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

It involves the use of innovative products that enable shippers to defend themselves from pirate attacks.

While it may not seem like a lucrative business, the uptick in high seas shenanagins over the past year or so threatens to become more prevalent if it’s not addressed. And with millions of dollars worth of cargo traveling by sea every day, both the shipping industry and the companies whose cargo they’re hauling hardly want to see the trend become a full-blown epidemic.

At the moment, however, only the Department of Defense and various small private companies are responsible for “mobility denial systems.” Described as an “oil slick in a can,” these weapons make it difficult for bandits to board (and remain on) a ship.

But there are a few major, publicly traded American companies that are combating this problem amid their other defense issues…

Take That, Jack Sparrow

First up, one of the world’s largest defense companies, Lockheed Martin (NYSE: LMT). The firm has partnered with BAE Systems PLC. (Pink Sheets: BAESY) and Israeli weapons systems developer Rafael Armament Development Authority to develop “The Protector.”

While it sounds like the hero of a 1980s action movie, The Protector Anti-Piracy Robot is an unmanned robot with a mounted 7.62mm machine gun. Originally designed to protect harbors, The Protector is capable of defending ships from attackers, while keeping the crew out of harm’s way.

A more widely used form of anti-pirate defense is Long Range Acoustic Device (LRAD) systems, designed by American Technology Corporation (Nasdaq: ATCO).

Equipped with high-powered speaker systems, these devices can be used to issue ear-splitting beams of sound directly at the bandits, or provide verbal warnings (no word, though, as to whether, “Back, ye scurvy dogs!” is on the list of available commands).

Despite the fact that these systems are more common, keep in mind that ATCO is a tiny stock and can be illiquid.

Here are three other ways to play the piracy protection trend…

Three Ways To Play High Seas Banditry

The Defense Angle: You can’t dip into many sectors or industries these days without finding the presence of General Electric (NYSE: GE).

The company’s defense subsidiary, GE Security, offers various communications systems that are used to enhance ocean security.

The Insurance Angle: In addition to direct defense sector plays, there are also several insurers and reinsurers, which have an important maritime business and could face exposure if a ship is lost at sea. These include CNA Financial Corp. (NYSE: CNA), Marsh & McLennan Companies (NYSE: MMC) and Willis Group Holdings (NYSE: WSH).

The Cargo Angle: Consider commodity plays on cargo like oil. If oil cannot be shipped directly for fear of it being intercepted by pirates, it could drive up the price. A straightforward, more diverse (and thus less risky), cheaper and safer way to play this would be to buy an ETF like the U.S. Oil Fund ETF (NYSE: USO).

You could also consider timber companies like Plum Creek Timber (Nasdaq: PLUM). It’s historically a solid market outperformer anyway, which isn’t a bad investment to have in your portfolio at times like these.

Move With The Waves As This Maritime Trend Grows

For pirates, the lure of capturing easy booty from an unsecured ship in the middle of an ocean is an attractive proposition.

And while the current US-Somali standoff will eventually end (hopefully in peace), companies are realizing that there’s a more pressing need to secure their cargo and crews while at sea.

In an economy where it’s mighty difficult to make money at the moment, the prospect of losing cargo to pirates will force companies to pay for the security products and services that can protect their haul.

While the majority of the companies in the maritime security space are small and privately owned, if the piracy trend increases, you’ll likely see more well established firms enter the market – especially those with long histories of securing government contracts, such as Lockheed and GE.

Hoping your longs go up and your shorts go down.

Source:  Ocean Piracy: Fill Your Trading Account With Booty From The “Pirate Portfolio”

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

You can even ignore the ever-popular gross domestic product (GDP).

Most of the indicators that the market relies on to forecast the future are worthless in this type of environment. The truth is the data coming out of the traditional economic indicators isn’t current. By the time it’s being reported, the information is already weeks or even months old.

If you want to know when the global slowdown that’s erased $28 trillion in wealth (so far) will finally reverse course, pay attention to the obscure Baltic Dry Index. And nothing else. Here’s why…

What Is The Baltic Dry Index?

Despite the name, the Baltic Dry Index has nothing to do with markets in Lithuania, Latvia or Estonia. Instead, it’s all about the cost of shipping major raw materials. Like iron ore, coal, grain, cement, copper, sand and gravel, fertilizer, even plastic granules.

The value for the index is determined by the London-based Baltic Exchange, which traces its origins back to 1744. Each day, the exchange canvasses hundreds of brokers around the world for price quotes on moving goods. For instance: Shipping 100,000 tons of coal from South Africa to Japan, or 50,000 tons of iron ore from Australia to China. It then aggregates the quotes to form the Baltic Dry Index.

Basic economic principles of supply and demand explain the significance of the index…

The supply of cargo ships is tight and inelastic. It takes roughly two years to build a new cargo ship. And the high cost of each prohibits docking ships during slow periods. In other words, a change in cargo rates does not change the number of ships in operation. So even the slightest changes in demand for shipping raw materials results in a change in the index.

And because the index tracks the cost of shipping raw materials – the precursors of economic output – instead of intermediate or finished goods, it provides a precise and rare measurement of the volume of global trade at the earliest possible stage.

A sharp move up, means global trade is increasing. Conversely, a sharp move down, means it’s decreasing. Since global economic activity ultimately influences the equity markets, sharp moves in the Baltic Dry Index often predict and precede similar moves in the equity markets.

4 Reasons to Favor The Baltic Dry Index

Of course, there are other reasons to favor the Baltic Dry Index over other leading indicators, including:

• No room for speculation. The index is not tradable, which means the only people booking cargo ships are those with actual cargo to ship. That makes the Baltic Dry Index, as economist Howard Simons put it, “totally devoid of speculative content.”

• Not subject to revisions. Unlike almost every other piece of economic data, the Baltic Dry Index is not revised on a monthly or quarterly basis. The price is the price. And it’s completely reliable.

• An inability to be manipulated. Governments, both here and abroad, love to “massage” economic data, especially inflation figures. Obviously, it’s difficult to base investment decisions off incomplete or “mostly” accurate data. But because of the way the Baltic Dry Index is measured, that’s simply not possible. Again, the price is the price. And it’s completely reliable.

• Real-time, daily updates. We all know markets shift fast. And in turn, we need indicators able to reflect those sudden movements. At best, we only get weekly updates for other leading indicators. And all are backward looking. The Baltic Dry Index represents the only indicator with “real-time” updates. And such frequency dramatically increases its relevancy and value.

In light of the above, it doesn’t take a market maven to predict what direction the index’s been heading lately – practically straight down. Here’s the thing. The Baltic Dry Index started plummeting in early June, before the global equity markets went into a tailspin, proving its predictive abilities.

So if you’re looking for a clear indication of a market bottom, forget about any other leading indicator or popular convention. Just look for the Baltic Dry Index to start trending noticeably higher.

Good investing,

Lou Basenese

Source: The Baltic Dry Index: The Only Economic Indicator Worth Tracking Right Now