Dismal Days For the Cruise Industry… And How You Can Capitalize On It

My sister loves “cruising.”

Me, not so much. The idea of lounging around the deck of ship all day sipping drinks with umbrellas in them isn’t my idea of fun. I prefer more active holidays.

I’m also one of those guys that really never stops working, so I need to be connected to the internet, which means I really object to the sky-high prices that cruise ships charge for Wi-Fi access.

We’re talking like $30 or more per day!

But I love spending time with my sister, her husband and my two nephews. So I begrudgingly agreed to go on cruise in May. 

But then I received this email from Royal Caribbean Cruises last week.

Don’t tell my sister, but I was delighted that the cruise was canceled. Not only do I not have to go on the cruise, I get 100% of my money back without any penalties or fees. Yippie!

More importantly, a cruise ship is the last place I want to be during this coronavirus crisis.

Nor is this the time to own cruise ship stocks, like Royal Caribbean (RCL), Norwegian Cruise Line Holdings (NCLH) or Carnival Corporation (CCL).

Each of those cruise companies were begging for some bailout money. But each one was left out of the new $2.2 trillion bailout bill.

The reason is simple: None of those three are incorporated in the United States. Carnival is incorporated in Panama, Royal Caribbean in Liberia and Norwegian Cruise Line in Bermuda. Which means that while their corporate offices may be located in the U.S., any taxes they pay go to these other countries.

It’s a little confusing, but cruising companies do this intentionally. It’s a completely legal way to escape paying corporate income tax to the United States.

My feeling is that those cruise companies can pound sand. They didn’t want to pay U.S. taxes, so they don’t deserve taxpayer-funded bailout money either.

Moreover, almost all the employees that work for cruise ships aren’t U.S. citizens. So very little bailout money paid to cruise lines would go to help Americans keep their jobs.

With all of this said, I don’t see any chance of the cruise industry rebounding any time soon. However, the bigger issue is that the cruise industry has been rapidly expanding, mainly thanks to the allure of cheap money. They are now sitting on billions of dollars of debt that will come due for the new, multi-billion-dollar ships that they’ve ordered.

The above three stocks have lost 60%-plus of their value in the last three months, but I highly advise against buying the dip. I expect they’ll sink lower as more states adopt stay-at-home orders. In fact, if these stocks happen to rally, I am going to buy put options on them.

When you buy a put option, you get the right to sell stock at a certain fixed price within a specified time frame. In short, put options go up in value when the price of a stock falls.

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Until next time,

Tony Sagami