SS/RCCL Finances: Improving, Options, Questions??!!

[UKCruiseJeff]

46 minutes ago, dawntrdr said:

 

Observer makes a good point.  The question has been raised as to how a vaccine solves cash flow/burn problems.  It does because as soon as an effective vaccine (hopefully, a number of vaccines) becomes viably and widely available, people will start making plans again and that brings new cash in.  I'd be very surprised if the cruise lines don't already have a pricing model researched for how this news will affect the supply and demand.   I believe RCL's Mr. Fain when he says there is a pent-up demand.  You don't have to look any further than the pictures of the people who flocked to bars and restaurants as soon as the restrictions were loosened a little bit.  Those crowds certainly demonstrated a pent-up demand for fun, food and society.

 

I think your view is a view is held by many.  A vaccine is the magic bullet it seems.

 

Cruises are taken mostly by elderly people.  You seem to have seen lot's of bars presumably full of young people rather than the elderly and seem to believe that this proves that the elderly will all start booking cruises as soon as anyone announces a vaccine.  Possibly booking without insurance.

 

I simply don't  see it as being that simple - and certainly don't make the extra leap that it will savve cruise lines..  🙂

Edited August 17, 2020 by UKCruiseJeff

[cruiseej]

@UKCruiseJeff I think your logic is sound… except it doesn't factor in reloading the "ponzi scheme" of deposits for future cruises. You're assuming people who want to cruise have full credits and won't bring in any new money. But some people have a FCC for a portion of a cruise they prepaid for. And a lot of those people will probably book more than one cruise: maybe one or two on FCC, but cruises in 2022 and 2023 which are new bookings and new cash. If everyone takes a wait-and-see approach -- let me take a cruise with my FCC and see if it's still as enjoyable in the "new normal" of masks and social distancing -- then you're right that it will take a long time for new bookings to come in. But I think a lot of people are anxious to travel, and will make bookings once there's clear light at the end of the tunnel.

 

Let's look at it another way: if the reality were as grim as your math suggests, surely the cruise lines know this; how are they seeing any way out? And if they aren't, why aren't they putting ships into cold layups or scrapping more of them? Do you think they're staking billions of dollars on just a wish that things will magically improve quickly?  

[UKCruiseJeff]

21 minutes ago, cruiseej said:

@UKCruiseJeff I think your logic is sound… except it doesn't factor in reloading the "ponzi scheme" of deposits for future cruises. You're assuming people who want to cruise have full credits and won't bring in any new money. But some people have a FCC for a portion of a cruise they prepaid for. And a lot of those people will probably book more than one cruise: maybe one or two on FCC, but cruises in 2022 and 2023 which are new bookings and new cash. If everyone takes a wait-and-see approach -- let me take a cruise with my FCC and see if it's still as enjoyable in the "new normal" of masks and social distancing -- then you're right that it will take a long time for new bookings to come in. But I think a lot of people are anxious to travel, and will make bookings once there's clear light at the end of the tunnel.

 

Let's look at it another way: if the reality were as grim as your math suggests, surely the cruise lines know this; how are they seeing any way out? And if they aren't, why aren't they putting ships into cold layups or scrapping more of them? Do you think they're staking billions of dollars on just a wish that things will magically improve quickly?  

 

A ponzi scheme is where new cash pays to reassure earlier adopters in order to reassure new entrantrs.  In the current cruise scenario it isn't as good as a ponzi scheme because none of the new cash coming in is paying for any previously booked cruises because no one is sailing anywhere.  It is simply paying current operating expenditure and attempting to reduce debt.

 

You have also overlooked that if FCC is to be believed it is now magically 25% more than it was when the earlier cruise was cancelled.  So there's more cash to be spent rather than less cash.

 

Your last paragraph is based on the assumption that everything management does is rational and based on certainty and can be para-phrased by asking me to explain why a management team wouldn't give up now  and wave the white flag rather than doing all the can in the hope that something turns up.  They would be nuts and irresponsible to give up now and are doing exactly as they should.  They are providing constant optimism and reassurance whilst hoping for the best.

 

Do you think anyone has any control over anything in this terrible situation?

Edited August 17, 2020 by UKCruiseJeff

[Stumblefoot]

54 minutes ago, dawntrdr said:

The question has been raised as to how a vaccine solves cash flow/burn problems.  It does because as soon as an effective vaccine (hopefully, a number of vaccines) becomes viably and widely available, people will start making plans again and that brings new cash in.

 

If past modern human behavior is any evidence, a vaccine won't be even necessary if a post-contagion treatment can be just as efficacious.  We've lived with viruses for millennia and the public travels all of the time when there are respiratory virus outbreaks such as the seasonal flu.  So, once a vaccine or treatments become widely available that reduces hospitalizations and the rate of death, it'll just be a matter of time before travel returns to some sense of normalcy.

 

1 hour ago, UKCruiseJeff said:

But I am interested in hearing contra-argument.

 

Of course we can debate the percentages you use, but in reality, the contra-argument to your scenario is it fails to account for the wide variety financing options available to RCL as they are not solely limited to new bookings (rather than bookings made with FCC's) for liquidity.

 

The world's insatiable appetite for yield means long term cash generating machines who are presently stressed due to extenuating circumstances, like cruise lines, are in high demand.  With central banks around the world making it readily clear that interest rates are going to remain at historic lows not only for the short-term, but well into the mid-term (3 - 5 years), the sheer amount of debt financing that is readily available is mind boggling when compared to even just a mere 20-years ago.  And, this doesn't even consider the cash that is available in the secondary public markets through the issuance of additional shares from a company's treasury stock.  As such, the runway length for a company like RCL is comparable to what an A380 needs to become airborne, not the Cessna you describe.

[dawntrdr]

Also, it's easy to forget this point as we are all familiar with Silversea luxury, but the vast majority of cruise passengers are not on an all-inclusive ticket.  Once you get them on the ship, you are not stuck with having to operate the cruise only on the strength of the fare of those 20% who have paid new cash.  There are also an unlimited amount of upcharges and extras including fancy sports equipment, excursions, surf machines, climbing walls, premium restaurants and alcohol packages, plus the commission paid by the shops, art auctions, jewelry sales.   I never cruised on Royal Caribbean without paying at least 50% over the value of my fare on extra's.

[UKCruiseJeff]

1 hour ago, Stumblefoot said:

The world's insatiable appetite for yield means long term cash generating machines who are presently stressed due to extenuating circumstances, like cruise lines, are in high demand.  With central banks around the world making it readily clear that interest rates are going to remain at historic lows not only for the short-term, but well into the mid-term (3 - 5 years), the sheer amount of debt financing that is readily available is mind boggling when compared to even just a mere 20-years ago.  And, this doesn't even consider the cash that is available in the secondary public markets through the issuance of additional shares from a company's treasury stock.  As such, the runway length for a company like RCL is comparable to what an A380 needs to become airborne, not the Cessna you describe.

 

I'm bewildered by the Cessna comparison.  It is not how I think it at all.

 

If everything remains unchanged and in a vaccum and cruise lines look in relatively good shape then of course they will attract investment but I do not share your view of the future background scenario  you predict.

 

Currently much of the world is being financed by an unhealthy cocaine-like addiction to quantitative easing.  The word chosen carefully because QE  provides illusion and temporary halucinatory images of well-being when things are not.  QE is designed to mask reality.  Basically you are putting of problems you have today that you cannot do anything about by simply shrugging and by mortgaging it to the future.  But few care about it because  few understand it.  So it is politically attractive because it becomes someone else's problem.

 

Buying up debt in order to keep interest rates low because it is currently cheap to do so has a day of reckoning in the future particularly when "everyone is doing it". It may keep interest rates down low for the present but it is doing so artificially and sooner or later there is a lot of QE  acquisitin swilling around looking for new homes. That is where a lot of loose cash will go because to sell it the yeild has to be comparatively attractive.  And that market will be in an environment of devaluing exchange rates, higher interest rates, higher  worldwide taxation, inflation and stagnation. Stagflation. 

 

I cannot see how anyone who understands QE - even slightly - believes that when it is all released back interest rates will stay low.  How can they?  And when interest rates increase it doesn't make it easier for highly-debt   geared, high fixed cost base organisations servicing extraordinary debt to find affordable and serviceable debt.

 

But we will of course see.

Edited August 17, 2020 by UKCruiseJeff

[Stumblefoot]

 

I was merely answering your request for a counter argument to your claim RCL couldn't "fund the whole company from 20% cash payers" and wasn't debating the merits of QE as QE is a wholly different subject matter.

With that said, I never once stated that I believe interest rates will stay low once QE ends.  But, as "anyone who understands QE - even slightly" knows, what one perceives as artificial today can indeed actually be an unrecognized new reality, as certainly has been the case since 2008.  The bottom line is, there is plenty of money sloshing around the world today and for the foreseeable future to allow RCL to fund the whole company well beyond the fresh cash contributed by 20% new customers over the course of the next 18 - 20 months. 

When, and if, QE ends, then the company will obviously need to adjust accordingly to fund any new debt requirements they may have at that time.  But, such a day of reckoning is so far in the future (5-years or greater) it has virtually no bearing on the restart of operations over the course of the next 6 to 12-months.

Edited August 17, 2020 by Stumblefoot

[tgh]

Very interesting discussion and the umpire seems unnecessary.

I agree with you both

The world has an unprecedented volume of liquidity sloshing about and looking for something to attach to.

Cruise lines (and airlines and hotels and…...)  may indeed attract enough long term cash to stay afloat and restart.

Conceptually this coterie may soak up much of the worlds loose cash which might lead to… er anyway...

 

Historically there has always been a day of reckoning and there have been some doozies.

Atm , we appear to be in uncharted fiscal territory as the money continues to be printed.

I opine that there will be a day of reckoning but there may be sufficient hope,  paper , glue and dike thumbs available to delay the day of all reckoning days until I have pushed up several generations of daisies.

I won't be buying any cruise or airline shares, but now have some hope for cruising post 2021

[Stumblefoot]

Thanks tgh.  I don’t disagree with a day of reckoning happening.  It’s merely when.

 

Also, Jeff has been known to have a sense of humor.  So the meme was merely to give him a chuckle.  No harm.  No foul.

[QueSeraSera]

Engineering school failed to prepare me for this discussion, but I appreciate the work the participants are putting into it, and I'm learning from each of you.  So a question, at the risk of betraying my ignorance, or getting squelched for political stuff, does the failure of governments to balance budgets figure into this in any way?  Both parties here in the US seem unconcerned with deficits increasing under their watch (see - this is not political), but I can't help feeling there's got to be a catch somewhere.  Is that the uncharted territory tgh refers too?  Is QE related to deficit spending?

BTW, engineers are quite familiar with the moving the goal posts analogy.  We refer to it as changing the specifications mid-project ... or scope creep

Edited August 18, 2020 by QueSeraSera
addition

[Daveywavey70]

My own personal experience is that if Dishy Rishi is handing a tenner to every council Tennant that would never usually pay more than £6 a meal, we will never see any of these cheapskate council dwellers again. They are “ living it large” whilst they can and are even trying Wine! We, of course dutifully dispatch out our  finest white Zinfandel to them. If they aren’t keen then we offer to top it up with a bit of “pop” and then it’s bloody lovely. I’m sorry, did I think the above outloud? 

Edited August 18, 2020 by Daveywavey70

[jpalbny]

23 minutes ago, Daveywavey70 said:

finest white Zinfandel

 

Now those are words that don't belong in the same sentence... I remember when Chris and I cut our teeth on that plonk, back when the '80s became the '90s, at about $3 a bottle...

Edited August 18, 2020 by jpalbny

[Daveywavey70]

4 minutes ago, jpalbny said:

 

Now those are words that don't belong in the same sentence... I remember when Chris and I cut our teeth on that plonk, back when the '80s became the '90s, at about $3 a bottle...

like I said JP, a bit of “pop” makes it bloody lovely  🙂 “pop” in the uk is lemonade. Our regulars are still shielding whilst people seeking out a cheap subsidised meal are somewhat frantically less reclusive. 

[jland]

1 hour ago, Daveywavey70 said:

My own personal experience is that if Dishy Rishi is handing a tenner to every council Tennant that would never usually pay more than £6 a meal, we will never see any of these cheapskate council dwellers again. They are “ living it large” whilst they can and are even trying Wine! We, of course dutifully dispatch out our  finest white Zinfandel to them. If they aren’t keen then we offer to top it up with a bit of “pop” and then it’s bloody lovely. I’m sorry, did I think the above outloud? 

Daveywavey was the above post meant to be humorous? I only ask because from where I sit the post reads like a disgusting put down of people which has no place on this forum.

[Stumblefoot]

3 hours ago, QueSeraSera said:

...does the failure of governments to balance budgets figure into this in any way?  Both parties here in the US seem unconcerned with deficits increasing under their watch (see - this is not political), but I can't help feeling there's got to be a catch somewhere.

Oh, that is so, so good.  Love ya, Que,Sera,Sera!
 

3 hours ago, QueSeraSera said:

BTW, engineers are quite familiar with the moving the goal posts analogy.  We refer to it as changing the specifications mid-project ... or scope creep

We refer to it the same way in the management consulting business too.  Followed immediately by a Change Order that must be executed before any further work can continue.

[UKCruiseJeff]

9 hours ago, QueSeraSera said:

Is QE related to deficit spending?

 

I fear that by missing an important line in my description of QE I may have masked the full horror of it all. 

 

Generally speaking it is when a government buys it's own debt by simply printing more money.  In other words it is a little like you printing banknotes to pay off your own debts. 

 

Effectively in difficult times there is a new tendency for institutions to seek gilts etc and QE is a short-term central bank mechanism for trying to encourage those investments to go into spending and company stock for reinvestment rather than safe havens of gilt investment.  Eventually the gilts and other similar investments are then put back into the market - without burning the cash that you had previously printed - at which time your currency will start to devalue making the purchase of imports (and cruises) more expensive - exports cheaper - except that other currencies may also be devaluing - and because lending becomes riskier because business is servicing higher interest rates on increasing levels of debt - then interest rates will tend to increase upwards sometimes rapidly.  Higher interest rates and worsening exchange rates starts a new set of challenges.

 

Printing cash tends to devalue currency when you do it because you essentially have changed nothing other than dilute your currency by printing.  Because you have also had a strong period of uncertainty - which is what caused the decision of central banks into QE, productivity and growth has faltered and so you also have caused stagnation and recession. 

 

Higher interest rates and poorer exchange rates make stagnation and recession worst particularly for those with a "strong overseas trading deficit" (ie imports are greater than exports) and what you have effectively done is applied a mechanism for the short-term that wreaks havoc for the longer term.  The fact that much of the world is doing the same thing at the same time also starts to nudge everyone into the same nightmare.  New rounds of QE is often then used as a sticking plaster to mask the problems you had caused by earlier rounds of QE. It becomes a spiral that gets out of control.

 

It is pointless arguing with people's wishful thinking about cruise-lines who have already acquired massive amount of debt at very high "rates" and it is difficult to follow the logic that when they realise that they need even more for survival and to service exisitng debt  that those extra funds will be provided at low interest.  Even without QE pressure on interest, common sense and logic and history tends to mandate that as the risk increases so does the interest rate being charged.  This becomes the death-knell of riskier indebted organisations.  And so the greater more expensive debt  compounds the challenges of the cruise lines.   Just because money might be swilling around that does not mean that lenders will be imprudent and lend at low rates to higher risks. 

 

And the icing on the cake is that governments then start to look for way of reducing the massive national national debt they have created and this inevitably means higher corporate and personal taxation which makes recession and inflation  etc worst because people have less to spend and high interest attracts more saving rather than spending.  A perfect stagnation storm.  To an extent some of this can be avoided by perfect timing but timing has never been perfect before because QE makes the situation better today but terrible for tommorow and drug-taking mentality of QE tends to create more demand for QE or the cure which is even more painful - as previously described.

 

This is a very ovely simplistic description of QE and it's effects and why it will have a huge effect on us all.  I hope you find my efforts at over-simplifying QE and it's consequences helpful and not too misleading.

 

🙂

Edited August 18, 2020 by UKCruiseJeff

[TLCOhio]

6 hours ago, UKCruiseJeff said:

Generally speaking it is when a government buys it's own debt by simply printing more money.  In other words it is a little like you printing banknotes to pay off your own debts.  Effectively in difficult times there is a new tendency for institutions to seek gilts etc and QE is a short-term central bank mechanism for trying to encourage those investments to go into spending and company stock for reinvestment rather than safe havens of gilt investment.  Printing cash tends to devalue currency when you do it because you essentially have changed nothing other than dilute your currency by printing.  Because you have also had a strong period of uncertainty - which is what caused the decision of central banks into QE, productivity and growth has faltered and so you also have caused stagnation and recession.   Higher interest rates and poorer exchange rates make stagnation and recession worst particularly for those with a "strong overseas trading deficit" (ie imports are greater than exports)

 

Things have been busy on this thread about the finances of Silversea, Royal Caribbean Group and other cruise lines, etc.  AND, getting deeper in the heavy academic and economic fields of QE, etc.  Had to look up that phrase and refresh my crowded and limited brain as to Economics 101.  

 

Agree with UK Jeff that printing more money does dilute the financial values and create other, longer-term monetary policy challenges.   Agree that the cruise lines have started out being highly-leveraged with billions in debts and financial obligations.  Now, they have even more finance hurdles to manage with the current shut-down of operations.  BUT, so far, Wall Street and others in the money worlds have some current levels of "confidence" that there is a future way forward.  Some consumers have pent-up demand and will sail regardless.  Others, like us, are more careful and cautious.  It is clear that when conditions are right that running a cruise lines can be highly profitable.  But, now, not!!  How a future recovery works and looks will be interesting to following over the next two to three years.  It will not happen in just three to five months.   

 

As I have noted previously, we moved in mid March to get our deposit and payments refunded.  Received it back in late April.   Glad to have that money back in our accounts.  Others are more trusting with future cruise credits, etc.  Only time will tell as to . . . which "BETS" pay off?  Which gambles are losers?

 

THANKS!  Enjoy!  Terry in Ohio

 

Barcelona/Med: June 2011, with stops in Villefranche, ports near Pisa and Rome, Naples, Kotor, Venice and Dubrovnik. Great visuals with key highlights, tips, etc. Live/blog now at 251,960 views.

www.boards.cruisecritic.com/showthread.php?t=1426474

[tgh]

OT , but very interesting that Terry needed a refresher on QE.

If  one assumes that Terry occupies, say , the upper 15%  of financially informed US  citizens, what hope do the bottom 60% of citizens have of understanding the world financial situation and their personal risk status ?
Leads to .. no wonder so many folks seem comfortable giving cruise lines extended, no cost/no effective liability, lines of  credit.

 

[Daveywavey70]

23 hours ago, jland said:

Daveywavey was the above post meant to be humorous? I only ask because from where I sit the post reads like a disgusting put down of people which has no place on this forum.

I Apologise if you don’t get my sense of humour. The post was intended to be both humorous and ironic. The truth of the situation is that the discount has resulted in a complete free for all. In my own hotel we are trying to be responsible and are only currently using every other table, every other service. This limits us to accepting approx 50 diners per night. Many local hotels are taking  150/180 diners per night that are packed in together like sardines and are obsessed with getting the discount despite putting themselves and others at risk. I Am extremely lucky to live in a part of the world that as had an extremely low rate of the virus, but now, we have been inundated with people that are more concerned about getting their £10 off than remaining safe. Is a cheap meal really worth dying for? I Have turned away more than 50 tables tonight and not one of them enquired about Social Distancing, almost all of them opened the conversation with “Are you doing the eat out scheme” I Hope this Clarifies a little where I am coming from. No hate was intended from my post but consideration was. I Apologise again if my wording was clouded by my frustration but I’ve spent 5 months keeping safe and following every rule only to be  overwhelmed with people that have no comprehension of social distancing that are happy to walk straight to your face seeking a cheap meal.

Edited August 19, 2020 by Daveywavey70

[TLCOhio]

14 hours ago, tgh said:

OT , but very interesting that Terry needed a refresher on QE.  If  one assumes that Terry occupies, say , the upper 15%  of financially informed US  citizens, what hope do the bottom 60% of citizens have of understanding the world financial situation and their personal risk status ?  Leads to .. no wonder so many folks seem comfortable giving cruise lines extended, no cost/no effective liability, lines of  credit.

 

Appreciate this smart and wise follow-up from our CC Board friend in Australia.  Yes, I plead guilty to not immediately recognizing and understanding what was "QE".  Here in the U.S., there is only light mention/coverage in the media as to what the Federal Reserve does, its internal mechanics, etc.  Therefore, those so-called "investment" by the Fed seem very distant and totally unclear.  The media and public cover and understand much as to the unemployment levels, interest rates, budget deficits, etc.  Agree strongly that long-time cruisers giving unsecured "loans" to cruise lines should do a better job understanding what risks and gambles they are making with what was once their money.  

 

From the Wall Street/financial website "Seeking Alpha"  this morning, they had this headline: “Royal Caribbean: Forget About Growth In The Next Few Years” with these highlights: “Just like Carnival Corporation, Royal Caribbean will continue to suffer losses as long as COVID-19 is not contained. The recent outbreak of the virus on the Norwegian cruise ship shows that the cruising industry will be one of the last to return to normalcy. While Royal Caribbean has enough liquidity to weather the storm, it still estimates to burn $250-$290 million per month and is likely to raise more debt along the way, since there’s no guarantee that CDC’s no-sail order will not be extended once again to a further date. Although Royal Caribbean is better positioned to survive the crisis in comparison to its peers, its stock is likely to continue to trade in a distressed territory until the end of the year.”

 

That is a sobering and enlightening analysis and summary.  Here is more from their reporting and the specifics cited that might be of interest: "As the number of active COVID-19 cases around the world and particularly in the United States continues to climb at an accelerated rate, there’s no guarantee that CDC will not extend the no-sail order, which prevents cruise companies from normally operating their businesses. While Royal Caribbean had a profitable and efficient business model before the pandemic, its future currently looks bleak. Despite having $4.15 billion in cash reserves, Royal Caribbean also has an overleveraged balance sheet, as its net debt position is $15.46 billion. The good news is that the company faces only $0.3 billion and $1.3 billion in debt maturities in 2020 and 2021, respectively, which gives it enough breathing room not to worry about the liquidity crunch.  There are several risks associated with Royal Caribbean's stock. Closed borders are one of the main reasons why tourists will not be able to sail on cruise ships like before and why Royal Caribbean will continue to lose money. Currently, the European Union accepts only citizens of 12 countries, while the Cayman Islands and Bahamas decided not to accept any cruise ships at all for the foreseeable future.  We should also not forget about the possible regulations from governments, which will hurt the bottom line of cruise companies.  After the inability of cruise liners to prevent an outbreak of the virus on its ships, there’s a risk that authorities will force the companies to either operate at lower capacity or prevent them from sailing at all at their waters until the pandemic ends. The truth is that the cruise industry will be one of the last to return to normalcy."  

 

Are these background details and questions sobering and realistic??

 

Full story at:

https://seekingalpha.com/article/4369649-royal-caribbean-forget-growth-in-next-years

 

THANKS!  Enjoy!  Terry in Ohio

 

Norway Coast/Fjords/Arctic Circle cruise from Copenhagen, July 2010, to the top of Europe. Scenic visuals with key tips. Live/blog at 240,208 views.

www.boards.cruisecritic.com/showthread.php?t=1227923

[philipb]

I think Jeff's analysis holds water. In the meantime the start of the corporate casualties in the cruising world looks to be upon us:

 

https://thepointsguy.com/news/crystal-cruises-parent-company-financial-trouble/?utm_source=flipboard

[UKCruiseJeff]

1 hour ago, philipb said:

I think Jeff's analysis holds water. In the meantime the start of the corporate casualties in the cruising world looks to be upon us:

 

https://thepointsguy.com/news/crystal-cruises-parent-company-financial-trouble/?utm_source=flipboard

 

Thanks,  however I do so desperately hope that my instincts prove to be totally wrong. 

 

As a result of your pointer, I've just glanced at the Crystal board and it is so utterly depressing.  Behind each of the posts of people waiting for refunds is a human story of anxiety and possibly significant loss.  Many people work hard through a working life and are motivated by the dream of a once in a lifetime cruise, and save towards that dream, and it really shouldn't end this way.  I hope something happens and those waiting anxiously get their cash or a cruise. 

 

As I have repeatedly posted,  I have a terrible feeling that a significant number of people who think and have trusted ressaurances from many that they have protections,  will I fear prove to be dissapointed. 

 

[drron29]

I agree that QE and low interest rates will eventually lead to a depression but the Japanese have been doing it for 30 years and haven't yet had the real disaster.but doing the same thing for 30 years and expecting that eventually you will get a different result has been explained by better people than I as insanity.

[UKCruiseJeff]

59 minutes ago, drron29 said:

I agree that QE and low interest rates will eventually lead to a depression but the Japanese have been doing it for 30 years and haven't yet had the real disaster.but doing the same thing for 30 years and expecting that eventually you will get a different result has been explained by better people than I as insanity.

 

And they can continue to do so for as long as they are able to borrow and to service the debt.  That is the whole point. The problem is when they can either borrow no more and/or they can no longer sustain or service the debt.

 

As I said in my earlier post, the way that many economies try to escape from the damage caused by QE - as Japan has done - is to do do more and more  QE.  If you cannot change the fundamentals you will be tempted to take more paliative  short-term solutions.  As I also sugggested it is drug like and masks reality until it all suddently goes wrong.  Japan also takes  a questionable approach to QE that is concerning.   In over-simple terms for the money supply to be increased by QE central banks should only buy long-term securities from non-banks otherwise they are not effectively increasing money supply in the medium to longer term - only rapidly recycling cash for short term results.  Japan has repeatedly not followed that approach.

 

Japan is now the most indebted country (debt to gross gdp) in the world and I predict you will find that as the rest of world increases in competition for borrowings which will be huge, Japan will be seen as a higher risk and their bond rates will become higher and for reasons I explained earlier it is more likely that their bubble they have been avoiding by continuous QE will become unavoidable and possibly catastrophic.

 

If you are interested in understanding more of Japan's approach to QE and it's potential harm you may be interested in reading .......

 

https://www.investopedia.com/articles/markets/052516/japans-case-study-diminished-effects-qe.asp

 

A fuller and decent explanation from Cato of the point I make with respect to Japan's approach to QE compared to the US, UK and EU generally....

 

https://www.cato.org/sites/cato.org/files/serials/files/cato-journal/2017/2/cj-v37n1-2.pdf

 

In exceedingly simple terms, even the most gullbile economist knows that you can only get something for nothing for a finite period and at some point all of the chickens do come home to roost.

 

Jeff

Edited August 21, 2020 by UKCruiseJeff

[TLCOhio]

14 hours ago, UKCruiseJeff said:

And they can continue to do so for as long as they are able to borrow and to service the debt.  That is the whole point. The problem is when they can either borrow no more and/or they can no longer sustain or service the debt.   Japan is now the most indebted country (debt to gross gdp) in the world and I predict you will find that as the rest of world increases in competition for borrowings which will be huge, Japan will be seen as a higher risk and their bond rates will become higher and for reasons   In exceedingly simple terms, even the most gullbile economist knows that you can only get something for nothing for a finite period and at some point all of the chickens do come home to roost.   Jeff

 

Appreciate these excellent info items, comments and follow-up from UK Jeff.  Much to consider at the longer-term financial challenges continue for various countries, cruise lines, etc., etc.       

 

From the South China Morning Post in Hong Kong this morning, they had this headline: “Will Genting’s Hong Kong plight affect its units in Malaysia, Singapore amid the Covid-19 pandemic?” regarding the owner of Crystal Cruises, plus other Asia-focused sailing operations.  

 

Here are some of the story highlights: “The Genting empire, which owns and manages resorts, cruises and casinos across the world, has been headed since 2003 by Malaysian tycoon Lim.  He has seen his fortune drop to a current value of US$700 million excluding pledged shares, down from US$1.5 billion at the beginning of the year.  'It’s a challenging outlook,' said an equity analyst.  'To be frank, any recovery hinges on a vaccine for Covid-19 being developed and the opening up of borders without any quarantine requirements.'  Investor sentiment towards Genting’s listed units might also worsen amid concern they could default on loans or bonds, the analyst said.”

 

While I do not have a Ph.D or Masters in corporate finance, the contrast is fairly clear as to these three biggies, Carnival, Royal Caribbean and NCL, . . . versus . . .  Genting Hong Kong.  The Crystal Cruises owner has defaulted, cannot borrow more cash, seen its stock value crash and not been able to attract more capital.   The big three are burning cash, but maintaining (for now) an ability to raise more capital and keeping their stock values somewhat rebounding and stable to a decent degree now.  

 

Personally, I believe this Covid-19 situation is going to take longer than hoped to solve and return to some form of “normal”.  Super glad that the cruise lines do not have any of my money.  As of this morning, the international media is still somewhat limited as to its coverage about Genting Hong Kong and Crystal Cruises.  This Financial Times story: 
https://www.ft.com/content/224cf641-f029-4d23-b24b-159f257294b8
has some decent background, but is still not that in-depth.  

 

My bottom line is that the supposedly super rich owner of Genting Hong Kong either cannot or will not put in more of his personal capital into these business.  He also cannot get more capital via the stock market or banks.  Based on those circumstances, it looks like Genting Hong Kong and Crystal are headed the wrong way on a dead-end street.  

 

Fair or unfair for the Crystal owner?  Right or wrong as to that lack of capital-access summary?   Am I missing something major or otherwise?

 

Full story at:

https://www.scmp.com/week-asia/economics/article/3098373/will-gentings-hong-kong-plight-affect-its-units-malaysia

 

THANKS!  Enjoy!  Terry in Ohio

 

Sydney to NZ/Auckland Adventure, live/blog 2014 sampling/details with many exciting visuals and key highlights.  On page 23, post #571, see a complete index for all of the pictures, postings.  Now at 230,846 views.

www.boards.cruisecritic.com/showthread.php?t=1974139