We are just a few hours away from the start of a holiday weekend. Along with about 50 million other Americans, I am headed to the beach. Not only will it be a great opportunity to spend a few days with my family, it will be a shot at an accurate gauge of the nation’s economy.

In case you did not know, I have spent many, many days plying the nation’s offshore waters in search of anything with fins. It just so happens some of the best fishing grounds are smack dab in the middle of the shipping lanes that point to Philadelphia.

One of my time-killing tactics between bites is to study the shipping traffic coming in and out of the area. There are oil tankers, barges filled with cars and trailers, bulk carriers and an occasional cruise ship or two.

This weekend will be an excellent opportunity to scope out what the nation’s importers and exporters are up to.

If recent reports are accurate and prove to be the start of a long-term trend, there is a good chance I will see a surprisingly high amount of traffic. Rumor has it, the port of San Diego is seeing a strong surge in export traffic. As Asian economies rebound, they need more of our scrap metal, plastics and agricultural commodities.

If you have followed the world’s shipping industry lately, you know the markets have been quite bearish. Shipping lines, with their huge fixed costs and debt loads, have been hit extremely hard as the global economy was flushed out to sea.

A rising tide

But reports today from Excel Maritime (NYSE:EXM) show the bears may be coming on a bit too strong. The company surprised analysts this morning with a quarterly earnings figure of $118 million, well above last year’s Q1 figure of $35.1 million.

Analysts were expecting a per share profit of nine cents. It is no wonder shares are surging today after Excel unveiled a figure of $0.95 per share.

Granted, much of the company’s revenue can be attributed to sound fiscal management, like strong charter contracts and a favorable hedging through swaps. Even so, the news proves that the sector’s bearishness is overdone.

For investors in companies like DryShips (NASDAQ:DRYS), which is trading in negative territory on news of share dilution, today’s action is creating a buying opportunity.

As the credit markets open and the world begins manufacturing and shipping goods once again, the shipping industry will turnaround.

They say a rising tide lifts all ships. It could not be truer for this industry.

If I had to pick just one industry to invest in right now, the shipping industry would be high on my list. I will let you know if my outlook changes next week after taking a first-hand look at the nation’s seas.

Source: Excel Maritime (NYSE:EXM): A Rising Tide Lifts All Ships

This from TFN’s Andrew Snyder:

The two-day rally started yesterday when DryShips (NASDAQ:DRYS) announced it reached a deal to restructure two of its loans. Shares jumped from $5 to $6 yesterday, and up to and over the $7 mark today.

This is great news for an industry that has been reeling in pain after the collapse of the global credit market. After years of expansion in a dire effort to keep up with exploding global demand, the industry is laden with debt.

Ships ain’t cheap

With a bit of light at the end of the credit tunnel, paying for all those new ships may not mean selling them at bargain basement prices, especially now that it looks like the rates shippers charge may be on the rise.

The closely monitored Baltic Dry Index made its biggest one-day move since this mess started last fall. Top rates hit four-month highs of $22,000 and are expected to climb as high as $30,000 in the coming weeks, thanks to increased demand from the Chinese steel industry.

So who are the winners and how do you play this news? First, in addition to dry ships take a look at companies like Eagle Bulk Shipping (NASDAQ:EGLE) and Excel Maritime Carriers (NYSE:EXM). Those two are up by 30% and 25%, respectively.

It sounds like a great, wealth-generating turnaround, but only the folks savvy enough to buy at recent lows are counting their profits. After all, shares of Excel hit lows more than 94% off last spring’s high.  There is plenty of more room to climb.

I would treat this sector like any other speculative investment. There are a lot of variables surrounding the shipping industry and almost all of them depend on a growing global economy. Right now, that could be months, if not years away.

But with credit becoming available and shipping rates rising once again, there is hope. At this point, the reward may not have overpowered the significant risk of selected industry bankruptcies, but we are getting much closer. As soon as more news of debt restructuring hits, you should gobble up all the shares your speculative portfolio can handle.

There is a good chance we are witnessing a strong turnaround in the indicative sector.

Source: The shipping industry stays afloat

• South Korea’s government announced plans for a 14 trillion won ($10.8 billion) economic stimulus aimed to create an extra 200,000 jobs, extend tax breaks for factory investments and increase infrastructure spending and development. Relief measures announced this year now total 33 trillion won, according to the finance ministry, Bloomberg reported.

• Initial public offering plans for buyout firm Kohlberg Kravis Roberts & Co. have again been delayed, this time because its Amsterdam-listed affiliate suffered big investment losses. With KKR’s delay, there hasn’t been a U.S. IPO in nearly three months, Reuters reported.

• DryShips Inc. (DRYS), Greece-based dry bulk ships carrier, posted a 71% gain in quarterly profits. The company dodged the cash drought by employing its vessels for long-term contracts, securing revenue as most companies are losing it, Reuters reported.

• Oil prices fell nearly 6% yesterday (Monday) as weak demand continued to drive investors from the market.  Light, sweet crude fell $3.90, or 5.75%, yesterday to settle at $63.91 a barrel. Black gold has plummeted nearly 57% from its record high of $147.27 a barrel reached in July.

• The Institute for Supply Management said yesterday (Monday) that its manufacturing index fell to 38.9 in October – the lowest reading since September 1982. Manufacturers have been crushed by mounting job losses and weak consumer demand.

• Viacom Inc. (VIA) announced yesterday (Monday) that third-quarter profit fell 37% from a year ago even though revenue rose 4% to $3.4 billion. Net earnings fell to $401 million, or 65 cents per share, down from $641 million, or 96 cents per share last year. The loss was largely the result of a $19 million operating loss in “filmed entertainment.” Viacom is parent to Paramount Pictures.

• October sales for General Motors Corp. (GM), Ford Motor Co. (F), Toyota Motor Corp. (TM), Honda Motor Co. (HMC) and Nissan Motor Co. (NSANY) all fell in the midst of tighter credit and a weaker global economy. GM sales of cars and light trucks fell 45% from last year. Ford down 30%. Toyota slipped 23%. Honda skidded 25%. And Nissan sales dropped 33%.

Source: Global Investing Roundups Tuesday, November 4th, 2008

Last week, Cash gave the raspberry to two IPOs (going so far as to highlight one as a potential short). Both names stunk up the joint, just as he expected. What came as more of a surprise, though, was a sudden flood of additional new offerings hitting the market.

This week Cash explains why new offerings can suddenly pop up out of nowhere; how he’s still making money hand over fist on the trading side; and, last but not least, he gives the scoop on an upcoming name in the red-hot shipping industry. Enjoy…

JL: So last week, you were sweating over the need to “take one for the team.” You pointed out two upcoming names, American Capital and Verso Paper, strongly hinting that both would be duds and that the second could be a good short for savvy readers. How did things turn out?

CASH: Well, both were indeed duds — just as I expected. Verso Paper (VRS) priced at $12 on Thursday morning. That was below the published range for the expected price.

JL: And I’m assuming the lower price didn’t excite anybody or inspire any value thoughts.

CASH: Oh, heck no. The lower price wasn’t indication of a better deal for investors… it was simply clear sign that the underwriters couldn’t find enough buyers for the deal, and had to price it deep in the hole just to get it done. The result was a smaller group of less-than-pleased buyers — me included — with a chunk of weak stock on their hands. The only thing to really do was sell. That’s why the stock immediately traded down two bucks, or nearly 15% of the share price. That’s no small loss.

JL: Ouch, no kidding. I’d imagine you’ll need multiple good deals to overcome that setback.

CASH: Actually, it should be easy to overcome. See, I took a portion of stock, but I did so grudgingly (if you’ll recall) and kept my allocation on the small side. I made sure my guys knew that this purchase was a personal favor, and that longer term, I expect the business relationship to work out much differently. It’s good, in a sense, because now I have “credit in the bank,” in a good will sense, when it comes to leveraging the next few deals coming out.

JL: Gotcha. And as for the American Capital Strategy (AGNC) deal, that one did just what you said it would, too. I saw the stock was priced at $20 and immediately went to a discount.

CASH: Yep. It doesn’t take a crystal ball. When you’ve been in this business day in and day out for nearly a decade, as I have, some things are just easy to see. Any IPO trader worth his salt should�ve been able to spot that outcome a mile away.

JL: So with two “cost of doing business” trades on the books, does that cut into your profits for the year? Or rather, how big was the cut? A nasty gash, or just a little nick?

CASH: Actually, there were a few other unexpected events that came up last week. Those events in the “other” category had an outsized impact on the ‘ol P&L sheet.

JL: Uh-oh. More pain?

CASH: Not hardly! Just the opposite, in fact. Surprisingly enough, there were no fewer than a dozen additional deals that came to market last week. Enough of ‘em were profitable for yours truly to push the equity curve to a brand-new high!

JL: Sounds like a pretty sweet week. You made your i-banker buddies happy by taking on some weak deals, enabling you to bank good will credits for future deals, and yet the market was strong enough for you to power past the small losses and make your investors happy, too.

CASH: Yep. Better than a poke in the eye with a burned stick, as you always say.

JL: Ha ha, true. I picked up that saying from a grizzled old stockbroker — a guy I worked for two summers back in college days. But anyhow, where did these dozen deals come from? Weren’t there only four on the calendar when we last talked?

CASH: Indeed, you counted right. There were four last time we chatted. But when we get into a market that’s been dormant and tough for an extended period of time — like we saw from September of last year through March — it creates an extra flurry of activity when conditions change. When the window opens, deals can pop up like mushrooms overnight. In fact, there’s an industry term for this kind of thing: “rapid overnight offering.”

JL: Sounds like a FedEx or UPS commercial. Or maybe some kind of clandestine military term… swift movements in the dead of night, that kind of thing.

CASH: Heh. In some ways there really is a bit of cloak-and-dagger to it. Normally you’d think a new offering benefits from press exposure — the more press the better. But with some of these more rapid-fire deals and secondary offering deals, the opposite is true. If there’s too much press beforehand, existing shareholders will sell in the face of added stock coming to market. The deals dilute their ownership in many cases, which no shareholder likes. And so, unless you have a relationship with the underwriters (as I do), you might not get the news until it’s all over.

JL: The offering and the damage done.

CASH: What?

JL: Sorry — obscure Neil Young reference. Couldn’t resist. Probably should’ve. Anyway, so existing shareholders don’t even get a say as to whether the transaction happens? Aren’t they the technical owners of the company? Why wouldn’t there be some kind of announcement or proxy vote?

CASH: The firm’s board of directors typically makes the decision. It’s perfectly legal under the docs that outline corporate governance.

JL: Nice. So a public company can dilute its shareholders pretty much at whim… this sounds like an important area for investors to be more aware of.

CASH: No kidding. I’m actually surprised how few investors pay heed to the “syndicate calendar.” There is a ton of important supply/demand information there that most folks miss.

I am hungry, but I cannot afford to eat.  Sure, I say that now because I am scrimping for a wedding, and more importantly, a honeymoon in 31 days, but I may not be able to use that excuse for long.  Soon, all of us could feel the pain.  And I am not talking about the pain of married life (I have been hearing a lot about that).

Over the last month, food-related riots have broken out all across the globe.  Because of soaring demand and a lowered supply, food prices are sky-high and folks are fed up (pardon the pun).  It looks like the problem is about to get worse.

No soup for you

Just yesterday, one of the nation’s largest grain producers announced it is forced to cut off its exports to the rest of the world.  With food prices soaring within its borders, Kazakhstan (the fifth largest wheat exporter) wants to ensure its people can afford to eat before it feeds the rest of the world. 

By propping up local wheat supply, Kazakhstan hopes to lower the prices its citizens have to pay.  Unfortunately, the reduced global supply will push wheat prices even higher for the rest of us.

The story is even worse in the rice markets.  Indonesia was the latest country to ban rice exports.  It joins India, China, Vietnam, Egypt, and Cambodia.  It is no wonder rice prices soared to set new records.  Instead of getting the global expansion so desperately needed, the world’s markets are contracting.

Unfortunately, the United States and its import-everything mentality will feel the brunt of the pain.  Need proof?  How about a dollar that is weaker than a five-year-old Girl Scout. 

Over the past year, the nation’s food prices are up by 4.4%.  Unfortunately, the inflation is just beginning.  With export bands, soaring demand thanks to bogus alternative energy political agendas, and a burgeoning population, the price you pay for a loaf of bread today may look like a fantastic deal this time next year.

Oh, ship!

So how can you profit from this global crisis?  Unless you are willing to plant wheat in your front yard and turn your swimming pool into a rice pond, you will have to turn to the equities market.  Right now, your best bet is to take a short position on the nation’s dry-bulk shippers.

Over the last month or so, the share price for many of these carriers has gained a few extra points.  Wall StreetWall-Street-Layoffs was excited about a few analyst upgrades and the return of growth in the steel and coal industries.  But a reduction in wheat and rice exports is going to put an end to the party. 

The bans may be temporary, but they cast an unforeseen shadow over future earnings.  Wall Street hates anything that was not predicted. 

Two of the most popular dry-bulk investments are DryShips (DRYS:NASDAQ) and Eagle Bulk Shipping (EGLE:NASDAQ).   Take a close look at September 2008 Calls that are close to being in-the-money.  Thanks to the recent bullishness, they are selling at a discount.  It won’t stay that way for long.

It may be the twenty-first century, but this planet still faces some major food issues.  We could be in for some tough times.