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Coronavirus - Impact on Investors? Dry Bulk Index - What is the Capesize Index? - YouTube
Channel: Learn to Invest - Investors Grow
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hi I'm Jimmy in this video we're looking
at how the coronavirus is impacting the
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investing landscape ideally we want to
identify potential pitfalls that are
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created by the corona virus as well as
potential investing opportunities where
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could they be hiding and hopefully we
can use this knowledge to get us closer
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to our personal goal of financial
freedom okay so I'm sure we all know
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that the corona virus is a virus that
has been dominating headlines and it
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looks like it originated in China and it
has spread to a couple dozen countries
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now I took this map straight from
Bloomberg comm and I know that it says
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right here that there were almost 1,400
deaths related to the corona virus but I
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believe that since then we've now passed
the 1,400 mark now this data map is from
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yesterday morning just so we're all on
the same page so in reaction to this
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rapidly spreading virus China has shut
down many businesses and they're
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restricting the movements of many people
within China especially in the Wuhan
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region and obviously this is going to
hurt the global economy since China is
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the largest manufacturer in the world
and their ability though or their
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manufacturing ability once it's been cut
off or clearly that's going to restrict
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the supply of many other businesses that
count on Chinese products to either
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build their own products or to resell to
the rest of the world's economy so
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broadly speaking this has the potential
to really hurt the global economy
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depending on how long the coronavirus
goes on for how long do things stay shut
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down now the impact of how is slowing in
China can ripple through a lot of the
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world's economy can largely be seen in
this dry bulk index and as we could see
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this index is really tanked recently so
what does this mean well many investors
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look at this index to see if it's rising
or falling and they use that to try to
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predict the future growth of the economy
so this index tracks dry bulk shipping
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which includes products like coal iron
or grains and a bunch of other things
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along those lines so in theory if less
of these commodities are being shipped
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well down the road at some point there's
likely to be a slower growth in the
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broader economy
now this index is actually try
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the cost of shipping and it's a blend of
three other indexes it tracks the cost
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from three different ship sizes the
largest is Capesize this is the
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capesize index and we could see that this
index actually went negative for the
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first time at the end of January and it
remains negative today this tells us
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that shipping companies are losing money
with the Capesize ship now the
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capesize index going negative isn't 100%
related to the coronavirus although that
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is playing a huge role in but in 2020
the International Maritime Organization
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implemented new rules that require cargo
ships to use better fuel and that
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ultimately have a meaningful impact on
what it costs to ship products so
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clearly that's gonna add a ton of
pressure to the Cape size index compile
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combine that with the dramatic reaction
to the coronavirus and prices are going
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to be forced lower due a lack of demand
since nobody's really shipping anything
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right now and once again China's largest
manufacturer in the world so if they
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even slow down shipping well you're
gonna you could end up with a negative
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Cape size index now for curious they
call this ship the Cape size ship
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because it is too big to fit through
I've the Panama Canal or the Suez Canal
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and it's forced to go around either Cape
Horn or the Cape of Good Hope hence the
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name Cape size the next piece of the
broader dry bulk index is the Panamax
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index now clearly this ship size has
also taken a hit in the wake of the
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Corona fires and once again they call
this ship the Panamax ship because it's
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the largest ship allowed to pass largest
sized ship a lot to pass through the
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Panama Canal okay simple enough once
again they've taken a beatin then the
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third and final ship size that's
representing the dry bulk index is the
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Suprarmax index now this the Supramax
ship usually carries smaller sized
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products but it goes on to more ports
and they have some advantages because
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it's it can do things that the other two
ships are too big to do clearly this
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index is once again the beaten down
thanks to partly the coronavirus they
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are also implement they're also
vulnerable to the new rules
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the IMO or the International Maritime
Organization but the coronavirus is
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really leading a lot of this okay so
what does this mean for us investors
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well clearly the broader dry bulk index
is calling for a pullback in the economy
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and this has the potential to ripple
through much of the world's major
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economies now some companies are going
to be more vulnerable in the short term
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than others for example Carnival Cruise
is down about 16% year-to-date
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then United Airlines is also down about
10% unity now our question with
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companies like this or really any
company impacted by the coronavirus
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which is clearly frozen a lot of
production and severely restricted
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travel well the question is do we think
that this is temporary and if we do then
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perhaps these pull back instead perhaps
the pull backs in stocks like this
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really presents us with an opportunity
assuming that we like the companies
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maybe this is the opportunity to buy it
at the price we've been waiting for a
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few other companies that have been hurt
by this is Royal Caribbean there are
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another cruise lines similar to Carnival
then they have Renault which is Renault
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is a car manufacturer they trade in
France they're down about 20% since all
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this started Fiat Chrysler is almost
down 10% so clearly there get will they
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are on the they were on the receiving
end of products manufactured generally
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in China then some real interesting
companies are actual dry brought bulk
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shippers good example of this is the
novios maritime partners ticker symbol
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NMM they're an international dry bulk
shipper and currently thanks to this
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huge drop in the stock price or they
have a dividend yield of more than 10%
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now I haven't done a deep dive into this
company in a few years I used to cover
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this one a while back so I'm not a
hundred percent sure that this is in
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fact an opportunity but this might be
worth us doing a deeper dive let me know
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if you in the comments below if you
think this is one of those or other dry
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bulk ship this is a few of them out
there if you're interested in that let
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me know in the comments below if you
know anything about it put those in the
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comments below because maybe this is a
great opportunity so that's something we
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should watch for then there's other
companies companies like Tesla which is
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doing quite well Apple which is also
doing quite well since all this happened
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and we know that they manufacture a lot
of stuff in China but for some reason
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that really
hasn't hurt the stock so far so I think
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the smartest thing for investors to do
is to use this pullback in various
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companies as the potential opportunity
to buy these companies at better prices
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the first question is do we think that
coronavirus is temporary now personally
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I think it's 10 well I hope it's
temporary and assuming that we do think
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it could be temporary
well that how's that going to affect the
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companies it's going to affect different
companies differently but overall are
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those that's likely to be a short-term
impact on that company so right now
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we're in the first quarter so a lot of
companies first quarter earnings could
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get hurt by this and if that does happen
perhaps some companies pull back even
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further as earnings start to come up so
you might end up with weaker first
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quarter earnings but then on the flip
side of that is that if you end up with
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week of first quarter earnings in 2020
well when the for first quarter in 2021
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comes out you're going to have easier
numbers to beat you're your growth is
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going to look better thanks to a
temporary dip in earnings - what we are
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hoping is a one-time impact of the
coronavirus so that could end up setting
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up a lot of companies to be a good
long-term buy and hold now if you not
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sure what stocks are best to look at
like she did a video called the art of
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finding great long-term stocks so if
you're curious that could be a good next
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video for you to watch there's a link
here there's a link in the description
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below and thank you so much for sticking
with me all the way into the video I
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really appreciate it thanks and I'll see
in the next video
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