Emma’s Note: Longtime Diary readers will be familiar with Bill’s colleague, Tom Dyson. Like Bill, Tom is a confirmed gold bug. In fact, before leaving on his nearly three-year around-the-world trip with his family, he invested nearly all his savings in the precious metal.
But Tom is always on the lookout for alternative “hard money” investments. And today, he shares the details of an essentially risk-free investment. If you’re looking to get your savings out of the dollar and into safe, hard assets, you’ll want to read on…
I recently heard about a company selling 15-year-old shipping containers for $6,000…
Here at Rogue Economics, Bill, Dan, and I are very skeptical that the dollar and other paper currencies are going to be good stores of value for our savings in the future.
We talk a lot about gold, silver, and other proxies for hard money.
But today, I want to suggest another form of hard money that could be an excellent new place for us to keep our savings: shipping containers.
Let me explain…
Big Steel Boxes
Shipping containers transport roughly 60% of the imported goods we buy today, according to Fast Company magazine.
From the coffee you drank this morning… to the computer or smartphone you’re probably reading this on… if it was imported, chances are it crossed the sea in one of these big steel boxes.
What you may not know is, these boxes pay rent to their owners, just like any other rental property. Except instead of having annoying tenants, they’re filled with “stuff”…
There are many different sizes of container. To keep things simple, the industry counts containers using a unit of measurement called the “TEU.” (TEU stands for Twenty Foot Equivalent Unit. The most common containers are 40 feet long or 2 TEU.)
As of 2021, there were about 50 million TEU of container boxes in service around the world.
Anyway, the giant ocean shippers like Maersk, Cosco, and Hapag-Lloyd own approximately half the world’s containers. The rest are owned by specialist container leasing companies. There are seven big ones.
Pure Profit for This Important Industry
Last weekend, I listened to an interview on Value Investor’s Edge, a specialist shipping research service I subscribe to.
The interview was between J Mintzmyer – a hedge fund consultant in the shipping sector – and the executive team of a large box-lessor company I recommended in my Tom’s Portfolio advisory service. [Tom’s Portfolio subscribers can access the model portfolio here.]
They said some desperate shippers in China were paying as much as $6,000 to buy used container boxes. These boxes are over 15 years old. They cost $2,700 new, and they’ve been earning rent their whole lives at more than 10% a year.
It’s like buying a car for $2,700, leasing it to a customer for 15 years, and then selling it for $6,000 at the end of its useful life. Not a bad business, especially when you own a million of them!
What’s interesting is, even though these boxes have an extremely high resale value, the accountants at these firms depreciate them to zero in a straight line over 14 years.
Put simply, that means any box that’s older than 14 years has been written off in the accounts already. So any amount the company can sell them for will be almost pure and unexpected profit in the reported accounts. (“Gain on disposal” is the official classification for these profits.)
Oh… and the annual rental yield on a container box? As I said, on paper, it’s over 10% a year.
But it’s actually better than that. That’s because the box leasing firms finance these box “fleets” with cheap, long-term debt (below 3%). So the actual returns for the owners of the boxes are far higher than 10%.
For example, the container-box lessor I mentioned above is reporting risk-free 22% returns on equity right now.
I say “risk-free” because the boxes are contracted for their entire economic lives to giant shipping lines that are unlikely to default on the rent.
As I mentioned, they’re contracted at 10% rental income and financed at 3% cost on bank loans. And when they reach 15 years old, they’re sold, and the proceeds go down as “gain on disposal” – which right now, is double what it cost to purchase the box in the first place.
It’s an incredible investment idea!
I humbly suggest that, if you’re looking to get your savings out of the dollar and into safe, hard assets, you could do a lot worse than buying a bunch of banged-up old container boxes…
…contracted out on long-term leases to the world’s largest shipping lines…
…and being represented on corporate balance sheets at values that are fractions of what they’re worth in the real world right now.
Out of respect for my paid-up subscribers, I can’t give the name of the company I recommended in Tom’s Portfolio. But if you’re interested in investing in this industry, just search for “box lessor industry” in Google, and begin your search there…
Editor, Postcards From the Fringe
P.S. I’ve built an entire strategy to protect our hard-earned savings from a depreciating dollar. And I’ve singled out the top names in the gold and shipping industries, so my subscribers can inflation-proof their wealth in the years ahead. To get full access to my research, learn more here.
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