A published report on Bloomberg confirms Finerman's thesis. "Shipping companies are making $3,826 a day for a single voyage, 88 percent below the breakeven point of $30,900 -- the amount that tanker giant Frontline says it needs to break even.
That’s because the supply of ships available relative to the amount of oil needed to be moved is out of balance.
"Rates are so far below where the operating break even is – it’s really a big problem," Finerman says.
And we haven't seen older ships come off the market yet. "The supply demand dynamic is just out of whack."
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Trader disclosure: On Oct. 25, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (BAC), (F), (NOK); Finerman owns (AAPL); Finerman & Finerman’s Firm owns (BAC); Finerman owns (GOOG); Finerman & Finerman’s Firm owns (JPM); Finerman’s Firm owns (HPQ); Finerman’s Firm owns (MSFT); Finerman’s Firm owns (SKS); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts; Terranova owns (APA), (AAPL), (AXP), (C), (GOOG), (GS), (IBM), (ISRG), (MCD), (MDT), (MMM), (NKE), (ORCL), (OXY), (PEP), (PFE), (PCP), (UPL), (VRTS), (XBI); Weiss owns (QCOM), (AKAM), (VZ), (TXN), (COP), (NIHD)
For Gary Kaminsky
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