May 20, 2014
- “It’s humongous,” said the onlooker. And it could also be highly profitable…
- The perils of the shipping biz… and a gem buried beneath the wreckage of 2008
- Stocks in the “snooze zone”: Get ready for a very loud alarm, says Jonas Elmerraji
- Criminal indictment against a bank (snore)… a postscript to the Buckyballs saga… the second inning of America’s new oil boom… and more!
- Plus: A special message for readers of Agora Financial’s FDA Trader
The future of moving stuff from one continent to another looks something like this…
Those are three shipping cranes — each able to stand taller than the Washington Monument — passing under the Bayonne Bridge in New Jersey on Sunday, headed to their new home at Port Newark. They came from China aboard a specially designed freighter.
“It’s humongous,” said Joe Passantino, one of many awestruck onlookers.
Next year, when an expansion of the Panama Canal is complete, newer and bigger ships will be making their way directly from China to the East Coast. With the cranes on hand, Newark will be ready.
“When operating, [the cranes] will sit atop vessels and remove containers from the vessels or move them on the ground,” explains the Newark Star-Ledger. “Their larger span will allow more containers to be accessed” — 22 rows worth, compared with the current maximum of 18.
Hey, every little bit counts when you’re moving stuff from a factory in Shenzhen to a Wal-Mart in Shaker Heights.
“I’ve been reading a fascinating book about the history of containers,” chimes in our microcap specialist Thompson Clark.
Thompson has eclectic interests — from surfing to Bitcoin. So we’re not surprised to hear about his book recommendation, The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, by Marc Levinson. “I haven’t been able to put this thing down,” he tells us.
“The author tells the story from multiple angles,” says Thompson. “First, there’s renegade entrepreneur Malcolm McLean. He’s really the guy who made containerization profitable.
“Then, you’ve got the longshoreman unions. At first, they were outraged by the reduction in jobs for their members because of container technology. Then they changed tack and started asking for more automation.”
Thompson also gave us a statistic to ponder: “Shipping costs when containerization was first tested in 1956 were $5.83 per ton. Containerization drastically reduced this cost to 16 cents per ton. That’s just a ridiculous cost savings.”
The shipping industry is not for the faint of heart. If you’re not careful, there’s no surer way of getting whipsawed.
The Baltic Dry Index measures the cost of shipping raw goods like coal and grains. It touched historic highs… and historic lows… within a six-month span during 2008. That’s a 97% plunge you see here…
“Leading up to the financial crisis,” Thompson explains, “shipping companies expected the show to go on. That is, they assumed growth would continue forever. To handle this projected growth, they built more ships.
“This led to a massive oversupply. The global economic crisis also led to a plunge in demand for shipping. These combined factors led to bankruptcies across the shipping industry.
“Industrywide damage like this doesn’t repair itself overnight. Today, the industry is still undergoing repairs.”
As he’s picked through the wreckage, Thompson has come across an intriguing niche player that could easily double within the next 12 months. It’s coming out from under a huge debt burden; that means it’s accumulating a cash hoard to build out its fleet and pay a handsome dividend. “I believe there are multiple ways for the share price to go up and very few ways for it to go down,” he says.
Fair warning: The kind of companies Thompson sniffs out for us are tiny. That’s why we keep a strict membership cap on his service. We don’t want our readers artificially goosing the price of this company. We want the share price to grow on its own and the company’s potential to develop organically.
That said, a few slots remain available for readers like you. They might be filled by the time you read this, and if that’s the case, we apologize. But if you’re looking for big gains in a short time, you’d do well to hop on this now.
Stocks are sliding as the week wears on. As we write, every major index is in the red.
Small caps led the way up yesterday, and they’re leading the way down today: The Russell 2000 is off more than 1% and is on the hairy edge of slipping below 1,100.
The S&P 500, meanwhile, sits at 1,181 — squarely within the “Snooze Zone” identified by Jonas Elmerraji of our trading desk…
It’s the two little charts at the bottom that have Jonas’ attention right now: “My two favorite measures of volatility are dropping like rocks in 2014.
“The middle subchart shows the VIX volatility index. The VIX measures the implied volatility of the S&P 500 — in other words, it measures how much risk people are pricing into ‘the market’ as a whole, not how much risk there really is. It became popular during the crash of 2008, when stocks were in free fall and volatility was soaring. The VIX is a useful tool for us because it’s a very biased volatility gauge — when it’s high, investors are fearful.
“Below the VIX is a metric called Bollinger Bandwidth. It’s a more statistical measure of how volatile the S&P 500 is right now. It cuts the bias out of the picture and tells us what’s happening right now — and with bandwidth at the lowest levels seen in years, stocks aren’t moving much in either direction right now.”
That’s usually bad news if you have a trading mindset like Jonas.
“The good news,” Jonas says, “is that this won’t last.”
Volatility comes and goes: “We’re overdue for a volatility squeeze, an exciting big move that injects considerable volatility into the market. When that squeeze happens, expect some exciting trades to happen too.”
That’s when Jonas will swing into action with his watch list of “hacked stocks.” What do we mean by “hacked”? Best let Jonas explain it to you — it could mean extra income of $2,571 or more every week.
Gold remains firmly lodged in the $1,290s, as it has been since midday last Friday. If it really matters to you, the bid at last check is $1,293.
So much for the feds’ “major milestone.”
Late yesterday, Credit Suisse agreed to plead guilty to helping its clients evade U.S. taxes — the first criminal case brought against a megabank in more than 20 years, the media eagerly reminded us.
Then an hour or so later, the bank agreed to fork over $2.6 billion to bring the case to a conclusion. The book is now closed.
And the difference between this case and the voluminous cost-of-doing-business fines the other banks have paid in civil cases stemming from the financial crisis is… what, exactly?
At least Cecily McMillan got off fairly easily.
We mentioned her case last week; she’s the Occupy Wall Street protester who faced up to seven years for elbowing a cop as he tried to break up a demonstration.
Whether it was a deliberate act was murky at best, and perhaps that figured in to the judge’s sentence handed down yesterday — not seven years, but rather 90 days followed by five years probation.
We contrasted McMillan’s case last week with that of Kareem Serageldin, the only Wall Street executive doing time for an act of fraud linked to the financial crisis. His sentence is 10 times as long — 30 months.
Hmmm…
“It’s good to finally have this case behind me,” says Craig Zucker — the man who for a brief and glorious moment earlier in this decade gave the world Buckyballs.
Buckyballs, as we first wrote in the summer of 2012, were “adult desk toys made up of BB-sized magnets.” The Consumer Product Safety Commission decided they posed a swallowing hazard to children and moved to ban them. Zucker sued the CPSC and lost. By year-end, he’d sold off his remaining inventory and shuttered the business.
But before losing the battle, he promoted his product with ads that mocked the regulators…
Once the case was closed, the CPSC performed what sure as hell looks like an act of bureaucratic spite — naming Zucker personally as a respondent in its ongoing recall proceeding, potentially leaving him on the hook personally for refunds to customers and retailers.
Now comes word Zucker and the CPSC have reached a settlement.
Explains Jim Epstein at Reason: “Zucker agreed to hand over $375,000 that will go to pay for a recall of the product. The CPSC will spend the first $75,000 publicizing the recall, but Zucker gets any unused portion of the fund returned to him. So if nobody turns in their old Buckyballs, Zucker’s only out the $75,000.”
“Only.” Oy…
“Yes,” a reader affirms after our account yesterday of how horizontal drilling has been the difference-maker in America’s new energy boom — not necessarily fracking.
“What I would guess is of even more long-term interest is the possibility of going back into older vertically drilled fields with new horizontal holes. Please ask your oil experts for their thoughts on tackling any of the erstwhile historically huge plays in Texas, Oklahoma, Louisiana or California. The fraction of potential oil actually proved recoverable by older methods is probably small enough to make a horizontal replay HUGE.”
The 5: Maybe, maybe not, says Matt Insley of Real Wealth Trader. “At least for the fields I’ve visited in Texas, there wouldn’t be much opportunity to use legacy oil wells from decades past.
“The new shale plays that drillers are aiming for today are at deeper depths than the conventional oil plays from America’s first oil boom.
“However! Even though we may not see re-entry into legacy vertical wells, drillers are becoming efficient enough that drilling new wells at current prices is highly economic. And more along the lines of your thinking, once we get a few more years into America’s second oil boom, we may have very legitimate opportunities in ‘re-fracturing’ or re-completing the horizontal wells drilled over the past few years.
“Fact is, in baseball terms, I keep hearing (really, I hear this a lot) that we’re in the second inning of this oil boom.
“That means there’s plenty more opportunity for oil production down the road. We’re talking about decades of production. And if new technology opens up new fields or new ways to reactivate previously drilled shale plays, you bet well-run oil companies are going to be working around-the-clock to produce even more oil.
“The second inning? Man, I can’t wait to see how the rest of this game plays out!”
And yes, Matt has his trading lineup filled out and ready to go. You can get started with a grubstake as small as $500 and turn it into six or even seven figures in as little as a couple of months.
That’s not a claim he pulled out at random, either. Let him show you the math right here.
“Why is it,” a reader writes, “that in the Agora Financial issue we are directed to click here and we are in a video presentation that is basically a recruitment for another ‘Catalyst Trader,’ Rick Pearson.
“Isn’t the Agora Financial a publication in itself a complete review, without us having to purchase more stock trigger subscriptions?
“Please clear this up for me.”
The 5: With pleasure. Not least because you might not be alone in your confusion.
This is a good time to extend a warm welcome to all new readers of Agora Financial’s FDA Trader. Like our correspondent, you might have had no previous exposure to us before. So here’s a quick if belated introduction.
Agora Financial, to be clear, is not a newsletter. We are a full-service publisher of entry-level newsletters, high-end stock advisories and premium trading services. That’s 16 publications, each of which aims in one way or another to offer you guidance as you manage your own investments. Agora Financial’s FDA Trader is one of our newest publications, in which our investment director Paul Mampilly identifies short-term triggers that can make a biotech stock rocket up in a short amount of time.
What you’re reading now, The 5 Min. Forecast, is a free supplement to your regular subscription. We email it only to people who’ve subscribed to one of our paid products.
The 5, as it’s affectionately known among the faithful, serves in part as a window on the work of all our editors. From the time our executive publisher Addison Wiggin launched this daily e-letter in 2007, our policy has been this: The analysis comes free. The advice and specific recommendations you have to pay for. That’s how we remain independent from Wall Street and avoid kowtowing to advertisers.
Hope that clears things up.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Speaking of Agora Financial’s FDA Trader, Paul Mampilly expects the thesis behind one of his recommendations to play out sometime between now and next Monday. That’s Judgment Day for a groundbreaking antibiotic that could prove a godsend for 3.3 million people in the United States every year.
How does Paul know the timing with such clarity? It’s all about the “Magic Calendar” that delivers big profit opportunities 36 times a year. If you’re not yet a subscriber but you find the idea intriguing, you’ll find it spelled out in detail at this link.