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Why UBS Thinks Cruise Line Stock Could Be Worth Buying Again

Why cruise lines could be worth buying again

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This article was originally published by Roger Montgomery.

When the COVID-19 crisis began, cruise lines were one of the first industries to be sold off.  But how times change as in the northern hemisphere passenger numbers and bookings are picking up again.  With the share prices of the listed cruise lines still in the doldrums, is it time for investors to get back on board? Last week we reported on work done by UBS that mapped stock year-to-date performance against their sensitivity to positive vaccine news. The idea is that if you are going to vaccinate your portfolio for a reopening of the economy, you should aim for the best bang for buck. The work UBS detailed, which is shown here again for convenience, revealed the sectors and industries that were the most beaten down since the start of the calendar year and which had the highest sensitivity to positive vaccine news flow.

Figure 1.  YTD sector and industry returns versus sensitivity to vaccine news

Picture1 One of the sectors that produces high average returns on positive vaccine news days and has been beaten up since the beginning of the year (and may therefore offer some value) is the Hotels and Leisure sector. Cruise lines fall into the Leisure sub-category and, prior to the pandemic, growth was accelerating. According to the Cruise Lines International Association (CLIA), the world’s largest cruise industry trade organisation, cruise ship passengers grew from 17.8 million in 2009 to 30 million in 2019, an annual growth rate of 5.4 per cent. Importantly, cruise industry revenues have grown faster than passenger growth, with approximately US$15.7 billion generated in 2010 and US$31.5 billion forecast for 2020 before the pandemic hit. Without the pandemic, compound annual growth of revenues would have averaged 7.2 per cent and the CLIA had forecast 32 million passengers to travel in 2020. Micro-cruises are one of the fastest growing segments of the cruise industry. According to Forbes, at the beginning of 2020, there were more than 1,400 micro-cruises lasting three days or less. The fastest growing segment of the cruise industry is luxury expedition cruising, including trips to the Arctic and Antarctic. At the beginning of calendar 2020 there were 278 ocean cruise line ships operating across 55 cruise companies with another 19 ships scheduled to debut in 2020. Passenger-carrying capacity was scheduled to increase by one-third between 2020 and 2025. In addition, there were over 500 river cruise ships. Listed global cruise companies include Carnival Corp (CCL), Royal Caribbean Cruises (RCL) and Norwegian Cruise Line (NCLH).

Figure 2.  Carnival Cruises share price 1 year to 16 October 2020

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Figure 3. Royal Caribbean Cruises share rice 1 year to 16 October 2020

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Figure 4. Norwegian Cruise Line share price 1 year to 16 October 2020

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The emergence of green shoots Activity however has been on hold since the coronavirus pandemic first set in, but many observers are now reporting the emergence of green shoots. Lockdowns, border controls and stay at home orders have the inevitable effect of creating pent-up demand for travelling. It may surprise many investors in Australia to hear that limited capacity cruising has already commenced in parts of Europe and Asia. In the US, which supplies approximately 50 per cent of global cruising passengers, members of the Cruise Lines International Association (CLIA) made the decision to extend voluntary suspension of operations in US waters through to October 31, while the US Center for Disease Control’s ‘No Sail’ order also expires at the end of October. In Europe, a safe and gradual return to ocean-cruising with limited itinerary sailing and reduced capacity is being supported by governments, the European Maritime Safety Agency and the European Centre for Disease Prevention. It has been reported that more than 100 cruises carrying 50,000-plus passengers have already sailed successfully in Europe since the summer. A vaccine of course would be a significant catalyst for increasing optimism around the lifting of the US ‘No Sail’ order but optimism within the industry is already rising. Richard Sasso, the US Chairman of MSC Cruises noted “as an industry we are resilient and will come out on the other side of this smarter and stronger.” It is further being reported that 2021 bookings are accelerating. What is the industry view? Among investors of course, there is a stigma associated with cruising because of the 700 infections and 14 deaths on the British-registered Diamond Princess quarantined off the coast of Japan for an entire month. At the time, the ship accounted for over half the reported cases of COVID-19 outside of mainland China. The industry and its supporters are now lobbying the velvet argument that while 37 million people around the world have contracted coronavirus and more than 1 million have died only 3,600 of those cases and 41 deaths stemmed from cruise ships and most of these occurred toward the beginning of the pandemic. With the benefit of appropriate and fast-advancing safety protocols the industry is expecting to be able to scale its return. Modern cruising Prior to the pandemic the industry was already working hard to create environmentally sustainable operations with the early adoption of new technologies and practices such as employing liquified natural gas (LNG) to cut particulate emissions by 95 to 100 per cent, nitrogen oxide emissions by 85 per cent  and greenhouse gas emissions by 20 per cent. The use of Exhaust Gas Cleaning Systems (ECGS) Advanced Wastewater Treatment Systems and the connection to shore-side power, allowing engines to be shut down while in port, means green credentials will permit a wide variety of investors to buy back in once fears over COVID-19 subside. Near term, the establishment by Norwegian Cruise Lines and Royal Caribbean of the Healthy Sail Panel headed by Dr. Scott Gottlieb — the former head of the FDA – has aided the development of an industry-wide plan with over 70 steps for a safe return to ocean cruising. The global cruise industry has committed to COVID-19 testing of all passengers and crew before boarding and disembarkation on all ships with a capacity of 250 or more. Further, the debut this month of a new digital health passport called CommonPass will verify a traveller has met a destination’s health requirements and generate a QR code that can be scanned by airlines, cruise ships and border officials. Fast-advancing technology will facilitate a reopening of global activity even in the absence of a vaccine, while pent-up demand (82 per cent of passengers are repeat cruisers) for travel could see a surge in cruising activity that exceeds the expectations currently implied in share prices.
When the COVID-19 crisis began, cruise lines were one of the first industries to be sold off. In the northern hemisphere, passenger numbers and bookings are picking up again. Is it time for investors to get back on board? Click To Tweet

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How Fanatics Took Over The World

How Fanatics Took Over The World

Authored by Jeffrey Tucker via DailyReckoning.com,

Early in the pandemic, I had been furiously writing articles about lockdowns. My phone rang with a call from a man named Dr. Rajeev Venkayya. He is the head.

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How Fanatics Took Over The World

Authored by Jeffrey Tucker via DailyReckoning.com,

Early in the pandemic, I had been furiously writing articles about lockdowns. My phone rang with a call from a man named Dr. Rajeev Venkayya. He is the head of a vaccine company but introduced himself as former head of pandemic policy for the Gates Foundation.

Now I was listening.

I did not know it then, but I’ve since learned from Michael Lewis’s (mostly terrible) book The Premonition that Venkayya was, in fact, the founding father of lockdowns. While working for George W. Bush’s White House in 2005, he headed a bioterrorism study group. From his perch of influence – serving an apocalyptic president — he was the driving force for a dramatic change in U.S. policy during pandemics.

He literally unleashed hell.

That was 15 years ago. At the time, I wrote about the changes I was witnessing, worrying that new White House guidelines (never voted on by Congress) allowed the government to put Americans in quarantine while closing their schools, businesses, and churches shuttered, all in the name of disease containment.

I never believed it would happen in real life; surely there would be public revolt. Little did I know, we were in for a wild ride…

The Man Who Lit the Match

Last year, Venkayya and I had a 30-minute conversation; actually, it was mostly an argument. He was convinced that lockdown was the only way to deal with a virus. I countered that it was wrecking rights, destroying businesses, and disturbing public health. He said it was our only choice because we had to wait for a vaccine. I spoke about natural immunity, which he called brutal. So on it went.

The more interesting question I had at the time was why this certified Big Shot was wasting his time trying to convince a poor scribbler like me. What possible reason could there be?

The answer, I now realized, is that from February to April 2020, I was one of the few people (along with a team of researchers) who openly and aggressively opposed what was happening.

There was a hint of insecurity and even fear in Venkayya’s voice. He saw the awesome thing he had unleashed all over the world and was anxious to tamp down any hint of opposition. He was trying to silence me. He and others were determined to crush all dissent.

This is how it has been for the better part of the last 15 months, with social media and YouTube deleting videos that dissent from lockdowns. It’s been censorship from the beginning.

For all the problems with Lewis’s book, and there are plenty, he gets this whole backstory right. Bush came to his bioterrorism people and demanded some huge plan to deal with some imagined calamity. When Bush saw the conventional plan — make a threat assessment, distribute therapeutics, work toward a vaccine — he was furious.

“This is bulls**t,” the president yelled.

“We need a whole-of-society plan. What are you going to do about foreign borders? And travel? And commerce?”

Hey, if the president wants a plan, he’ll get a plan.

“We want to use all instruments of national power to confront this threat,” Venkayya reports having told colleagues.

“We were going to invent pandemic planning.”

This was October 2005, the birth of the lockdown idea.

Dr. Venkayya began to fish around for people who could come up with the domestic equivalent of Operation Desert Storm to deal with a new virus. He found no serious epidemiologists to help. They were too smart to buy into it. He eventually bumped into the real lockdown innovator working at Sandia National Laboratories in New Mexico.

Cranks, Computers, and Cooties

His name was Robert Glass, a computer scientist with no medical training, much less knowledge, about viruses. Glass, in turn, was inspired by a science fair project that his 14-year-old daughter was working on.

She theorized (like the cooties game from grade school) that if school kids could space themselves out more or even not be at school at all, they would stop making each other sick. Glass ran with the idea and banged out a model of disease control based on stay-at-home orders, travel restrictions, business closures, and forced human separation.

Crazy right? No one in public health agreed with him but like any classic crank, this convinced Glass even more. I asked myself, “Why didn’t these epidemiologists figure it out?” They didn’t figure it out because they didn’t have tools that were focused on the problem. They had tools to understand the movement of infectious diseases without the purpose of trying to stop them.

Genius, right? Glass imagined himself to be smarter than 100 years of experience in public health. One guy with a fancy computer would solve everything! Well, he managed to convince some people, including another person hanging around the White House named Carter Mecher, who became Glass’s apostle.

Please consider the following quotation from Dr. Mecher in Lewis’s book: “If you got everyone and locked each of them in their own room and didn’t let them talk to anyone, you would not have any disease.”

At last, an intellectual has a plan to abolish disease — and human life as we know it too! As preposterous and terrifying as this is — a whole society not only in jail but solitary confinement — it sums up the whole of Mecher’s view of disease. It’s also completely wrong.

Pathogens are part of our world; they are generated by human contact. We pass them onto each other as the price for civilization, but we also evolved immune systems to deal with them. That’s 9th-grade biology, but Mecher didn’t have a clue.

Fanatics Win the Day

Jump forward to March 12, 2020. Who exercised the major influence over the decision to close schools, even though it was known at that time that SARS-CoV-2 posed almost risk to people under the age of 20? There was even evidence that they did not spread COVID-19 to adults in any serious way.

Didn’t matter. Mecher’s models — developed with Glass and others — kept spitting out a conclusion that shutting down schools would drop virus transmission by 80%. I’ve read his memos from this period — some of them still not public — and what you observe is not science but ideological fanaticism in play.

Based on the timestamp and length of the emails, he was clearly not sleeping much. Essentially he was Lenin on the eve of the Bolshevik Revolution. How did he get his way?

There were three key elements: public fear, media and expert acquiescence, and the baked-in reality that school closures had been part of “pandemic planning” for the better part of 15 years. Essentially, the lockdowners, over the course of 15 years, had worn out the opposition. Lavish funding, attrition of wisdom within public health, and ideological fanaticism prevailed.

Figuring out how our expectations for normal life were so violently foiled, how our happy lives were brutally crushed, will consume serious intellectuals for many years. But at least we now have a first draft of history.

As with almost every revolution in history, a small minority of crazy people with a cause prevailed over the humane rationality of multitudes. When people catch on, the fires of vengeance will burn very hot.

The task now is to rebuild a civilized life that is no longer so fragile as to allow insane people to lay waste to all that humanity has worked so hard to build.

Tyler Durden Fri, 06/11/2021 - 21:40

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Brandon Smith: The Real Reasons Why California Leftists Are Terrified Of The AR-15

Brandon Smith: The Real Reasons Why California Leftists Are Terrified Of The AR-15

Authored by Brandon Smith via Alt-Market.us,

This past week a US District judge in California struck down the state’s 30 year ban on high capacity semi-automa

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Brandon Smith: The Real Reasons Why California Leftists Are Terrified Of The AR-15

Authored by Brandon Smith via Alt-Market.us,

This past week a US District judge in California struck down the state’s 30 year ban on high capacity semi-automatic rifles which leftists label “assault weapons”. The judge called the ban unconstitutional (which it is). In response, the progressive media has lost their collective minds, screeching in horror at the idea of AR-15 rifles being legal within the borders of their carefully manicured socialist Utopia state. Their most commonly expressed reaction seems to be fear.

Fear is rarely a rational thing. When someone operates based on fear they tend to make terrible decisions and support oppressive causes and laws. Fear leads to an obsession with control. Fearful people also tend to look for large mobs of other terrified people so they can feel safe and secure and anonymous. They want to be able to act impulsively on their fears without having to face consequences for it later.

Leftists are driven primarily by two factors: Narcissism, and yes, fear. I’ve discussed their narcissism at great length in past articles; now I think we should delve into their fear.

The most common leftist retort to the question “Why are you so afraid of the AR-15?” will usually be a snort of indignant disbelief followed by the words:

“Because it’s a military weapon designed to kill a lot of people quickly…idiot!”

But this is not an argument, it is an expression of irrational fear. Why are they, as individuals, afraid of the AR-15? What are the chances that they will EVER be faced with a person intent on killing them with an AR-15? And, why do they believe that disarming innocent law abiding Americans will somehow save them from their paranoia?

Let’s examine the first issue of statistical probability; how many people are actually killed by AR-15s each year? Not many according to the FBI, which does not track the stats on specific rifles, but does track the stats on all rifles together. And, as it turns out, only around 6% of all gun deaths involve rifles in the US each year.

How much of that 6% involves the use of military grade rifles like the AR-15? It’s impossible to say, but even if it was half, or 3% of all gun related crimes, that would still mean you have FAR more of a chance of being murdered by a knife or blunt object than an AR. By extension, Rifles overall are dwarfed by handgun murders, so, again, why are leftists so afraid of the AR-15?

What about mass shootings? It seems like the AR-15 is a favorite among mass shooters because of it’s “efficiency”, so is this reason enough to be fearful? According to the New York Times own analysis, the AR-15 was used to kill 173 people in mass shootings in the US from 2007 to 2017. Meaning around 17 homicides per year over a decade can be attributed to the rifle. Again, the AR is dwarfed by almost all other weapons in homicide including knives, even when accounting for mass shootings.

With the sheer number of military grade weapons in the hands of civilians in the US there should be mass homicides everywhere you look if you take the common position of the typical progressive gun grabber. But, this is not the case. In fact, if you want to increase your chances of being killed by a gun, move to a major Democrat run city like Chicago, New York or Philadelphia. In Chicago, there were 4033 shootings and 784 homicides, predominantly in black neighborhoods and primarily with handguns.

So, statistically, access to AR-15s does not increase gun homicides. But what about living in a black neighborhood in leftist run Chicago under some of the strictest gun laws in the country? Yes, your chances of being shot are MUCH higher (just not by an AR-15).

Since the math does not add up in favor of the leftists, perhaps we should examine other factors that might be driving them to focus on the AR in particular. Let’s talk about “precedence”…

Look at it this way – States like California are a petri dish, a testing ground for the future that leftists want for the entire country. There is an old saying that “As goes California, so goes the US”, and this is because California is often where most experimental legislation is pushed; legislation that violates the boundaries of what the constitution allows. Sometimes it’s New York or New Jersey or some other blue state, but most of the time CA is where unconstitutional precedents are set. Its massive population and large number of electoral votes make it a perfect target for conditioning the wider public to further restrictions on their freedoms.

This explains some of the fear the media is showing regarding the latest federal court decision on military grade weapons like the AR. Political elites see California as their own little kingdom with their own special laws, and they plan to eventually spread those laws across America using California as the model. But, if such laws are overturned as unconstitutional, then the precedent actually works in reverse. Now, the leftists are concerned that an overturned gun ban in CA means more blue states will follow and their entire gun grabbing scheme will go out the window.

The leftist mind thinks in terms of unchecked and unhinged “democracy”. Meaning, they believe that the majority is paramount; the majority is law. If a majority in a society wants to take away your freedoms, then they have the right to because they have the mob on their side. 51% rules over the lives of the other 49%. But this is not how things work in a Constitutional Republic.

Under the Bill of Rights your freedoms are codified and sacrosanct. They are inherent and gifted by God (or whatever you happen to believe in); government has no domain over these rights. The right to firearms and self defense is one of these inherent qualities. It does not matter what the State of California thinks, or even what the “majority” of people in California think. If an American in California wants to own an AR-15, then he/she has the right to own an AR-15.

We also cannot ignore the fact that leftists have an insatiable appetite for collectivism, usually in the name of the “greater good”. Collectivism is basically totalitarianism disguised as humanitarianism. They know what’s best for you, and they are going to make sure you follow THEIR plan for your life.

The AR-15 is indeed a weapon in military use, and maybe this is what frightens leftists the most. Not because they are personally more likely to be shot by one (we’ve already proven that notion false), but because leftists desire control over all else, and with military grade weapons in the hands of the public control becomes much more difficult. ALL totalitarian governments seek to first disarm the people they intend to enslave or destroy. This is a fact.

When a group of people in power are working hard to remove defensive or even offensive weapons from your hands, it’s best to assume that their intentions are malevolent. They are not trying to help you, they are trying to help themselves.

They will deny this motive to the grave, but look at how the political left has been acting lately: They are the only people that have supported mass censorship of opposing viewpoints. They are the only people that are supported by international conglomerates and Big Tech companies. They are the only people that supported the pandemic lockdowns, which were completely useless in stopping the spread of covid, but they were very useful in killing hundreds of thousands of small businesses across the US. They are also the only people in favor of vaccine passports which would destroy the very fabric of our society and erase what is left of our freedoms.

It’s not really surprising that they want to disarm us as well.

Of course, they will claim that this argument is “silly”. After all, what can an AR-15 do against an Apache helicopter or a Abrams battle tank? Well, these rifles in the right hands can do a hell of a lot to stop a technologically advanced military, as we have seen for the past two decades in Afghanistan. Let us not play games; there is a reason why leftists and elites are obsessed with our disarmament. If military grade rifles were not a threat to them, then they would not be going after them so aggressively.

Finally, the mainstream media has rolled out all the typical propaganda tools when it comes to spinning the federal decision in CA, including attacking the judge and his character. Almost every single article on this issue focuses on the fact that the judge compared the AR-15 to a “Swiss Army knife”.

The left will continue to use this narrative as a means to distract from the real problem at hand because false conflations and straw man arguments have worked for them in the past. Clearly, the judge was not trying to say that an AR-15 and a Swiss Army knife are exactly the same, or that they are equally capable of killing people. The logical interpretation is that the AR-15 is a tool like any other tool, and it has multiple uses. It is a utilitarian object, not an inherently demonic death machine as leftists would have us believe.

Gun grabbers love to make the argument that firearms are only designed for one purpose: “Killing”. This is a lie. They are also tools for self defense. They are a means to defuse a violent situation before it even happens. There are thousands of videos on the web showing people with criminal intent running away from a Good Samaritan with a gun. There is no way of telling how many potential victims have been saved by the mere presence of a firearm, but the accounts are documented and numerous.

This is on top of all the other uses for guns, including hunting and sporting uses. So, yes, the judge is absolutely correct; an AR-15 is a multipurpose tool, just like a Swiss Army knife.

In my view, the gun control lobby in America is in the midst of a considerable decline, and maybe it is even about to die. The political left has long operated on the mantra that “the squeaky wheel gets the oil”. In other words, they think if they whine long enough and loud enough about an issue someone will come along and give them what they want just to shut them up, even if what they want is illogical or morally bankrupt.

This strategy has worked out for them for many decades so it’s not surprising that they keep using it, but times are changing. Now, the squeaky wheel gets no oil, at least not from gun owners. The squeaky wheel gets nothing.

Gun control is the big line in the sand for most law abiding conservatives and moderates, and we have grown tired of the debate because it’s no longer a debate, it’s a imposition of ideology and cultism. All the facts are on the side of gun owners. All the legal protections are on the side of gun owners. All the moral dynamics are on the side of gun owners. As long as we stand our ground, there is nothing that leftists can do about it.

They can continue to lie, they can continue to threaten and they can continue exploiting emotional arguments, but they’ll NEVER get the guns. And, as we have seen recently, we might even start returning some of those gun rights and rifles to states like California, where fear was used to cloud the public mind and people were conned into compliance.

What are California leftists and their comrades in other blue states really afraid of? They are afraid that their strategies are failing, that the public is getting wise to their games, that their incrementalism only works for so long, that their true intentions have become transparent, that their narcissism has blinded them to their own frailties, that the law is not their plaything and that every piece of constitutional ground they have stolen over the decades could be taken back from them in the blink of an eye; as fast as a speeding bullet.

Leftists and totalitarians fear the AR-15, but what they fear more is what it represents. And with each carefully placed practice shot at every gun range across America, they hear the crushing sound of inevitability.

*  *  *

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Tyler Durden Fri, 06/11/2021 - 22:20

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Perfect Storm: Congestion Plagues South China And US West Coast Ports 

Perfect Storm: Congestion Plagues South China And US West Coast Ports 

Peak shipping season is ahead — and the parking lot of container ships moored off the US West Coast continues to worsen, with the epicenter of congestion based around…

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Perfect Storm: Congestion Plagues South China And US West Coast Ports 

Peak shipping season is ahead — and the parking lot of container ships moored off the US West Coast continues to worsen, with the epicenter of congestion based around Los Angeles/Long Beach ports. On the other side of the Pacific, in southern China, a surge in COVID-19 has caused some of the biggest port congestion in more than one year. 

So now port congestion is seen on both sides of the Pacific as it's hardly a secret that the recent collapse of trans-pacific supply chains will remain strained through the summer and one reason why prices for goods are soaring (as recently discussed in "It's About To Get Much Worse": Supply Chains Implode As "Price Doesn't Even Matter Anymore" and "Port Of LA Volumes Are "Off The Charts."") 

But now, focusing at South China ports, exploding cases of coronavirus infections in Guangdong province, a top manufacturing and exporting hub, recently triggered local governments to increase prevention and control efforts that "curbed port processing capacity," said Reuters

Major shipping companies have warned clients of vessel delays, changes to port call schedules, and the possibility of avoiding some ports altogether.

Ocean Network Express (ONE), a container shipping company, warned customers in an advisory Wednesday: "The container logistics situation continues to deteriorate around all the ports in the area [South China port]." 

Most of the congestion has been building at the Yantian International Container Terminal (YICT), a deepwater port in Shenzhen, Guangdong, China handing some of the largest container ships in the world, has reduced capacity at the port due to a recent outbreak of the virus, according to Seatrade Maritime News, citing ONE. 

The world's leading container line Maersk told customers to expect delays up to two weeks because of the reduced capacity of staffing at the port. 

Refinitiv data shows 50 container vessels are moored in the Outer Pearl River Delta, waiting to dock at YICT. For comparison, this compares with 20 vessels for the same time last year. 

Reuters quoted one exporter who said loading delays and slow deliveries continue to tangle global supply chains. 

"Basically we had a similar experience last year so we have experience in responding, only the increase in transport costs are getting really astonishing. The freight fees are reflected in the increase in material costs which are up by around 15%-30% already," said a sales manager at an electronics cable manufacturer in Shenzhen, a large manufacturing city in Guangdong. 

The congestion and delays in South China came when container shipping supply chains were already at full stretch due to US West Coast port congestion. As a result, container freight rates have hit a record high and are expected to continue to rise further. 

"The recent rise in Covid-19 cases in China has resulted in a shutdown that may add to the already record cost of shipping goods out of China. The delays have already resulted in pressurizing soaring shipping prices within China due to a lack of containers and increased export demand," said Josh Brazil, the Vice President of Marketing at project44. 

Port congestion on either side of the Pacific continues to deteriorate. It suggests that the normalization of trans-pacific supply chains will not happen anytime soon and will continue to add cost pressures for exporters in China and importers in the US - adding to the cost of products and ultimately pushed along to US consumers. Delays will also continue to create additional shortages...  

Tyler Durden Fri, 06/11/2021 - 21:20

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