Why the Shipping Industry Is Hot Right Now

CHISWICK, WEST LONDON – How do Kate and I get by financially without full-time jobs?

We have a little savings and we speculate with it in the financial markets. Hopefully we make a little profit from these speculations and we can get by that way.

Last year, we bet more than 15% of our account on the hypothesis that the shipping industry had entered a renaissance… (More below.)

Burdened With Possessions

Greetings from London…

We’re at my mum’s house. I’m sleeping in her bed, drinking tea out of her teacups, watching TV on her television, surrounded by all her things. Sometimes I even wear her slippers when my feet get cold. Is this weird?

It’s just so hard to say goodbye.

Kate and I are hard-core minimalists, and yet here we find ourselves burdened with possessions suddenly – beautiful things that once belonged to my grandparents and great grandparents, irreplaceable things, my mother’s things.

It’s like life is testing us. “You call yourselves hobos, but let’s see what you’re really made of!”

Sigh.

Here I am writing today’s Postcard in a spot where I used to sit when I was a child reading my books…

Making the Most of Our Time in London

In the meantime, we are making the absolute most of our time here in London.

Yesterday, for example, Kate and Penny attended a local church service while I took the boys to Lord’s Cricket Ground to watch cricket.

The day before, I met up with two of my oldest friends from college and we toured Pitzhanger Manor, a spectacular example of a neoclassical English country house located in Ealing, West London.

Over the last few weeks, we’ve been to Oxford, Hampton Court, Tower of London, a bunch of museums, and the Wimbledon tennis championships.

Dusty even has a job working in a botanical garden that’s about to open to the public for the first time. He goes once a week and gets paid £5 an hour to pull up weeds and trim the lawn.

The kids have done intensive training in cricket, rowing, gymnastics, and karate. And this week, they’re attending a drama school called Stagecoach. 

Back to the renaissance in the shipping industry…

Renaissance in Shipping

There are two elements to the shipping renaissance…

First, shipping has been a terrible investment for years. And so in general terms, the stock prices of publicly traded shipping fleets are cheap.

(They aren’t quite as cheap now as they were this time last year. But pull up any long-term chart of a shipping stock and you’ll likely see a more than 90% decline in the stock price over the last 12 years.)

And the second is new anti-pollution, environmentally friendly regulations that may eventually include a complete rethink of the type of fuel ships burn. This is making shipping executives very reluctant to order new ships.

(New ships are very expensive, and only have a lifespan of 20 to 30 years depending on the type of ship. If there’s any chance your new ship won’t meet emission standards in a few years, you’re not going to spend $100 million on it. You’ll be much better off buying a secondhand one.)

Each shipping segment is different but, generally speaking, orderbooks for new ship construction are at record lows.

For example, take a look at the chart below. It shows the orderbook for two types of oil tanker: very large crude carriers (VLCC) and Suezmax.

As you can see, the orderbook for both VLCC and Suezmax tankers is the lowest it’s been in more than 20 years.

Now, consider this in conjunction with the fact that 1) America is about to embark on a massive infrastructure spending spree using printed money, and 2) the price of steel should rise from here (steel is energy intensive and the war on climate change is going to make steel cost more in the future).

I’m really interested in owning big fleets of cargo vessels. Especially if they’re going for sale cheap (which they were last year) and they’re not run by crooks or incompetents (which, unfortunately, many are, so we have to weed out the bad ones).

We’re not going to get rich from this, but we think we can make 10% or 12% a year, which will really help. It’s way better than keeping our money in the bank. And it’s a great complement to our gold investments.

– Tom Dyson

P.S. I’ve recommended a model portfolio of shipping stocks in my elite service, Tom’s Portfolio, including all types of cargo ships… But out of all of them, I’m probably most interested in container shipping right now.

Rates for chartering container ships are going absolutely insane. Some of the companies we follow are making obscene amounts of money and locking in these rates for the next few years. (As I wrote in last Monday’s Postcard, they are making so much money, it’s starting to draw the attention of politicians and even President Biden!)

Last week, the Harpex – which is one of the indices for container ship charter rates we watch – went up another nearly 4%. It’s now up 62% in the last eight weeks. And it has gone up every single week since June 12, 2020 (58 consecutive weekly increases) for a gain of 663%. To get the list of the shipping stocks I believe are most likely to profit, learn more about a Tom’s Portfolio subscription right here.

In the mailbag today, not everyone is a fan of Tom and Kate’s choice to homeschool their kids…

Reader comment: The one major danger I see with homeschooling is that the children’s thinking will be strongly weighted towards what their parents think and say (even if it’s not overt). Of course, the parents will always believe their thinking is the correct analysis, and this will carry over to the children.

I see this very clearly with regard to religious affiliations. Religion is, and always has been, a cultural/social phenomenon that is considered by adherents to be immune from critical thinking. Exposure to school teaching is certainly not by itself the answer since biases there will also prevail.

Children need to be taught to focus on independent critical thinking, both with regard to their parents’ points of view as well as societal and school biases. This is likely to be a hard thing for homeschooling parents to swallow.

While others appreciate Tom’s adventures, investment insights, and parenting style…

Reader comment: What adventures and lovely eloquent writing. I’ve moved my money into gold but do kick myself that I’ve missed the rise of the stock market… Guess you can’t have it both ways.

Reader comment: Your story is great reading. I have fun conversations with a couple of similarly minded friends (to me and perhaps you as well) about our life’s choices over the years. My friends (and our wives) stay open to future changes despite our 67 years. We try to open our grown kids’ minds as well (it’s difficult!).

Your choices and the fact that you acted on them are profound. Most people will only be fascinated, at best. Probably, like my kids, and like I was, we make moves that let go of places and people. I think you’ve perfected the art of letting go. Embracing “the road” was really gutsy. I’m most comfortable with your present assessment: “Live as tourists” and embrace the 3-6 month “field trips.”

What I’ve found from my open-minded friends – and my open-minded self – as pertaining to your profound and thoughtful living choices is that it’s born of hardship. Those without our life challenges may be very content (or not!). Challenge may be what life is all about – the impetus for moves of great courage bring great living.

Reader comment: I have been reading your Postcards for at least two years, probably longer. Thank you for all your insights and balanced observations on our world economy. All the best to you and the family.

Reader comment: I love reading about travels and economic lessons! When you make it to Israel, if you have time, let me know. I am a long-time reader and follower. I am active-duty military assigned to the U.S. Embassy here in the Tel Aviv area and would enjoy meeting for dinner or something. Safe travels.

Reader comment: I have greatly enjoyed reading about your family’s adventures. I think that the education you are giving your kids is priceless. Plus, the time that all of you are spending together will build lasting memories as well as bring your family close together. My hat is off to you. God bless you and your family.

Tom’s note: As always, thanks for your messages. Please keep writing us at [email protected], and I’ll do my best to answer your questions in a future Friday mailbag edition.