A good and famous joke and the sad reality in #Shipping

You all know this famous joke about the canadian lumberjack and the wise Great Indian Chef… here is it below to refresh your memories

Bob and Doug lived in the northern wilds of Canada. Winter was approaching so they went out to chop wood to keep them warm during the cold months. After working all day they had gathered a respectable amount of firewood and were feeling pretty exhausted. Bob turns to Doug and says

-“Well, what do you think? Do we have enough? What if we have a really cold winter?”

They discussed this for a while and finally decided to ask wise Great Indian Chef  what he thought. So Bob climbed to the top of the hill, found Wise Great Indian Chef and asked him :

-“Wise Great Indian Chef, is it going to be a cold winter?”

Wise Great Indian Chef looked over the vast forest and nodded,

-“Yes, cold winter ahead”.

So Bob went back down and told Doug what Wise Great Indian Chef had said. They worked the night through, chopping down more trees, until morning when they had a huge amount of firewood. Again, exhausted, they discussed whether that would be enough. Bob climbed to the top of the hill and asked Wise Great Indian Chef again,

-“Wise Great Indian Chef, is it going to be a very cold winter?”

Wise Great Indian Chef looked over the vast forest and nodded,

-“Yes, very cold winter”

So Bob made his way back down to Doug and told him what Wise Great Indian Chef had said. They worked the rest of the day through, until they had a mountain of firewood. Close to collapse, they decided to ask Wise Great Indian Chef if it was going to be a very, very, very cold winter. Both of them climbed to the top of the hill and Bob asked Wise Great Indian Chef:

-“Wise Great Indian Chef, is it going to be a very, very, very cold winter?”

Wise Great Indian Chef looked out over the vast forest and said

-“Yes, very, very, very cold winter”

Bob and doug at work

doug

Doug, who couldn’t take any more said

-“Listen Wise Great Indian Chef, I know you are a native Indian and you people know this stuff, but how do you know it is going to be such a cold winter?”

Wise Great Indian nodding

chef

Wise Great Indian Chef looked at them and said

-“If White man chopping bit of trees then winter will be cold, when white man cut mountains of trees, winter will be very very very cold”.

Now you can read the real sad story which you can read in Tradewinds last week

****

 JP Morgan in $500m deal for up to 12 newbuilds Investment bank’s Global Maritime arm backs up bullish stance with expression of interest in newbuilds at Chinese yards April 13th, 2017 14:09 GMT by Irene Ang and Adam Corbett Published in Dry cargo

JP Morgan has backed its confidence in the dry bulk market with an order for up to 12 capesize and newcastlemax bulkers in China, hard on the heels of 11 secondhand acquisitions since November.

Industry sources say the US investment bank has signed letters of intent (LOIs) for the newbuildings with three yards for 2019 delivery. If all three LOIs are firmed up, the order could be worth $500m.

It is understood the deal has been done through Global Maritime, the shipping section of JP Morgan’s asset management division. Privately owned New Times Shipbuilding and Jinhai Heavy Industry are said to have been approached to build four newcastlemaxes each.

State-owned Shanghai Waigaoqiao Shipbuilding (SWS) has been approached to construct four capesize bulkers, although there is some doubt over whether this deal has been formerly signed or is still at the LOI stage.

“Other Chinese shipyards that JP Morgan approached included Yangzijiang Shipbuilding,” said one shipbuilding player. “It also contacted Japan Marine United [JMU]. But it only signed LOIs with Jinhai, New Times and SWS.”

TradeWinds is told that JP Morgan’s capesize newbuildings at SWS would be Tier III-compliant and cost between $44.5m and $45m apiece. The newcastlemaxes at Jinhai and New Times are Tier II and would cost around $43.5m each.

Sceptical observers

However, some sceptical observers suggest that JP Morgan may not firm up all the newbuildings at the three shipyards. One source said: “LOI is just an expression of interest in newbuildings and it does not mean the buyer is committed to the deals.”

Others caution that the deal may have been arranged on behalf of clients of Global Maritime, which works closely with major companies such as the Greek Livanos Group.

However, JP Morgan’s Chinese newbuilding deal and recent secondhand acquisitions would appear to fit perfectly with the Global Maritime cyclical investment strategy.

Global Maritime, headed by Andy Dacy, says its strategy is to “capitalise on historically low asset valuations and the potential for longer-term steady income in an otherwise low-yielding environment”.

The bank has been talking up the dry bulk market lately. JP Morgan analyst Noah Parquette recently predicted freight rates would strengthen through 2018.

He said new sulphur emissions regulations arriving in three years’ time and a major slice of the fleet hitting scrap age early in the next decade would provide “tailwinds” for the sector in 2020.

As befits its bullish stance, the bank has been acquiring vessels. Last week, it was reported to have bought the 180,000-dwt Pacific Capella (built 2012) from Pacific International Lines (PIL) for $27m.

That brings the number of secondhand capesizes that it has acquired since November to four. The other three are the 179,000-dwt True Explorer (ex-K Explorer, built 2012); the 179,300-dwt True Frontier (ex-N Fos, built 2010); and the 179,100-dwt Hanjin Esperance (built 2012).

It has also bought two supramax vessels and five ultramaxes. According to VesselsValue, the bank’s total spending on the 10 vessels, excluding the Pacific Capella, is $183.95m.

JP Morgan also co-owns bulkers with other shipping companies. It has a joint venture with MUR Shipping involving four handysize vessels and is a partner with Norway’s Kristian Gerhard Jebsen Skipsrederi in Bulk Trading with eight Japanese-built kamsarmaxes.

Dacy did not respond to requests for comment before press time.

****

And now The twistted joke

Bob and Doug are top PM NAGPOR investment bank’s management. Shipping crisis has been running for a while with new buildings being cheaper than ever. Bob and Doug are sitting on a baunch of money and are asked by their share holders to find some ways to invest in clever ways to bring back quick ROI/big money. So they went on the shipping market, discussed with some Shipyards and found out they could buy brand new ships at value/unit being 50% below 5 years ago prices. They thought then, « investing in shipping is ticking all the boxes of our objectives, let’s buy some brand new ships. » So they went to shipyard and invest big money in order to be ready, full of tonnage on the market, when the shipping crisis is over and the cycle is back again to Green. Then after securing some good big deals, they went to see some Shipping market experts, asking their opinion about the shipping market prospective.

Shipping experts went to see there usual market analysis tools and said :

-« the crisis will be over soon and freight will be high again ».

Bob And Doug, on these good market analysis went back to shipyards and placed again orders for newbuildings, asking for more ships and negotiating for quicker delivery. Once this done, Bob and Doug went back to the shipping experts, who took again a look around on the market analysis tools they have at their disposal and nodded

-« Market will boom quicker than we thought and freight rates will be sky high ».

Bob and Doug being far from being silly, went again to the shipyards placed new orders and even bought some secondhands ships for a very quick delivery -To be ready when market’s booming again-. Their director starts to be bit challenging about these investments and are wondering if more money shall be put into the system. So Bob and Doug as good banking employees went back to the shipping experts to get some confirmation their strategy is the right one. Shipping experts confirmed, after checking their usual market analysis tools :

-« Market is already somehow already ready to boom. It’s going to be « market is crazy » again. Like in the good old golden days back in 2007 »

Trying to understand bit better Shipping experts analysis’ they asked then to these guys :

-« thanks for your good advises and vision about shipping market’s forecast, we know you know what you’re talking about but may we ask you on which basis you assume shipping market is going to be booming again ? ».

To which shipping experts replied :

« the more PM NAGPOR investment bank is putting funds somewhere, the more PM NAGPOR’s experts are confident in their investments, the more we believe the related industry will go sky high soon »

as a conclusion: nobody really as a clue about what’s close future in shipping looking like. In case of doubt, bet your friends’/customers’ money…

disclaimer

 

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