YANKTON, SOUTH DAKOTA – Big news in tanker land last week. But before we get to that, here’s the case for gold in one paragraph and one chart…
The U.S. government is broke. They’re going to use inflation to reduce their debt burden. Then, the central bank will use its money-printer to prop up the price of U.S. government debt when inflation begins. Gold is going to surge (which the feds will support as a rising gold price helps foster the inflation they need).
The chart below shows gold’s big correction over the last 10 years. It’s almost over. Soon, gold will be making record highs again. I think it goes AT LEAST to $10,000 an ounce as the government’s debt crisis goes “critical” over the next five to 10 years.
But that’s not the biggest news today. Things are heating up for oil tanker stocks – which, as you know, are the only investment I’ll make today that’s not gold.
More below. But first…
Into the West
Greetings from Lewis and Clark Lake…
My family and I are having the best summer vacation ever.
We left Florida two months ago in a car and we’ve been driving around America, meeting up with friends (new and old), sleeping in campgrounds, and seeing as much of America’s natural beauty as we can.
So far, we’ve been exploring the eastern half of the country. This week, we crossed into the western half of the country.
For the next three months, we’re going to explore South Dakota, Colorado, Wyoming, and Montana. We’re also hoping to make it into Alberta and British Columbia in Canada.
Today we drove three hours west from the farm we were staying at in Iowa. We crossed the state line and we’re now in South Dakota.
Tonight we’re staying with Myles and Valary, who have kindly invited us to “crash” at their house for the night.
Here we are with Myles at the nearby Gavins Point Dam on the Missouri River…
Dusty, Miles, Penny, and Myles check out the Missouri
Back to the big news for tankers…
Cash Bonanza for Oil Tankers
First, oil tanker lease rates surged last week.
Spot rates for the largest tankers averaged $35,500 per day on Thursday, said Clarksons, a shipping services provider. That’s up almost 50% from the week before.
Rates for Suezmaxes, the second-largest tanker class, averaged $14,400 per day, up 32% week-on-week.
In 19 of the past 20 years, the summer has been the weakest period of the year for tanker lease rates, so it’s very encouraging to see them rise unexpectedly last week.
(The rates booked last week are the highest they’ve been since 2015, and double what they were this time last year.)
Could this be the beginning of another surge in tanker lease rates – and another cash bonanza for the tankers?
Not sure… but either way, it virtually ensures the tanker stocks will report strong earnings for the third quarter of this year. It’d be their third successive quarter of strong profits in a row.
Tanker stocks soared on Friday, with several up more than 6%. But let’s see if they can hold onto these gains this week…
Tomorrow, we’ll hear news from the Organization of the Petroleum Exporting Countries (OPEC).
In April, OPEC cut its oil output by 10 million barrels a day to meet the sudden collapse in demand caused by coronavirus. That’s about 10% of total daily world oil production.
Cutting sales must have been very painful economically… Not only for the lost revenue, but especially as their cuts have been a huge boon to oil and gas producers in America.
They’ve run out of patience.
Tomorrow, OPEC is meeting to decide how to increase production again, starting in August (about two weeks).
Good News for Our Feast or Famine Thesis
More OPEC production means more cargoes on board oil tankers and more long voyages.
Now, if you’ve been reading these Postcards, you know our core thesis for investing in tankers… That is, the shipping business is a feast or famine business.
The core determinant of whether it’s going to be a feast or a famine is how many ships there are in the fleet to serve the market.
When there are too many ships, no one makes any money and there’s a “famine.” When there are too few ships, the shippers make fortunes or enjoy a “feast.”
And last week, we got news from the shipbuilding industry that supports this…
Shipbuilding declined 57% in the first half of 2020, says Clarksons, to the lowest levels this century.
“Just 269 ships were contracted in the first six months around the world, putting many yards in jeopardy of running out of business in the coming year,” says Splash, a shipping industry publication.
The reason shippers aren’t ordering new ships?
As we’ve been saying in these Postcards, there’s great uncertainty in the shipping industry over ship emissions.
Shippers don’t want to order expensive new ships until they know what the regulations will be. (See the July 7 Postcard for more details on that, too.)
Our tanker thesis remains on track. Invest accordingly.
– Tom Dyson
P.S. The industry’s next feast is just around the corner. And there are four oil tanker stocks that will benefit the most…
To find out how to get full access to my list of oil tanker stocks, watch this. You’ll find out why tankers are the only investment I’m making with my money today other than gold… and I’ll also show you why the case for $10,000 gold is now stronger than ever.
You’ll even learn how to get the 11 gold names I recommend to take advantage of gold’s climb over the next five to 10 years…
P.P.S. Earlier today, Myles took us up in his plane so we could see the local landscape from 1,800 feet up…
Dusty and Miles, ready for takeoff
Readers plead with Tom to change his eating habits, after… he said he may soon “only eat fast food”…
Reader comment: Tom, I’m gobsmacked!! I’ve been reading your postings for the past couple of years and really enjoy them. I like the fact that you seem to often fly in the face of what’s accepted as the “way to go,” and my assumption was that you are a pretty smart guy and do your homework in these areas.
Well… After reading your response to a reader’s suggestion that you lay off the fast food, I have to change my thinking about you being as smart as I thought, and the homework part!! Surely, you realize that the fast-food businesses are as successful (financially) as they are because they operate on making people addicted to their rubbish. Have you thought about why you “have these terrible cravings for it?”
Reader comment: Hey Tom, I saw your comment on how you crave fast food more all the time. I believe you could find a way to change your gut microbes and your cravings. If you’re truly interested, that is. Just think of all the other wonderful changes you’ve experienced in the last couple years! Take care!
Reader comment: Hi Dyson family, read your postcards every day and love following your adventures. Concerned about your fast-food diet though. Don’t think it’s good for the long-term health of all of you.
Tom’s response: It’s definitely not healthy. But it’s 100% Americana and it matches the experience we’re having. We’ll go back to a plant-based diet soon.
While others weigh in on oil tankers, taking the Dow-to-Gold ratio international, and the Dyson family travels…
Reader comment: Hi Tom, I have a question regarding the four tanker stocks that you suggested might be a windfall investment. As you’ve stated, they are down considerably, from my buy-in price also. I’m thinking of buying a second tranche of all four at the current sale price. My aggregate price would be more attractive. Do you think that would be prudent, or a bad idea? My broker doesn’t list the NAV. Where is there easy access to that? Thanks in advance. Stay safe and happy travels with your charming family.
Tom’s response: I can’t give you personal advice and without knowing the specifics of your particular situation, I can’t really say. What I would say is err on the side of caution as tankers are very volatile, and don’t go above your “sleep well at night” position size.
Reader question: Hi Tom, thank you for the entertaining messages! Quick question: Did you ever consider applying the Dow-to-Gold trading strategy to markets in other countries? On the surface it appears that the approach should work, and I’m just wondering if you ever explored that angle.
Reader comment: Dear Tom, it’s been great reading your postcards this past year. Your trip across America will be one to remember.
Tom’s response: Thanks for writing in! Please keep sending us your questions and comments at [email protected]. Even if I can’t respond to your comment right away, I read every message you send us.