My mate Les Miserable recently described me as the Julian Assange of dry bulk shipping. I assumed because of my tireless pursuit of the truth. He said no, it was because I have a personality which would be more likeable if I was locked away from the public view. That was not far from the truth this week (the locked away bit, not the personality bit) as Julian sits trapped in the Ecuadorian Embassy in London waiting to see if he can avoid a trip to America, while I sit trapped in the Premier Inn on the Forfar ring road, waiting for some UPVC windows to be fitted in my penthouse bedsit over Frank’s Chip Shop in Airdrie high street.
It gave me time to read a lot this week, passing the time between repeats of Homes Under The Hammer. While skimming the increasingly disappointing Linkedin pages I read with keen interest a post suggesting that now was the time to buy a ship. Now my Ford Capri isn’t the only thing I’ve brought with me from the 80’s. My recollection of ships making a one way voyage from the launch to the scrap beach always makes me think that when you see light at the end of the tunnel it could actually be somebody with a torch bringing you more bad news.
So it seemed like a good time to go see Vim Van Vinky, a particularly smooth old friend who suns himself down in the Mediterranean. Vim picked me up from airport in cheery mood. He smiled to himself as he tapped his finger on the steering wheel of his 4×4 while Boys Boys Boys by Sabrina played on Tax Dodge FM. Life was clearly pretty good for Vim. As we swerved along the coast road I asked him what his secret to happiness was, because everybody else is about as cheery as the attendees of the ‘coffin building for pensioners’ course at Airdrie Tech.
‘In 30 years in this business I’ve never lost a buck in shipping’ he said. Well I suppose that’s true. His investors might have lost billions in that time, but he was right. He personally had got stinking rich. As we sat in a bar by the harbour looking at the yachts, him in his Ray Bans sipping a Bellini, me in my England away strip (vintage circa 1994) eating my Duty Free Toblerone for lunch, I popped the question. ‘Should I think about buying ships now?’
Vim sat back, took a deep breath and fixed me with an intense stare. ‘Well, what you need is somebody with real experience to advise you. Somebody with a track record.’ Like you Vim? ‘You could do worse! Hahahaha!’ Some have suggested that the only way to make money with Vim is to actually be Vim. But much like what Vim used to say when he sold second hand carpets in a previous life, never mind the quality, just feel the width.
He talked about supply, demand, Greek asset players, Chinese economics, interest rates, leverage, iron ore demand, the list of things that make people nod along when talking about shipping. ‘This guy really knows his stuff’ you often hear. Some 25 minutes later he had made a case using all of his experience and weighing it all up. ‘So what’s your conclusion then Vim?’ I pleaded. He held the last dregs of his bellini up to the Mediterrean sunshine, rolled the glass between finger and thumb, then slowly slid the bill across the table towards me. Without looking away from the endless blue sky he simply said ‘It looks cheap. Why not?’
Time to call Smart Eddie – the biggest frontal lobes in shipping and the mother of all sceptics. ‘Well for a start I don’t want to speak to technical managers, spend huge amounts of time and money on surveys and reports that, to put it mildly, I wouldn’t trust. I don’t want to worry about P&I Clubs, have meetings with 1001 different service providers from armed guards to caterers. So on that basis, buying a ship may very well be cheap, but the amount of management time in running the thing eats into your opportunity cost enormously. It feels like it would be better to pay all of the service providers half the money to not do it,’ he told me from a ski lift somewhere near Zermatt.
‘Put it like this. Sponsors of asset buying vehicles always tell you about the high level of experience the various technical and commercial managers have, about how they can charter out to the best in the market, get the best deals and so on. But you’ve got to remember that the only people who are guaranteed a return on the venture are the service providers and often the sponsor owns the service providers too.’ Heads I win, tails you lose.
‘So how can I avoid the traps set for me by the conventional investment vehicles?’ I asked him. ‘I’d consult a shaved chimp before any of these advisors and sponsors,’ he snapped back. ‘What if I could do all of this without ever having to listen to anybody tell me that ‘shipping is different, or a ‘people business’? The smartest brains on Wall Street have fallen for many snake oil sellers that pop up out of the woodwork with a tale of vast riches and long track records. They miss out the bit that the industry is currently bankrupt as a result of people using exactly the methodology that they themselves are peddling. Now I’ve got to go as me and a bankrupt ship owner are heliskiing and I think that the chopper is landing in a minute’ were his parting words before I heard a muffled cry over a background of whirring blades.
It does appeal to have a way to invest in dry bulk either through my belief in rising asset prices or rising earnings, but never have to get my hands dirty running the darned things. What if Old Meg, my trusty calculator, was telling me that today I should own an asset and sell the earnings as an arbitrage. Then tomorrow the earnings move and Old Meg tells me that I should be long the earnings and short the asset value? All you need to know is the asset value, the break even and the FFA forward curve and you have a really interesting way to get away from much of the cold stew that is currently served.
Once on a trip to New York, Vim and I were leaning up against the bar of an expensive hotel with some investor folk in tassled loafers, way past midnight, and he says ‘Well, shipping equities always trade at a discount to asset value’ They all nodded along and asked why? ‘People who invest in shipping know nothing about it,’ he declared. I thought that maybe actually they might know something and that perhaps (and I’ll whisper this) it’s the asset values that are wrong and not the investors.
Before Vim dropped me back at the airport I did have a chance to ask him ‘What about the idea of a derivative I can trade based on ship values? Then I can choose if I think capes are cheap. I can choose to buy vessel values and sell earnings.’ ‘But who’s going to do all the shipping?’ he said. ‘And how on earth am I going to make money from it if everyone knows the secrets?’ he added with a wink and a swagger before disappearing through the crowd of sunburned Glaswegians in sombreros and Rangers shirts who, like me, were headed back to Scotland in a state of befuddled confusion.