Tuesday, July 05, 2011

Ocean Rates Falling, Falling, And Falling

The hard ride up in commodity prices is very probably going to turn into a hard ride back down (until long-term scarcity forces them back up, of course).  Thank the Fed's quantitative easing for pushing hedge funds to chase yield in hard assets.  Anyway, slackening industry demand for commodities is already prompting forecasters to lower their outlook for the economy.  The jumps in shipping rates earlier this year are likely to be as short-lived as the non-recovery that spawned them.  Shippers added capacity too quickly and will soon pay a huge price for their misallocation as rates drop.  We don't have to wait for these pessimistic forecasts to pan out.  Shipping lines on the Asia-Mediterranean route are already cutting back service as lower rates make them less profitable. 

I can't wait for the next downturn to hit the shipping industry.  It will give me the chance to buy some shipping stocks I've wanted for years.  I'm willing to wait a very long time for the right entry point.