pasadena, California based East West Bancorp.

East West Bancorp will add 63 branches to its 137 branches throughout the U.S.. Thirty of United Commercial’s branches were in California, the rest in five other states. East West will also take over UCB’s 2 banking operations in China, one in Hong Kong, the other in Shanghai.

The acquisition will make East West Bank California’s second largest bank and the nation’s largest bank servicing the Asian American community.

No number was given for the shared loss agreement between East West Bancorp and the FDIC. But, be assured, there will be more losses.

The final tally for the FDIF remains to be seen, but it could far exceed the cost of the S&L crisis of the 80’s and 90’s which cost the FSLIC and FDIC over $124 billion before the crisis was over.

More next week!

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“False Positives”

The markets are still bullish almost 8 months after the March 9th bottom. The Dow closed above 10,000 on October 14th and the bulls have been fighting to stay above it since then. But it has been trending below the ten thousand mark for the last 24 or so days.

The hopes were that earnings for the quarter being reported would be decent. This would give the bulls the ammunition to push the Dow and S&P still higher, well above the 10,000 mark.

So, where is the market going?

Read the rest of this entry »

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“Shades of Shipping Hues”

Shades and hues
of shipping news,
Will not diffuse
the Shipping cues.

And markets choose
or just refuse
to see the clues,
Of the storm that brews
around The Shipping Blues.

There is even more depressing news about the difficulties in the shipping industry. Even niche ports, such as the Port of Hueneme, are being affected by the slowing economy.

The Port of Hueneme, in Ventura County, south of Oxnard, north of Los Angeles lost $1.3 million during their fiscal year ended June 30. The profit at the port was $1 million the previous year. The port relies mostly on automobiles and produce at their 130-acre facility.

Ronald D. white, author of the informative article about the problems at the largest ports in the country, has also written about the difficulties at Port Hueneme, “Tiny Port Hueneme is hit by perfect storm.”

The perfect storm White describes is further evidence of the head-winds confronting a perceived recovery.

Despite the need to rebuild inventories the ports have not seen the benefits. The ports are clearly a leading indicator of the economy, and judging from the current traffic, the future doesn’t look too promising.

The ports are indicating that there is little demand for either imports or exports. Demand is down because the consumer’s purchase power has declined drastically. If the consumer is not able to buy the products there is no need to restock inventories.

Until the consumer returns to spending; which cannot be accomplished without jobs, rising salaries, and a reduction in debt, we can expect a slow holiday season.

Maybe then we will see a ‘real’ decline in the overheated stock markets.

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