Ton Mile Trader

I hope that the pairs traders among us laid low on Friday's dry bulk action. Recall I had mentioned that you really want to see 20% spread or so in this sector before jumping in - all else equal. Anyone who tried to put the squeeze on GNK/NM at 10% or even 15% lost money. Dry bulk is tough - and Friday's are tougher. For what its worth, recently I have found Monday's as difficult as Fridays. Conventional wisdom says that trading gets tougher as each day goes on - and as each week goes on. I am now as careful on Mondays as I am on Fridays. Keep your head on a swivel and avoid pile ups.

- Natasha Boyden maintains a BUY on GMR, though she reduces her price target to $19 (from $33). She has reduced her rate assumption for balance 2008 and 2009, citing a weaker economic outlook, lower oil demand and the recently announced OPEC supply cut. (Her GMR note was released pre-market last Friday and should have been included in my Friday brief).

DRYS

- Erik Helberg maintains a HOLD on DRYS. He places NAV at $24. More Below.
- Anders Rosenlund maintains a SELL on DRYS ($10), and comments as follows: "We will review our forecast, but do not expect to make significant changes and expect to reiterate the SELL recommendation as the financial risk is high despite high contract coverage."

OSG
- Scott Burk upgrades OSG to OUTPREFORM (from perform) with a new price target of $55, citing a strong balance sheet - and has increased EPS estimates going forward.

- Natasha Boyden maintains a BUY on OSG ($77), citing significant undervaluation given the company's modern and diverse fleet, good balance between spot and contract, and strong balance sheet.

Other

- Justin Yagerman maintains an OUTPRFORM on CPLP.
- Scott Burk maintains an OUTPERFORM on CPLP ($17).
- Natasha Boyden maintains a BUY on SBLK ($9).
- Natasha Boyden maintains a HOLD on SSW ($13).
- Glenn Lodden maintains a BUY on Precious Shipping (THB 22.50).
- Omar Nokta maintains a HOLD on DAC and expects its 23% dividend yield to provide a level of support.

DRYS commentary from Erik Helberg:

•§ Lack of financing of global trade has temporarily brought the spot market to a virtual standstill but DryShips expects this situation to normalize as the credit crunch subsides and stockpiles are gradually but steadily drawn down.

•§ On the demand side, the infrastructure building in the developing economies of China and other countries is irreversible and will continue.

•§ On the supply side, DryShips expects that a significant portion of the orderbook will not be delivered due to financing constraints, while scrapping will increase, leading to a tighter supply between supply and demand balance and a healthier freight market.

•§ DryShips are on track with the objective to spin off its ultra deep water drilling unit to our shareholders within the first quarter of 2009 or earlier.

General dry bulk comments from Johannes Moller (from Friday):

The worlds largest producer of Iron Ore, Brazilian company Vale, has today announced, that they cut production with 2.5 million tonner per month, beginning from November. This is equivalent to 10% of total Brazil Iron ore export.

The cut is driven by weaker demand. As we are already in a situation where Panamax and Capesize vessels are laid idle, this move is very negative. To be honest, I find it hard to see any significant rebound in rates over the coming couple of quarters - and after that period the huge orderbook will start to be delivered.

So I'm probably switching from having a little hope to no hope.