Sad News
My wife emailed me a Yahoo headline today which broke the news that actor David Carridine died some time yesterday in Thailand. Article from Yahoo can be seen here. Sadly at this point it seems to have been a suicide.
If you are not familiar with the name, David Carridine has been one of the greatest action film stars of the generation. Probably best known for playing the title role of "Bill" in the "Kill Bill" films, my favorite work by Mr. Carridine was the villain role he played to perfection in "Lone Wolf McQuade". Sad news and best wished for those close to David Carridine during this painful time.
Odyssey Marine Exploration Torpedoed
A while back I highlighted a stock I found to be exciting called Odyssey Marine Exploration (OMEX):
The company I took a position in is called Odyssey Marine Expeditions, Inc (OMEX). This firm is the company that found the SS Republic, and has located many other ships that may harbor valued salvage. If you read the book you can appreciate just how good these guys are. The stock itself trades at about $3 today, and shows a market cap of $158 million. The stock trades pretty thin with average volume of 242k shares daily. (All data from Yahoo Finance Ticker report)
As I see it, OMEX is a lottery ticket. The stock is one lawsuit gone wrong on a claim from going to zero. Ships that are located may have nothing recoverable. They could run out of money in short order. This stock is a speculative play at best. If you are still interested, read on.
Still, I am a romantic at heart for treasure hunting and took a micro (very small) position in the stock at $3.
Today brings news that OMEX has lost another salvo in a battle with the Spanish Government over a find:
Odyssey sinks as judge rules loot belongs to Spain
I will not get into the legal details as they are far from clear, but this ruling is very bad for OMEX. They are appealing, but it seems that there is just not any real maritime law out there that applies to such an enterprise. All this I was well aware of when I bought the stock. The stock was hammered for almost 50% today and closed at $2.
At this point I would rate OMEX as a strong sell. $2 is better than $0 which may be the next stop. As for myself, my position is so small that I will hold what I have and see what happens. Never play with what you cannot lose. Going further I would advise OMEX to do the following:
-Pack up the contents of the find
-Travel to the exact point at which they found it
-Jettison the cargo
-Provide Spain with the exact coordinates
-Provide Spain with a detailed cost list (over $150 million) which is the minimum required to salvage such a find
-Laugh
I know, I am mean.
Rising Oil Prices and Rising Mortgage Rates are a Good Thing
In what can only be seen as a return to the crazy days of DOW 14,000 and S&P 1500 there are contortions of logic going on that are worth taking a look at. Two items have had the most attention over the past week, Oil and 10 year yields (aka mortgage rates).
Oil Prices
At the top of the market, it was believed that $130 a barrel oil was "able to absorbed" by the "strong balance sheets of households" with their access to "savings represented by their home equity" or some such logic at the time. It even seemed true for a while.
Now we know that gasoline was being paid for with credit cards which were being paid off using roll over home equity loans. How did that work out?
A serious case of "systemic risk".
In practice high oil (hence gas, normal people do not buy oil drums) prices were able to be carried, but not by wages or real savings but by debt generation.
So now oil has double to almost $70 a barrel and the local gas stations are ramping up prices daily. Where high gas prices should have caused an issue before, they now will have no buffer ("the Corleone family used lots of buffers, Senator") between them and consumer bottom lines. And remember those unemployment lines are MUCH bigger than before. Usually rising oil is indicative of:
-higher inflation expectations
-shortages of some sort
-Global tensions
-Speculation
We all know because the FED has told us that inflation is out. Stockpiles are as big as they have been in some time. There are some global tensions, but nothing to get carried away over. So that leaves us with speculation as the last resort. Anything to support that? Well, maybe:
Oil Stored On Tankers Is Up 71% Since April
The volume of refined fuel stored on ships floating at sea has jumped nearly 71 percent since early April, industry sources said on Thursday.
About 41 million barrels of gas oil and jet fuel were being stored in tankers mostly off Europe's coast, up from around 24 million barrels in April, sources said.
Crude has rallied to a seventh-month high on optimism the economy would soon improve, despite the continued build in storage.
The demand for ships to store fuel has boosted freight rates for the Long Range 2 tankers mostly being used, shipbrokers said. The tankers can hold between 600,000 and 1 million barrels.
"Storage continues to be an option for traders and we see bookings running through at least the end of August, with several of them adding options to extend storage into September," a shipbroker said. U.S. investment bank JPMorgan Chase & Co has hired a crude supertanker to store gas oil off Malta's coast, a unusual sign traders were looking to take advantage of the weaker crude oil freight rates to store distillates. The ship would have to be cleaned to hold the refined fuel.
Crude rallied to over $69 a barrel this week, the highest in seven months, as optimism about the global economy outweighed concern about poor fundamentals in oil markets.
I have warned that the rush to save banks without any regard to how they mishandled their own dealings was a mistake. Back to old tricks again it seems. At this point I do not view rising oil prices as a "global recovery sign" at all. Even if a recovery was in the works, rising energy would surely kill off the expected anemic recovery. Then again, I bought OMEX stock, so usual grain of salt disclaimer.
Mortgage Rates
Mortgage rates can be set by so many benchmarks and tracking indices that it gets crazy. Generally the yield on the 10 year treasury is a good gauge of rates. Yields have been spiking because, you guessed it, the expected recovery in the economy. The spread between the 2 year and 10 year is often looked at to gauge economic matters and Calculated Risk supplies the goods (click for larger view):
CR notes:
This graph shows the difference between the ten- and two-year yields.
Usually a steep yield curve precedes a period of decent growth, but several analysts suggest the current ten year sell-off is due to concerns about increased Treasury issuance to finance the deficit. Whatever the reason, mortgage rates higher are moving higher..
Leave aside for a moment that the rise in yields could be because there is concern about deficits as far as the eyes can see. We were told by the FED just yesterday that the US Congress must CUT SPENDING or else. I am sure they will comply. Right after they fix social security and come clean about Roswell New Mexico.
Regardless, the focus point is that mortgage rates are directly influenced by this action. So how exactly is a higher mortgage rate going to be a good thing?
Essay Contest
My homework assignment to any and all interested is to pen a small thesis (small, so it fits in the comments section) that can explain how rising oil prices (hence gas prices) and higher mortgage rates are "good" for the economy going forward. You can even split it up and pick one or the other. Post your conjectures in the comments and I will post tomorrow the most persuasive cases. Remember, it is always the best way to grow your understanding by giving opposing views fair consideration. The winners will be rewarded with their names in print and a fair discussion of their work, and truly achievement is its own reward! If the winners are really persuasive I may (no promise) be inclined to reward with an ounce of silver (if we can work out details of shipping without undue disclosure of personal info). I look forward to the results.
Have a good night.
