Diana Shipping, DSX Kicks off 9%+ With Issues

Diana Shipping, or DSX is one of a group of dry bulk carriers of things such as iron ore, coal and grain we've been up on at The Hoe, for it's good looks, which are almost TGTBT, with a current yield of 9.90% standing still.

DSX has been growing steadily over the last several months, which has given buyers a hardy capital gain.

DSX has gathered fans, to be sure-- but it's P/E has grown toppy at over 18, which does not exactly leave a wide margin of error for, say, broad market declines, or say something unforseen, such as a ship running a ground, as it did this week. The repair looks to be in the range of 600k, and time lost shipping things is estimated to cost the company 600k in opportunities to earn.

The market noticed, and DSX sank some today by a sizeable sum, enough to hit The Hoe's trailing stop limit order, which locked in a tidy sum. With the bloated P/E, and certain market commentators (including some jackass at Citicorp who seems to have never heard of stop loss orders on high yielding stocks, and Cramer, who certainly has) yacking about overbuilding in the shipping space. So today was backslide day for DSX based on its bad news.

DSX is one of a group of shipping companies that kick off nice high yields, but must be administered in controlled doses to avoid getting paid with your own money. These include NAT, EGLE, FRO, QMAR, and GMR among others.

The down side of high yield-- lower lows for sub-prime lenders

New Century, or symbol: NEW, the company who's head of IR/PR called me to tell me that she was shocked, shocked, to think that gambling was going on with there mortgage pools, dropped another 50% this morning, which I kind of suspected would happen at 3am when the Asian markets were dumping. I would be happy to take her call today to follow up about what percentage of their pools were funky paper, since she told me it was a very small percentage and that I was factually wrong about NEW a few months back, about the time Businessweek did a front page story about sub-prime lending, and Barrons explored the calls, puts and longs of investing in NEW. I left a message last week to ask if they were going to cut their yield, which seems necessary; but they never called back.

If you've been following the knitting we do here at Theyieldhoe.com, you know the time to load the boat with Put contracts (maybe the LEAPS in 2008's) was last week, along with the Puts on a few other companies with Sub-prime loan portfolios that were underwritten by 23 year old "rock star" brokers over the last few years. Is anyone sick of the adjective "rock-star" yet? Maybe we will be when the mortgage companies finish their dance of the falling knifes.

The good news is, many of them are no doubt riding in Lexis in heated seats; the bad news is, a lot of people will be moving out of the homes that were bought with these adjustable mortgages, which were syndicated and sold around the world as high yielding, scecuritized paper.

Speaking of hell, what the hell does the underlying business have to do with anything, right?

Thus, today is a great day to look at what some of this Sub-prime toilet paper stocks did in the market, and how their Puts are trading, which are the equivalent of a short sale for those who are new to the great game. Here is the spreadsheet I am maintaining to show the gains or losses on "the down side of high yield" so to speak, including NEW, Indymac and LEND.

• http://spreadsheets.google.com/pub?key=p_T48-HYs1wuXfatni6GLZw

If I have the time, I'll included Countrywide, and HSBC (love that theme song on there TV commercials, don't you? But maybe it they'll have to pick something even more blue and melancholic after this quarter and next).

Volitility is high, a look at Lower Beta Beauties...

Times like these, with the VIX having taken it up a knotch, it could be a good time to consider low beta, higher yielding securities, with nicely growth rates, which is just the part of the craps table to where we like to stay close.

Step one, go to the screen machine to find these types of stocks; and step too, look deeply into their other factors, including earnings, trading history (Bollenger bands and Moving averages) and events on the horizon, and it seems almost TGTBT, but there you go. It's a list to help you sleep at night with all this bouncing around of prices, and Sub-prime lender blowback.

Here is a hand picked list from a screen to find a list of high yielding, low P/E, Lower Beta Beauities, with sizable growth rates, available on our online spreasheet:

• http://spreadsheets.google.com/pub?key=p_T48-HYs1wuFRfYJsKkTZQ

Symbols:

SPH
SFC
SBR
AINV