Shipping Sector Adds Ever Larger Container Ships

Daewoo Shipbuilding & Marine Engineering Co.

As Rates Fall Ever Larger Container Ships Are Being Built and Added To The Fleet

Daewoo Shipbuilding & Marine Engineering Co.
Ships sit under construction in a dry dock at the Daewoo Shipbuilding & Marine Engineering Co. shipyard in Geoje, South Korea. Photographer: SeongJoon Cho/Bloomberg

(Bloomberg) — This is how much size matters in the shipping industry: Bragging rights for the world’s largest container ship have changed hands four times in as many months – – and will soon shift again.
With weak freight rates encouraging shipping lines to send as many goods as possible in a single voyage, Samsung Heavy Industries Co., the world’s third-biggest shipbuilder, is constructing four vessels capable of carrying 20,100 20-foot containers — enough to fit about 203 million iPads — for Mitsui O.S.K. Lines Ltd. of Japan. Another two ships of the same size will be built by Japan’s Imabari Shipbuilding Co.
The seaborne arms race comes even as overcapacity has led to a plunge in shipping rates since late 2010 and four straight years of losses for the industry. Some lines have responded by driving their vessels more slowly to save fuel and by scrapping older, less efficient ships. Others have decided to go as large as possible to cut costs by as much as 30 percent per voyage.
“Shipping companies are favoring bigger ships because of the benefits. With bigger ships you can move more goods at one go, helping to reduce your costs.” said Park Moo Hyun, an analyst at Hana Daetoo Securities Co. in Seoul. “But at the same time, it raises concerns about whether these ships can be filled.”
Mitsui O.S.K. will receive its new ships from Samsung Heavy by August 2017. The vessels will be 400 meters long — equal to four soccer fields, longer than the Eiffel Tower is tall — and 58.8 meters wide, Samsung Heavy said March 2. They also will have fuel-saving features.
Samsung Heavy expects more 20,000-container vessels will be ordered in the first half of this year because of the economies of scale they offer, the company said in an e-mail to Bloomberg.
Mitsui O.S.K. believes switching to larger ships “will enhance our competitiveness,” Tetsutaro Kozai, assistant manager of the company’s public relations office, said in an e-mail to Bloomberg. The company expects the new ships it has ordered “will be the largest in operation for some time,” he said.
Whether ship sizes continue to grow depends on builders finding ways to make even larger vessels that will be structurally sound amid the punishment of rough seas. Ports will need ever-deeper shipping lanes and terminal operators will require cranes capable of stretching all the way across the wider decks.
That could be a problem for ports on the U.S. West Coast, where Los Angeles and Long Beach, California can’t handle ships holding more than about 12,000 containers. That — plus the fact that there are no ports of call between Asia and the U.S. West Coast — means the supersize vessels mainly ply Asia-Europe routes.
A.P. Moeller-Maersk A/S started the recent trend toward bigger vessels in 2011 when it ordered 20 “Triple-E” ships from Daewoo Shipbuilding & Marine Engineering Co. At the time they were the biggest vessels in the world, capable of carrying more than 18,000 20-foot containers each.
A ship of that size can cut costs by about 30 percent per trip compared to a 13,000-box ship, based on a bunker fuel price of $600 a ton, according to Drewry Maritime Equity Research. Even at current fuel prices — $393.12 a ton as of Thursday in Singapore — a larger vessel is still about 15 percent cheaper per voyage, Drewry said.
Most vessels used now on the Asia-Europe route can fit 14,000 containers, according to Park at Hana Daetoo. There currently are more than 100 of these ships in service, he said.
Maersk Line, the world’s largest container shipping company, currently operates 15 Triple-Es and expects five more to be delivered in the first half of this year.
“Maersk moved the market with big ships, and people are seeing Maersk’s results,” said Rahul Kapoor, a Singapore-based director for equity research at Drewry. “So people are thinking that’s the way to go forward.”
Maersk Line doubled its after-tax operating profit in the fourth quarter of 2014, to $655 million. Maersk Line will soon place its first order for new ships since 2011, probably in the first half of this year, Nils Smedegaard Andersen, chief executive officer of A.P. Moeller, said last month.
“We may order Triple-E ships, but don’t expect an order of 20 or 30 ships this year because we need to time it carefully so we grow with the market,” Andersen said last month.
The Triple-Es didn’t keep Maersk Line on top of the size rankings for long: China Shipping Container Lines Co. took the title in November with a ship able to carry 19,100 20-foot containers. That was overtaken barely a month later when Mediterranean Shipping Co. launched a ship able to carry 19,224 containers.
In late January, Imabari received an order for 11 ships capable of carrying 20,000 containers. Those briefly became the world’s biggest planned ships — until Mitsui O.S.K. placed its order this week.
Driving the push for size is the collapse of shipping rates over the past four years. Spot cargo shipping rates to Europe from Asia dropped to $938 per container in the week ended Feb. 27, down 6.5 percent from two weeks earlier and 15 percent lower than at the end of February 2014, according to the Shanghai Shipping Exchange.
Shipping lines have tried to raise rates in recent months, largely without success, and some are trying again to raise rates from March 15, according to shipping-data provider Alphaliner. If anything, though, slowing global demand and new vessels set to enter service this year could drive levies even lower, Alphaliner said in its weekly newsletter.
Hyundai Heavy Industries Co., Daewoo Shipbuilding and Samsung Heavy — the world’s three-biggest shipbuilders — have the technology to build ships that can carry as many as 25,000 boxes, suggesting that the title of world’s largest ship will soon shift again.
“There’s no end to it. You will have someone soon displace Mitsui O.S.K. as the largest shipowner,” Drewry’s Kapoor said. “The container shipping industry has always been like they all want to follow the lead. That’s the competitive intensity that’s driving this.”

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Will Tesla Ever Make Money?

Tesla Manufacturing Plant

Elon Musk makes great cars, but investors are wondering when his company will turn a profit.
(Bloomberg) — Chris Ziegler presses the pedal of his Tesla Model S. It surges forward silently and instantly — unlike gas-powered cars that roar and gulp for air before accelerating. Driving in the hills north of Los Angeles, he whips through hairpin turns without worrying about flipping over. Thirteen hundred pounds of batteries under the floorboard make that nearly impossible.
Ziegler loves everything about his all-electric, $107,000 Tesla, including that he recharges its batteries using solar panels in the trees above his house. That lessens his contribution to climate change and his dependence on oil from the Persian Gulf — which Ziegler patrolled as a Navy gunnery operator in 1983.
“I’m stunned major automakers haven’t fired back with a product to compete with Tesla,” says Ziegler, 49, a real estate project manager in the L.A. suburb of Monrovia. The license plate on his Model S reads “Waat Gas,” Bloomberg Markets magazine will report in its April issue.
Ziegler is so convinced the Tesla is the car of the future that he and his wife, Barbara, a sales executive for an institutional investment firm, sank 90 percent of their liquid assets in its shares beginning in 2010, when the stock sold for $16. Barbara also earned hundreds of thousands of dollars trading options against investors who thought Tesla would fail, she says.
Tesla, of course, hasn’t failed. Rather, Chief Executive Officer Elon Musk says it’s leading the world into a future without gasoline. Already going toe-to-toe with competitors such as BMW and Mercedes-Benz, he wants to take Tesla cars to the mass market — and push forward the process of freeing the world from its dependence on fossil fuels.
Skeptics Abound
Eventually, “all cars will go electric,” Musk said at a press conference in January
Yet there are plenty of skeptics who question whether Tesla will ever be capable of competing with the Toyotas and General Motors of the world — or get out of the red any time soon. Since its founding in 2003, the company, which went public in 2010, has earned a profit in just one three-month period. In 2014, it lost $294 million on $3.2 billion in revenue.
Some $217 million of that revenue came from the sale to its competitors of zero-emission-vehicle, or ZEV, credits and other pollution allowances.
“You’re talking about a company with no cash flow,” says Matthew Stover, an analyst at Boston-based Susquehanna Financial Group, which in the three months ended on Jan. 31 sold more than half its 1.5 million Tesla shares. “One hundred percent of the value of the shares is associated with some view of the future that has not manifested itself in the past.”
2020 Profits
In a Feb. 11 conference call with investors after releasing Tesla’s fourth-quarter financial statements, Musk, 43, predicted the company would have positive cash flow by the third quarter of this year. He has also forecast that Tesla will be making a full-year profit under generally accepted accounting principles by 2020.
Stover isn’t the only investor skeptical of Tesla’s prospects — and of its stock price, which at $199.6 on March 3 valued the company at $25.1 billion. (That’s almost 40 percent of the market capitalization of Ford, which last year sold 6.3 million vehicles, almost 200 times as many as Tesla.)
As of Feb. 13, 26.8 percent of Tesla’s shares had been sold short, with more investors betting on their decline than for any other company in the Bloomberg Intelligence Global Automobiles Valuation Peers Index.
Musk’s Confidence
The naysayers haven’t dented Musk’s confidence. On the Feb. 11 conference call he said that in 10 years Tesla could match the market cap of Apple, which on March 3 was the world’s most valuable company, worth $753 billion. In a February letter to shareholders, he wrote that vehicle deliveries would increase by 70 percent this year and that there would be a “significant” increase in what he called non-GAAP income, a calculation that takes into account factors such as lease payments and deferred stock options.
Tesla — named for Nikola Tesla, who designed alternating-current power systems in the 19th century — offers buyers just one product, the Model S, of which it sold 31,655 in 2014 at a price that started at $71,000. The company will introduce a gull-wing SUV late this year, also priced at around $70,000, and then target middle-income consumers with a $35,000, 200-mile-range (320-kilometer) car called the Model 3 in 2017.
Musk forecasts he’ll make 500,000 vehicles by 2020 at his Fremont, California, factory, equipping them with batteries from a massive plant dubbed the Gigafactory that he’s building with Panasonic in the Nevada desert.
Innovation Leader
Even supporters question whether Musk can meet his targets. Morgan Stanley auto analyst Adam Jonas is a Tesla enthusiast yet predicts the average Model 3 will cost $60,000 and that Tesla will sell 319,000 cars a year by 2020. He thinks that even at the lower number Tesla can make money and lead innovation in the global auto industry.
Jonas has an overweight rating on the shares.
Susquehanna’s Stover says that the Tesla share price — it peaked at $291 in September before falling in tandem with oil prices — suggests investors already regard the Model 3 as a hit.
“Since nothing can happen for two years to validate that view, the market will simply be guessing,” Stover says.
Tesla’s debt is no less popular than its shares. In February 2014, investors bought $2.3 billion of Tesla convertible notes with coupons of 1.25 percent or less — a smaller return than U.S. inflation. The bonds won’t convert to shares — and provide a bigger return to investors — unless the stock reaches $359.87.
Model X
If the past is prologue, the Model 3 will be late; it’s already about two years past its original launch date, as is the SUV, dubbed Model X. And analysts say there is no guarantee that Musk’s battery factory — which he predicts will dramatically reduce the cost of the Tesla’s most crucial component — will live up to expectations. The plant will supply batteries for two businesses that are in their infancy: electric vehicles and solar power systems being built by another company he founded, SolarCity.
Tesla doubters point out that once the Model 3 comes to market, it will face a tsunami of competition. Virtually every major carmaker is producing or is on the verge of producing a ZEV, in part to meet rising emission standards of the federal government and the state of California.
No one doubts that, in the Model S, which Tesla introduced in 2012, Musk has created a vehicle that’s hard to hate. The appeal is based on its ferocious performance and 265-mile driving range — the highest among electric cars. In October, Tesla launched a dual-motor version that goes from zero to 60 miles per hour in 3.2 seconds, half a second faster than a gasoline-powered Corvette.
Dashboard Touchscreen
The Model S also has cozier features, like a 17-inch (43-centimeter) dashboard touchscreen. Drivers control nearly every function by swiping their fingers — just like on their iPhones. (It’s no coincidence that several high-level Tesla employees were hired away from Apple, which is also researching automotive technology.)
The communication system enables Tesla owners to regularly download new capabilities, like a navigation system introduced in September that plans alternate routes based on traffic.
Among U.S. buyers, 96 percent say they love their Tesla’s technology, according to a December survey by marketing consultant Strategic Vision, compared with 62 percent for Porsche and 55 percent for BMW.
Entrepreneur Musk
Wall Street’s love affair with Tesla is really a romance with the charismatic Musk, a South African–born entrepreneur who pronounces his company’s name TEZ-la. He earned bachelor’s degrees in economics and physics at the University of Pennsylvania and then dropped out of the Stanford University Ph.D. program in physics to join the Internet boom.
Musk helped create PayPal in the 1990s and pocketed $165 million when EBay bought the company in 2002. By the time he joined Tesla in 2004, he had already launched rocket manufacturer Space Exploration Technologies, or SpaceX.
A decade later, he’s got a near-mythic reputation.
“Elon Musk is our generation’s Thomas Edison,” says Joseph Fath, a fund manager at Baltimore-based T. Rowe Price Group.
“He’s the greatest inventor of all time,” says Gwynne Shotwell, chief operating officer of SpaceX.
“Elon will be the richest man who ever lived,” says Scott Painter, CEO of TrueCar, a Santa Monica, California–based online auto-buying service.
Disruptive Technology
T. Rowe Price started buying Tesla at $20, and the firm now owns 6 million shares scattered in half a dozen funds. Fath, who runs the Growth Stock Fund, says the shares will do OK even if the Model 3 is only a moderate success and could double if the car is a hit.
“You don’t often see large-cap stocks with this kind of significant disruptive potential,” he says.
Max Warburton, a Sanford C. Bernstein & Co. analyst in Singapore, says Tesla’s shares are priced less on the company’s own financials and more on how it’s forcing competitors to boost spending on electric cars.
“Tesla is massively disruptive,” Warburton says. “Its valuation reflects the $30 billion problem it’s created for the rest of the car industry” — a reference to the amount he says other automakers will spend chasing Tesla.
Reusable Rockets
Musk is even disrupting outer space. SpaceX has promised NASA, with which it has $4.2 billion in contracts, and satellite makers that the reusable rockets he’s developing can deliver their payloads at a much lower cost than other companies.
In person, Musk is relaxed and soft-spoken, with blue-green eyes that dart around the room as he talks. He works long days at his various California offices — Tesla’s headquarters is in Palo Alto; SpaceX’s in a Los Angeles suburb — and spends as much time as possible with his five sons in L.A. He’s twice divorced.
In speeches and interviews, Musk shows little immediate concern for investors who’ve watched shares of alternative energy and related companies plunge with the price of oil. He says his priority is popularizing electric cars.
“We’ve certainly chosen high growth over profitability,” he told reporters in September in Tokyo. “If the shareholders don’t like me, they can just fire me.”
‘Fantastic Vehicle’
If Musk’s competitors don’t always share his zeal for fighting climate change, they appreciate the cachet Tesla gives to the ZEV category.
“The Tesla is a fantastic vehicle,” says Raj Nair, head of global product development at Ford. “It’s made the public more open to this type of propulsion.”
At the Detroit auto show in January, Porsche said it was considering a plug-in electric version of its 911 flagship. Honda’s Acura division unveiled an NSX supercar with three battery-powered motors and a gasoline engine. Audi, General Motors, Honda, Hyundai, Mercedes-Benz, and Nissan all spun out plans for battery-powered cars to compete with Tesla.
GM, Ford, and Renault buy their batteries from LG Chem Power, a unit of South Korea’s biggest chemical company. CEO Prabhakar Patil says his company doesn’t need a Gigafactory to compete with Tesla on costs. And he says Musk may be placing too big a bet on electric cars.
No one knows, he says, whether fuel cells, plug-in hybrids, or battery-only cars will prevail.
Cautionary Tale
Electric-car makers already have a cautionary tale to study. Nissan and its partner Renault committed $6 billion to their all-electric Leaf compact, including plans to manufacture 500,000 cars a year. In 2014, they sold 82,602. One factor in the car’s disappointing sales is that it travels just 84 miles between charges. Tesla’s Model S has helped reset the standard at 200 miles, auto executives say.
“The batteries are getting lighter, cheaper, and smaller,” Carlos Ghosn, CEO of Nissan and Renault, told reporters at the Detroit auto show. “This is totally normal with the amount of investment we are all doing. And we will be competing with the 200-mile car.”
As Musk strives to create a viable company for the long term, his most formidable challenger could be Toyota. The Japanese company swears by hydrogen fuel cells — batterylike devices that produce power through an electrochemical reaction of hydrogen and air, with water vapor as the only byproduct.
Fuel Cells or Fool Cells
The company started marketing its Mirai fuel-cell car for $61,000 in Japan in December and hopes eventually to be selling hundreds of thousands a year, says Yoshimi Inaba, chairman of North American sales. The Mirai travels 300 miles with a hydrogen tank that can be refilled in five minutes. With high-volume manufacturing, Toyota has cut the cost of handbuilt fuel-cell components by 95 percent since 2008, says Satoshi Ogiso, a Toyota executive who helped develop the hybrid Prius. During the next decade, he says, Toyota expects to cut today’s production costs of the Mirai by two-thirds.
Toyota and Tesla once had a close relationship — and Khobi Brooklyn, a Tesla spokeswoman, says they still do. In 2010, Toyota sold Tesla its abandoned Fremont factory for $42 million. A new plant could have cost $1 billion, says Ron Harbour, a partner at New York consulting company Oliver Wyman Group. Toyota then bought electric motors from Tesla for two years.
Today, in Toyota’s view, the companies are drifting apart. “Our relationship with Tesla is not going upward; it’s going stagnant at best,” Inaba says.
‘Fool Cells’?
Toyota didn’t learn much from Musk’s technology and doesn’t expect Tesla to ever sell 500,000 electric cars a year, he adds.
Musk says most commercial hydrogen to run fuel cells is made from natural gas in a process that consumes energy and emits carbon. Hydrogen is also dangerous to store and transport, he says.
“Fuel cells should be renamed ‘fool cells,’” Musk said in a 2013 Bloomberg News interview.
“I think this is not classy,” Inaba says of the remark.
Of course, much of the electricity for recharging Teslas comes from coal. Yet Musk says electric motors are so much more efficient than those that run on gasoline that they are cleaner even if all the electricity comes from hydrocarbons.
Whatever the merits of fuel cells, all automakers are rushing to electrify. By 2023, battery-powered-car deliveries, including gas-electric hybrids, could triple to 6.1 million worldwide, says Sam Jaffe, a Navigant Consulting analyst in Boulder, Colorado.
ZEV Requirements
A big motivator is California’s air pollution control regulations, which require the six biggest automakers to derive 4 percent of sales from zero-emission cars this year. Nine other states, including New York and Oregon, have similar laws.
By the 2018 model year, the ZEV requirement in all those states will jump to 15.4 percent and include smaller companies such as BMW.
The new rules are a great boon to Tesla. Electric-car buyers receive $7,500 in federal tax credits and, if they live in California, $2,500 from that state, where Tesla sold 6,110 Model S’s last year.
In addition, the 10 ZEV states distribute credits that companies can buy and sell to meet emissions targets. Companies that fall short of the targets can buy credits from companies that don’t to avoid fines.
At 2015 prices, these credits earn Tesla $14,000 for every Model S sold in the 10 states, people familiar with the situation say. (Details of the transactions aren’t public.)
Battery Swaps
Tesla can earn another $17,500 in credits every time a Model S swaps its battery pack for a fully charged new one at an experimental station north of Los Angeles.
Each car is allowed 25 swaps, with total credit-eligible visits capped at the number of cars Tesla sells each year in the state.
Dan Sperling, an environmental engineering professor at the University of California at Davis and a member of the state’s Air Resources Board, defends the ZEV program as a way to promote technologies California needs to cut carbon emissions. Still, he expects the Air Resources Board to reduce credits for battery swaps.
“We want to be generous in supporting these technologies, not obscene,” he says.
If nothing changes, Tesla could make enough money selling credits — as much as $500 million a year — to fund a quarter of its capital expenses, says Morgan Stanley’s Jonas.
Cheaper Batteries
When he was designing the Model S, Musk chose lithium-ion battery packs that in 2009 cost $1,200 per kilowatt hour, Jaffe says. The Gigafactory, by consolidating an extensive global supply chain, could help reduce the cost to as little as $250 by 2020 — low enough to make batteries competitive with gasoline engines, he says.
To build a $35,000 car, Tesla will need more than cheaper batteries. Tesla executives say it will have to make optional some of the equipment that’s now standard on the Model S and buy more generic components, such as shock absorbers, from high-volume suppliers.
And the company will need higher productivity. The Fremont plant today boasts some cutting-edge technologies, such as a device that uses air under high pressure to twist hot aluminum sheets into complex shapes. But the production process also includes labor-intensive operations incompatible with mass production.
Labor Intensive
For instance, just after body panels leave the stamping presses, workers use files and rasps to smooth out their surfaces. Other workers assemble bundles of wires that connect hundreds of components — a job usually outsourced to a cheap-labor foreign country.
Tesla does such jobs in-house in part because it’s making design improvements to the Model S “20 times a week,” says Greg Reichow, Tesla’s manufacturing vice president. He says Tesla is rapidly deploying more automation. Producing a new electric motor for the dual-motor Model S requires one-sixth of the manpower devoted to prior designs, he says.
Musk says he’s determined to conquer the mass market because the world needs electric cars, even though, for the moment, hydraulic fracturing has lowered gasoline prices dramatically and made driving gas-powered cars cheaper.
“Fracking probably increases the accessible oil and gas in the world by a factor of 10,” Musk said in Detroit in January. “We’re really going to regret the amount of carbon we’re putting into the oceans and atmosphere.”
Loading Up
Rolling through fire-scarred canyons above Los Angeles on a hazy afternoon, Chris Ziegler says he’s confident Tesla will make the world a better place. Meanwhile, he’s loading up. In addition to his Model S, he owns a $109,000 Roadster that Tesla discontinued in 2012, and he’s one of 20,000 people on the waiting list for a gull-wing SUV.
He never tires of driving his Model S. After showing off its speed and agility, he apologizes for resuming normal driving.
“I’ll get motion sickness,” he says.
Praise from owners such as Ziegler, together with the long waiting list, underscores Musk’s success as an auto designer and manufacturer. The question for investors is, will the entrepreneur ever be as proficient at making money as he is at making cars?

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Silver Wheaton’s ‘train wreck : bought deal is getting snubbed

Silver Wheaton acquires silver and gold “streams” from mining companies to help them finance their projects. That has been a very active business during the mining downturn, and Silver Wheaton has kept bankers busy.

Nicky Loh/BloombergSilver Wheaton acquires silver and gold “streams” from mining companies to help them finance their projects. That has been a very active business during the mining downturn, and Silver Wheaton has kept bankers busy.

The stock traded below the offer price all day Tuesday, and sources said a very large portion remains unsold. One source described the entire deal as a “train wreck.”

The bought deal, which was announced Monday night, was priced at US$20.55 a share by lead underwriter Scotiabank. The pricing was very aggressive, as it represented a 3% discount to Silver Wheaton’s closing price that day. Typically, the discount on bought deals is larger, as a reflection of the risks taken on by the underwriters, one of which is that the stock price drops. On this deal, the underwriters are also charging agents’ fees of 3.75%. – or $0.77 a share.

Amid weaker precious metal prices Tuesday, Silver Wheaton shares did fall, by 5.5%, and closed at US$20.02. On heavy volume – trading in New York and Toronto at 11.4 million shares was about 1.5 times normal – the shares hit an intraday  low of US$19.83.

Silver Wheaton is a very liquid stock, so if investors want to build a large position, they can buy it on the open market and bypass the bought deal. Deal insiders are hopeful that metal prices will rise on Wednesday and they will be able to sell more of the offering.

Investment banks lined up to be part of this bought deal, because Vancouver-based Silver Wheaton has been one of their top mining clients in recent years. Indeed there are four lines of underwriters (all with varying degrees of liability), with BMO, CIBC and RBC on the second line, BofA Merrill Lynch and TD on the third line, and Scotiabank signed on for a 25% share.

Silver Wheaton acquires silver and gold “streams” from mining companies to help them finance their projects. That has been a very active business during the mining downturn, and Silver Wheaton has kept bankers busy.

A source said there has been no serious talk so far about trying to cut the price on the offering, or reduce the size. Scotiabank does not typically lead mining offerings this big.

This is the third time in recent months where banks had trouble selling a very large mining stock offering. It shows that investor appetite for these stocks is not endless amid rough market conditions.

In late 2013, Barrick Gold Corp. did a US$3 billion bought deal, which was priced at a 5.4% discount to the market price. And in the middle of last year, Franco-Nevada Corp.’s US$500 million share offering proved to be a tough sell.

The Franco-Nevada bought deal has similarities to the current Silver Wheaton deal. Both firms are in the mining-royalty business, and in both cases, the discount to the market price was very small. It was less than 2% in the Franco transaction.

Silver Wheaton plans to use cash from the bought deal to fund its acquisition of a gold stream from Vale SA’s Salobo mine in Brazil. It is the second gold stream that Silver Wheaton is buying from this mine.

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Zacks Shipping Review – DRYS Takes A Hit

 

 

DryShips (DRYS) Misses on Q4 Earnings, Beats on Revenues – Analyst Blog

Zacks

DryShips Inc. (DRYS) declared lackluster fourth-quarter 2014 financial results. Quarterly GAAP net loss came in at $24 million or 4 cents per share compared with a loss of $24.4 million or 6 cents per share in the year-ago quarter. Moreover, adjusted net income per share of 2 cents missed the Zacks Consensus Estimate of 5 cents. Quarterly total revenue stood at $598.4 million, up 38.7% year over year. Moreover, the figure surpassed the Zacks Consensus Estimate of $550 million.

Note : Our Jack A. Bass Managed Accounts are long out of shipping ( as per our November newsletter.

Quarterly total operating expenses stood at $459.9 million, up 32% year over year. The rise in expenses can be mainly attributed to higher drilling rig operating costs. Operating income in the reported quarter stood at $138.5 million, up 66.9% year over year. Adjusted EBITDA was $298.7 million as against $179.8 million in the year-ago quarter.

At the end of the fourth quarter of 2014, DryShips had $658.9 million of cash & cash equivalents and $5,517.6 million of outstanding debt on its balance sheet compared with $739.3 million and $5,568 million at the end of 2013. The debt-to-capitalization ratio stood at 0.56 compared with 0.59 at the end of 2013.

Drybulk Carrier Segment

The Drybulk Carrier segment generated $54 million in revenues, up 1.9% year over year. Time charter equivalent revenues totaled $46.1 million, flat with the year-ago quarter figure. Time charter equivalent (TCE) rate stood at $12,974, down 2.5% year over year. Total voyage days for fleet stood at 3,555, up 4.2% from the year-earlier quarter.

Oil Tanker Segment 

The Tanker segment generated $45 million in revenues, up 36.8% year over year. Time charter equivalent revenues came in at $23.9 million, up by a whopping 120% from the prior-year quarter. TCE rate was $26,003, up a significant 100% year over year. Total voyage days for fleet grossed 920, flat year over year.

Offshore Drilling Segment 

Quarterly revenues from Drilling contracts totaled approximately $499.4 million, up 44.5% year over year. At the end of the reported quarter, this segment had an order backlog of $5.2 billion.

Zacks Rank & Other Stocks to Consider

DryShips currently has a Zacks Rank #1 (Strong Buy). Other favorably-ranked stocks in the shipping and other related industries are Danaos Corporation (DAC), Nordic American Tankers Limited (NAT) and Spirit Airlines, Inc. (SAVE). All three stocks currently sport a Zacks Rank #1.

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Warren Buffett BERKSHIRE HATHAWAY INC. SHAREHOLDER LETTERS

BERKSHIRE HATHAWAY INC.

SHAREHOLDER LETTERS

Many of the letters below are presented in PDF format. If you do not have Adobe Acrobat® Reader® software on your computer, use the link to go to Adobe’s web site for a free download.     Adobe
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For shareholders and others who are interested, a book that compiles the full unedited versions of each of Warren Buffett’s letters to shareholders between 1965 and 2012 is available for sale at this link.

 

ALL SHAREHOLDER LETTERS INCLUDE COPYRIGHTED MATERIAL REPRODUCED WITH PERMISSION

 

 

Apple to Hold Special Event March 9th the Apple watch

 

(Bloomberg) — The countdown has begun to Apple Inc.’s next big thing: the Watch.
The company on Thursday sent out invitations to an event on March 9 in San Francisco, where it will unveil details for the release of the Apple Watch, a person with knowledge of the matter said.
Optimism about Apple has been growing since Chief Executive Officer Tim Cook first took the wraps off the smartwatch, along with larger-screened iPhones, in September. The new phones helped fuel record profit in the last three months of 2014. Apple shares are trading near all-time highs, giving the company a market capitalization of about $758 billion. The event gives Cook the chance to show off the gadget’s capabilities and convince consumers they need one.
“The development community has had at least three months to start writing apps so I think they’ll profile some of the best apps,” said Tim Bajarin, president of Creative Strategies Inc. “It will start giving us reasons for why we may want the watch.”
Cook said last month that the smartwatch will ship in April. The connected, fitness-tracking wristwatch is the first entirely new gadget line to debut since he took the helm at Cupertino, California-based Apple. The company hasn’t given much information about the gadget’s battery life or how much models will cost, other than $349 for the basic version.
Time Shift
“Spring forward,” reads the invitation to the event, to be held at the Yerba Buena Center for the Arts Theater at 10 a.m. The headline refers to the annual switch to daylight savings time, when Americans move their clocks and watches forward by one hour. This year, the time shift begins on March 8, a day before Apple’s event. The event’s focus will be Apple Watch, said the person with knowledge of the matter, who asked not be identified because the topic wasn’t made public.
Apple Watch, with a rectangular touch-screen face, includes sensors to detect pulse rates and other health-related features and must be paired with an iPhone to work properly. It will come in two sizes and three styles — classic, sports and gold editions. The company may give more details about styles and prices at the event.
“The creativity and the software innovation going on around Apple Watch is incredibly exciting,” Cook said when he announced the watch would begin shipping in April.
Sales Projections
Morgan Stanley has projected Apple Watch will generate $8.1 billion in revenue in fiscal 2015, including $1.35 billion in the March quarter, while RBC Capital Markets said Apple could “conservatively” generate $6.5 billion from 20 million watch shipments.
At a Goldman Sachs Group Inc. conference earlier this month, Cook talked about uses for the watch, saying he uses it to track his activity levels.
“If I sit for too long it will actually tap me on the wrist to remind me to get up and move because a lot of doctors believe that sitting is the new cancer,” he said. “It’s something that you’re going to think, ‘I can’t live without this anymore.’”

Oil Continues to Fall, and OPEC Isn’t Helping

February 23, 2015

It was another down day in the oil market: Crude prices fell more than 2 percent, with WTI finishing Feb. 23 below $50 a barrel for the first time in almost two weeks.For a moment, things looked like they might go the other way. OPEC President Diezani Alison-Madueke said in a Financial Times report that she would call an emergency meeting of OPEC if prices continue to fall. Oil prices were buoyed by the news—briefly—until they fell again.

In addition to being president of OPEC, Alison-Madueke serves as Nigeria’s oil minister, and cheap oil has helped sow crisis in her country. The Nigerian currency, the naira, is at all-time lows against the dollar, terrorist attacks by the Islamist group Boko Haram have worsened, and national elections were recently postponed more than a month. It makes a lot of sense that Nigeria would want to put a floor under oil prices by hinting at an OPEC resolution—even if such a resolution is unlikely.

Some reasons for doubt:

  1. Another OPEC delegate told Bloomberg News today that OPEC has no plans to hold an emergency meeting. OPEC is scheduled to meet in June, and all 12 members must agree to hold a special meeting in the interim.
  2. It’s unlikely that Saudi Arabia, OPEC’s biggest producer, would agree to such a meeting, not to mention actually cutting production. Saudi Oil Minister Ali Al-Naimi has said OPEC won’t change course even if prices go to $20 a barrel.
  3. Even if a meeting were called, it’s not clear whether OPEC is capable of mustering support to cut sufficient production to boost prices. It would require imposing a shrinking market share for oil-dependent economies that are already stretched.
  4. Even if OPEC members were to cut production enough to increase oil prices, how would the legions of U.S. oil producers respond? Probably by putting all those idled rigs back into action, adding more supply to the market and undermining OPEC’s efforts.

In oil markets, perception is everything. It’s very possible that today’s talk of an emergency meeting was simply meant to reassure unstable markets. Sometimes the threat of taking action removes the need for taking action.

If that’s what happened, it comes at a risk for OPEC. The fact that markets brushed off the threat so quickly may imply that OPEC’s threat is losing credibility.

 

Banks still use accounting tricks to hide their true condition

 

Pacioli’s invention was the double-en

 

Pacioli’s invention was the double entry accounting

 system; in fact he’s known by bean counters today as the father of accounting.

This was a major and much needed innovation at the time.

In the 15th century, Italy was dominating global trade and commerce.

Yet unlike in the centuries before where merchants were primarily transporters and traders of exotic goods, 15th century merchants had essentially become proto-bankers whose primary business was extending and trading credit.

This was a major change in the way that business was done, and it absolutely demanded a new way to keep track of it all.

That’s exactly what Pacioli invented. And his system of accounting is still being used today, over 500 years later.

This was a seminal moment in business history—the near simultaneous birth and convergence of credit-based money, banking, and accounting that would eventually become the global financial system.

It revolutionized everything.

Back then, just as today, few people really understood it. And those who did were often clever enough to find loopholes in the system to hide their fraud. Especially banks.

There are some really stunning (and sometimes hilarious) examples of early banks who learned how to cook their books and misstate their capital using Pacioli’s system.

Curiously very little has changed. Banks still use accounting tricks to hide their true condition.

Bloomberg showcased one such technique last year, exposing the way that many US banks are rebooking their assets from “available for sale (AFS)” to HTM – Hold To Maturity

 

-  they’re called “available for sale,” because the bank has to sell these assets to pay their depositors back.

But here’s the problem—many of these investments have either lost money, or they soon will be. And banks don’t want to disclose those losses.

So instead, they simply redesignate assets as HTM.

It’s like saying “I don’t care that these bonds aren’t worth as much money as when I bought them because I intend to hold them forever.”

Thing is, this simply isn’t true. Banks don’t have the luxury of holding some government bond for the next 30-years.

This is money they might have to repay their customers tomorrow, which makes the entire charade intellectually dishonest.

That doesn’t stop them.

JP Morgan alone boosted its HTM mortgage bonds from less than $10 million to nearly $17 billion (1700x higher) in just one year. This is a huge shift.

Nearly every big bank is doing this, and is doing it deliberately. This is no accident. And there’s only one reason to do it—to use accounting minutia to conceal losses.

But the accounting tricks don’t stop there. And in many cases they’re fueled by the government.

One recent example is how federal regulators created a new ‘rule’ which allows banks to consciously reduce the risk-weighting it assigns its assets.

The Federal Financial Institution Examination Council recently told banks that, “if a particular asset . . . has features that could place it in more than one risk category, it is assigned to the category that has the lowest risk weight.”

This gives banks extraordinary latitude to underreport the risk levels of their investments.

Bankers can now arbitrarily decide that a risky asset ‘has features’ of a lower risk asset, and thus they can completely misrepresent their investments.

Bottom line, it’s becoming extremely difficult to have confidence in western banks’ financial health.

They employ every trick in the book to overstate their capital ratios and understate their risk levels.

This, backed by a central bank that is borderline insolvent and a federal government that is entirely insolvent.

It certainly begs the question—is it really worth keeping 100% of your savings in this system?

I would respectfully suggest finding a new home for at least a portion of your savings.

After all, it’s 2015. You no longer need to bank in the same place as you live and work.

It’s possible to establish an account offshore—at a safe, stable, well-capitalized bank overseas in a country with no debt.

You might even find that the bank will pay you a reasonable interest rate that actually exceeds inflation (shocking!).

And in many cases you may be able to do all of this without leaving your living room.

It’s hard to imagine anyone would be worse off.

The Bottom Line

 

Jack A. Bass, B.A., LL.B.an independent professional firm and with its affiliates provides a full range of offshore corporate services – registration and administration of IBCs and Special License Companies, Registered Agent and Registered Address services, directors` and company management, shareholding and custody of documents and bank account introduction.

When structured properly, history shows that a well-informed offshore strategy can have an immediate and  generational impact on your wealth.

Who Is Designing Your Offshore Strategy ? ( do you have a strategy?)

The most important thing that you MUST do is seek advice from a qualified advisor – Jack A. Bass, B.A. LL.B. (someone who understands international tax jurisdictions and tax law) . Your advisor must understand the benefits of particular offshore jurisdictions. It is your responsibility to take action.

In most jurisdictions you can set up your offshore company in as little as a few weeks. We most often start the process with registering a company name and sending in the right documentation and supporting documents for the incorporation and a bank account(s) or merchant account for you and your business.All of this can be conducted by internet on in rare cases we will attend in person – for you.

Contact Information:

To learn more about asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email info@jackbassteam.com  OR

Telephone  Jack direct at 604-858-3202

Do You Have A Plan – or are you just planning to think about a plan ?

 

 

Trading Alert PHM.V

Patient Home Monitoring

Volume and Price Moving

Rapidly growing by mergers and acquisition team

PATIENT HOME MONITORING CORP(PHM:TSXV, CA)

$1.11CADIncrease0.03(2.78%)Volume: 
Above Average
As of 23 F

COMPANY DESCRIPTION

Patient Home Monitoring Corp. (PHM), formerly International Health Partners, Inc., is a Canada-based company which provides in-home disease management services for patients in the United States cardiology market. The initial focus is on providing in-home monitoring equipment, supplies and services to patients in the United States who take prescription blood thinners, such as Coumadin (Warfarin). In June 2014, it acquired Care Medical Partners, LLC…

Greek Banking / Euro Crisis Will not End Well – get out while you can UPDATE FEB 22

Originally posted on Tax Haven Guru:

The IMF’s director Christine Lagarde, greets the Greek finance minister, Yanis Varoufakis

Greece Won’t Ever Be Able to Pay Off Its Debts With Austerity

FEB 22

The drachma will be a currency which it can print to its heart’s content. Greece would thus no longer be subjected to the confines of the Euro gold standard. This ability would be the source of most other consequences.

What would be the consequences, then? A few predictable ones follow:

  • Since the drachma could be printed at will, as soon as it became official currency it would devalue by at least 40% or so;
  • Inflation would shoot up by a similar amount, internally, at least for a short while. The inflation would first be concentrated on foreign goods, but not limited to them;
  • Greeks — Employed unemployed, pensioners — would thus instantly lose around 40% of their purchasing power;
History shows the country is facing a wall few nations surmount

When will Greece run out of…

View original 963 more words

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