for a quick trade
have all of you forgot how fast/quick this beast can jump?
GNK gave me whiplash jumping to 11 2xs.
My target was 3.90 but I held off -- looking for 3-3.50 to start
my position, again
You should also have quoted the following:
"The point being that commodity demand is not perfectly elastic."
Most of your objections are addressed by that sentence.
China will produce more electricity PRIMARILY because it needs more electricity, not because the price of coal declined.
Just as China will build out its infrastructure PRIMARILY because it needs an expanded infrastructure to support its economic growth, not because the price of iron ore has declined.
I was actually *expecting* someone to make the argument you made - but figured it would be based on consumption of gasoline, which is much more sensitive to the price of inputs than is the consumption of bread.
Critter consumption was also a thought... but the issue here is more than just the cost of feed; there is also a cultural aspect that renders that potential increase in grain demand somewhat more inelastic than would otherwise be true.
The bottom line... demand is not all about price. And in the case of industrial commodities such as coal and iron ore, there are much more consequential factors than price that drive demand for those products.
Just to extend the discussion a mite...if China gets into fracking in a big way and, as a good neighbor decides to tackle their GHG emissions, they'll substitute gas for coal as a fuel of choice for generating electricity (an example of product substitution).
Which would be a disadvantage for bulkers like GNK.
"If the price of natural gas - or whatever you use to heat your home - drops by 20%, do you increase your use of fuel by raising your thermostat to 80 degrees?
Well, actually there will be more demand from the likes of chemical companies ...... this happening now with relocation of chemical manufacturing in US. The utility shifted their coal/NatGas mix towards more of the cheaper NatGas.
"Do you buy an extra car because the price of steel has declined?"
Why you always focus on existing users ........ how about a new guy come and buy his first car when the price is right? Forget the car industry: how about new building projects get commissioned because of lower steel cost?
"If the price of bread drops by 20%, do you double your consumption of bread?"
Bread will find its way to new markets: cattle feed, etc ........ do not under estimate market forces.
Your Econ knowledge, and argument for dilution are kind of weak!!!
GNK is linked to world trade. At the moment, we can count on some exceptional corn exports from US (due to drought elsewhere and great times in US). The last time I checked, a good chunk of the dry bulk fleet has been immobilized ....... it is not about demand only, cost of operation is also key, and determine who keeps operating at profit and who go away
And one that goes from $80 to $3.63 is even worse. It's a poorly run POS in a POS industry with a dismal future brought on by moronic industry participants being GREEDY and not thlinking about the future of their companies or the future of their industry.
I agree with you...
And the best part is that they can do it either via GNK or BALT or both.
BALT is getting ready by converting the S1 to S3... i would give it a couple weeks...
hold on the side lines... INTERESTING THINGS ARE DOWN THE LINE.
Leaving aside the likelihood of GNK having to do a significant dilution to raise equity...
If the price of natural gas - or whatever you use to heat your home - drops by 20%, do you increase your use of fuel by raising your thermostat to 80 degrees?
If the price of bread drops by 20%, do you double your consumption of bread?
Do you buy an extra car because the price of steel has declined?
The point being that commodity demand is not perfectly elastic. Just because prices decline doesn't mean that demand will increase proportionately.
The result might just as well be an improvement in the balance-of-payments for the importing country (and the opposite for the exporting country).
Which is why GNK will (probably) have to do a large equity issuance that will result in significant (50?) dilution of existing common holders.
It is a screaming buy right now... and while the short sellers are having all the fun while the market bottoms, the transportation of goods by sea is not going to remain in the doldrums any more than will commodities... world demand will grab the low priced commodities and shipping will follow suit... GNK is an amazing buy right now created by fear and Greece with a population of 11 Million people having a disproportionate impact on stock markets... admittedly the Euro zone is weak but this story is not exactly new, so much of all the down side is priced in right now... surprises, when the come, will be upside ones...