Tanker Operators Boom as Oil Swoons

The tankers are a hard sector to play in, mostly because there are so many nuances to what they do. Many people got caught up in the dry bulks, thinking DRYS would be a winner coming out of the oil collapse. Not true. I’ll get to the 2015 tanker winners in a moment.

Rates have soared.

While oil prices fell about 35 percent in 2015, average earnings for these carriers jumped to $67,366 a day, the most since at least 2009, according to Clarkson Plc, the world’s largest shipbroker.

“The stars are aligned for us right now,” Nikolas Tsakos, the chief executive officer of Tsakos Energy Navigation Ltd., said in an interview at Bloomberg’s New York offices, adding that falling oil prices will likely stimulate demand and cargoes next year.

“We are benefiting from what is currently a challenging environment for the energy sector,” said Svein Moxnes Harfjeld, joint chief executive officer for DHT, in an e-mail. “We expect 2016 to be a rewarding year.”

“Investors look at tankers as an oil service, which we are,” Tsakos said. “But I think very few have identified that this side over here is the only oil service that’s positively affected by the dropping oil prices. I hope in the new year that this will be recognized, and our share prices are moving in the right direction.”

“A scenario in which crude oil prices are suppressed across 2016 could lead to a boom in tanker earnings of comparable magnitude to 2007-08,” said Tim Smith, senior analyst at Maritime Strategies International, said in a report.

There are numerous reasons for this boom to continue, from a surge of foreign oil imports into the U.S., as domestic drilling shuts down, to companies running out of room to store the damn stuff–opting to store it comfortably and conveniently in tankers at sea.

The greater the glut, the better chance tanker storage becomes a growing trend in the oil industry.

The top performing tanker stocks, traded in the U.S., during 2015 were: NAT (+65%), TNK (+38%), FRO (+18%), DHT (+17%), EURN (+15.6%), SFL (+28%).

Look at the earnings growth of NAT this year. Similar trends persist in all of the above names.

It’s worth noting that in 2008, in a year when cataclysm struck mostly all equities, NAT rose from $16.55 to $19.53, paying almost $5 in dividends along the way.

That was real fun while it lasted. I mean, I haven’t had this much fun being right on a huckster since…shit, since forever.

My posts regarding KBIO can be accessed here.

Bankruptcy docs are here.

Shareholders are here.

Martin Shkreli will soon be here.

Crime doesn’t pay, kids.

UPDATE: As $KBIO files for bankruptcy protection, @MartinShkreli livestreams himself in pajamas playing drums. https://www.youtube.com/watch?v=YCB6AybM4Cs

Today closed out the last 10 day holding period, in Exodus, for the last oversold signal purchase of SPY for 2015.

This investment strategy for an account worth $100k requires the investor make $33k investments upon each oversold signal. This means, in the event of signals exceeding 3 within the required 10 day holding period, that the account delve into leverage. Although the instances of levering up the account are limited, they might not be suitable for everyone.

The way it would work is like this.

OVERSOLD signal flags and an investor allocates 1/3rd of his account into SPY. Win, lose or draw, the investor must sell at the end of 10 trading days. In the event there aren’t any signals, the investor will remain in cash, limiting his exposure to equity markets. Naturally, as the account grows, so will the size of the initial investments. Hence, the power of compounding returns reigns supreme under a methodical strategy like this.

Max drawdown was -4.12%. Average drawdown was -2.09%. The win rate was 81%, 21 for 26. The investment return was upwards of 19% for the year.

I will be trading this exact strategy, exclusively, in 2016. However, I might change the index investment from SPY to QQQ or something more aggressive on occasion.

He stole Pep Boys from the wrench heads over at Bridgestone.

Bridgestone cowered behind a column of sub-quality tires today, announcing they were backing out from the bidding contest they found themselves in with Carl “permanent capital” Icahn, who won the deal for $18.50.

Shares of PBY are down 3% in after hours trade, as degenerate gamblers file out of the stock, disappointed that the idiotic bidding war had ended.

As an aside, Carl’s holding company, IEP, is down 28% for the year, with losers on the books such as CHK, LNG, FCX, FDML, NAV and HTZ. He’s been somewhat insulated due to his overweight exposure in AAPL and CVI.

Despite what the Sohn conference founder, Doug Hirsch, says, his hedge fund is closing down because of poor returns, not due to his busy scheduled mixed with his wine tasting classes.

“I am no longer able to continue making the commitment and sacrifices required to run outside capital,” Hirsch said in the Dec. 21 letter. “Despite negligible redemption requests and increasing market opportunities that are the result of a challenging year in event-driven investing, I cannot in good faith start next year with the dedication required to manage your capital.”

I am almost certain had Seneca risen by 20% this year, Hirsch would be praising his genius this pagan holiday season, luring investors into his $500 million bucket shop.

Seneca is down 6% for the year.

According to Hedge Fund Research Inc., more than 670 hedge funds closed in the first 9 months of 2015. Wait until the data comes crawling out from the corner offices after the New Year. It’s gonna be a doozy.

Take a shot every time he says “secular.”

Ari Wald, head of technical analysis, “executive director” at Oppenheimer, is calling for the mother of bull markets, which will last “for years to come.”

Clearly, his charts tell him that “The Facebooks”, “Amazons” and “Googles” of the world are winners and believes they will continue to win. But, if you take a step back, pal, he cites MSFT as a stock that is “just getting going (+60% over the past two years).”

It’s humorous to hear a technical analyst call for a secular bull market, not having the insight into core fundamentals and news flow. Apparently, everything is already baked into the fucking charts.

Nothing to see here. Carry on. Secular bull market on its way.

So we bitched and moaned about being dependent, even ‘addicted’ to foreign crude for decades. Then we did something about it by building our own empire of black gold, only to see it come crashing down into pieces within a few short years of having built it.

Now we’re seeing the ramification of building out an industry at historically high levels of pricing. There are ancillary victims, such the the steel industry.

Foreign steel coming into the U.S. dropped 36 percent in November from a year ago, according to U.S. Census Bureau data. That’s with domestic prices at the weakest in at least nine years and new taxes on products from six countries deemed to be unfairly priced. Yet U.S. mills have idled the most capacity since the financial crisis, operating at just 61 percent in the week ending Dec. 21.

Helping explain the capacity decline is a drop in demand for steel pipes and drill bits used in the energy industry after the price of oil plunged 66 percent in the past 18 months. Previously, sales of high-margin products to oil and gas companies had helped shield U.S. mills from sluggish growth in construction and other industries.

“I don’t think imports are the only problem,” domestic mills face, Timna Tanners, a New York-based analyst at Bank of America Corp., said in an interview Tuesday. “Nobody really expected oil to stay as low as it did as long as it has.”

Shares of X are down 69% for the year.

A very common characteristic of a weak market is low breadth during market rallies. When markets rise 200, you want to see 85 or 90% market breadth, not 70%.

Today’s 70% market participation tells me this market wants lower. We are in a low volume, end of year, garbage time for stocks, so don’t take your gains too seriously. What you should be doing is heading for the fucking hills, licking your wounds, preparing to hone your strategies for 2016.

There will be lots of pain to come over the next 12 trading months. You’d be wise to heed these warnings and quit your idiot approach to investing.

Time to batten down the hatches, lads.

I sold out of PAH and reduced the size of nearly all of my positions to raise cash that will be designated towards a totally different approach to this market during 2016.

Gone are the days when you could depend on the Fed to jolt markets higher. The paradigm has shifted and the central banks favor european equities. Since 2009, I speculated in the market with confidence, knowing stock prices would always be supported and dips would be bought. Over the past two years, extreme oversold conditions were supported; but the momentum that we’ve enjoyed in previous years was absent.

It is my belief that 2016 will represent more of the same, with some potential pitfalls in the mix that might pose as a significant problem for aggressive investors. Because of this belief, coupled with the untenable facts that the Exodus Market Intelligence Platform crushed 2015 with seamless ease, I’ve come to the realization that bold change is needed in my investment approach, one that relies upon my propietary strengths, withdrawing from non-systematic risk and attempting to avoid market risk whenever possible.

What the fuck am I talking about?

I’m selling shit and will be exclusively trading the oversold signals in Exodus.

During 2015, Exodus won 81% (21 out of 26) of the time in overall market oversold mean reversion trades. In a study recently done, an investor with 100k, allocating a tranche of 33k into each OS signal would’ve yielded a 19% return for the year. The holding period for this system is 10 trading days. Risk is mitigated by holding period. Maximum drawdown for the system was 4%, trading SPY. Those gains could’ve been much higher if trading leveraged ETFs or QQQ, naturally.

People have asked me for years “why bother with all of the market noise when you have something that works so great?”

The truth is, I enjoy the daily grind and like picking stocks. But I’m not having fun anymore, dealing with the emotional mine field of a market dealing with economic uncertainty. Therefore, going forward, Le Fly will exclusively trade the OS/OB signals from Exodus, using ETFs or in some cases individual stocks. Trading will become much more disciplined and regimented, with clear lines in the sand defined by holding periods. There will be times when trading will be non-existent, sometimes for months at a time. But it will all be for the better, especially for members of our hallowed halls.

Perfect. This is exactly what an economy saddled with $20t in debt needs, soaring borrowing rates.

“The universal phenomena of dealers cutting balance sheet at year-end is contributing factor and overall because the Fed is showing pretty good control over front-end rates,” said Aaron Kohli, a fixed-income strategist in New York for BMO Capital Markets, one of 22 primary dealers that trade with the Fed.

Now the Fed will have you believe higher rates is a result of a booming economy. Jobs are on the rise, profits are strong, and people are generally happy. Yellen and her ilk believe the market needs higher interest rates, in order to stem the tide of the overwhelming inflationary pressures that lurk in the shadows.

Where exactly is the inflation?

I’m not going to offer an opinion as to the borrowing costs going higher for a government that is reckless with its balance sheet and budget. These are merely the facts. Take it for what it’s worth.