“Books Will Be Written” About This Shipping Market | Ed Finley-Richardson of Misadventures in Shipping on War-Induced Oil Tanker Mayhem, Squeeze for Asiabound Refined Products, and Persian Gulf “Feeding Frenzy” Scenario

The oil market and the fertilizer market have been essentially broken by the closure of the straight of her moves, but it's not just that. With war in the Middle East, cracks are forming in the shipping industry itself, particularly the tanker market that transports crude oil and refined products around the globe. My guest today lives in breeds shipping. Ed Finley-Rissertsend began thinking hard years ago about what a closure of the straight could do to shipping markets and the opportunities it might create for shipping investors. With shipping prices surging 2x, 3x, in some instances 10x, normal levels, I wanted to see what's really going on in one of the world's most important markets. At the risk of sounding a modest, I really don't think you're going to get an interview like this anywhere else. Monetary Matters listeners can get 20% discounted access to Ed's research service, misadventures, and shipping for monthly and annual using the link in the description. If you're interested in shipping and shipping stocks, it is worth checking out Ed. He's one of the best shipping analysts alive. Subscription includes access to his private Twitter account. Let's get into it. I am joined today by Ed Finley-Rissertsend, who is an expert in the shipping industry. He has been tracking all of the rates, all of the different types of ships, and potential investment opportunities as well. Ed is the author of the misadventures in shipping substack. Ed, so glad you're here. Welcome to Monetary Matters. Thank you. The conflict in the Middle East has caused the price of oil, refined products, and many other things, including fertilizer, to skyrocket. Many people know that, but what my people might not be as aware of is that shipping has gotten a lot more expensive as well. How would you describe the closure of the Strait of Hormuz? How has it affected shipping, availability, and pricing within the Strait, and then worldwide? Well, I think the first thing to highlight is that the Middle Eastern Gulf is really the epicenter of a lot of commodities trades, in particular having to do with energy. And we've just taken for granted that yes, there is a choke point, but that trade has always been fluid through it, has never been disturbed for longer periods of time. There's been a conspicuous example of a war in the 1980s, but trade was still able to continue. So we had price shocks, but never quite anything like we have right now. And I think markets had discussed this. They had talked about it, even I had written an essay about it two years ago where I anticipated exactly how it would affect oil tanker markets in particular, but I still thought it was a very low probability event. And seeing it unfold is just surreal. So what's happening is obviously there are ships that are trapped, so that takes away vessel supply. But really the biggest panic is from the fact that the Far East, which is the largest consumer of most of these commodities, both as an industrial refiner of certain of them, of the Ores, and sending them back to the West. But also the ships which can replace those volumes are largely in the West side of the Western hemisphere. So the US Gulf particular is a large producer now thanks to the Shell revolution of crude oil, but also of natural gas liquids. And so it's just creating a huge disruption where things have to come from a lot farther away. And so that also implies that there's a time delay, which is pretty problematic. And because there's so much uncertainty, people are just in panic mode. So the Far East is not able to produce its own refined products. So it has to source them from farther away. And they're just endless knock on effects. So all of that's playing out and shipping. And to make a long story short, that is profitable for ship owners because they tend to absorb inefficiencies for themselves. It's really the one part of the market that loves inefficiency. Inefficiency usually tends to lead to friction, which tends to lead to margin contraction for many businesses. But in shipping, greater inefficiency leads to margin expansion, which is interesting dynamic. It's a very dangerous myth, let's say, to say that all disruption is positive for shipping, because you need to be more nuanced than that. You need to figure out exactly where the replacements will come from, where there's just enough of it. But in this case, it has been largely positive in the sense that shipping companies are doing very strange voyages, very, very far distances. They're being booked farther in advance. They're being paid three, five, ten times what they normally would be. And so they're really benefiting from the situation. In your career or the careers of your mentors who are 20 or 30 years older, has there ever been something like this? How does this compare? Just how drastic is the situation? And precisely, then we'll get into what is going on, where the prices are going up the most. I think what's really unusual about what's happening now is that normally these shocks are relatively short-lived. So you'll see some events, like for example, when the Houthis attacked the largest Saudi oil field in 2019, that was an event which sent spot rates for the largest crude carriers from something like $30,000 a day to over $200,000 a day in the span of a week. So it was extreme. And just as quickly as it went up, it dropped. So actually, the reason why 10k of freight rates went up so much is because US Treasury sanctions, blanket sanctions, one of the biggest 10k companies in the world, Costco, which is a state-related entity in China. And everyone penned so much because it was such an extreme action. This is during Trump's first administration, that there was just a scramble to get ships. And then people figured out that it wasn't going to be in the world. I think what's really unique about what we're seeing now and different than most of these disruptions which tend to be short-lived is similar to the Red Sea disruption with the Houthis. These disruptions are just lingering all in all. And the same way that Europe has forsaken Russian energy imports, so whether it's diesel or crude oil, the U.S. barrels to their refineries, all that Russian energy is not going halfway around the world to China and India. And this has been a persistent change in trade flows, which on paper, it makes absolutely no sense. Like if you wanted to make markets efficient, the last thing that you would do is take Russian barrels and send them to India. It's stupid, it's completely inefficient, but that's where we are. Do you have to go all around Europe, all around Africa? It's a long trip. It's a long way. Some of those operators, part of what we call the dark fleet, are actually, they feel safe going through the Red Sea, some of which is through the Swiss Canal. They shave off about 12 days by doing that. But I think that getting back to the crux of your question, what's unusual about what we're seeing now is we could imagine this persisting a lot longer. And that's something which, you know, it's kind of like the way that when oil spikes these days, you have all these speculators who rush into sell the volatility, because they just assume that there's no way this volatility could remain high. And it's become such a knee-jerk reaction in a very dangerous one, because they're not really thinking it through. There's been, I've, no, I communicate with some oil traders, and they seem to think that oil is still underpriced even today with Brent going above, you know, $10 a barrel. And I see a very logical argument for that in the sense that Iran really has the Trump administration by the balls here. This is a very tricky situation. Extremely dangerous, probably going to be difficult to do anything by force. Not just that, but even China, who is a Iran's biggest customer and best customer, and imports something like 90% of its crude oil. Even they don't seem confident sending their takers, which are laden with cargoes sitting in the Gulf, even they can't get them through. So that's very strange. And points to the fact that people are genuinely worried about the danger and the risk involved with sailing through. So that seems to point to the idea that Iran, whether purposely or maybe even of its own surprise, has discovered a pressure point, leverage that it can use, and it seems very reluctant to let that go. They want the world to witness how powerful it is and how they can single-handedly damage the world economy. So that kind of argues for a slower resolution, and that's pretty scary. How many ships roughly are going through the straight of Hormuz per day? I know it's higher than zero, but well below the 150 before this crisis. And just how damaging and disruptive is that and talk about that destruction? Well, the irony in all of this is that Iran has managed to continue to export its own oil. It hasn't been exporting as much LPG as it normally would. I think a lot of people are controlling gas. Yes, liquefied petroleum gas. Everyone's so focused on the oil aspect that I think the LPG is not as well known a part of the trade story, but just as there is a dark fleet of oil tankers, which are either owned by Iran directly or by interests, let's say intermediaries. who might be sanctioned by the US Treasury, but carry the hydrocarbons all the same. There's also something like 15% of the very large gas fleet, which is dark fleet in the same way. And constantly struggling thousands of cubic centimeters of gas volumes, it's a big business, very important to petrochemicals in the east in particular in China. And so in a way, it's been good that Iran's been able to continue to export because that's taken that extra two million barrels of pressure off markets. But very few-- excuse me, very few ships have gone through. I've been surprised. I was expecting there to be more risk-taking. I think the fact that Iran indiscriminately attacked vessels of various interests from interests which were effectively tied to the US to really vessels from all around the world created a sense of panic and uncertainty and successfully disweighted people. So actually, the attacks really fell off in the last 10 days. It seems to have been enough to do all those attacks up till about the 20th of March. Now we're seeing anywhere from two to 10 vessels go through per day. It's quite varied. And the other thing is the vessels are turning off their voluntary AIS signaling, which means that sometimes we only know that a vessel has gone in or out after the fact. So typically what they'll do is they'll decide to cross. And then 10 days later, they'll turn their AIS back on, sometimes less, sometimes five days later. But then we'll say, oh, wait a minute. There was a break in the action here. I could see via my archive of the satellite that was here and now it's here. So we can deduce, therefore, that it did move in and out. But even people who watch satellite imagery, if it's a cloudy day, we don't know. So we have basically satellites in these AIS. And there's not much else to go by. We don't have photographers sitting there, it's nothing snapshots of vessels as they're going by and identifying them that way. That would be wonderful. But the moment we're stuck using these limited tools. So anyway, to come back to your question, it is quite limited. I'm surprised by that. I think that Iran is pleased about that. I think that if we were to see an increasing trickle of vessels, I think that would be seen as Iran's leverage dissipating. And I think that maybe that would help take away the fear factor of vessels being able to choose the leave or take the chances because they could potentially be paid a lot of money to go through. I mean, there are offers being made, but they seem to really be taking the danger seriously. I would have thought that some shipping companies would have been impacted. I mean, it must be very bad to have a ship that's trapped in the middle of the straight-of-harming news, right? Is that impacting some companies or no? It is definitely. I guess the way I would think of it is, even though there's a lot of ships trapped, it's usually just a bad accident. And it's only a couple of ships that are trapped out of a larger fleet. The larger players, most of the publicly listed companies have at least 20 vessels. Some of them have up to 100. So if they have one, two-- in some cases, even four vessels trapped inside, it's true that they're, let's say, missing out on a month of earnings. They're not being paid to just sit there. They're in danger. Let's not minimize the humanitarian aspect of the crew, which doesn't have access to stores, to fresh water, to food, and just the danger of not knowing whether you're going to be attacked by a drone or a ballistic missile. But in the larger scheme of things, what's happening is most of these companies are more than making enough to compensate for those losses by the premiums they're getting in other basins. So some companies are lucky to have no ships inside. That's ideal. But by and large, the companies, I should also say, who tend to carry these volumes, there's kind of a corridor, an energy corridor, going straight from the Middle East to the Far East. And so not all of these wages are spot market wages. They are kind of like a shuttle bus, which just goes back and forth every hour, early hour, as liner services do. It's very regular. So those are disrupted, but it's not quite the same market effects. Whereas the vessels which trade on the spot market, those are the ones earning the premiums. And the spot market is something you conducted now. A contract is you book a certain rate at a future. So ideally, a company would have zero futures market or contract exposure, and they'd be all in the spot market. Because rates have gone up so much now. I, as an investor, somewhat disappointed to learn that actually the drill ships, so drilling oil, a lot of that is contracted out in the future. So they didn't capture a lot of the up move in pricing over the past three years. In terms of tankers, actually transporting oil, as well as transforming refined products, as well as transforming chemical products, how much exposure do they have to the spot market? And how much can these companies capture the extremely high prices that are in the market right now? So as a general rule, you could maybe separate things into the gases and then the liquids. And when it comes to the liquids, by and large, the public companies, which investors have access to are very spot market oriented. When it comes to gas markets, whether that's liquid petroleum gas, so that could be like propane or a dutain, those, there is part of it, which is the spot market, which is a very exciting, very volatile spot market. And then there's part of it, which is long-term contracts, so that it could be one year, it could be longer. And then when you have liquid natural gas, that is very much-- more like an infrastructure play in the sense that you have 10-year charters, 12-year charters. Because the ships are so expensive, this is an important part of the context. These LNG carriers are hundreds of millions of dollars. And so in order to get the backing from a bank to order them, people aren't just getting coins out of their couch to order these vessels. They have to be built against guarantee contracts, whether it's with Qatar or whether it's with Kuwait or major producers, so they have visibility on those future cargoes. So to make a long story short, the most exposure this spot, I would say, are very large gas carriers, which normally are loading a lot of cargoes in the Middle East. And then you have oil tankers of all kinds, all sizes from small to large, from petroleum products to crude tankers. Most of the publicly traded companies want that spot market exposure. And they do that on purpose, some try to protect the downside a little bit with some longer term contracts. But by and large, they know that as public companies, investors want to be able to capture that volatility. And there are companies that have tried to do nothing but long-term charters. And what's really interesting to notice is that in bull markets, they actually don't seem to benefit. In other words, investors don't bit up the shares. But you would think that in the contrary, when in weak markets, they should be protected and rewarded for that risk management. But in fact, they sell off with everybody else. So it's all downside, no upside, if you are on long-term contracts, by and large in terms of publicly traded shipping companies. So that really incentivizes the companies to keep that spot exposure. You meticulously track shipping rates around the world, follower, luckily of your private Twitter, and you're posting all of these rates as they appear, as you hear about them from your sources, from your data, that, of course, and on your sub-stack. Where have prices gone up the most and why? I would say the most extreme moves have been in the US Gulf product exports. These are small vessels, relatively speaking. These are vessels which normally do not enjoy the most extreme volatility. For the simple reason that on a dollar-per-ton basis, the smaller vessel you use, the more expensive it is. So what happens is if you're using a small vessel and it gets very expensive, someone wants to ship a cargo, will just upsize the cargo so they can take advantage of those economies of scale. So there's kind of a trickle up effect in freight, which happens in every sector. And therefore, the very large crude carriers or in the case of products, LR2s, they capture the biggest upside. So for example, when Europe banned Russian petroleum products and there was this huge panic at the end of 2023, the vessel costated the best was the large product carriers. This time what's really strange is we have the smallest vessels making the most money. I've also seen this in handy size vessels in the Mediterranean. So these are voyages which can be quite short, going from say, North Africa to the Mediterranean based in some might be Italy or France. And in four or five days, these vessels can be making $300,000 a day. And their expenses are closer to say $8,000 a day. So-- And what were the-- Sorry, what was the-- It's $300,000 a day now. What was the pricing two months ago or two years ago? And-- It would have been closer to $30,000 a day, two months ago. And that would have probably been-- These prices have 10 act. Yes. And that already would have been very profitable at $30,000. So it's just-- I would say that the VLCC is just before this war started. We're already at multi-heared highs if not all time highs in the small market. There was an immediate panic effect where the first vessels to be booked to go to Yem Bu on the Sony West Coast were It was only a few vessels that got those rates. What I find really remarkable about what's happening in the US is this has been going on for a month and we're still basically at all time highs at about $100,000 per day, sometimes more. These are voyages either going from Texas to the Caribbean or from Louisiana to Europe or it might be through the Panama Canal and as far as Japan. Now the Jones Act has received a temporary waiver which means that product can also be taken to Alaska or to New York. There's just crazy pool because the US is really the only place which can provide extra barrels and is prepared to do it. Normally these barrels are becoming from Asia, from Singapore, from South Korea, from China. I mean China could very well draw down some of its tremendous petroleum reserve and start inching up refinery capacity. And really become a release valve but they're choosing not to do that. So I guess that they are protecting their own interests in the sense that they don't know how long this will last and they probably figure that they might looking from their perspective. I don't want to just assume that they're acting in bad faith and want to pinch everybody else around them. But they are apparently from a diplomatic perspective exporting a few cargoes to some neighbors like Laos and Vietnam borderly desperate. But normally seeing an MR tanker, this smaller product tanker carry, let's say diesel or jet fuel or even gasoline from the US Gulf through the Panama Canal to Japan to the Far East. That's really, really bizarre. I mean this is not something which is supposed to happen. I'll explain a few terms. So you mentioned Yanbu. That is the port on the west side of Saudi Arabia. Most of the time, South Korea is going to be in a state of war. But most of the time Saudi Arabia does its exports through the east side of Saudi Arabia and it goes to the straight of Hormuz. They've switched things around. So I think they're now, you know, I'm not going to have the right number. But around six million barrels per day. So over half of their production, they've been able to export now via the pipeline on the west side, Yanbu instead of the east side. You said VLCCs. That's very large crude containers. And then you also talked about ships. I think you said smaller product ships. So not crude oil but products like a caracene jet fuel, gasoline, going from $30,000 a day to $300,000 a day. But then you said VLCCs are so, you know, in a hot market as well. So I understand that everything's in a hot market. But I thought you said that the hottest market was the small refined product ships. And then so then tell us about what, you know, so what went on with those rates and then what went on with VLCCs, which is a better market in why I'm glad you raised this question because it's not an easy one to answer. But to make a long story short, just before the war happens, the large crude tankers, so the VLCCs, the next one down is called Swiss Max. It's a one million barrel capacity crude carrier, which is the largest which can go through the Swiss canal fully loaded, which is called, why it's called Swiss Max. And then you have the Afro Max, which is the next one down, which can carry 750,000 barrels of approximately. So that was the hot market and there was a lot of reasons why it was so hot. But one of the main reasons is because the last time we had a really hot market was over 20 years ago, people bought to order too many vessels and now we're going to still working off that overhang. But also because there's been this very mysterious market participant, a Korean billionaire who is the son of a shipping, I guess you could say conglomerates, who is involved in all different shipping sectors called sinecorp. And they have increasingly gained exposure to the largest, the VLCC market. So little by little, and this has been going on for years, but most people weren't aware of it. But I was tracking this and I was in touch with people who are explaining to me that this guy had a theory that Iran was going to be attacked by Israel. You know, he was like a visionary. He saw all this happening two years ago. And you know, I heard these theories and I said, well, you know, it could happen for sure. But that's a pretty low probability event and I wouldn't want to make a bet on that. But this guy has been slowly and quietly accumulating these VLCC carriers. And then over Christmas holiday just three months ago, he approached basically every single large owner of this class of ship. And there's only 900 of them in the world. And he made an offer to them about 20% above the par value at that time. So an offer that was very difficult to refuse. And a lot of owners accepted and sold even multiple ships, sunsult in six ships, eight ships. And then, you know, things were quiet because it was over Christmas. So the brokers were at their desks. And you know, no one really realized what was happening. And then one day, everyone wakes up in January and this guy's bought like 50 more ships. It's it was an incredible move. And the beginning of the market in January started off a little bit slow. And then when people started realizing that there was this one company who had basically overnight, become the second largest controller of these ships in the world. He also charter some in. So actually he is the largest. And he started pressuring rates higher. He started saying, if you don't pay me anything, something above this level, I'm just not going to take your cargo. And so then what happened, everyone else took the cargoes. And there was nobody left. So he was essentially cornering the market. So there was this once in a generation dynamic happening. In addition to the fleet that was already old. And then the war hits on top of that. And that's why the stocks were all at 52 week highs when the war hit was because of this dynamic that I just described. So. In theory, if the war stops tomorrow, we should go back to that market. There's no reason why. You know, nothing else has changed except to maybe, you know, crew supply the Iraqi barrels will take some time to get back online. But a lot of barrels in the Middle East will be able to travel. And in theory, that would be the category of stock to the ones I just described. So that would be companies like frontline to car, FRO, D.H.T., which is a VLCC pure play. In theory, all these companies are going to benefit from sign a core, a private player, essentially making the market. Now, when the war hit, all of a sudden, the vessel class that was the least exciting in tankers, the MRs became the most exciting. MR is middle range, medium range. Yeah, medium range. These are vessels which are meant to be doing relatively short haul voyages. So local voyages, let's say a typical voyage might be from the US Gulf to either Mexico or the Caribbean or to Brazil. They also put a Europe, but that was already considered one of the longer voyages. But seeing them go all the way to Asia is crazy. I mean, that's why why did they normally do short range and not longer range like like Gulf to Asia. It's a question of economies of scale. I mean, you have larger tankers called LRs, long range, which are built to do longer voyages. You would tend to want to aggregate cargoes together. There's nothing which prevents MRs from doing longer voyages. It's just that that has traditionally been the way the market was organized. The larger vessels did the longer voyages, economies of scale. So in other words, it doesn't really matter. You know, they can certainly do it, but it's just squeezing the market because if you have demand from your neighbors, let's say in the Caribbean. And you have demand from Chile and from Peru and from Mexico and from Canada and from Europe. And then on top of that, you have demand from Japan and from Australia and from Alaska and all these weird destinations, which was off the case five weeks ago. It just really squeezes that supply. So that's making it really exciting. And essentially what we're seeing today in the market and I have no reason to think it will continue. The prices of these products in Asia are going to all-time record highs, whether it's a diesel produced in Singapore or gas oil and jet produced in Korea. The prices are so high that it's actually even with tankers at all time highs, it's cheaper to make it in Texas and send it all the way across the world. Then it is to make it in Asia. And that's what we call an arbitrage. So essentially you can lock in a guarantee profit because the product itself is still much cheaper in Texas and also more plentiful, more available. And you pay the middle end, the tanker owner, who's going to ship it all halfway across the world. And you still make money doing that. So, you know, as we're speaking spreads and cracks and everything are on fire because I think there was an expectation that in Trump's speech last night, he was going to announce an end to hostilities or maybe more specific timeline or maybe an agreement or some kind of negotiation. And there is there really was no information. And the price of crude oil just ripped higher on that on that realization. I think the entire market. it, suddenly we shocked into the realization that this isn't going to end. And resolution is not in fact on the horizon. And that means that these Asian economies need to plan ahead. It means they're not going to be able to ramp up their refinery utilization anytime soon. And therefore, they have to book cargos from the US Gulf. I mean, there's very few other sources of this extra product. Europe is sending extra barrels to West Africa into Asia now, which is again, not something which was happened. So it's wildly profitable to buy oil in the West. So mostly Texas, let's say, and refine it and sell it to Asia. That's just a wildly profitable trade. And if I imagine a lot of firms doing this are the trading houses like a V-Tool Trafigura. Obviously, the oil companies have their own trading houses that can be smaller. And they're paying the shippers, which is the sector we're talking about. And the shipping companies are able to extract an arm and a leg, but it's still wildly profitable. There's a lot of money to go around. Yes, everyone is making money. And it's also affecting asset values because as soon as you can, you have a little bit of visibility on exceptional cash flows, even for three months, then this really interesting dynamic happens, which is one of the key things to understand for any shipping investor. So you have the spot market and you have these violent moves, but they don't last very long. So you wouldn't want to, let's say, put a multiple on those earnings. I mean, some analysts do, but it's like a joke among shipping investors because who knows what earnings are going to be next year. However, where things come in to become really interesting is that if you know that a voyage is exceptionally expensive today, and that voyage lasts, let's say, two months or three months, then you can actually lock in by chartering in, in other words, taking control of a vessel for the next year at a very high rate, but you can de-risk it immediately by the expensive first voyage. So you were talking about Traffigura or the taller, some of these traders in your career. So what they'll do is I'll put real numbers on this. Yeah, yeah. Let's say you have an MR tanker, which under normal circumstances, if it's making $25,000 a day, is very profitable. Expenses in we're like 10. That's your baseline. Now imagine we have this situation. Let's imagine that you can do a 45 day voyage, $120,000 per day. So that's a month and a half, an absurd rate. So you would have to do the calculation to figure this out. And you know, people literally spend all day with spreadsheets figuring this out. But you would say, okay, 45 days times $128,000 per day, that's my hurdle. Now, what if I could charter in an MR at $40,000 per day for a year? What do I do? I chartered in, so 40,000 times 365. Then my first voyage is 120,000 times 45. As I subtract that, and then my hurdle for making money on the remainder of that charter is much, much lower. I've derasted immediately. And this is exactly the kind of calculation which Sinequar has been doing. They've been acquiring vessels, but also chartering in vessels during that Christmas made him that I was alluding to earlier. You know, they weren't just buying vessels. They were chartering in these DLCCs at rates, which seemed really high. But spot rates went so high immediately afterwards that on the first voyage, that whole commitment for a year, it was deranged. So that means that charters are going higher. What happens when charters go higher? That's guaranteed cashflow. That's something you could actually put a multiple on. Let's imagine that you book a voyage, like a couple of companies to just hit for five years. Five years 365 days a year, the owners are not paying for fuel, which is the most expensive part of a voyage. It can be millions of dollars per voyage. So per saving money on the fuel, they are, you know, making money handover fist for five years. So then you can put a multiple on that vessel, which is much higher. And then you apply that multiple to the rest of the fleet. And then all the sudden, the valuations that we had three months ago, which were already high at the time, they don't look so high anymore. And all the sudden people are yolowing into buy vessels, you know, $40 million more on an vessel that was worth a hundred million two months ago. So there are these knock on effects. You have the spot market, the charter market, the asset values, the equities. And then of course, you have even more knock on effects, which is when it comes to the banks, you know, the banks really want to lend to shipping companies right now because they're making so much money because they have reduced their debt. And so then that allows you to have collateral, which is worth a lot more, which means you can borrow more and order new ships. And it's like this vicious cycle where we are just predestined to order too many ships, to have a bust and then do it all over again in 15 years. So you get that virtuous cycle of analysts can now have a greater certainty, greater visibility into future cash flows because the one year spot rate has gone up because there's visibility about a two month trip. So if there's you know, three types of ships in terms of, you know, chemicals, refined products, and then crude oil. And like let's say there's seven sizes. So there's theoretically 21 types of ships, but I know that some of the ships don't exist. Let's say there's, I don't know, like seven or eight or 10, whatever types of ships. What are the best ships that you want to own right now if you were a ship owner? And what are the, the quote unquote, worst ships that probably you're still making a lot of money, but it's the least profitable. So that's easy. As long as this disruption remains in place, you want to, I'll be even more specific than ships. I'll say where you want to own ships in which basin and the kind of ship because that's, you know, we become so segmented now and so kind of surgical in what's good and what's bad. So you want to own an MR tanker in the US Gulf. That is like the gold mine right now. It's such a gold mine that you can take a cargo basically anywhere in the world and sail back empty and you will still make money as long as this crisis is happening. The other asset class which is doing really well is medium sized crude tankers. And the reason is simple is because from the Middle Eastern Gulf usually it's the largest crude carriers which do this kind of shuttle route I was willing to earlier between Middle East and the far east. I'm early giant but not extensively. Japan, Korea, Thailand, Vietnam, Taiwan. So people are scrambling to replace those barrels and they're not coming from the Middle East where they coming from. They're coming from the west west Africa, the US Gulf, the North Sea, Mexico, Colombia, Venezuela. Most of those cargoes are coming on Swiss mexes or Afro mexes. So that's what you want to own. There's a company TK tankers which only owns medium sized crude tankers. They are cleaning up. They just happen to be one of the cheaper companies. You know, they have 30% of their net asset value in cash because they've just been hoarding cash which a lot of people have criticized them for. It's a little bit weird to have a shipping company with negative leverage but it's certainly de-risked. You can say that much and they're doing very well. So either the small product tankers or the medium sized crude tankers. Now the worst to speak is the VLCC class because there are simply no cargoes. And so therefore the danger is that some of them will carry cargoes from Texas or from long-called Brazil also all the way to China but eventually all these ships that are waiting outside the Middle East and have nothing to do they're going to start getting worried and they're all going to go west and there are going to be too many vessels and not enough placement cargoes. So that's the danger. If this, let's say, persists for next two, four, six, eight weeks, that market's going to crash and we're already seeing signs of it. There are maps of these large crude carriers which are ballasting under the tip of the warp up. You can just see them heading over there. It's like I watch in the car crash and slow motion. If we have normalization those vessels are going to go back to being the most profitable. So that's going to be exciting but for the moment they are handicapped. Now the other vessel class which is going to be problematic is the LR2 and the LR2 is the largest product carrier which normally would be doing very well because they would be picking up all these cargoes in Saudi Arabia and in Kuwait and that is like 75% of their trade. So with 75% of their trade essentially paralyzed they are kind of stuck in the middle. They don't have the flexibility of an MR which is a smaller tanker. It can go into a lot more smaller ports which can accommodate smaller vessels. Their main stay of their trade is gone. So they're kind of stuck in between. So that's very dangerous and therefore at the moment that's not really the vessel class to own. So the market that was the tightest going into this war was the VLCC's very large crude carriers cargoes because there was kind of a squeeze on that market and the Korean gentleman you mentioned had bought up all these ships and obviously it was a very hot market. And so that guy, you said, many predictions that Israel and the US would strike Iran and see some fireworks, unfortunately. And he turned out to be correct. I also want to say that another person who had been thinking very hardly about the closure of the Strait of Armouz is you, almost exactly two years ago, you wrote about what a disruption would need for crude tankers in the Middle East. And it's from this piece on your Mr. Ventures and Shipping Substack that I learned that the VLCC market is mostly, a lot of it is from the Middle East because that's where the true gushing of oil comes from. Like tons of places in Africa and Brazil and the North Sea produce a lot of oil. But in terms of, I mean, I didn't know you said a million barrels. That's a lot. Like that's more than the daily production of most countries by far. So the VLCC market has been helped the least by this conflict. And it sounds like they've been hurt not because so many of the ships are trapped in the Strait of Armouz. A lot of them are, but I learned in preparing for this that a lot of those tend to be owned by state owned companies like Chinese, so not publicly traded stocks that we're going to be talking about. But that they're kind of swiddling their thumbs outside of the Strait of Armouz because they have nothing to do. Yeah, that's exactly right. I think you hit upon something which is really key to this whole market and I think it's worth taking a moment to kind of reflect on that. Most people consider energy shipping to be energy names. In other words, sometimes they trade in markets as if they were like, let's say oil goes up and then tankers will go up. Like, it doesn't always happen. But I think that there's a little bit of an assumption made that what's good for oil producing companies or drillers or something else is good for tankers or vice versa. What's bad for them is bad for tankers. And I think it's a nuanced point of view, but you actually, you can't make that direct link. In other words, there are freight specific elements, which means that essentially, if you know what the price of oil is doing, it tells you absolutely nothing about what's happening in freight markets. You have to know what the regional disparities are to know if a shipyard can make money off that arbitrage. That's what we were talking about earlier. But also what really matters is cargo supply. So as you said, Saudi Arabia, Oman, Kuwait, Iraq, and particularly a huge producer with a lot of the LCC cargoes. And the fact that those barrels are offline means there's just not enough for these LCCs to carry. And that is a huge problem. I mean, something like two thirds of the fixtures normally would happen between the Middle East and the Far East. And so we're left scrambling for work, basically. It's a little bit as if you had, let's say, a city where a lot of the taxi drivers made a lot of the money on their airport run. And then all of a sudden, the airport stopped working. What would these taxi drivers do? Well, they would fled to the city and they would probably be doing much shorter trips. But there would be too many of them. All the guys who had depended on that airport to city run would suddenly be available. But I know the opposite of Uber search pricing where there would just be more drivers and the price would automatically be adjusted. So that's what we're in danger of seeing in terms of fallout from this disruption when it comes to the shipping markets. Right. And again, so in that piece you wrote two years ago, which we can link to, you said that imagine there is a hot war disrupting crude oil exports through Kormuz. The Far East would strangle to source alternative crude oils from the US Gulf, Latin America, West Africa, Mediterranean, North Sea. There would not be nearly enough to compensate the loss of Middle Eastern barrels. In inventories would aggressively be drawn down in places like China, demand for Russian oil with skyrocket overnight. So all, you know, all four of those predictions have happened. The US would release barrels from its strategic petroleum reserve would not be enough. Europe might be forced to abandon its ban on Russian crude imports. I know that the US has has abandoned it. I don't know actually if the Europe has, but basically all those predictions have come true. And you also predicted that the real demand could rise significantly would be for the Suez Maxes and the Afro Maxes. So smaller ships than the VLCCs and that mid-sized crude tankers would be needed to load the additional throughput. And you predicted that it would be, you know, that the stocks would do well, but that they might sell off a little bit into the crisis, which is exactly what happened. So basically all, you know, seven or eight of those predictions that you made two years ago have happened. I believe the one thing that you were exploring of a potential of that has not happened is that you said VLCC rates would plummet because of this dynamic would happen. So what has happened to VLCC rates and are you still worried about this risk that VLCC rates could plummet because these, you know, very large crude container cargo ships are kind of twiddling their thumbs? Yeah, I'm really glad you highlighted that. I was starting to get really smog listening to all the things I predicted. So it's good to, you know, to be reminded of something which I didn't, but yeah, I think really what made this a little bit different than what I was expecting is the fact that the market just happened to explode higher just before. And so therefore when Saudi Arabia interestingly chartered in a certain number of VLCCs the night before the war started. So whether they had intel, you know, this is a state connected organization, a Ramco, Bakhring, they took on extra exposure at a very high price six figures per day. This turns out it was cheap because they were right. But they chartered tremendous number of ships to go to that Western port. And so to their credit, they have managed to ramp up capacity on that pipeline. And that has supported the market. So in other words, it was already such a strong market that even though rates have essentially come down from those levels now. So we are lower than they were, but they're still great. I think that that's taken a lot of people by surprise. I think that they expected vessels to go west faster and to create a gludge. And I think that ironically what's kept the VLCC market of float is so many owners are just they keep saying to themselves, this can't go on. So they weighed outside the prison gulf without cargo with no hopes of getting a job, just saying to themselves, this is going to, this can only last for a couple of days. This, look at the price of oil. This is crazy. They're going to do something. They'll find a way. It comes back to this thing which a lot of people are talking about, which is that the Australian foremose is too big to fail. It's something which has been repeated quite a bit lately. And it's true. No one expected this exact scenario. And I think it actually made it easier for me to game this out because it was complete science fiction to me. I had absolutely no expectation of this actually happening. So when it comes to VLCC, it's now a system matter of how long it's going to take before all those owners who are twiddling their thumbs as you say, decide to go to where the work is, which is in the West. The other thing which is a little bit dangerous is that if these far Eastern refineries really throttle down their utilization, then they're not going to meet as much crude feed stock in a month or two. And they're not going to fix cargoes to becoming, you know, because to get to the West of the East is like a minimum of 50 days. You've got to fix the ship. Usually a few weeks in advance. So this is like a two month delay. And no one knows what the world is going to be like in two months. So do draw down invatories if you're China. You probably do. You know, on the margin, do you order that extra cargo? Do you fix it? Some will, some will. Depends on their risk tolerance. It's very tricky to game out. So I think the expectation now among free analysts is we're going to see a little bit of weakness. But then there's this unexpected element of coming back to sign up for who has, some people are exaggerating saying he's trying to corner the market. It's not that he's trying to corner the market, but he has a position of strength and he has demonstrated that he's willing to use it by not chasing cargoes. So that is something which was not quite true yet. I mean, two years ago, he might have, maybe he controlled 30 ships, 25 ships. Now he controls more like 150 ships. So that, wow. And his own is something no one could have predicted except him. So that's like 20% of the VLCC market. Yeah. And if you just take the ships, which are the most attractive and the most likely to be chartered by national oil companies or international oil companies, it's actually a much higher percentage. It's probably 30, 35, perhaps higher. They're also very secretive. So they're continuing to buy vessels. They're not telling anybody. Sometimes we find out about war. Because we don't know the data providers who are normally quite accurate don't have up to data information because they're not sharing it. So it's really like a stealth campaign. It's super interesting. So I'd love us now to go through a piece you wrote in later in March last month about it's called Atlantic Middle Range Bananza, who benefits most. So talking about the stock. publicly traded securities of shipping companies in the tanker sector and which are how to have the most advantages. Ultimately, I want you to tell us the answer. What are the companies that you think are poised to do the best in this environment? But take us through the journey that you went on in answering that question. The thing is that there was this very strange thing happening soon after the war started. There are usually we refer to them as the Atlantic Basin and the West. So that's kind of let's say the Western hemisphere as we know it. So Latin America, North America, but also Europe and the Mediterranean and West Africa. That's the Atlantic Basin. And then you have east of Suez is the Pacific Basin. And normally what happens is in most asset classes you'll have a healthy balance of ships in each part of the world. And then if earnings are better in one, then subsequently ships will kind of move over there, corrects that balance and you know, dissipate and then that'll leave a you know, it's just kind of this continuous back and forth. And so therefore tends to be quite smooth and gradually move, you know, for a few months it'll be this one and then we'll come back down and and also remember these vessels are curing carcass from one basin to the other. So if the earnings are better in one, they might just carry the carcass and then just stay over here. So that tends to be quite predictable, but what was happening when the war started is all of a sudden Asia panicked. And they wanted to take carcass as I was saying from the West. And so the earnings spread became like unlike anything I've ever seen before. Normally the spread might be $5,000 a day. Sometimes when it's 10, that's like considered extreme. So you might have like in the West, a tanker might be making 30,000 in the east, it might be 20,000. That would be like a normal spread already notable spread. We were seeing in the Pacific MR's making 20, 25,000 and in the Atlantic making 75,000. So you know, I was already graphing this and tracking it and tweeting it privately. My subscribers saying like this is crazy. Why is this continuing this long? It's bizarre. I don't understand how much longer can this last? It turns out it's continuing to last. And most investors sent to themselves well, that will correct because people from the Pacific will eventually make it over. And when actually the opposite happens, actually the the east became higher because they were trying to attract vessels to come over there. So once I determined that that trend was happening, I said to myself, I want to own the companies who have the most vessels loading in the US Gulf. It's not going to be all that I know that for a fact, I've tracked fleets before. You know, I've set it all up on my AIS software. I have a couple of different software isn't I? So I can just you know, the click of a button I can see where the fleet is. But it's not enough to see where the fleet is today. You have to know where it loaded the cargo because that's what determines how much it's making. So then I started going through the fleets literally vessel by vessel. So some of these fleets have 60 MRs. So I was examining the last few voyages for every 60 middle rendships 60 middle. Yes, that would be like Scorpio tankers took her STNG, Tor and ticker TR MD, Half Nia ticker H a F and those three are the big MR owners. But you also have a company which some people like to refer to as the tanker ETF because they have both product and crude and they own the big sizes and the small sizes. And that's international seaways, which is one of the few truly American shipping companies in the sense that management the offices are the US management is by and large of your can. And so I was going through these companies one by one and Tor is a company I've been a shareholder in for many years. They tend to be the strongest commercially. Management is just very clever. They're also generous with their shareholder returns. They have a very high PR ratio. There's just they have a lot of things going for it. So I'm in touch with that company regularly. I really believe in them. I think they're best in class essentially for the product tinker market. So I was not that surprised to discover in my research that their MR fleet was heavily weighted to west about 70% which is really quite imbalanced. But to me the big surprise was to see international seaways in this tanker ETF stock which has to be fair done quite well in the performance of its MR fleet which is 29 vessels. And I interviewed them to learn more and share it part of that with the subscribers. And you know it really gave me a lot of insight into why they're doing so well. It's because they delegate their MR pulls to two pulls which is a kind of a provider which aggregates hundreds of vessels and charters them for seaways. So they have one called Norden which is a Danish company with offices all over the place. But they have another one which is based in Chile and Florida. A big shipping company. So they do a lot of Latin American work. And if you look at spot rates to carry products to Latin America in the last month they have been unbelievable. Like over a hundred thousand dollars per day consistently. So you know seeing iron sw ships as a seaways constantly going from the U.S. Gulf to Latin America in back again gave me the confidence to know that well first of all I can model their earnings higher. So what happens typically an analyst will take let's say benchmark rates and they'll sit which are kind of averages and then they will extract those and extrapolate to what earnings will be based on that knowledge and they'll do it the same extrapolation for every owner. But if you know for a fact that actually 70% of the fleet is benefiting from this basin with earnings which are let's say on average 70 80 90 thousand dollars per day it's not an average you know you can you can project that into your earnings you can expect an earnings beat you can anticipate that if there's any weakness in the stocks you can anticipate what's going to eventually lead to not just a earnings beat but leading up to the earnings beat the analysts will update their estimates because they'll in process they'll figure it out they'll upgrade the stocks but by the time that happens it's too late to buy. So I was essentially front-running that whole process because I'm so used to knowing how this works that I'm trying to get ahead of the game by tracking the vessels individually sync who benefits from that good positioning most and even without modeling it you you would be able to be confident in knowing that they would be beating estimates for that asset class which is a big chunk of their earnings. So what you're looking for of ships that are making the most money right now it's not just the type whether their product companies are accrued ships it's not just the size whether they're very large or their affer max Suez max whatever it's also where are those ships right now and you're saying the most profitable ship to be right now is one that is in the west that can pick up oil or refine products and ship it to Southeast Asia where it is most desperately needed either a company a ship that can do that right now or a ship that's already on the way I could and could lock in those economics. So is that the only reason that you like international that that company you mentioned or is it about the fleet because because you you said they do they're in ETF so they do have the very large crew carriers that are the least profitable right now right? Yeah or the one the most at risk you could say to put it differently but the thing with all these companies is obviously there's a range of governance there's a range of shareholder returns of balance sheets of my confidence and management's ability to make the right call in terms of when to divest assets, when to buy new assets, what they're going to do with this amount of cash which is going to be coming around on the horizon are they going to share it with shareholders or not do I trust them that kind of thing so that's where basically that's the reason why I have the substack is because it's an ongoing conversation and because the perception of a company can change over time you know sometimes like for example there's a company which did really really well in 2022 and was spending mountains of cash on buybacks and that was amazing and then the management got very nervous about the uncertainty in the world and essentially suspended all shareholder returns except for like a nominal dividend and since then they have not reinstated buybacks even though the shares were trading at like half of net asset value so which company is this? This was Scorpio Tankers which has one of the youngest fleets and you know they do very well I mean I followed their fixtures on a daily basis there's some very smart people working there who I interact with regularly so it's just that you know my opinion of them changed based on that change in their decision making process based on the fact that I was expecting if not a larger dividend than at least the buybacks especially when the shares are trading in a discount but when they didn't do that then over time my attention shifted to other companies which were and you know this is an investor's market in the sense that when it comes to most of these segments you have multiple options to choose from so you know you can look at it as like an ETF or like a basket approach where you own all five let's say of the product tinker companies and you wait them differently so maybe you would do 20% each but then when you realize that Torm and C-Ways have more vessels in the west maybe you would bump that exposure to 25 and reduce exposure to some of the others but this is all part of the decision-making process of being informed knowing what's happening And basically avoiding that moment of getting blindsided where earnings hit and they're nowhere near as good as you expected, even though the market was on fire. And then you dig in and you realize why, or sometimes you never even realize why. Sometimes it's just like a black box and you're left wondering why this big earnings miss. And then you feel stupid for having an allocation to that company is opposed to the other one. So it's about anticipating those subtleties. Another thing which is important is I know that among my subscribers and clients on a one-to-one basis, I have hedge funds and I have pot shops and I have people who will take the information that I'm sharing and they all have an even more sophisticated way of using that to make money that maybe I couldn't come up with or anticipate, but that doesn't matter because they don't need me to chew their food and swallow it for them. They just need the food. So I think that's one of the coolest things about this process is I have anything from retail investors who are serious enough about shipping to want to invest in the knowledge you need to be well informed to people who are probably devising sophisticated strategies, maybe treating, intraday, going along short, doing earnings plays. I think all that's fantastic. All of it helps the market become more efficient. So international seaways has, I know this from your work, 29 MR ships. You've tracked every single one of them. You also made a map of where those ships are. The fact that when you wrote that article, the ships were focused on the Western hemisphere is what made you like that company a lot and think it was well positioned. You also did that analysis for three other companies. You mentioned Torm already, but tell us the other companies that you did the work of tracking of where the ships are and then how you rank that in terms of I like the positioning of where they are in the world versus not so much. Yeah. The one that was really surprised me was Artmar, which is the company I like because it tends to be very predictable in its way of managing cash flows, but also the fleet. And they are both chemical tankers and also these MR tankers. So they're kind of like an MR tanker pure plane. But it turns out that based on my research, they were more balanced. So they were more 50/50, which is actually what I expected most companies to be. I was quite surprised to see the work that they're doing among both basins, in particular, because they tend to have a quite strong presence in the Atlantic. So part of that might be the fact that some of their smaller tankers have special coatings, so they can carry things like vegetable oils or more delicate cargos, which are specialist cargos. And that might carry a premium. So we'll see when their earnings come out, whether that turns out to be the case and whether they have compensated based on, let's say, getting premiums on special cargos, even though after vessels are in the east. But to me, I've been a proponent of our worth for years now. I voted on and off since 2019. It was one of my biggest winners in the kind of tripling which happened in 2022. So I have good residual feelings for the company based on that. There have been some changes in management, and the new CEO is a chartering guy, so he's very sensitive to his commercial questions, and he's a good communicator. So I enjoy exchanging thoughts with him, but just based on the positioning, my expectations are always high for them. When it comes to Scorpio tankers, which I mentioned a moment ago, they have a huge fleet, and they also have a lot of LR2s, which is one of the assets which I was saying is maybe not as advantageous as because it tends to depend on the Middle Eastern cargos. So that's let's say a strike in my book, even though the article was just about the MR class. To their benefit, I would say they have booked a lot of very strange cargos, which is something I wouldn't have known, unless I've gone like line by line, less sold by vessel. For example, a cargo from Vancouver to Chile, or from China to Vancouver, or Alaska to China, empty, or New Orleans to Poland, or UK to Northern California, so if you're just a bit more than that, just strange voyages. And I saw the rates on some of those, which were quite good, but in general, strange voyages tend to carry a premium. I've tracked Scorpio quite carefully, and again, I've been a sureholder all for years. They are also very strong in Latin America. But let's say they are a liquid name. They tend to be the name that people think of first traders in particular when they want to express this product to be a trade. But they also tend to be the one which is the most obvious. And I often like to play in the last obvious names. Another one which was quite balanced, similar to Ardmore was Hathnia. Hathnia is in an interesting position because they have a large LR1 fleet, which is kind of like this in between segments. I think they're going to do well, but I really like the fleets which are heavily skewed towards MRs at the moment. I think that's going to be the one. So for example, you know, Torb has a kind of a barbell approach where it's LR2s and MRs and very few LR1s. The LR1 is going to piggyback on some of that MRs' strength. But I think Hathnia has something like 30 of them. So are they going to find enough cargoes? I'm not so sure. It's a great company. They're very predictable when it comes to governance, that kind of thing. They are actually seemingly in the process of acquiring Torb. They've already acquired a very large take on the company. And I'm just waiting to see if they're going to acquire the rest of the shares that Oak Tree was selling off. So that's kind of like an intriguing little aspect of that. But I think it's not really going to matter. Both companies are making so much money. It's all going to shake out in the end. I think I'd be able to guess that because Oak Tree distressed debt and credit investor owns a stake in this, did this company once go bankrupt? Yeah, they were in deep trouble in the. It's interesting what happened. Torb is one of the companies which has been publicly listed for the longest of all the tankers. And at the end of the last cycle, famously, management from what is Scorpio Tinker's today for a company which is called OMM or OMI was the company that the company, but the Tinker was OMM. They sold not quite at the top, but they sold very well at the last cycle. So they had a mix of product tankers and large crude carriers, a little bit like C-Ways is now. And they sold their crude tankers to T-Kate and they sold their product tankers to Torb. And then they were done. They had their sweep exit. And then the strength lasted for another year or so. And they must have just been kicking themselves saying, "Oh, if only we had held on longer." You know, it's just like when you as a trader, if you sell to really and you watch your positions go up another 40 percent, you're thinking, "Ah, how stupid. I left all this money on the table." But actually the crash was quite dramatic after the great financial crisis and Torb and T-K were in deep trouble. They became distressed and as a part of that process, Howard Marx, a Vogue Tree who is very good with shipping actually, he has a very long time horizon. He bought quite well. So he actually was the largest shareholder in Torb for over a decade. And I think it was also the largest position of Vogue Tree. I think probably people were perplexed about that. He just thought it was cheap and kind of an inevitable success at some point. I think that his entire cost basis was paid back in dividends after COVID. So he's done well. He has. So before we get more into the stocks, Ed, tell us a little bit about the work that you provide to clients who are subscribers of yours, both on the substack of misadventures in shipping as well as your private Twitter. Yeah. So initially, I had a free Twitter account which I just was very active on. One might say, compulsively active. It became part of my research process, but also it allowed me to meet a lot of people. So that was really useful. And then a lot of people when substack was taking off three years ago encouraged me to do something. So I started writing a few articles. And then there was this wonderful guy who's also named who pledged a subscription. And I didn't even know what that meant. And it just meant that he was encouraging me to start a paid tier. So I did. Once I started paid tier, I got my first few dozen subscribers. And then I felt really guilty because I just felt like I should be providing some content. And it's snowballed into something which has become a lot more intense. I have to say that I was anticipating. I've written hundreds of articles now, deep dives on some really specific aspects of things. So it's become like a repository of knowledge that you can go back and learn about if you don't understand, let's hit the rates that I'm posted on Twitter. And then one day, I think about a year into it, I went on a ski trip with my family to the out. And it just became impossible to write these long form articles with my kids around all day. And so I started the private Twitter account to continue the dialogue and just to keep subscribers up to date. And it turns out that the private Twitter, which is like real time information, as soon as I hear a rumor about a ship sale or about a new fixture or about something having to do with the company, you know, to be clear. Like some of it is bank research type analysis, but a lot of it is like whispers or, you know, something I'm seeing, which no one knows about yet, which they might read about in the press in three days. But you know. information has not been diffused widely yet. And the subscribers really, really took to that and they love it. And some of them actually spend more time on that than reading the articles now. So I decided to keep doing it. Now I do both. So basically every single day I'm either tweeting, you know, dozens of times per day on the private account with respect to different markets like Drive-Oke, LPG, sometimes the underlying commodities, aluminum markets, box-eye, coal, and then of course, the shipping. And then I'm writing the articles, which kind of tie things together because I find that the tweets, they're helpful, but like at some point you need a structure to understand the company or you want an examination of the filings. So that's really what I'm doing. It's pretty intense. I think it suits people who are intellectually curious and who really want to dig deep and who want to have an edge. In the sense that not just buying a ticker, but really want to go deeper. And I tend conferences I give talks also. That places like Marine Money. I'll be going to Positonia, which is a famous conference in the on the Bay near Athens. Happens every two years. And that allows me to exchange information with other investors. And I often meet people who are very serious shipping investors. It's really like a brotherhood. Right. And I think that so shipping specialists are definitely going to find value in your work. They probably already know who you are. Let's be honest. What about people like me, Ed, who are, let's say, tourists? I enjoy your work. And your sub-stack has been very valuable to me. And I understand it. But I understand it because I do the work. If someone was just going to flip through this and they had nothing about shipping, in order to fully get the value, I feel like they would have to go through the work. Would you agree with that? Yeah, I agree. What I would say is it's not so much that you need a lot of knowledge to get to a value for it from it. In lots of other trades that I'm involved with, in particular, let's say the underlying commodities. I'll understand some of what I'm reading, but not all of it. And sometimes I'll try to dig deeper to figure it out on my own. But it's a little bit like learning a foreign language. I mean, I'm here sitting in France. And I remember very clearly when I first moved here, I thought I spoke French because I had learned it in the high school. And then I would like go to the bakery and order a croissant. And I would have the woman make fun of me because I wasn't ordering it exactly the right way. And obviously the French are quite abrasive about that. But people have different personality types. And that made me want to do better. And equally, when it comes to, let's say, the jargon involved with shipping, most people, they get intrigued. And they want to learn more. And they're prepared to just spend time with it. It doesn't necessarily always feel like work. Sometimes it's more just about getting 10% closer to understanding something. And I think that if you were that kind of person, then you would enjoy it. And also, I would just say, shipping, if you just spend a little bit of time to understand it better than the next person, you're going to have a huge edge in markets. Because still today, people will think of, let's say, oil tankers as a way of expressing a long volatility trade or something to do with the war. So let's say if the war is normalized tomorrow, maybe tankers will sell off because it's seen as a war trade. Or like, you know, you would see, for example, when there were peace talks between Russian Ukraine, sometimes container ships would sell off or drive up with sell off because people would just extrapolate that the war was going to come to an end. And, you know, if you're deep inside, or if you're following a little bit more closely, you would be able to have the self-confidence to know that this was a great buying opportunity because the chances of peace happening are probably pretty low. And also the chances of Europe taking, let's say, Russian oil are even lower, unless they really have no choice. So I think it's like a process of, I guess what I would say is, shipping allows you to connect to more dots. You know, most people, they'll know a little bit about geopolitics, a little bit about energy markets, a little bit about macro, a little bit about currencies. But shipping is not something that most people pay attention to. So if you do, then it allows you to, let's say, have like a lattice of information, which is just a little bit richer. And, you know, it doesn't appeal to everybody, but I can guarantee that the people you'll meet in shipping are, let's say, more colorful characters than you'll meet in a lot of other sectors in the market. That makes it fun. Parties are better. I believe that's the case. I gotta go to one of these parts one of these days. So, Ed, yeah, and I'd say, I'm definitely don't want to tell people listening this. You need to be investing in shipping. You need to devote everything to shipping. But if people are interested in investing in shipping stocks, and it sounds like there is, you know, potential opportunity, there's a lot of disruption in the shipping market and then the global supply chain, oil, everything. If people are watching this are interested, I think they definitely should subscribe to your work. I find lots of value in it. And I think that, you know, if you want to be successful in markets, a lot of the time you have to find out things before the market and definitely before earnings. I actually was an investor not in tanker stocks, but in this container shipping stock called Zim. And I didn't get in early enough for this, but I literally think that the dividends paid in a year were greater than the stock price was at its lows. It was an extremely good opportunity, but you didn't, you know, the time when, oh my God, we made billions of dollars this quarter, the stock price was already high. So you gotta do, you gotta do some work, and you do do that work all the time. So I definitely think people, if their interest should follow your work, and I think they'll get a lot of value out of it. And I think also it's relevant to investors. It's not just shipping as an industry, like you talk about the stocks a lot and have views on them and have personal investments as well, skin in the game. So monetary managers listeners can get a 20% discount to access the discount, click the link in the description and enter your email. If you don't enter your email, it won't take you to the discount page. And that will last for two weeks after this interview air, so in the middle of April, and going back to the shipping stocks, talk to me about governance. In a lot of sectors, particularly in US markets, corporate governance is generally seen as quite good. Shareholders are generally taken care of if the stock is wildly underpriced. There tends to be a buyback. If the company is earning a ton of money and they don't have a high return on invested capital opportunities, they'll do a high dividend. I think the shipping industry, I don't think you'll be offended at all. You're saying this has a reputation for a lot less good corporate governance. Talk to me about what kind of bad things happen in shipping. And do you recommend avoiding the bad governance companies entirely and also what percentage of companies in the tanker market would you say have bad governance versus moderately okay governance, acceptable governance versus actually good governance? - Well, it's a loaded question, but it's an interesting one, so I'll do my best. I would say that as a general rule of thumb, the, let's say the consensus or even the caricature of kind of a rule of thumb is that you want to avoid Greek shipping companies. Traditionally, the Greeks have been more adventurous with their governance looks spread that way. But luckily, the truth is a lot more sophisticated than that, a lot more nuanced. And there are exceptions to the rule. The story of why Greece is such a shipping powerhouse now, it's pretty interesting. I think it's worth taking a moment to talk about it. So following World War II, there were all these commercial boats, merchant boats, Bellamy to America, which have been sunk by German U-boats. And as a result of that, there was this campaign to mass manufacture cargo ships just to be able to carry the cargo to the army abroad and also for food stores and everything in the US. So those were called Liberty ships. And there were hundreds of them made and they were kind of made on the cheap, but they served the purpose, they were cargo ships. And when the war was over, the US started making new ships replace them and they decided to sell them to their ally, Greece for a really cheap price. So there were a lot of investors who became legendary names and shipping, like Aristotle Unasis, but also Liebernossens and others, which acquired these ships on the cheap. And then they made a killing in the decades to come in particular in the 70s during events like the Young could could reward. So this tradition of, you know, ship money goes back much further than that in Greece, but let's say modern Greek ship owning dates to that period. And it's been an interesting thing because now they use what are called flags of convenience, which basically shield owners from liability to make a long story short. That means there are, you know, not like, let's say labor unions that way there might be in European jurisdictions. And it just makes it more regulation light for owners. In addition to that, there's something called the Tunnage Tax In Greece, which is essentially a way for these billionaires or oligarchs to get around paying taxes on their operating profits. And also in the capital gains from when they sell ships. So that's why, you know, at the moment, I think when it comes to the oil tanker fleet, Greece owns twice as many as China, which is the next biggest country, which is totally absurd, but it's also amazing. So an outgrowth of all this is that when it comes to publicly listed companies even in New York, because to my knowledge, there are no publicly traded companies on the Athens Exchange, which is shipping, which is kind of ironic. They're all trying to-- trading on the Oslo exchange or New York. And some of the dangers to get back to the crux of your question are related party transactions. So the typical thing that they'll do is they will have a private fleet and then the public arm and then they will mutualize costs and such. And they might do it in a way which is advantageous to the private company where they have disproportionate part of profits and which bleeds the public company. That might be something which you might be, if you were like a forensic analyst who would find evidence of that in some of the violence, they might also sell ships to the public company from the private company. They might manage the public company ships by the private company which has the same office in Athens. As, you know, it's like, it's basically related party transactions. That's one of the biggest dangers. Then you have a whole class of owners who are even more problematic who aggressively dilute in order to buy the assets which are expensive or they make promises they don't keep in terms of sheer hold of returns. Then there's kind of like a middle ground which is companies that hoard cash but don't pay it out. And ever since that big commodity super cycle in China in the early 2000s, it's become a tradition for shipping companies who benefit from huge, let's say, outsized aims to pay out large dividends which are earnings based. So, you know, you might sometimes see a crazy quarterly yield of like 5%, which then everyone annualizes and like, oh my god, 20% yields. But in fact, it just happened to be an amazing quarter. Like every shipping company I've discussed so far today with you is going to have an amazing Q1 and an amazing start to Q2. And therefore, if they are companies that pay out dividends like TORM and like international C-Ways, those dividends will be unusually large. - Another variable dividend? - Yes, they are always variable. Scorpio actually does more like a fixed dividend which they're slowly ramping up, which is I think they're way of establishing a different investor base, which isn't necessarily looking for a huge payout but is looking for stability. They're looking for a company with a fortress balance sheet. You know, it's not going to have any problem bym ships if the market crashes. So, you know, more power to them. That's great. Some investors are more comfortable with that. But I think most investors who are professional shipping investors who really know the sector as well are used to the tradition which started about 20 years ago with this banker named Hamish Norton who since became the president of Starbolt carriers, which is one of the highest quality and largest dry bulk shipping companies, which is a fantastic company, still undervalued. And he's a very, very smart guy. And he helped kind of institute this tradition of having a carrot for investors in the sense that if it's a bull market, you want to share the proceeds with them and that will entice investors to stick with you when times are rough. Now, in practice, people tend to trade in and out of the names and they don't tend to hold on to them for years of the time. So that's part of the volatility, which comes with the names. But yeah, those are the pitfalls, I would say. And, you know, that's one of the reasons I tend to be quite careful about the names that I focus on that I do deep ties on. Essentially, my way of dealing with this issue, not that I don't criticize companies I do, but I think it's usually good to just avoid or ignore the companies which are below a certain threshold because it doesn't draw attention to them and then most investors won't even know they exist and therefore the danger is last because my fear is that if I highly accompany which is really cheap and I've experimented with that once or twice in the past, and then they do something stupid and the price, you know, creator is 30% overnight. Even if I weren't somebody that was dangerous, if you have an experience that before, then it's really not a pleasant feeling and I feel like it's just more, it's kind of a better part of the service to just ignore the whole thing altogether. - That makes sense. So looking at the like the biggest tanker stocks in the world, I think we talked about for maybe four or five of them, but I'd love to name some of them that you haven't shared your analysis on and you to tell us your thoughts in terms of do you like the company? Do you think they're well positioned based on the product size, the size of the ship, where the ships are, perhaps the valuation as well as governance? So I think I've got maybe four or five companies, I could just, is that okay if I just quickly. - No, you're not still in lightning rounds. - All right, what do you think about frontline? - Frontline is the go-to name, great governance, a great majority shareholder in John Ferdrickson, who is one of the legendary capital allocators in law of shipping. He's involved in all shipping sectors, he's also involved in offshore drilling and husband for decades. He puts a lot of pressure on his managers. So in a sense, you will have professional managers who are very competent, running his individual companies, but I think that no one has any illusions as to who the real boss is behind the scenes. And he is generous in sharing returns with his fellow minority shareholders, which has been a big part of why people love to invest alongside him. So frontline has a great, let's say, diversified fleet in the sense that it has the three largest asset values and crude tenkers, from ex-Swezmax and VLCCs. They recently did a very intelligent transaction where they sold some of the VLCCs and then took the money and recycled it, so they'll have new build deliveries arriving in a few months. That was a transaction that people kind of raised the eyebrows at because he was buying it from his own private related parties. So in some ways, he has a little bit of a Greek heritage in his way of running the business shipping company at some times, but I think that everyone wants if anything from that. It's also a liquid name. It's a name which paid out multiples of its share price and dividends during the last cycle. And so people, when they imagine what could happen this cycle, they always look back to the last cycle and the 2000s and imagine that the share price of frontline will similarly go up the way, kind of like a chart of uranium miners does in the best case scenario. So no great name, I own it, I have owned it for years. If I was to recommend only one name, it'd probably be that one. That's kind of the no-brainer. - More than international seaways. - Well, they're similar, I would say. International seaways would alike about them as they tend to trade more of a discount. So you feel like if you have a little bit of a margin of safety, also I feel like with international seaways, owning them is more of a differentiated point of view whereas with frontline, it's very consensus and part of that consensus is priced in via the premium. So international seaways, for example, as recently as six months ago was trading, a significant discount and that discount is actually closed. So not only do you get the total return of the shareholder returns and the price of reciation, but you also get over time, the market recognizing that it probably deserves a higher baseline valuation. So that gives you like an extra 15% bump. You know, I own both of them, they're both great companies. I'm in more direct contact with seaways, it just so happens, but you know, I know people work at frontline as well and I'm always following their fleet carefully. So. - I got just so front lines a little bit like beta to the tanker market, whereas seaways is perhaps a little bit of alpha potentially. And your front line is, it sounds like it's kind of the exon mobile of the name, it's the biggest, biggest name. - Yes, and in fact, that's a great way of putting it. And if there was a tanker ETF, the way that you have see XLE for the energy sector, frontline would be the heaviest weighted. You know, if it was like weighted by consensus, frontline would have like a 20% weighting and the other companies might have 4% or 5% and that would surprise nobody. And in fact, that would probably be a great way to outperform because it just tends to do well. If there is an event, if there is, let's say something in geopolitics which could be interpreted as positive tankers, you want to buy frontline, you know, like buy first and think later and read the headlines and figure it out. It's just the name that will move first. So it's good to know. - All right, what about the next biggest one, formerly known as Euro Nav, now has the name CMB Tech. - Yeah, CMB Tech is a really interesting case because they were taken over by the summer's family who are, you know, have a long tradition in shipping also. They are more well down in dry bulk, I would say, as an operator than they are with tankers. They've actually sold a lot of their tankers just recently. So they still had exposure, but their exposure is not as heavy in tankers as it was. They have a lot more exposure in what's called the Newcastle Max segment, which is dry bulk. So there's a really exciting catalyst on the horizon that people should be aware of in West Africa in Guinea, which is the CMDU mine, which has been in the works for decades. It's finally coming online basically because the Chinese invested so much money in infrastructure, they've invested in the mine itself, and they're helping bring that iron ore very high quality to market. They're gonna be shipping it all the way to China. And so that's a trend when I'm really excited about in that classic class. So there's two companies, I think, which are worth thinking about. In addition to the star bulk one I mentioned earlier, that would be Himalaya shipping, which is less liquid with very high quality. And then you have CMBT, which is again, a liquid play on that. So, you know, they have a lot of vessels which I don't necessarily want exposure to. They have containers, they have offshore wind vessels, it's kind of a conglomerate. And in shipping, the conglomerates don't always behave the way you want them to, just because they have this repetition thing diluted a little bit. So if, for example, as I was saying earlier, if you know that the MBR tanker market is the one you wanna own and you have one company with nothing but MRs, well, it makes a lot of sense. just by that company, as opposed to a company that owns a bunch of other stuff too. And then you have like Japanese conglomerates which own hotel chains and tankers and you know, it's great to the whole Japanese, but those stocks tend to perform as well because their earnings volatility are dampened by their diversification. So that could be considered good in the sense that safety, but they won't be paying out those huge dividends as a shipping company which just does that. So CMB, very interesting case, but you know, not my first choice for tankers. It's diversified which you don't love and even though you see an opportunity going forward in the dry bulk market, they also have some container stuff which is, you know, you're not nearly as excited about that as you are tankers. Okay, then we talked about Scorpio tankers, we talked about Hafnia, talked about international seaways, tell me about DHT holdings. DHT, that stands for double whole tankers. They're one of the oldest companies in the business and they are among the highest quality names in all listed shipping stocks. I would say that when it comes to governance, predictability, management, accident, they would be very hard to argue that they are not in the top three across all shipping stocks. So, you know, that's high praise. They're the company which worries me least if I was to own a company in a retirement account for my wife, let's say, then that would be the one I would own and I wouldn't even check the share price. That's how much I trust them. So in terms of governments, about as good as you can get and that would be like say top three out of 50, 60 names across all sectors. They're also a pure play of the LCC which is particularly exciting because of this dynamic I was describing with respect to Sinacorn, the Korean company which is in the background going to put in a floor for the VLCC market. If we ever get out of this quagmire and the VLCC market returns to its positive volatility that we were seeing in February, DHT is going to be among the biggest beneficiaries and they're going to pay out 100% of their net earnings. So there's absolutely no ambiguity about benefiting as a shareholder. They're liquid, they have options, they're actually lower beta which is not necessarily a bad thing because it's less stressful to own on those days where there's a news headline that hits and a lot of their 10 Koreans will be down 5, 6, 7%, often DHT will be down to 2. Now that works both ways, sometimes it won't rise as much as well. But DHT has a big audience among the kind of boomer shipping investors but you know those boomers, they're pretty smart. You have to hand it to them. I don't want to say that in a derisive way. A lot of those people have been in shipping markets for longer and they weigh governance and manage the higher than some of the cowboys who are treating their personal accounts, not necessarily managing money. DHT can be a lightning wrong for liquidity and for people who care about quality. So that's interesting because you have all these retail traders who maybe follow shipping markets carefully but they don't have enough money to really move the stocks. When it comes to manage money, if something happens with tankers, it takes just a couple of managed money accounts to just press a button. They're not going to be price sensitive, they're going to move the stock and you will see it, you can see it on the tape. So that's a nice benefit. Also, DHT is the stock that they would buy in the same way that like if you're a giant college endowment, if you're buying an energy stock, it's going to be Exxon mobile or Chevron or a big boy, it's not going to be some $200 million market cap. That's right. It would be do you share front line basically. Those are the two that they would, you know, I'm not saying that they're no other, better companies, but it's just the obvious play. But also these are reputations which have been, which have been earned across decades. Again, predictability is something you pay a premium for with shipping management. People who keep their promises, people who always do things a certain way. I mean, it's funny because the DHT CEO and president says things like we are financing this new build order with DHT style financing. In other words, he's like coins and expression. It's as if there was like a Japanese company with a handbook. You know, like I remember I bought a Japanese car once and they gave me like the handbook, which was written by the founder. It's a very, very Japanese thing to do. And it's like with DHT, there's a pride in doing things the right way and in managing risk and in protecting the downside. And these are not things that many shipping companies talk about. Thank you. I got you. So in terms of the intangibles, which are very important, reputation, management, prowess and integrity, you give them extremely high rankings. It sounds like, however, I just want to point out that in terms of what they actually do, what are the assets and what are the assets doing now, they are, as you said, 100% in the very large crude container market. And that is the least strong market, as you said earlier, of what we're talking about so far. So I just want to, you know, absolutely, absolutely. By the same token, if we see hope for a resolution, then they should stand to benefit. So it's an interesting double ed short. In a way, you kind of, if you're involved in this trade and you're thinking about her moves, you want to own both because you don't know which one's going to work more in the sense fundamentally. There's also a pretty strange dynamic, which is not entirely possible to explain away, which is over the years, except for that 2022 post-Russian invasion of Ukraine, where the three product tinker names outperformed in particular, the old tripled. It was Scorpio Tinkerers, Faradmore Tinkerers, and Torm, and half me a double. Since then, even when the companies which own the smaller names are actually outperforming in terms of earnings, because DHT and Frontline are the go-to names, their stocks have performed better, which is bizarre. But I think it's because people just want the blue chips. And so therefore, they don't make that distinction. But I think a lot of people have been frustrated thinking they can kind of outperform the market by buying lesser well-known names. It's tricky. That can be quite unpredictable. Sometimes you say to yourself, "I'm going to heavily wait my portfolio this name, and it's making more money, and the market doesn't see this." But sometimes the market never acknowledges what it is you're selling, even if it's true. That makes sense. All right, we talked about Torm. We talked about TK. Tell me about Nordic American Tankers. Nordic American Tankers is kind of a running joke because their CEO is such a voice-traced character who occasionally makes appearances on CNBC. And I would say that during the last cycle, Nordic American Takers was a big trading stock. And so people who were involved in the last cycle, when I say last cycle, what I really mean is 2003 to 2008, the people who were trading that market, then they will flock to Nordic American Tankers as soon as there's good news. They also are a Swiss Max pure play, they're the only one. And Swiss Max actually happens to be one of the only asset classes which is unambiguously doing really well right now. The problem with Nordic American Takers is that they have typically issued a lot of shares. They like to brag that they have been paying out a constant dividend for, I don't know how many dozens of quarters, but when their profitability has suffered, they end up issuing shares in order to keep the dividend going. So it's taking money out of one pocket and into the other. And obviously not everyone pays close attention to those details, but I would say that in addition to that, my actual issue with them more so than that is that since the Russian invasion of Ukraine, Swiss Max Tankers have benefited because there was great demand to bring Russian oil to India and China. And you can't load a VLCC in Russia because the ports are not deep enough. So that really stretched that part of the fleet. And it was like this unbelievable gift to Swiss Max owners. And Nordic American Takers, their commercial performance throughout that period was not that great. And I found that really disappointing because this was their chance to shine. And they were the pure play and it showed it amazing. And if you compare their earnings on a TC basis, which is kind of earnings per day, or ship across the whole. Total charter was what is TC. It's time charter equivalent. It means it's adjusted for all the ballast days when it's empty. And it's just kind of like what you're earning on an average across. You know, when you work at all out, let's say. And if you compare to companies with mixed fleets, we've had a few Swiss Max, those were earning a lot more with the Swiss Max. And so it didn't really make sense. And I found that rather disappointing. So I tend to leave that name to other people. You know, they want to dabble in it. But that is one of the things that I don't own. And I don't tend to. Got it. And that makes sense. And I think keeping time horizons is important because I bet you're probably right that the stocks that you like over a long term time horizon are probably going to do better than the stocks that you don't like. But this stock, you know, that Nordic American Takers that it sounds like you're not in love with, you do acknowledge that they have a very hot product right now that I can't include to his max. Absolutely. I mean, from a fundamental perspective, they have almost no time to ever cover it. So it's all spot market. They have the right asset class. And recently they issued a press release with some other spot rates and they were very impressive. So, you know, we'll see how it comes out in the wash. But there's another company which a few years ago was quite niche called Ok Honours Eco Tankers, which is actually the public arm of a very long tradition of reapship hunting and the sun took over the chief executive rule about a year and a half ago, the ticker is eco, ECO, and there have been, it's become kind of a cult stock because it's sort of small fleet. It was until recently the youngest, the youngest fleet on the water, and they have slowly built up consistent outperformance. So basically they extract more cash from the same kind of vessels, and they do it consistently and they are absolutely obsessed with that outperformance, and that is really exciting. You know, that is the kind of thing where you say to yourself, yes, this company does deserve a premium because ultimately it traits the same kind of ships and say frontline, it has Swiss mexism, the LCCs, but consistently, I think every quarter for the last 16 quarters, they have earned more money, professional day than frontline using the same ships. So you could explain that various different ways, but they're clearly doing something right. They're also keeping their leverage on the balance sheet, which means they're juicing their earnings. I've spent a lot of time studying what they do. They're probably the best commercial operator in the space. They take pride in it, they take it very seriously, they live, breathe, this stuff. They compare themselves constantly to other owners. Like it's a point of pride to when the numbers settle for them to be the best. So for me, even though Okianis, so Eco, isn't a Swiss mex pure play, they are like spot market junkies. You know, they are going to be comparing every single fixture they do to everybody else. They're going to be sharing with their friends. If they fix under somebody else, their friends are going to make fun of them. You know, like this whole, you know, under the surface, this culture of spot market competition within owners in Greece is very particular. These guys go to the same restaurants. They went to the same high schools. They all know each other. You know, like their kids go to the same schools together. Like it's a very, very small world and very competitive. So even though a lot of these guys became ship owners because of their families, they're not resting on their laurels. And that's part of the dynamic, which I think learns, it's very exciting because as you were saying earlier, a large part of the fleet is like state owned company. So when you take the large tankers, you have Iran is one of the largest owners of large tankers. Bafri, which is a romco. It's a Saudi Arabia. Yeah, Saudi Arabia, Costco, the Chinese, you know, if you look on like the top owners of tankers, a lot of is basically just state logistics companies. And then you have the Greeks because like boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, boom, great, great, great, great, great, with 20 vessels each. And yeah, that's how we, as investors can gain access to the market. You know, we don't buy turn your shipping stocks. So are there any, it sounds like if there's a company who's corporate governance, governance, you're not in love with, I'll put it that way. It sounds like you, you prefer just to not talk about it rather than to actively kind of, you know, trash the name. So I respect that. Are there any Greek shipping names that you would actually like to talk about that you actually think are presents some opportunity? Or if the answer that is no, I think that kind of answers my question. Yeah. Well, the two, which I own and which I really believe in are the tanker company I mentioned just a second ago, okay, honest. So that's for the large tanker. You know, I detross them for matters of liquidity. I might not size it the same way as I might D.H.T. or frontline because, you know, if I change my mind, then it would be trickier to get out of the entire position. Not that I'm really that worried about that to be frank, but it's just something which goes into the calculation of what you're on and how do I wait it. Starboat carriers is a very reliable operator in the dry box space, which I'm very excited about. For different reasons than tankers, that's a different time horizon. It's a different thesis. What's their Greek and their Greek? And their Greek. Yeah. Almost entire management is Greek. They have this guy I was mentioning earlier, Hamish Norton, who was a banker in New York for many years, and she was kind of like the token American. I like to say he's a very good presenter. He's a very intelligent person. He also sees the big picture in a way which most shipping management teams dealt. So, you know, that's an exciting opportunity. They've done everything right, I think. They're very generous with shareholder returns. They're disciplines. It's a massive company in terms of their fleet. And yeah, it's going to be, as far as I'm concerned, the liquid name to own if dry bolt takes off. So, you know, those are two good examples. I think that maybe a different way to think about it is that in any of one of these segments, there's like a spectrum. Yep. And it's very, very shades of gray type thing. And everyone will have their own line. They don't want to go below. But it's pretty obvious, you know, which are the blue chips, so to speak. That's easy to find out. What's much trickier is knowing what to avoid. And that's something, you know, I do talk about openly for subscribers on the substacking, on tweets, and on substack chats. You know, I do go into it. And also, if people push back, then I'll say, well, look, you know, I'll show you the filing where they did something I don't like. Or I'll say, well, you know, this is what I've been hearing about something that management did. And or this is what makes me a little bit uncomfortable. Or this is how they changed their discourse about a promise they made. And then, you know, everyone makes their own decisions. There are people that just prefer lower valuations and don't care. And I respect that. But I'm not one of them. That makes sense. What about SACO's energy navigation? It sounds like it's a Greek company. Is that Greek? It is Greek. That's like an empire. The founder and CEO is a legend in Greek shipping circles. He also has a large private fleet. I would say that it has consistently traded at it, almost absurd evaluation. And therefore, it's become the darling. High valuation or low valuation? Low valuation. Low valuation. And it's become the darling of the deep value investor who says, you know, this is trading at 40 cents on the dollar in terms of its assets. You're buying foot line at a 10% premium. I'm buying SACO's and of, you know, 60% discount. My barge of the safety is better. I will outperform you over time. That has not proved to be the case. Ironically, they, you know, it's been pretty correlated. They do not have the policy of doing meaningful buy back sort of dividends. And so again, it's one of these things where there's so much choice now that you really don't need, I mean, I personally don't feel the need to have exposure to talk as necessarily. Sometimes it can be interesting to have a cat-trip play. So if you have like eight stocks in the sector and six of them have run really hard and two of them have been thought that could be an interesting opportunity. Sometimes trading liquidity is less. So with less money, let's talk with move more because if someone wants to buy a two million of notional, it'll move tacos. It won't move front line in the same way. So, you know, all that comes in the decision-making process. I have zero concerns about the long-term viability of tacos because he's a very responsible owner and manager. And he's constantly renewing his fleet. His fleet is mostly Japanese and Korean vessels which are at the high-schooling world. He's going to be around. It's a dynasty basically. But it's not really a publicly listed shareholder return machine in the same way that some of these others. Like there are companies which are clearly have been designed to a benefit from a very specific market and be benefits shareholders by paying it all back. So the perfect example of that is Himalaya shipping, which was originally listed just in Los Lo. Now has a New York listing. And it's like if you bought the IPO and just did nothing, you have done extraordinarily well. And it has been designed to pay everything back to you with high leverage. So that's a very different model than a tacos where you basically have to care a lot about the market value of the assets and say I will never be directly paid back in earnings because the company's going to make a mountain of profits and I'll never see a dime. But the assets will appreciate and the stock will go up. So maybe it doesn't matter. And there is a difference between a good company in the industry and a good company to own or a good stock to own. Like it's possible. Yeah, you said they're constantly refilling their fleet. That is a great thing for the company. But if they're doing that by issuing shares instead of paying dividends, that's not amazing long term. I now want to ask you about the valuation. So there is a company. I don't own it now. I had owned it at the past. I think I bought it at a PE less than one Imperial petroleum. I know it's a great company and I know if you thought glowing leave of their management, likely you would have already said so. But that's a company that trades at a low valuation. So it sounds like the company that perhaps have some management issues do trade at a lower valuation. The companies that you have spoken positively of so far that you think their management is good. You like their assets. You like what their assets are doing right now. What valuations would you assigned to them on a PE basis with rates where they were three months ago. What about with rates where they are right now? You know, what are those PE multiples? And also, do you think PE is the way to value it or you like price to book? Tell us. Yeah. So, typically the metric that people use is price to net asset value. And the reason is, because when it comes to multiples, there's a leap of faith involved when you're using multiples, which is, you know, I think Peter Lynch talked about this, how cyclicals are cheap as at the top. And what happens is, if you, in shipping, what tends to happen is, if you're extrapolating peak earnings, then you're not being realistic. Because yes, the company might make half its market pack and cash, market pack and cash in the next six months, which is the case with TK tenkers at this level. Let's say maybe, or maybe it'll take a year, but it's absurd because they're already sitting on 30% of cash. Other net asset value. So, I find multiples tricky. I find that it's usually better to buy when multiples look awful. When they're treating a PE of, let's say, ten or 12, because it kind of expresses the fact that earnings are pretty bad. And, you know, there's this kind of saying, which some of us shipping investors like to throw about, which is, you want to buy low dividends and sell high dividends? Because when the dividend is low, earnings have been bad. And pessimism is pricing the stock. And no one is expecting any upside. And they're probably being overly pessimistic. And then when the big blowout dividend is announced, let's say on earnings. And everyone's buying into that dividend because they want the, you know, 6% or 7% quarterly yield. You usually want to be selling to that person. Because it's likely that whatever earnings they just benefited from, you know, three months before are not going to continue indefinitely into the future. So, I think it's worth thinking about. In that sense, you really want to be buying pessimism. I think it's a better way of thinking about it. You want to be buying dislocations, which usually come from sell-offs, which are not warranted, or which are exaggerated. So, in that sense, like, there are traders who use RSI or technicals to analyze what's happening with shipping stocks a lot. And they don't even be attention to the fundamental so much. And while I sometimes use technicals to inform, to not make a big mistake. And to buy extreme moves. Let's say extremely oversold names, which is definitely not the case right now, to be clear. I think that's a better framework to think about things. It's also a better framework to think about sectors that people aren't talking about. So, for example, LNG freight has a lot of problems right now. And there's only one ticker you can use, well, I guess, are two CCC, capital. And then also FlexLNG, FLNG is really the. What about GolRNG, GGLNG? GolRNG sold its vessels to CoolCo, which then delisted. So, GolR is more of like an LNG infrastructure play. It was traditionally part of the shipping universe. And so, shipping investors love it. And it's still discussed among shipping investors. But to call it a shipping stock is really a stretch. But when it comes to the LNG, just the purely the shipping side, no one's talking about it. The only people that are extremely negative. Nothing positive is priced into the stock. FLNG is what I mean now. So, that might be something to think about. But, in the case of the LNG, the LNG is a lot more of a problem than the LNG. And so, the LNG is a lot more of a problem than the LNG. And it was interesting because a lot of shipping stocks, like dry box stocks, whose earnings had not changed, actually benefited a lot from that. So, oftentimes, shipping stocks, or even offshore stocks for that matter, which is another thing I've read about in the sub-stack, they will often just randomly move with these cross currents. And so, it's really useful to be so in touch with the fundamentals that you can clearly distinguish when that makes no sense. The way that offshore sold off for like 12 months consecutively during 2024. But the earnings of a company like Tidewater, which is one of my favorite names, which is kind of a cross between shipping and offshore. I mean, they were just throwing off free cash flow absolutely solid. And they were sounding off as if they were being decimated financially. So, what's great is when you're really deep into these names, you're following what the vessels are doing, you're getting intel about the contracts from people in Brazil, or the Middle East, or the US Gulf, or Norway. People are DMing me on WhatsApp on my phone, and I'm getting all this stuff, and I'm sharing it with subscribers. So, then we can hold through these down drafts, and we're like, this is BS. I'll add. I feel very confident. You don't feel like that awful feeling where you feel like you might be missing something, that the market's trying to tell you something, that there's a risk, which maybe you're not appreciating fully. But if the companies are doing really well, and the market just decides to randomly sell them off, then it's an opportunity. So, that's where, you know, on technicals, you could buy oversold, but it really feels different to be so deep in the markets, to know that earnings are going to be great, and that this is just a temporary distribution. You talked about how LNG-liquified natural gas tankers, you could see an opportunity there, because that's an unloved sector right now. Based off of where oil tankers and refined products, what we've been talking about, based on where those rates are, as well as what the stocks have done, they've rallied a lot. It sounds like the tanker market is not unloved. So, how do you feel about those stocks right now? What's your analysis? You've shared your alpha view of the companies in painstaking detail, but if you could just broadly describe kind of your beta view, how bullish are you on oil tankers generally, and how that compares to, you know, kind of your average view on oil tankers? And then I've got some scenarios to run by you. Sure. You know, it's ironic, but I feel like the really non-consensus view is that we are not bullish enough on oil tankers, and that even if the stocks are fully priced on a conventional valuation basis, I feel like there's some potential catalysts on the horizon, which are really exciting. The first one is that just before the war started, there was this dynamic I mentioned earlier about science, or kind of cornering the large VLCC market. And, you know, I've done a lot of work analyzing historical data, going back 35 years. And in some instances, going back even further, when I've able to access that, and traditionally what happens is the largest tankers for economies of scale do well, and everything trickles down. So if it's a true bull market, all tanker owners will do extraordinarily well. And there's a couple of things I'm really excited about, as things stand today, even with all the uncertainty. The first is that one of the most bullish things that can happen in any shipping segment is congestion, as strange as that sounds. And that is the reason why, when you mentioned Zim earlier, why that's one of the reasons anyway, why Zim did so well in the aftermath of COVID. It's not just because people were ordering a lot of consumer goods on Amazon, and there was a surge in demand for container vessels, but also because there were problems processing those goods out Chinese ports, and upon arrival, west coast or east coast US, because of COVID restrictions. And then there was a similar dynamic with dribble vessels, which was the biggest bull market in recent decades in 2021, because of COVID. And so let me describe what I see playing out in the next few months. When we start to see some kind of normalization, just before we got on to talk, there were a few two VLCCs, which went through the Hormuz trade for it. The first time since this conflict started, loaded, which belonged to Oman, which is extraordinary. Now it's important to contextualize that. Oman has close diplomatic relations with Iran, has served as a good between and a neutral party at all times, even though they've been attacked. So they're credit, they've kept their cool. They technically control the Hormuz trade jointly with Iran, who has the worth, and Oman has the South. But they were able to sail through, without going through the famous, the toll booth trajectory, and Leiden with Kharga, which is quite something like in broad daylight, with their AIS on. So this is what I've been waiting for. I've been expecting this to happen two weeks ago, and I'm really disappointed that it hasn't, but now that it has, I think there's hope that we will see a beginning of some kind of normalization. So if vessels feel confident going in and out, if China puts pressure on Iran to let its vessels out, and to go in and get new cargoos, then what we're going to see is, all the storage tanks, which have been filled with crude, when everyone was shutting in production, and they were going to be in the park in Kuwait, all these places, they're going to drain those storage tanks, and all these, it's going to be like a feeding frenzy at the zoo. You know, when the person who takes care of the lions, like throws the red meat, and they all come together, and kind of, you know, find each other, or maybe a better metaphor is like, pigeons with popcorn, when you have the park, it's going to be a feeding frenzy. at the same time. And we already have a kind of an appetizer of this dynamic on the west coast of Saudi Arabia, where Arilko fixed 40 tankers to come in. And they can only load three or at a time. So, or maybe it's four I think, but I think it's the flow pressure which is limited to a certain number of barrels per day. So, you know, the other 36 are just sitting there. And that's so-called capacity for vessels to just be sitting there doing nothing. It means that they can't go work somewhere else. It means that they are essentially removed from supply. And that's gonna happen in the Middle Eastern Gulf. We're gonna have dozens of tankers waiting. And they get paid to wait if they have been chartered by a oil company. And if the oil company, if it's their fault that they can't load, which it will be in this case, because it's simply gonna be impossible to get everything logistically ready on time. So, in other words, there's gonna be traffic jams. There's gonna be a traffic jam in the far east where they're discharging. They're all gonna arrive at the same time. There's gonna be traffic jam in the Persian Gulf. All of this was that went to the west because they weren't expecting to be able to load a ramco oil anytime soon or they're like, oh my God, I gotta go back to the Middle Eastern Gulf. It's just gonna, everyone's gonna be in the wrong place at the wrong time. That inefficiency is gonna cause a lot of excitement when it happens. So, that's our first catalyst. The second catalyst and, you know, it's in a way as far-fetched as the catalyst of the Korean guy who bottled his vessels, imagining a war, his Israel bombing, a war on all that kind of stuff. It's one thing for an Israeli to say that. It's another thing for a Korean to say that. That's pretty impressive to have made that call. But what I see is, I see the end game of all of this. At some point, is that Iranian oil will no longer get sentient. In other words, some kind of deal will be had, some new government will form. I'm not saying that it's gonna be a democracy. I'm not saying that the Iranian citizens are gonna be pleased with the results. But I do think that Trump release the Venezuelan template as a model. He would love to get something like that going with Iran. I'm not saying that he'll be able to. I'm sure that Iran hates that idea. But it would be extremely profitable and beneficial for everyone, if that were to happen. If America were to be able to send its petroleum engineers to Iran to help them with their refining also, there could be a really a win-win. I think that Israel would not be pleased. Especially because Trump would probably have no problem with current IRGC-related politicians, just remaining in post as long as that kind of deal could be worked out. Israel might be living, but that's what we're storing. There will be some mechanism by which Iran and oil will not be sanctioned. This happened before. There were waivers in during previous negotiations with Iran in 2015 with Obama. There was a very specific example which could be used as a template where Iran then needed to check the maintenance of its tankers. And six months later, frontline was carrying Iran in oil. So it is possible. If that happens, that's the dream scenario. It is the ultimate catalyst because Iran's tanker fleet is almost all 20 years old or older. Those ships cannot be successfully vetted by the exons and the chevrons and the BP's of the world. So they will have to either be scrapped or be used as storage, but they will leave the fleet. And that means that we will have even more barrels of demand. I was talking earlier about how you, having lots of cargoes is like the wet dream of a tanker owner. It is what matters. It doesn't matter if the oil is expensive, if it's cheap, there just has to be a lot of it. And that's what we're going to see when Iranian oil comes back to the world market. Ideally, a restaurant oil would come back to the world market too. I don't know if Europe's going to take a restaurant oil, it's a different story, but ideally, you would want as much oil as possible competing for vessels. If that happens in the next 18 months, let's say, that could be a very exciting scenario for the front lines, the DHGs of the world. And that would be like a whole other level of profitability. And I think we'll see such outsized earnings and then as a result dividends that we're going to have $20 stocks paying out $5 dividends. And therefore, this kind of cat and mouse routine where the dividend keeps being so big that the stock price resets, but the total return is going to be insane. So that's what I think is possible and the market doesn't believe it quite yet. But obviously, it's better to buy in a dislocation if there's bad news and the stocks sell off. That's a much better time to buy. It won't get me wrong. But in the last year or so, more people have been left waiting for a better valuation than anything else. - Right, and I did just pull up those numbers earlier. I referenced Zim how the year they paid out more dividends than at one time their price was. And I remember correctly, the market cap when they IPO'd was about $1.3, $1.4 billion. And in a year, they did pay out over $3 billion in dividends. So Ed, you talked about how the price of crude oil and the price of shipping is not often correlated, is not always correlated on a fundamental basis. However, a lot of macro non-specialists often think they are. And one example is that even though the closure of the straight-hover permuse has been bullish for the price of oil very much so, and bullish generally for tanker shipping, which we've been talking about, you're saying that if the straight reopened, that could actually benefit a ton of crude tankers, even though the straight reopening would of course be quite bearish on a relative basis for the price of oil. Just because, as you said, it's like lions at the zoo when it's feeding time. Is that mean that if you're long these oil tankers, you actually kind of want the straight-of-hormose to reopen? And also the fact that this market has been so bullish for the west to east, small product tankers that we've talked about, is that dynamic going to be over if the straight reopens? - Yeah, great question. Look, I think that it will to a certain extent. I mean, we in theory should go back to a version of the market we had just before the war. And the version of that market was that all of the smaller vessels were profitable, in fact, very profitable, but just not as extreme in balance where the small is doing better than the big. So I think that's where the adjustment will be made. Also, I think it's just better for everybody in terms of macro, in terms of GDP, in terms of inflation, in terms of so many lives, which are being negatively reflected by this war, if it was to stop. So it's really a bigger package. Let's say, I don't feel like tankers need this in order to do well. And that's why I think that either way they probably will. I think it's a nuanced argument, but the worst case scenario is for the tankers and for the macro economy is if we have this kind of almost full closure, which becomes semi-permanent. That's a disaster. That is absolutely a disaster because then the not going to affect mean that demand destruction kicks in probably a lot faster than people think. And even if you have a few great fixtures going long distances, it's just not enough. So that's the straight remains closed. Obviously, a disaster for the world. And we are hoping that that does not happen. But you're saying the straight remaining closed is a disaster for shipping, even though the closures of the straight short term has been very good for shipping. Yeah, that's right, because it's very simple. It's because at the moment prices are high in Asia, but they can still afford to pay them. But if this disaster goes on too long, people are just not going to want to pay those prices. It's going to get to a point where-- and it's not just consumers. Remember, it's industry. Industry depends on cheap feedstock and cheap inputs in order to be profitable, whether it's mining, or whether it's heavy industry, whether it's petrochemicals, which we depend on for plastics or car manufacturing for so many different things. Everything that we take advantage of and take for granted and daily life. I'm not saying it's going to grind through a halt. I don't want to be too much of a doomer. But it's going to really be compromised. And that's going to affect sovereign budgets as well. I mean, think about how destabilizing it could be if sovereigns like-- I mean, Saudi is actually managing to compensate because the price of oil is so high, and they're able to still pump out a lot. But Iraq is going to become very unstable soon. A lot of these countries are going to-- their instability is going to spread through the region. And this is going to be a problem for everybody. So I think that's not something to be taken lightly. Because I focus so closely on the ability of shipping names to benefit. I don't want to be too sanguine about things or too non-solent about the suffering which is happening. And that's why I try to take the point of view that a reopening which is messy is ideal. Because it means that there are still disruptions and inefficiencies. And select tangeroters will make a lot of money. But the world will start to see the light at the end of the tunnel. I think where this gets really depressing is either if we have an extreme escalation on the part of the the US and Israel, which then leads to a counterattack, which permanently takes some of those Middle Eastern resources offline, that is going to become a historic disruption, which could cause a cast hearing, macroeconomic effects. And then, as I like to say, shipping stocks going down will be the least of our worries, if that's what that means. So hopefully people are going to act with restraint. And I want to ask, how much of you saying, if the StrayGerman's closed, eventually, these shipping costs are going to go down just because the Asian refineries won't be able to pay for it and they'll be demand destruction. How much of that is basically a prediction that refined products in Asia, which are currently trading at $200 diesel, $200 jet fuel, extreme are going to go down. If diesel and jet fuel stay at $200, and WTI, Texas oil is $110, $113, as we're going to say, is it still going to be just wildly profitable to make that trade? And the VTOLs and trifigures of the world are still going to be paying out a tremendous sum to these shipping companies to make the track. Yeah. I think that's a good thing to point out. As long as the economics makes sense, those barrels will be moving. But it also takes for granted that there's a certain baseline of demand. So for example, these voyages that are going to strange places in which are long voyages are usually in addition to all the normal voyages, which are happening underneath the surface, and with no one really cares about, because they're not as sexy to tweet about and cheer on and that kind of thing. But if the baseline economic demand is hurt, that's where things get dicey. And if you look back to crashes in the offshore market, for example, I've gone back decades in some of my articles tracing what ended offshore cycles. And you would think that it would be like oil market specific things, or geopolitics or something. But actually, it was always an economic meltdown, which I'd nothing to do with offshore rigs per se. It's not that there were too many rigs or not enough being invested in capex. It was that that was actually an economic meltdown. So you're saying if the straight-in-per-moo's re-opens, that could be negative for oil prices, but good for oil shipping stocks, the tankers, what about the reverse? There are basically three scenarios. There is a scenario where it opens completely and somehow is normalized within a week. That would be fantastic because of the congestion element. And then hopefully we get back to our previous bull market. So that's great. Maybe tanker stocks will sell off because they've been perceived to be beneficiaries of the war, but that's just a blip. It's a viable dip. Maybe we have this messy normalization where there's like a toll booth and some more attacks, but still more vessels go through. That's probably going to be OK. It'll be messy, but it'll be OK. But if Iran doesn't let ships go through and continues to attack, and in a month we're still sitting in the same scenario we are now, you probably want to have sold well and advanced to that because the market's going to start to smell the economic damage it's going to do. And the entire market will be 20% lower anyway than so. This won't be a shipping system. But the price of oil will be higher. So you think that there could be an inverse correlation between the price of oil and the price of oil shipping stocks. That's interesting. Yeah. Some people even like to think of shipping stocks as a hedge for their oil laws, or some people will buy long oil exposure via ETFs or futures as a hedge against their shipping stocks and their index funds or their tech or whatever it is. Because as we've seen in the last few weeks, every time there's a kind of a risk off move in oil and it's a risk of ramps because it's usually related to the poor news news. Well, that becomes like a nice kind of hedge, very predictable mechanism. Other things have not been as predictable. All of a sudden gold has become a risk on asset. Some other commodities have sold off in strange ways. It's become a little bit less clear how things are supposed to act. But yeah, I think the main thing to keep an eye on when it comes to shipping stocks in any sector is underlying profitability. This profit, you also want visibility on future profits. So if these profits are great, but they're going to evaporate next week, get out. I got you. Well, on your website, you have a Homer Simpson meme that says, "Dumors get clicks, optimists make money." Explain that philosophy, which I agree with. And how does that philosophy apply to right now when it's a little hard, perhaps, to be optimistic about the world? Yeah, I agree. I inform this view with something that geopolitical strategist Marko Poppich has talked about, which is this framework of material constraints, which doesn't always work. But I really like it because it allows you to kind of take an eagle eye view of what's happening and not get to obsessed with the chatter or the politics or the declarations of, "I want this or I want that." It's more what are you forced to do, whether that be politically in terms of your electorate or in terms of your economic constraints. So for example, we don't really know the dialogue which is happening between Iran and China right now. But we do know that China is the only buyer of all of Iran's hydrocarbons and that that funds more than a third of Iran's budget, perhaps more. And China's money pays for the drone manufacturing and China exports the components and arms to Iran. So if China doesn't have access to energy the way it needs to-- in other words, if you're compromising China's energy security, that's not a long-term strategy you want to pursue. So therefore, whatever Iran says, that is a lever, which will be pulled at some point. And that leads me to believe that this will not-- we won't be talking about this in six months with now ships going through. What I think we could see happen is friends going through, which would mean that Iran would make one-on-one, let's say, agreements with individual countries, which either have ships and one cargo is like India and China, or with co-exporters like the UAE or Saudi, maybe we'll see a realignment, geopolitically. Maybe some of Iran's neighbors will come around to its view that America is not really there thinking in its best interests and cannot protect it successfully. And therefore, you might as well be realistic about things and pragmatic and openly communicate with your adversary. If it allows you to at least get your oil and LNG and not to export back on track, I don't want to discount that because I think that that's a logical thing to at least consider if you're in their shoes. These countries are completely dependent on these industries. And you really have to wonder considering the footage that we've seen of, let's say, UAE of these, let's say, citizens in public spaces having missiles and drones drop on their heads. I think that Iran has been very clever about the way that it has used, what it is able to do to change maybe the perspective of those watching from a distance. And I would not rule out the same way that I would well rule out Europe taking Russian natural gas via pipeline, maybe in 12 months, maybe in less, depends on the circumstances. Maybe they take their oil also. Maybe things really shift. Maybe the US imports some of that Russian heavy residual fuel for its refineries in 12 months. I mean, a lot of things can happen. And I think that just excluding certain things from possibilities is probably on wise. So I like to say the spice must flow and energy markets find a way. It's a little bit like when you have a leak somewhere in your house. Like the water just finds a way into a crevice or-- there's a certain kind of almost like intelligence in the way that things tend to flow. And I think that the path of least resistance here is for some kind of flow to be reestablished. And I remain optimistic that that will happen. And I refuse to believe that with so many people wanting the same thing, including Iran, who ships its own oil, I don't see that this turning into a major economic meltdown. And therefore, I want to be realistic about what's happening. I want to acknowledge the pain of the seafairs and the citizens of those countries and not be flippant about it. But I also want to be realistic in the sense that this is not going to be the end of the world. And something's going to happen, whether it's kind of lost by Trump or in alliance led by the manual that could or somebody else who was more palatable. Maybe it's Pakistan. Why not? Plenty of people are interested in having this resolved. And of course, we don't know what's going to happen as we sit here in early April. I do want just to underscore, though, just how high these rates are. I mean, you write-- literally, and I'm quoting exactly-- you say that books will be written about how profitable the shipping industry is right now, and when it comes to tankers. Yeah. And also, there has been so much written and so-- talked about when it comes to the living memories of those who lived through the last cycle. Then I think that even though we had a great period of profitability during 2022 to 24, there was a feeling that maybe the cycle was over that a lot of ship owners had made a lot of profits which they had rotated into orders of new ships. The delivery of those new ships would kind of handicap access profits for the remainder of the cycle. So, you know, I used to joke and say, "I'll see you in 2045 for the next cycle," but it turns out that the cycle's not over and it turns out that if you have studied previous cycles, they're not just outsized profits for five years at a time. They are very messy. And if you go back and you look at the stock price in front line from that 2003 to 2000 and the period there are some massive drawdowns. Like over 80% drawdowns and then back all the way up. So, yeah, I think this is, this is going to be an unusual cycle and Wix will be reading about it because there are more people involved and because we have better data and we're tracking it more carefully and more granularly. But also because everything which has happened in shipping since those cost co-synctions in 2019, maybe the cycle would be considered to have started with COVID is really part of this historic rolling sequence of historic events which have all led to outsize shipping profitability in different sectors. LNG carriers, containers, dry bulk, tankers, LPG carriers, offshore vessels. You name it. How often do you write a piece for your sub-seq subscribers and what is your latest piece that's going to come out soon? I tend to write about twice a week, although sometimes it's more. There's also a chat feature which is like more kind of like a morning note which I did today because when things are moving really quickly, I mean it does take time not just to gather the information but also to, you want to make sure that it's up to date and if things are changing too quickly, it's very tricky to do in-depth articles. It's also very distracting because for example that news today about the VLCCs, well, allowing to own on an LNG carrier going through, I was in the middle of writing an article when I got the news, I just stopped everything, I had to do it. And for the past month, more often than not, I find myself stopping everything to do something. The next article is going to be very interesting in terms of iron ore inventories and that has to do with studying the evolution of iron ore markets in China in the last 25 years of before that. The reason is this, hopefully without giving too much away, iron ore is really the driver of the largest vessel size for iron ore markets which is the Cape size or the Newcastle Max. And these are basically huge carbos of rocks which are being moved from Brazil and West Africa in Australia to China. And China seems to have unlimited demand for these rocks which are then refined into steel, using metallurgical coal, infernises, and it's this extraordinary the amount that they import. And I like to go back and read analysts estimates for how much they're going to be importing next year. And every year analysts say that this was the peak. And every year, Chinese government officials say we need to rationalize steel over capacity in this country we're making too much. And every year they make more and every year they export more. And it's like clockwork. So, members to this I went back and I started researching about the iron ore market and it turned out that the way this whole thing started is that iron ore was exported from Australia to Japan. Of course, Japan had that kind of industrial miracle on the 60s, 70s, 80s. And then China was kind of close behind. And because of Chinese demands, the contracts for iron ore were no longer negotiated on tenure contracts but rather on one year. And then it became a monthly and then it become a weekly. And then it became an index, a floating index. And the fascinating thing that happened once it was a floating index is then banks got really interested. Because once you had a mark to market of your iron ore cargo, that created trading liquidity. And this was at a time when getting access to credit in China was very difficult. So what happens? In 2007, there was a reform which said that you could use movable objects or commodities like cargoes as collateral. What do traders do? They got letters of credit for a bank for 20% of the on the yuan. To go out and buy an iron ore cargo, they moved the cargo to a bonded warehouse. The cargo never made it to the mainland. They didn't pay taxes. Before selling the cargo, they used the cargo as collateral to take out another loan. So it became this liquidity machine. Or they would sell the cargo, but because the bank didn't want the money before 180 days, they would invest it in short term paper. Or they would lend it to somebody at extortion rates like 12% for a few months. So these guys were rolling US dollars because iron ore was priced in dollars. And all of that was made possible by iron ore becoming indexed. So you knew what the cargo was worth. And then from time to time, the iron ore priced might crash. The banks would come calling. You know, whatever was a 20% collateral, all of a sudden became 10% because the value went down. And so forth and so on. And I love this statistic. At the highest 40% of iron ore cargoes were part of the scheme to recycle dollars. So you have all these guys trying to, you know, turn their hair out, trying to understand the iron ore market. And they're saying, wow, they're importing some of the iron ore. I guess we can expect a lot of steel. And sometimes the iron ore imports would go up and the steel export were still production would go down. And people were like, what's going on? Why is this? So this is the kind of reason why you need to understand the background of these markets. So that just because someone's building inventory doesn't mean they want to do more with it, some of these inventories can be sold up to 10 times before they are taxed. So these are just piles of rocks sitting at a Chinese port, which are basically collateral liquidity. And they do the same thing with copper cathodes. So this kind of like liquidity Ponzi scheme, you would think they would have done it with oil and with coal. But no, it was iron ore because it can sit outside without being damaged by the weather. It's still dirt. It still has the same iron core content. And this whole thing just researching this, it's, you know, I just laughing the whole time I'm reading, I can't believe the way that these Chinese steel mills and traders got around the system considering the constraints they were confronted with. It's just brilliant. It's so typical of the way that commodity trades work. And I love learning about it. And then I love writing about it and getting other people excited. And then the next time they see a statistic about iron ore inventories rising, they take that with a little greater salt. Maybe they don't say to themselves, oh, this is worrisome. It means that in the future they won't import as much. Maybe it means nothing. But now I know why I understand it. Now you know, and now when I read this, when people read this, they will know too. I think that's the example of just how in the weeds you can go. I'll be honest, some of them went over my head. I'm going to have to listen to that again. But again, I want people to know that it's not just, you know, nerding out on this stuff. It is like this stuff has investment implications. And that's really an important ed. Tell us why. So, you know, we've got this discount running. People can get a 20% off if you're a listener and you click, click the link through the middle of April. And of course, people can subscribe monthly and annually. You just raised your prices on an annual basis. Nevertheless, it still remains the fact that obviously, of course, subscribing monthly is cheaper. One month is cheaper than one year. But the ratio is quite somewhat that like, you know, annual is priced as expensive as like three or four months instead of 10 months. So it's like a heavily incentivized to do annual and heavily disincentivized to do monthly. Tell us why you structured it that way and kind of how it is a factor of the type of subscribers that ultimately you're looking for. The reason is because I know that this sector will periodically attract attention from people who don't know much about it and who want to subscribe for a month and maybe get access to the information and then leave. And, you know, I totally respect that. However, in particular when it comes to the private Twitter, I invest a ton of effort in sharing things on a daily basis. And so therefore, it really is a commitment in terms of educating my readers and wanting them to understand over time. You know, it's really like as if I was teaching somebody in many lessons per day. And I think that, yes, it's like a relationship. So therefore, broadly speaking, I do prefer to have long-term readers. And it's not to say that their allocation to shipping will necessarily always be high, but it means that they can tap into the knowledge base when something is happening and have a little bit of a context to use, to understand it because they have enough background. So, you know, I would say that who it's for, it's for people who want to make sure they have access to the best information possible, the best data, who want to be ahead of the curve, who don't want to be people watching the stocks move higher without understanding why and then being the last person to buy before it dips. You know, that's always the danger. I mean, to be frank, a lot of shipping owners invest in stocks because they are so well informed. You know, so it's going to be difficult for investors to compete with that level of of inside knowledge in terms of what's happening in the market because those people are living and breathing those physical markets. However, you can be a little bit closer. And I would say that in addition to my analysis and my research, really what I bring to the table is that I am absolutely focused on this. In other words, if you have a book which is six different sectors or eight different sectors, or which I think is probably smart for most people, in terms of some diversification, shipping is very particular and it's hard to know what's important and what's not. And so in a way what you're really doing is you're delegating that task of full-time focus and attention to me. And that's also why, you know, my goal is not to make this subscription cheap, but I am an extremely dedicated and focused individual and I built a network of contacts and, you know, I take this very seriously. And so therefore, I think that somebody who is subscriber, they can feel comfortable knowing that they're not going to miss something important because I'm a flagged and I will write about it and I will explain it. And so therefore, it's kind of like you can sleep better at night holding a shipping stop, which otherwise might be you might feel a bit risky about it, whereas with someone, I'm basically on-call watching and monitoring and even at the times when I let's say not in front of my computer, if anything of important happens, I get five messages with imponence because everyone from all over is just telling me. So it's I think that that is really what this subscription is about. Some people might not even read all of the articles, maybe interested in some sectors and others, but yeah, it gives you a window into that world and an authentic one by someone who works very hard at, you know, trying to understand for what it is. Right. And so I'm glad that we let, you know, let people know that if they notice the differential of the monthly prices versus the annual pricing, that's because you want long-term subscribers and if you're just, you know, a tourist, I'm a tourist, but nothing wrong with that. But if you're a tourist and you just want to check out the monthly price, see if you like it. Like, of course, that's allowed and you are welcoming them, but they have to pay up. Likewise, if you are a longer-term subscriber, you really value that and people can, you know, heavily incentivize to do that relative to a monthly price. I've never read admittedly like a bank research note on shipping, but there's no way that there is good as your research. I mean, this is no way. Your stuff is really good, and I want to be clear to my audience, well, I'm kind of underwriting, you know, with my reputation of like, you know, now that you or I are promising, this shipping market is going to be an permanent bull market in terms of beta. In terms of alpha, you know, I definitely think personally, in my belief that you have tons of alpha, whether people subscribing to it, whether they're hedge funds or individual investors can successfully implement that alpha, you know, I'm not I'm not promising that at all. What I am underwriting is that like, I think your work is extremely high quality. So again, if people are interested, they can click the link in the description. And actually, I think it kind of does roll off the tongue. The link is Ed Fin dot sub stack dot com slash monetary as Ed Fin dot sub stack dot com slash monetary. And remember, once you click the link, you have to enter your email. Ed, thank you again. Talk to him. Thanks, John.