Those of you who have been around may recall my name from a year and a half ago. I have not sold my stock since then.
One issue that increasingly bothers me is the fact that GSL's cash flow is most likely to go in one direction in real terms: down. The bond market is currently saying that inflation isn't an issue... but you can't print the way we are printing without inflation eventually becoming an issue.
And when inflation hits, GSL's fixed rate charters are going to be a real problem because their value in real terms are going to go down while its floating rate debt will go up along with LIBOR. End result is obvious.
The US is now in the same predicament as Japan, and there will probably not be any material amount of inflation here for the next decade. It's certainly worth contemplating how inflation might impact GSL, but it's not worth worrying about.
Debt deleveragings are deflationary. I personally believe the inflation everyone is so worried about actually occurred over the last decade (think about it, credit was created and asset prices inflated -- we are now seeing the unwinding of that. Printing money will only plug the hole in the current debts that already exist). In my opinion we need to be printing money...but that is just my opinion.
In any case, in an inflationary environment the vessel values act as the inflationary hedge. Vessel values will rise and renewed charters will rise. A deflationary environment is far more troublesome for an indebted enterprise. Let's hope we see inflation -- that is easy to fix (raise short term rates, invert the yield curve). Deflation is much harder to deal with (as you may have noticed).
Good post, you understand the big picture. The trouble that is inherent in the fractional reserve banking system is that in order to create "money" some entity (either the government or private through commercial banks) must borrow first. Either government debt or promissory notes for private parties. Thus, when the society reaches the point where the government can't borrow more, and, the private parties either can't or won't borrow more, the money supply must shrink due to the constant requirement to pay debt service.
We've had 40 years of ever increasing debt with lower interest rates, now we are near the floor in interest rates and balance sheets are over leveraged. Debt liquidation will occur, (deflationary), its just a question of when and how large the defaults will be.