Financial Markets Meltdown

[Buckhead]

Now, I could be way off base. But I am not seeing any upside in this stock at all. Everything points down - freight rates, cash flow, dividends and stock price. Sure, one might even get paid a nice dividend the next quarter but that will be more than offset by the next 30-50% drop in the share price.
The time to buy this stock was 18 months ago.

[eric2381]

I agree. Inflation means higher costs across the board for consumers. Which means less shipments. Companies will compete for remaining shipments, dropping rates. Higher energy prices will mean higher costs for those shipments. Higher labour costs due to inflation will further decrease profit margins.

[CanaGun]

I know the interest rate has increased and may be going higher, but I still think it's been very low since 2008, compared to what the older generation had

[DiabeticKripple]

Originally Posted by CanaGun

I know the interest rate has increased and may be going higher, but I still think it's been very low since 2008, compared to what the older generation had

but the prices on everything from vehicles to houses is astronomically higher. so a small interest rate bump has a big impact.

[trailraat]

Originally Posted by CanaGun

I know the interest rate has increased and may be going higher, but I still think it's been very low since 2008, compared to what the older generation had

The bigger issue is the ratio of household income to house price/debt. Most of the previous generation here in Alberta experienced about a 1/3 ratio - now its closer to 1/6-1/8. Most people used to be able to afford a home on a single income - low interest rates, reduced availability of land, and increasing dual income households have been at least partially responsible for an arms race on house prices.

In reality, in terms of land, we are where Europe was 500 years ago. So if you can afford land now - it will be worth it for your great-great-great grandkids as long as they see the value. Unless of course our dear leader and his ilk reach the point where they feel comfortable confiscating it.

[fishtank]

Buffet is dumping Chinese electric car maker BYD and adding more oil. Maybe it’s the Chinese economy or maybe it’s the EV market .

[Map Maker]

Originally Posted by Dean2

Both you and Eric should do some detailed research on ZIM before you jump to that conclusion. I did just a surface scan, will do more this coming week, but at first glance it is more than interesting enough to look further into it. Thanks for posting that KGB, might make a decent short hold if nothing else, too bad we missed the Aug 26 Ex date for this current dividend.

I did a scan as well and did a book value calc.
I can’t find anything hugely out of whack.
I decided on a buy-in price and put in a buy order. Quite a bit lower than its recent price but I would be comfortable buying if it hits it.
Play money of course.
Curious if you saw anything.

[Dean2]

Originally Posted by Map Maker

I did a scan as well and did a book value calc.
I can’t find anything hugely out of whack.
I decided on a buy-in price and put in a buy order. Quite a bit lower than its recent price but I would be comfortable buying if it hits it.
Play money of course.
Curious if you saw anything.

The big attraction to this stock is the oversized dividends they have been paying the last while as a result of the huge ramp up in shipping prices. Their costs have stayed relatively flat and shipping rates are 4 to eight times what they were pre-pandemic. They have reasonable debt to assets at 50%. That is in the normal range for this type of capital intensive business. All other ratios seem in line. Company has been around for 75 years and is one the larger shipping companies, operating 120 ships plus ancillary assets with a market cap over 6 billion. There asset base has grown a lot in the last few years from 3 billion to over 11 billion but 3.4 billion is cash on the balance sheet. They are carrying 3 billion in Capital leases from purchasing more ships.

Shipping rates have come off somewhat but are still way higher than previous. Even if the level out at double the old rates this company will still be flush with cash. Given their stated intent to payout at least 30% of profits in dividends the high dividends could continue for some time.

Current share value is elevated from historical levels and is likely to drop back closer to that range, so not one to buy into now nor have I done enough research yet to call this a good long term hold. I have added it to my watch lit stocks and I have it diarized to look at it again just before the next dividend Ex date, around Dec 14th, 2022.

[EZM]

A general comment about large overseas shipping companies - as pointed out above - overseas freight costs peaked at around 400% of "normal" contract and spot pricing about 8 months ago and have been normalizing. This was due to backlog in ports due to covid and nothing else.

Fuel, cost of cash and fleet maintenance, labor, etc... did not go up nearly that rate - so the cost of freight (and the revenue it brings to these companies) was artificial and purely a supply/demand driven through backlog (and to a far lesser extent) some capacity.

All of the big shipping companies benefitted. Many have added capacity (specific to their primary lanes).

The current decline of this stock price is now bring this all back to "normal".

The story for ZIM is likely in alignment with that - so I personally don't see any big benefit and/or detriment to buying this stock, dumping it if you have it, or anything.

Things are normalizing. I agree with Dean - he is spot on here. I work with overseas freight and manufacturing on a very large scale daily and his insight (derived from his research) mirrors what we "industry insiders" already know.

[jstubbs]

Originally Posted by trailraat

The bigger issue is the ratio of household income to house price/debt. Most of the previous generation here in Alberta experienced about a 1/3 ratio - now its closer to 1/6-1/8. Most people used to be able to afford a home on a single income - low interest rates, reduced availability of land, and increasing dual income households have been at least partially responsible for an arms race on house prices.

Goes a lot beyond that as well. High commoditization of housing in places like Van, TO, MTL, Ottawa, Halifax, Victoria, the list goes on, has a lot of folks cashing out of their homes there and moving out to prairie cities and raising the costs out here too. Edmonton has been fairly well insulated but still saw its first real good month over month price increases for what feels like since 2013, and Calgary saw some real price increases this time around before rates started rising.

Overall, unless you’re in Edmonton, Winnipeg, Regina, Saskatoon and to a lesser extent Calgary, it’s getting REALLY hard for any young folks to afford to buy homes. When real wages have been stagnant (if not dropping) in so many places while real home prices have continued to shoot up, it’s becoming a real issue.

Lots of folks like to point out that average new home sizes have increased a lot too, but consider that given land values have shot through the roof, developers on greenfield (and infill) are building the biggest possible houses on the smallest possible plots to maximize their land investments. Why build a 1000 sq ft home on a $150,000 lot to make $300k house sale when you can build a 2000 sq ft home and sell it for $500k? If the consumer market doesn’t want to pay that, developers/agents point at the 1000 sq ft duplexes/multi fam buildings and say there’s your smaller house if you want it.

How that plays into the future, I’m really not sure but just as you’ve noted, debt ratios are off the charts, and that is for people trying their hardest to live within their means. Inflation has (almost) been a god send that its forced the BoC to finally raise rates to cool the RE markets off. Before that, way too much of Canada’s economic growth has been tied to real estate services which anyone can tell you that at a certain point it’s entirely rotten hollow GDP growth.

Lately, I’ve become pretty convinced that in North America (and more specifically Canada), got extremely lucky during which they grew and boomed post WWII while the rest of the world was either so war ravished or not developed enough that we got such a head start and enjoyed incredible luxuries—but that was never and will never be sustainable and was merely a miraculous blip in time, and that we’ll never find ourselves in a similar situation again due to how the rest of the world has been catching up. Where we go from here, I’m not sure, and how you can convince an entire generation that they can only expect a lower economic quality of living going forward, I’m not sure. I’m in my mid 20s, and you can see the signs everywhere. Who has a decent pension outside of government? Who is supporting a family on a single income without being a top <5% earner in their industry and not living in a small town/city? How many jobs out there require substantially higher educational requirements for degrees that have soared in tuition costs, leaving people to enter the workforce later with already high debt loads compared to 30, 40 years ago? The days of skating by and living really well are passing by, as its a global workforce young people in Canada are competing against, not just their neighbours.

Alberta is a hard place to talk about this sort of things, because there are ample opportunities for folks to skip higher education to be tradesmen that can make great money (as they should, nothing wrong with that inherently but it masks the ongoing issue), and oil booms and their resulting busts really distorts economic views as every loves to point to really lean years of the past in the varying points of the 70s and 80s where people were scrounging pennies and living off shoestrings, but that was due to the severe energy price depressions, while on a macro scale Canada as a majority was a lot better off in those times. If young people are struggling a lot today while we’re in alleged economic good times, how bad is bad going to be for young people when times get real bad?

Sorry for the weird rant. None of this is political, just some thoughts on how things are progressing economically in Canada these past few decades.. I wonder a lot about the future and what the right move is for me and mine. I love Canada and it’s been my home my whole life and I hope it continues to be, but something needs to change as the course this country is on sure doesn’t look at that bright.

[KGB]

Originally Posted by Dean2

The big attraction to this stock is the oversized dividends they have been paying the last while as a result of the huge ramp up in shipping prices. Their costs have stayed relatively flat and shipping rates are 4 to eight times what they were pre-pandemic. They have reasonable debt to assets at 50%. That is in the normal range for this type of capital intensive business. All other ratios seem in line. Company has been around for 75 years and is one the larger shipping companies, operating 120 ships plus ancillary assets with a market cap over 6 billion. There asset base has grown a lot in the last few years from 3 billion to over 11 billion but 3.4 billion is cash on the balance sheet. They are carrying 3 billion in Capital leases from purchasing more ships.

Shipping rates have come off somewhat but are still way higher than previous. Even if the level out at double the old rates this company will still be flush with cash. Given their stated intent to payout at least 30% of profits in dividends the high dividends could continue for some time.

Current share value is elevated from historical levels and is likely to drop back closer to that range, so not one to buy into now nor have I done enough research yet to call this a good long term hold. I have added it to my watch lit stocks and I have it diarized to look at it again just before the next dividend Ex date, around Dec 14th, 2022.

I couldn’t get a better analysis of this stock even if I called BNN market call or Max Money guy, lol! You are a one smart cookie dude!
I am thinking the same way for now, it’s in my watchlist. It has been going down in the last few days, just like the rest of the market. Never the less, an interesting company to keep an eye on.
Another company that I am watching now is a small bio company called Todos Medical, ticker TOMDF. ITS A PENNY STOCK so treat it like a roulette at the casino. They are developing a medication for Covid, similar to what Pfizer has but pfizer med is showing very poor performance as of now. These guys developing something different that is in phase 2 trials now, called Tollovir, an antiviral treatment. And also Tollovid- dietary supplement to support immune function against circulating coronaviruses.
If they get good results - the stock will explode! At $0.03 per share, I am throwing a $3000 into it and hope for a big win!

[fishtank]

Every tech earning so far has been disappointing , and the price reflects that most are 50%+ below the ath . Looking like that market is slowly unwinding on tech .

[Fisherdan]

Originally Posted by bdub

I really enjoy reading about financial history and behavioural finance.

I reread the wealthy barber the other day. Now on to the intelligent investor. The history is pretty cool. It’s easy to forget that bonds were a huge part of peoples portfolios, and could outperform stocks over certain periods of time. Now the only game in town is Stocks. We are in such a weird time.

[Cement Bench]

hey Stubbs if you are in your mid twenties you are very smart

way smarter than I was at 40

[fishnguy]

Saw someone mentioning NVDA not long ago. Hope they sold at the little bump a couple of days later. Gonna be a bad day tomorrow (not that there were many good ones lately…):

Chip designer Nvidia Corp (NVDA.O) said on Wednesday that U.S. officials told it to stop exporting two top computing chips for artificial intelligence work to China, a move that could cripple Chinese firms' ability to carry out advanced work like image recognition and hamper Nvidia's business in China.

[ganderblaster]

Originally Posted by trailraat

The bigger issue is the ratio of household income to house price/debt. Most of the previous generation here in Alberta experienced about a 1/3 ratio - now its closer to 1/6-1/8. Most people used to be able to afford a home on a single income - low interest rates, reduced availability of land, and increasing dual income households have been at least partially responsible for an arms race on house prices.

In reality, in terms of land, we are where Europe was 500 years ago. So if you can afford land now - it will be worth it for your great-great-great grandkids as long as they see the value. Unless of course our dear leader and his ilk reach the point where they feel comfortable confiscating it.

Good points. Now we have both spouses working to achieve financially what a one income family would have in the 50s?

[fishnguy]

Just reading back a couple of pages.

Originally Posted by Dean2

Just a heads up, a few U.S. analysts appear to now agree with me about Carnival, who own Princess and quite a few others, and Norwegian cruise lines, having put a $0 and $1 price target on their shares. On top of investment considerations this has implications for putting deposits and fully paid cruise bookings in place with these companies. If you are going to book a cruise you may want to look at how you protect your deposits.

Interesting because I was talking about it (not here; though maybe here too, not sure) last… June, perhaps, when the cruise liners were hitting post-pandemic high and people were proposing that this trend is to continue and they are going to explode once they hit the seas again. I laughed at the proposal and made good bank shorting RCL at the very top and NCLH later, which, by luck, happened the day before they announced yet another dilution. Here is one of my responses to one of the guys on the subject (CCL) from last year (there is one with way more detailed analysis of both CCL and NCLH, but for whatever reason I cannot find it):

I am sure it will run because people are crazy, but the following is to keep in mind because correction will come, without a doubt, when common sense (ie fundamentals) kicks in:

Right before the pandemic was declared, they had 685M shares outstanding; the current number is at about 1,200M. Those shares were trading at $51.9 per share at its peak; today they closed at $27.53. That provides a market cap of $35.55B at the peak before the pandemic and $33.04B currently.

At the same time, long-term debt increased from $12.94B to $31.33B. Cash on hand as at Feb 28 was $11.51B, up from $9.51B. That provides the enterprise value of $38.98 before the hit and $52.86B currently. This is a very rough calculation and some numbers may be slightly different, but it isn’t far off.

So, while they lost $11.43B last year (and made about $3B the year before), market cap hasn’t significantly changed and enterprise value rose by a whooping $14B! Pretty sure everyone in their right mind understands that this is insane.

This does not take into account that they will still be burning cash for the next few months, at least; and thus, issuing more shares or assuming more debt. Income prospects are also questionable for the foreseeable future for obvious reasons. For example, RCL’s CEO was talking about “favourable bookings” for 2022 (!). That was on the earnings call a couple of months ago (if I recall correctly).

Then add the green regulations that will come rather sooner than later since there were talks about it in not such a distant past and the current environmental concerns of the decision makers. That will require additional capital, which leads to more dilution and/or higher debt.

What I am saying is that it isn’t even remotely as bright as people are assuming it to be. Keep in mind that what I wrote above is really just the stuff on the surface and there is more **** to scratch. When the real market correction comes, cruise liners will be taking one of the biggest hits. When that correction comes is up for debate (not in the next few months, in my opinion, but I was wrong before). You should also keep in mind that they can dilute at any time and the last time they did was at the end of February; so we may be about due for another one, maybe not. Their next earnings call is on July 9, so that dilution may come before or right after, or not at all.

I haven’t looked at it since, I don’t recall, but it would be interesting to look at the same numbers now and see what they look like. I am assuming there is even more debt and more shares in the pool at this point. The analysts propping them up last year were probably heavily invested themselves or really have no clue what they were talking about. Can’t be the latter because there is no way that people like that can work for some of the most respectable banks and agencies, or can it? Lol.

[fishnguy]

Originally Posted by fishnguy

Saw someone mentioning NVDA not long ago. Hope they sold at the little bump a couple of days later. Gonna be a bad day tomorrow (not that there were many good ones lately…):

Chip designer Nvidia Corp (NVDA.O) said on Wednesday that U.S. officials told it to stop exporting two top computing chips for artificial intelligence work to China, a move that could cripple Chinese firms' ability to carry out advanced work like image recognition and hamper Nvidia's business in China.

Just looked and the after-hours already looking bad:



My guess is it will look worse tomorrow.

In general, looking at the past 5 years, I would say there is a lot of expectations already priced in and then some:



And all time:



Who knows. I only day- and short-term traded it in the past couple of years. I would say it is quite a bet to hold it medium (or even long) term at the current valuation. I never looked at the actual numbers though, so I am almost talking out of my behind perhaps. Either way, good luck and hope people who bought in will make good bank on it.

[dth_]

Fed starting QT tomorrow. Blood bath incoming?

[Dean2]

September is historically a time when stocks perform poorly, usually a good time to be looking for deals. That said, ANY stock that does not have solid earnings, low debt, quality management etc is going to be in BIG trouble the next couple of years. Bed Bath and Beware is getting hammered and their stock price is still artificially supported by the Legions of MEM stock investors whoi do not yet seem to have learned their lessons.

If you can find top quality stocks selling at or just above their Feb 2020 prices, those will be an excellent deal, but there are darn few of them to pick from. Most top quality stocks are still well above their Feb 2020 highs. Any stock below their Feb 2020 highs needs to have a real detailed look and dive done on them to see if they should still be in the portfolio.

I know I keep harping on this but times are volatile and rapidly increasing interest rates that will be around for a long time, high inflation and a good chance of recession means portfolio balance needs to be looked at. If you have not talked to your investment advisor in the past 4 or 5 months, you should really be looking at replacing them, you aren't getting value for the money you are paying.

[fishtank]

Russia second biggest oil company Lukoil chairman. Fell off the window of a hospital…
https://ca.finance.yahoo.com/news/lu...091617949.html

[KGB]

Originally Posted by fishtank

Russia second biggest oil company Lukoil chairman. Fell off the window of a hospital…
https://ca.finance.yahoo.com/news/lu...091617949.html

I was telling him he can’t fly but he didn’t believe me….
Why are you all looking at me like that? I didn’t do it…

[Fisherdan]

From the book, The Intelligent Investor, recommended by bdub…

“If you had invested $12 000 in the S&P 500 stock index at the beginning of September 1929, 10 years later, you would have had only $7223.

But if you had started with $100 and simply invested another $100 every single month, then by August 1939, your money would have grown to $15 571.”


The power of dollar-cost averaging, even through the worst depression in modern history.

[Map Maker]

Originally Posted by Fisherdan

From the book, The Intelligent Investor, recommended by bdub…

“If you had invested $12 000 in the S&P 500 stock index at the beginning of September 1929, 10 years later, you would have had only $7223.

But if you had started with $100 and simply invested another $100 every single month, then by August 1939, your money would have grown to $15 571.”


The power of dollar-cost averaging, even through the worst depression in modern history.

Interesting. I wonder what the same scenario would be in a typical market ( Ie bull). Might flip.

[Fisherdan]

Originally Posted by Map Maker

Interesting. I wonder what the same scenario would be in a typical market ( Ie bull). Might flip.

I really don’t know. The idea is that if stocks are high one month you end up with less, but if stocks tank, your monthly amount buys a lot more units. Maybe someone else has more insight.

[fishnguy]

If you dropped all $12K sometime in 1932, you would be better off. There was a crash in 1929. Here is a fun watch:

https://www.reddit.com/r/wallstreetb...erformance_as/

[Fisherdan]

Originally Posted by fishnguy

If you dropped all $12K sometime in 1932, you would be better off. There was a crash in 1929. Here is a fun watch:

https://www.reddit.com/r/wallstreetb...erformance_as/

Yeah for sure. I guess the point of it was more to show how investing a little every single month, even in the worst economic decade on history, would still pay off. Not really about timing markets or anything like that.

[fishnguy]

^ Consider another example - Nikkei index. A guy dropping $12,000 in April 1991 would have $12,000 in November 2020. And about $12,500 today. SP500 would turn the $12,000 into $113,000 over the same period of time (if my math is right).

[Buckhead]

Dollar cost averaging seems to work best as part of a long term strategy - say 30 to 40 years.

[fishnguy]

^ Using Nikkei example, one would be averaging down for 12 years before (potentially) seeing any gains, all to be erased in 2008.