Is Greek dry bulk shipping dead? [TOPS]

If you look across the board at the once big, huge even, names in dry bulk shipping, they were pretty much all Greek.  I'm talking about once high flying names like DRYS, DSX, TOPS, GNK, etc.  All of them are now in the toilet.   DRYS was trading at the Ponzi price of well over $130 during its meteoric rise.  I was active on the DRYS Yahoo chat board at $120 up until the peak telling the fan boys that the mania was ready to collapse to "below $4".

You might argue that some of the above are not really "Greek" shippers.  GNK, for example lists NYC as HQ but the Greek ties are obvious with only a little bit of checking.  For example, CFO is Apostolos Zafolias and the company owns a subsidiary called Baltic Trading LTD.  Needless to say, the Greeks control a huge part of global shipping and global shipping is not going away any time soon.  Deflation has resulted in its collapse but deflation never lasts forever.  Inflation is the intrinsic characteristic of fake money and no it won't be different this time.  A leopard cannot change its spots.  A day will come when the Greek collapse of bad debt is done and it will likely be coupled with the questioning of the actual value the currency promoted by those who have demanded Greek austerity for their sin of massive leverage.

As bad as the Greek shipping leverage was, the leverage of fake paper money is far, far higher.  Greek shipping is real work, real capital, real ships.  There is economic value in all these things, just not as much as the now dead Ponzi pump made many believe.  But fake paper money is just puffery and bullshit, period.

I do not think people should lightly dismiss Goldman's recent statements that bond prices are not realistic with respect to inflation.  They are warning anyone who understands that paper money has no intrinsic value (and never did) but that labor and labor multipliers such as tools and energy  absolutely do have economic value (and always will).   At the Ponzi peak of Greek shipping, dry bulk was incredibly overvalued.  Now I believe the austerity and deflation in this sector is reaching a major long term bottom, in conjunction with the price of commodities and of course gold and silver.

Of course I have been on bottoming watch in this sector for some time now.  I took a couple long swipes at DRYS in the 80 cent and 70 cent range but was eventually stopped out each time.  Recently DRYS trades at 18 cents and I am hanging onto a small position at  21 cents bought shortly after making this post.  Recent activity over there convinced me that the company was not ready to throw in the towel.  It sold off all of its dry bulk ships and then made a deal to buy 6 oil services ships.  As oil prices rise, so will the value of this investment.

For those Greeks which remain in dry bulk I also see their fortunes on the rise.  In fact, I think their future rise will be at the expense of their main accuser in the PIIGS debacle.  As you can see from this article, Greek shippers have been buying distressed assets on the super cheap and the main loser here is none other than Germany.  As the article states, Germany and Greece were the shipping power houses in the region and in shipping it seems that Germany was even bigger of a PIIG than the Greeks were.  At some point this massive consolidation will be over and Greece will likely rise quickly in the after math because Greek shippers are mos def a good old boy's club who will collude to fix shipping prices higher.  With the decline of German competition in this area, the world will pay those higher prices.  The only question is of course, "when?" and more specifically, "will it happen before some Greek shipping company I buy goes BK?".

Well, nobody knows the future for sure but I see the commodities bust as already having completed its bust back in August or just about to do so in the coming couple weeks.  I have alerted everyone in my family as well as close friends of this view although I have not given the "BUY GDXJ" signal to them yet.  I feel that we are really close.

I also think that serious money will be made in oil services as well as Greek shippers and that good timing on the most beaten down shippers could prove to be a ridiculously good gamble.  Of course, these plays could just as well BK so I would not bet the farm but a few k treating these as call options that will only expire upon BK I think makes sense. 

So today's focus stock along the lines of "hail Mary" (high risk, high potential reward) is TOPS.  It just received its delisting warning from NASDAQ which makes it less interesting to many traders even though this has no impact on its business.  I suspect that this news will be the final bit of pessimism that cements a long term bottom for the shares.  This view is not a gut based perspective; the EW model is below in log scale.  TOPS is very leveraged and if inflation begins to reduce this leverage then the price trend can and will reverse upwards with strength that will cause the massive shorting of this sector to cover.  Keep in mind that this is very thinly traded at this point: ~100 k shares per day.   That's not much money at only 70 cents per share.  Because of these factors, the price bounce here could be dramatic to say the least.

I count that a 4th wave HT just concluded and that the 5th wave which is now playing out is likely an expanding wedge.  Optimally we would want to see a throw under of the bottom rail and then a break back into the channel before stepping in here.  But the key thing to look for is a 3 wave move down from the recent peak because internal motive waves of expanding wedges are 3s not 5s and 3s.




After the multi-year, historically significant collapse that we have observed in Greek shipping, wouldn't it be something if EW could actually be used to model the exact day of the bottom for the entire decline, at least as measured by TOPS as a proxy?

I think a rising inflation will literally float all Greek boats and that rising interest rates will be seen as rising inflation.  Do not ignore Goldman's warning about a move from what are essentially momentum driven assets to so called value based investing.  And do keep in mind what "value" means.  It does not mean PE!  That metric of investment value is generally for suckers.  No, folks, the real metric of value is PB.  Price to Book.  Prechter was clear about this in Conquer the Crash.