During the bull market in commodities that peaked midway through 2008, shipping companies that transfer base commodities across the oceans enjoyed phenomenal runs to all-time highs before fizzling out like a Roman candle.

Companies that carry wheat, corn, soybeans, fertilizer, cement, iron ore pellets and sugar were printing money as the day rates for shipping dry commodities soared.

The rate charged by dry bulk shipping companies to buyers of commodities abroad, as measured by the Baltic Dry Index (BDI), began 2008 at roughly $5,800 per day. The rate topped out at $11,700 midyear, and bottomed out in early December at $675 -- a 94% correction. Absolutely unbelievable!

Shares of the most widely traded stock within the dry bulk shipping sector, DryShips (NASDAQ: DRYS), traded as high as $116 in May, reflecting the fullness of the commodity rally that seemed to be irreversible based on the glowing projections of China, India, central Europe and what are now known as "Frontier Economies," like Vietnam and Indonesia.

Following that meteoric rise in shares of DRYS to $116, the stock proceeded to careen all the way down to $3 in November.

Continue reading Best Trades of 2008: #4 Buying DryShips (DRYS) at the November low

Best Trades of 2008: #4 Buying DryShips (DRYS) at the November low originally appeared on BloggingStocks on Wed, 31 Dec 2008 15:30:00 EST. Please see our terms for use of feeds.

This shorting strategy defied all odds and pretty much defined the year for the stock market.

I don't know anyone who truly thought Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) would both be trading under a buck as 2008 came to close.

The idea of these once-in-a-class-by-themselves quasi-government entities that touch more than 85% of all mortgages in the United States going into full receivership by the government was considered foolish, almost ludicrous discussion that only invited serious sarcasm from professional Fannie and Freddie watchers.

The ultimate collapse of both stocks was devastating, not only to investors that continued to believe all the false headlines spewing from the front offices of FNM and FRE that said they were more than amply capitalized, but the whole financial sector as well.

The notion that Freddie and Fannie were too big to fail was a given, sucking in long-side investors at every 10-point interval on the way down to zero.

Continue reading Best Trades of 2008: #5 Shorting 'too big to fail' Fannie and Freddie

Best Trades of 2008: #5 Shorting 'too big to fail' Fannie and Freddie originally appeared on BloggingStocks on Wed, 31 Dec 2008 15:00:00 EST. Please see our terms for use of feeds.

For those that had the fortitude to pull the trigger, shorting crude back in early July when all the perfect storm conditions for $200 per barrel oil were on the horizon ... and had the stones to stay with that trade ... made a killing.

This is one of the greatest reversals for any major market of any kind that has ever occurred. And it clearly shows how the crude oil market was being manipulated by speculators and hedge funds.

The impact was fatal for hundreds of small airlines and small- to medium-sized trucking companies, along with thousands of other companies that didn't hedge against the price explosion in energy.

The price of crude, which topped out at $147 per barrel in July 2008, crashed to $35 per barrel by Dec. 18 -- a 76% haircut -- before getting a bid that got the price back above $40 on the eye-popping headline that OPEC would slash daily production by 4.2 million barrels.

Continue reading Best Trades of 2008: #3 Shorting oil on the Fourth of July

Best Trades of 2008: #3 Shorting oil on the Fourth of July originally appeared on BloggingStocks on Wed, 31 Dec 2008 14:00:00 EST. Please see our terms for use of feeds.

This strategy went from being a modestly successful trade through October to a hero-sized trade in the past 45 days.

The Fed funds rate, the most widely followed interest rate the banks charge each other for overnight lending, topped out in August 2006, at 5.25%.

When the Fed started easing rates thereafter, no one at the economic think tanks forecasted anything close to what we are seeing today (namely a Fed funds rate of zero to 0.25% -- a decline of a full 5% in 17 months).

The decline in rates started out so orderly and coordinated that it seemed almost too good to be true, and the Dow Jones Industrial Average hit an all-time high, topping 14,000 for the first time in July 2007.

However, the quarter-point cuts gave way to a three-quarter-point cut, or 75 basis points, on Jan. 22, 2008, signaling that the Fed was seeing a material breakdown in the credit and housing markets. Following that seemingly radical rate cut, just eight days later on Jan. 30, the Fed again slashed the Fed funds rate by another half point, or 50 basis points, to 3%.

From there Bernanke & Co. held steady for a couple months to see if any good would come of their efforts.

When evidence of further erosion in the credit markets surfaced with the impending collapse of Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), Indy Mac, Bear Streans and Lehman Brothers (OTC: LEHMQ), the Fed lopped another three-quarters of a point off the Fed funds rate, taking it down to 2.25% on March 18.

That was considered the absolute floor at the time, a level that would stick. But that wasn't the case.

Continue reading Best Trades of 2008: #2 Getting long and staying long the 30-year Treasury bond

Best Trades of 2008: #2 Getting long and staying long the 30-year Treasury bond originally appeared on BloggingStocks on Wed, 31 Dec 2008 12:00:00 EST. Please see our terms for use of feeds.

With all the media buildup leading up to the Olympic Games in Beijing this past summer, just about everyone and their brother was bullish on the China/India emerging market theme.

"Chindia," as it was coined, was supposed to be the next great economic wonder.

The belief that these markets did not need American demand swept international investment circles. Forecasts of double-digit GDP growth continuing for the next several years became the mantra of emerging market funds, and Wall Street analysts got caught up in the commodity bubble, which burst a month before the Olympic torch was lit.

The widely held belief of global economists was that these two sleeping giant economies would lap America in a matter of a few years, as per all the economic extrapolations and white papers published leading up to the Summer Games.

Stocks like Baidu.com (NASDAQ: BIDU), China Mobil (NYSE: CHL), China Life (NYSE: LFC), Huaneng Power (NYSE: HNP), PetroChina (NYSE: PTR), Infosys (NASDAQ: INFY) and Reliance Industries (not listed) seemed bulletproof given the revenue and earnings models being floated by the Chindia bulls.

Continue reading Best Trades of 2008: #1 Shorting 'Chindia' the day after New Year's

Best Trades of 2008: #1 Shorting 'Chindia' the day after New Year's originally appeared on BloggingStocks on Wed, 31 Dec 2008 10:30:00 EST. Please see our terms for use of feeds.

For most investors and traders, 2008 was a tough year. But while many people saw their portfolio take a merciless beating and watched their retirement vanish into thin air, there were a select few who made a killing.

In fact, if you had been on the right side of any of these bets, you could have banked enough dough to make up for your losses and then some.

Here are five trades everyone wishes they had made in 2008:

#1 Shorting 'Chindia' the day after New Year's: The Chindia experience peaked in Beijing with Michael Phelps, and the market knew it would a year and a day before the Closing Ceremonies.

#2 Getting long and staying long the 30-year Treasury bond: This strategy went from being a modestly successful trade through October to a hero-sized trade in the past 45 days.

#3 Shorting oil on the Fourth of July: The drop in oil prices has been nothing short of unbelievable. Those that had the fortitude to short crude in early July (and had the stones to stay with that trade) made a killing.

#4 Buying DryShips (DRYS) at the November low: Following its meteoric rise to $116, the stock careened all the way down to $3. But if you went long then, you saw the share price quadruple in less than a month.

#5 Shorting 'too big to fail' Fannie and Freddie: This shorting strategy defied all odds and pretty much defined the year for the stock market.

Best Trades of 2008: 5 moves that could have made you rich originally appeared on BloggingStocks on Wed, 31 Dec 2008 09:00:00 EST. Please see our terms for use of feeds.