Sunday, October 07, 2007

The Next Bubble

Bubbles beget bubbles. So what's next? The picture gives away the answer but the numbers are so unbelieveable I don't know why this one has escaped notice. By 2011, 34 new cruise ships are scheduled to be delivered. Some will be as large as 5400 passengers.

At the same time in February Norwegian Cruise Line's America division (the only cruise line allowed to offer cruises that start and end in Hawaii), will reduce its presence in Hawaii due to significant financial losses in that market. Their new ship "Pride of Hawaii" will be reassigned. Not surprising as hotel occupancy rates in Hawaii continue to fall.

Man if you thought being under contract for a new house in Las Vegas was a tough proposition imagine being on the hook for one of the half billion dollar babies.

My solution? Affordable housing.

31 comments:

FlyingMonkeyWarrior said...

First, I went to a conference Last week with the Vacation Resort Developers, and learned that you are correct, in that the cruise ships are already over built. Only 13% of the population has ever been on a cruise and over 45% want to go on one.

Murstly, the next bubble is the energy sector according to Itulip.com.

Just sayin.

Northern Renter said...

Damn you FMW! You took both first and murst!


And to think I coulda been a contender. I coulda been somebody, instead of a bum which is what I am.

NR

Pleather Murse said...

Thurst!

Anyway, before I'd worry about the cruise industry (what % of GDP is it anyway?) I'd look to the extension of the credit crunch to auto loans and credit cards. All those specuvestors living off sweet (tm) leverage credit card advances will start defaulting like the mortgage folk. Unlikely they'll get a bailout.

Rob Dawg said...

McMansions of the Sea.

The economics don't work out. The Cruise Lines cannot drop price to where 45% can go on a trip. Heck, I'd wager half the 13% couldn't really afford it either. With all those new berths coming on line and what looks like continuing high energy prices there's a bubble for sure.

I'm more optimistic for the "resort" industry. Not the pricy Cabo indulgences but there may be room for an honest form of the Eric Estrada plan leisure developments. If things get bad enough I might even build one myself.

Lou Minatti said...

I've wondered about this too, Dawg. Never thought of it as a bubble until now. There are cruise ships leaving from every podunk port in the country because traditional ports like Miami are overserved. Galveston of all places has two cruise liners. They are running out of places to stick these megaliners.

Personally, I've never seen the attraction to this. When I go Las Vegas I can leave the casino and go elsewhere once I get bored. On a ship, you're SOL. The only cruise that has ever appealed to me is the Alaskan cruise.

ha38349 said...

I know several people who go on multiple cruises each year. They have several cruises booked already and can't wait until the second half of 09 opens so they can book more. And from what I understand there are significant numbers of non Americans that cruise from American ports (with the exchange rate it is easy to figure out why).

ha38349 said...

Lou, these cruise ships are like a city! I've been on one a few years ago and that ship was huge. Plus you are in a port just about every day. Not really my thing, but there are folks who do them two, three or more times in a year.

wannabuy said...

McMansions of the Sea.

ROTFLMAO

Good one. :)

Huge surge. To fill those ships it requires "trees growing to the sky." But they won't. The boomers have already borrowed their way out of retirement. Oh, not all of them. But enough have hit the home ATM too much that they are retirement toast.

Hey, I'm part of the 45% who have never taken a cruise but want to. :) The issue is these ships are not cheap to build, fuel, or crew.

They are going down like a Spanish condo.

Oh, thanks for the link on Hawaii. I was wondering when the market would start to break. I'm still thinking that the commercial paper backlog between now and Thanksgiving is what will back up the market. When? No specific bets before Turkey day. But we'll see a change by then.

This is getting scarier by the week.

Got popcorn?
Neil

serinitis said...

The cruise ships are only a symptom of investments targeting retiring baby boomers. The logic on investing in cruise ships is simple. Retirees like cruises. Millions of baby boomers are going to retire. Cruise lines are going to have millions of new customers.

Where else are bubbles going to form as investors over prepare for the baby boom retirement.

Jennifer said...

My family has been on a lot of cruises the last few years. We usually pick a time we want to go and then watch for the deals (unsold rooms). My brother and his wife just went to Hawaii and really seemed to enjoy it. Last one we did together was the Mediterranean Sea. When you have 6 or more people in your group, its cheaper to go on private group tours, which is what we did. Otherwise you are going in those huge groups with some really slow (very old) people.

FlyingMonkeyWarrior said...

Damn you FMW! You took both first and murst!
****************************
LOL LOL LOL LOL LOL LOL

(*:

FlyingMonkeyWarrior said...

When you have 6 or more people in your group
________________________
another trend ,ad hoc group vacations for up to 12 people.

Funny Circus Bears said...

I never have more than 5 or 6 active options plays in progress at any given time, and right now all but one are bullish. The bull plays are all very profitable (RIMM, AAPL, GOOG, AMZN), and my one current bear play is standing pat (CFC), although I still believe that before options ex date (Nov16) the stock will have moved down into profitabilty.

Bearish options plays are becoming harder to find, with the pure bears looking to hibernate until after christmas. I am happy to see the HB's moving up nicely, thereby setting up yet another short play.

I don't care about up or down, as simple verticle movement and volatility of any sort is where the money is to be made.

Santa Flipper Clause said...

Ho Ho Ho - It's Santa Flipper Clause

Santa is back from Tibet.

Did I miss anything? I saw the recent Casey post.

Santa F. Clause

Akubi said...

@Santa F. Clause,
How was your trip to Tibet? I've always wanted to go there and I believe you promised photos of your climb.

Santa Flipper Clause said...

Ho Ho Ho - It's Santa Flipper Clause

@akubi

The trip was wonderful. Flew into Kathmandu and two days later flew into Lhasa. We saw the Potala Palice and Jokhang temple. From there, we drove along the frindship highway to Shigatse and saw the Tashilhunpo.

We then drove to Tingri. As you get further and further from Lhasa, Tibet becomes primative. Tingri has no running water and no electricity.

From Tingri is the original road that Mallory and Irvine took to Everest in the 20's.

We took another road to Cho Oyu base camp and spent three days acclimatizing. After that, we hiked to interim camp and advanced base camp at about 18500 feet high.

There are three acclitization climbs on Cho Oyu to get ready for the summit. I could not finish the third one, the altitude simply wore me out. I got to about 22000 feet.

I left Cho Oyu before the summit attempts. I got a ride on the rest of the friendship highway through absolute stark and stunning high desert of Tibet. The summit teams encoutered a large storm and nobody summited.

Got back to Kathmandu and flew home. I am simply amazed that I did not get a GI disease, as it was very dirty in Tibet.

I have some pictures but they are not digitized yet. Sorry, I'm still in the analog world with my camera. I plan on scanning them in but I am not sure when I will get to it.

Santa F. Clause

golfer_X said...

As vacations go, cruises can be quite inexpensive. You can book a 7 day Mexico or Caribbean cruise for around $500 if you don't mind an inside room. Since you are rarely in the room anyways, paying extra for a small window is kinda silly. Sneak on a couple of bottles of Jack and you can keep your bar bill to a minimum too. Take a few buddies with ya and a cruise is hella fun. With all those new boats coming the deals should be great. If you do it right it's hard to beat the value of a cruise.

TK said...

I have little to add this evening except SCREW THE YANKEES!

Akubi said...

I'd take climbing Cho Oyu over some loser cruise any day!

Akubi said...

Even if you don't summit at least you tried.

Akubi said...

Sweet octopus in fishnets now!
BTW, don't forget to free Tibet and Burma too!

CHJTS said...

YOU HAVE GOT TO BE FUCKING KIDDING ME.

Casey is back online....JESUS CHRIST on a damn pogo stick.

This is almost unfucking believable and I am actually quite pissed off over it after he sat there on the last sharkcast and said he was a changed man and blah fucking blah blah blah..

He needs his ass kicked in the worst way.

WEll fuck it...since that little bastard has come out of retirement..so am I.

I will be restarting the haterzcasts shortly..problably with one of them tomorrow.


This is the worst possible time for you to come out of hiding casey...this is the time of the year that I get extremely busy and I have so many things on my plate right now that it is going to be extremely difficult to give you the attention you deserve.

DAMMIT casey why couldnt you have waited until February or March of next year to crawl out from under your rock.

Pleather Murse said...

Oh my phuck, KC's back. Just when I had gotten over my withdrawal from the previous blog and started getting more interested in other trivial distractions like, I dunno, the housing crash and USD woes, recession worries, post-nuclear post-Bernanke meltdown, etc.

Time to get my priorities straight and get back into caseytime.

Peripheral Visionary said...

I'm with Pleather Murse, the next stage of The Great Meltdown is in consumer credit and auto loans--and I also agree that there won't even be talk of anything resembling a bailout in those sectors.

Consequently, the most vulnerable area going forward will be diversified financials. Of course, the whole market is feeling very fragile, but financials are most exposed. The investment banks have had to take on huge loads of LBO debt that they guaranteed but which nobody wanted to buy (whoops!) They also have more mortgage exposure than they're letting on to--and now add to the mix consumer credit and auto loans. Bad, bad, bad, and bad.

And yet they still go up. The market can remain irrational longer than you can remain solvent, never more true than now. I don't know how long it will take for the sentiment to change. It looks like we're forming a massive double top, so a downturn can begin at any point, but it may still take a matter of months before there's a serious change.

Peripheral Visionary said...

On topic, I've seriously considered the possibility of going with floating real estate rather than grounded real estate. The cost per square foot, at least in the major metro areas, is comparable. The main issues are docking fees (which vary widely), and of course financing, which is difficult to line up even though you have real collateral (which can actually be physically repossessed by the bank if needed!)

But for me, the main holdup is showers. I like nice strong water pressure :), and boats just don't have it :(, at least not most of the more affordable houseboats. But it's still tempting . . . $300,000 for a run-down one-bedroom condo, or $200,000 for a two-bedroom two-bath houseboat, with a spectacular view of the waterfront, and where you can pull up anchor and cruise the coast any time you want . . .

Bilgeman said...

Rob Dawg:

Now you've zigged into my particular bailiwick.

Boom and Bust is SOP for the maritime industry, and has been since the first clown strapped two logs together with vines and floated out on a lake.

As soon as he returned with a fish or two, a whole heap of other clowns started looking for spare tree trunks and vines...(especially when they could get a subsidy from their fellow mud-hut dwellers by promisisng "free fish").

This decade it's cruise ships, in the 90's it was cable ships, in the 70's and 80's it was oil tankers.

If shipping line execs ever read shipyards' order books, very few ever say:

"Gee...I think the market for tugboats is getting overbuilt"

Nope...largely they say:

"Hey!....We should get in on this new hot segment of the industry, too!".

And a cautionary note to all of you.


If you book and take passage on a cruise ship,you should be aware that you are NOT on US territory if the flag at the stern is not "Old Glory".

These "Flag of Convenience" ships are not built or crewed to US standards, they operate precisely to dodge US laws.

Sail them at your own risk.

http://www.amo-union.org/Newspaper/Morgue/10-1999/Sections/News/cruise.htm

Rob Dawg said...

This decade it's cruise ships, in the 90's it was cable ships, in the 70's and 80's it was oil tankers.

Amen, Brother. I'm a generalist. It is good to get confirmation from the specialists on these issues.

Man, oh man. Cruise ships just don't have any other use. They aren't fast or efficient or cheap or cheap to operate. True "White Elephants" in the original meaning. Maybe a few can be turned into hospital ships for the third world but in an age of portable MRI and specialist datalinks even that is becoming mariginalized.

serinitis said...

Cruise ships just don't have any other use

They could always be converted to floating condos. I hear Miami is running out of them.

Bilgeman said...

serinitis:

"They could always be converted to floating condos."

In fact, they did just that with a few of 'em after Katrina.

The USG,(that subsidy thang again), chartered a pair of "Love Boats" and moored 'em downtown to house essential personnel who had been "de-homed" by the flooding.

(You don't want to know the price this cost, or the inter-cranial pressure it would cause would blow your brains right outta yer bunghole.)

Upshot of the story is that none of the essential personnel wanted to debark the vessels after several months' aboard.

Anyway, if you ever get the chance, sail into Freeport, Bahamas it's where they lay up unused cruise liners from the US East Coast trade.

All of Mickey's Big Red Boats become Mickey's Big Rust Buckets.

formul8 said...

I could never figure out the allure of cruises. Who wants to be stuck on a boat with 5,000 other people?

Like a floating tourist trap that there is no way to get off of.

b4freedom said...

Let me do the TIMESHARE math:

Cost of ship: 1/2 billion $$$
# of passengers: 5000
# of running weeks/year: 50

wholesale cost of each timeshare= (1/2billion divided by 5000)/50 = $2000.

Retail value of each financed cruise timeshare: $12,995. Interest rate charged: 12%. Term: 20 years. Month cost: $143.09.

Attention America: For less then $145/month you can OWN your own vacation cruise timeshare! We finance!

I'll have to oversell by selling lots of suckers some "discounted floating weeks".