Reflections and other things we should never do

At the turn or every year, I analyse the predictions of most of the financial press to understand which companies they expect to outperform in the year ahead. If one company appears in more than one of these articles, I tend to make a modest investment and assess it at the end of the year. In all honesty, I am struggling to recall a single one of these positions that has ever made money. This year, after being rated in three separate columns, I invested in the building supplies group Travis Perkins; almost immediately thereafter the shares fell 25% and have remained underwater ever after.

Market predicting in the freight market is a dangerous pastime and futures markets provide little clarity to what may lie ahead. On December 31st 2002 the value of the panamax 2003 market was $12,100 which was a significant premium to the performance of the market over the course of that year which had averaged $7,725. But selling at this price would have proved a costly mistake given that the market performance over the course of 2003 averaged over $20k and peaked at just a snip under $38,000 in October. There are some similarities in the market position now and at the end of 2002 – the market of 2002 started the year below $6,000 and only truly picked up in November where it took many by surprise with its strength. There were many more doubters than believers and only the brave took long positions and sat on them long enough to make significant money. This year the panamax market started the year below even $4000 but only rose significantly in November and spiked to $12470 on the 12th December.

Cal 17 panamax can be bought at around $6,700 but few will consider this an attractive proposition in a year where the panamax has festered at such low levels for much of the year and only the recent gains has pushed it to an average for the year of $5,550. But if you are starting with a flat book, 2017 will not be a year to be short panamax. Pace yourself – timing will be key but a buying opportunity to position yourself cheaply for the second half of the year will emerge and there may be some rich pickings. And if that doesn’t work, let me know and I may flog you my Travis Perkins shares – they will probably do rather better in your hands than they have in mine!

Merry Christmas one and all and may 2017 bring you health, happiness – oh and some good fortune too!


About FFA Experts

Clarkson Platou Futures, the pioneer of the forward freight agreement (FFA), is now the leading broker of dry FFAs and iron ore swaps
This entry was posted in Clarksons, Commodities, commodity, Dry bulk, FFAs, Freight Derivatives, Regulation, Shipping. Bookmark the permalink.

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