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Quantitative easing will punish the shipping industry

By Emerging Money,  March 28, 2012, 12:00:50 PM EDT

Federal Reserve Chairman Ben Bernanke's recent remarks about supporting a low interest rate environment has the Guggenheim Shipping exchange traded fund ( SEA , quote ) weakening while the United States Oil ETF ( USO , quote ) remains strong.

[caption id="attachment_32959" align="alignright" width="220" caption="High oil means trouble at SEA"] [/caption]

SEA had been showing improvement for most of 2012, rising 24.40% year-to-date. It has now dropped 3.74% in the last week, and has a worrying short float of 8.84%.

The shipping industry has suffered greatly from the previous rounds of quantitative easing by the Federal Reserve. The stimulative measures devalued the U.S. dollar. As a result, commodity prices for oil, gold, and silver soared as investors and traders sought alternative assets.

The increasing price of fuel was devastating for shippers, and it looks like it's happening again.

The heavy oil used by shippers is back at the peak prices set in 2008. Much of this is from speculation , not fundamental economic demand, and that speculation will only increase if more quantitative easing restarts the weak-dollar rising-commodity cycle.




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, International, Stocks

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