Investors Can Inflation-Proof Their Portfolio With Shipping Containers

CHISWICK, WEST LONDON – This weekend I heard about a company selling 15-year-old shipping containers for $6,000…

Here at Postcards, we’re 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. In particular, I’m really into cheap cargo ships as hard-money proxies at the moment. 

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…

(More below.)

Best Summer in London

Greetings from London…

We came to London six months ago to say goodbye to my mother, sell her house, pay the death taxes, and go back to the U.S. as fast as possible.

But instead, we decided to stay and make the most of our time here…

We went to the British Museum, the Victoria and Albert Museum, the Science Museum, the Imperial War Museum, the Geffrye Museum, the Tate Britain, the Tate Modern, the National Gallery, the Museum of London, the Tower of London, Kensington Palace, Hampton Court, Lord’s Cricket Ground, Wimbledon, Brentford, Crystal Palace, St. Paul’s Cathedral, the Royal Courts, and Oxford.

We’ve taken lessons in guitar, drums, cricket, golf, rowing, gymnastics, karate, and stage performing.

We’ve gotten involved with our local church, our local homeschool meetup group, our local cricket club, and we’ve made friends with all our neighbors.

As for doing the job we came here to do?

Not so much. We haven’t sold my mother’s house yet – and we’re not sure we want to anymore.

Oh well. We have to go now. (Our 180-day visitor visas are up next week.) We’ll just have to lock the house up… and come back next year and try again.

Weekend Trip to the West Country

We left the city this weekend. We went to the West Country.

We don’t have a car, and even if we did have one, we probably couldn’t get gas for it at the moment, as there is a weird gas shortage in the U.K.

So we went on a National Express bus (the U.K.’s equivalent of a Greyhound Bus). Here we are at Victoria Coach Station…

On Saturday, we went for a walk in the Cotswolds, a rural area with rolling hills and medieval villages. The weather didn’t support us, but we had fun anyway.

Here we are playing table tennis in the forest in the rain…

On Sunday, we visited the Roman Ruins in Bath. There’s a hot spring there – the only one in Britain, according to the City of Bath World Heritage Site. And 2,000 years ago, the Romans built a temple and a public bathhouse next to it.

Today, it’s one of the world’s most important archaeological sites, and the reason the city is now called “Bath.” 

Here’s Penny sitting next to the main bath, listening to the audio guide recorded for children…

Trouble in Canada

In other news… My brother Jo may be about to lose his job.

His company (in Canada) has introduced a new vaccination policy that says he has to be vaccinated against COVID-19 if he wants to keep working for them. My brother isn’t vaccinated…

Jo is the healthiest person I know. He’s an expert in nutrition and physiotherapy, and he gets up at the same time every day to exercise and use the sauna. He loves healthy food.

He has also done a lot of research about the COVID-19 vaccine in his own time. He says it’s risky and the drug companies and politicians aren’t being honest with the public about the risks. He and his wife, Krystal, are trying for a baby…

And anyway, he says, he doesn’t need the vaccine because Covid wouldn’t do him any harm if he caught it. He may have even had it already.

He has until October 12 to show proof of vaccination… and then, we’ll see…

A Hard-Money Proxy to Protect Our Savings

Back to shipping containers…

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 Postcard 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

This weekend I listened to an interview on Value Investors 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.

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. 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 were 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…

– Tom Dyson

P.S. The container-box lessor company I recommended to my Tom’s Portfolio subscribers is the best play on this opportunity. And it’s not the only hard-money proxy we have in our model portfolio…

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.

Like what you’re reading? Send your thoughts to [email protected].

Readers are impressed by Tom’s eldest son, Dusty, who penned last Wednesday’s Postcard…

Reader comment: Fantastic newsletter Dusty! Kept me interested and wanting to know more. Heck, I’ve already forgotten your dad’s name! Keep them coming.

Reader comment: Fantastic Travel Tales, Dusty! Keep it up and I’m sure by the time you are your father’s age, you will have many more experiences to share and many more people reading about them. I am currently traveling in Europe, visiting friends and family, and making new friends just like you. My trip is just five weeks before I head back home to Vancouver, Canada. I’m looking forward to reading about your trip to the British Parliament. And more reports!

Reader comment: You should let Dusty write the Postcards more often; he did a good job.

Reader comment: Hi Dusty. Just want to let you know how impressed I was about your story. The subject matter was fabulous. It’s always great to hear good news. Having our spirits lifted with good news is the best thing anyone could do in this world right now when things seem negative and confused. Please keep up the good work. Best wishes to all your family and I hope you get to do a tour of Parliament. Maybe you could write about that also.

Reader comment: Great job Dusty! Enjoyed your comments. I agree, most people, if not pressed, are very nice and generous. I have ridden motorcycles over much of the world and am continuously amazed at how helpful people are. I hope you guys get to tour Parliament. It would be a great way to cap your stay in the U.K.

Reader comment: Enjoyed reading your column today, Dusty! Well done. I see that you’re taking after your dad. Thanks for sharing the uplifting stories of kindness by strangers and acquaintances. Enjoy the Parliament tour and keep writing. Sure your dad doesn’t mind the break.

Reader comment: I absolutely loved reading Dusty’s Postcard. He is a natural writer and brought tears to my eyes with his stories of kindness. The stories were wonderful, and the writing was wonderful. I can’t wait to read about his tour of Parliament if you have time to go! Dusty should write more often, even if it’s not for these Postcards. Although I suspect he already does. Keep it up, Dusty!

Tom’s note: Thanks for the kind words and feedback! Please keep your comments and questions coming at [email protected], and I’ll do my best to address them in one of our Friday mailbag editions.