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The Shipping Trade Is a Great Way to Beat Inflation

Chris’ note: One of the biggest themes we’re tracking right now is the threat inflation poses. U.S. inflation is running at about 5% a year. And despite claims by the Fed and President Biden that it’s “transitory,” it’s time to start thinking about how to protect your wealth.

That’s why, today, you’ll hear from colleague Tom Dyson. He’s been warning his readers about inflation… and a crackup of the U.S dollar system… for the past two years. His top recommendation is gold. But he also loves what he calls “steel that floats” – the container ships that form the backbone of global trade.

Tom introduced you to this inflation-fighting play in these pages back in March. And he just sent out an urgent update, which I want to make sure is on your radar. As you’ll see, the shipping trade is heating up. And Tom believes now is a great time to buy in.


A shocking piece of news came out last week…

A container ship called the CSL Santa Maria has been chartered for $160,000 a day for three months.

From Lodestar, a shipping news outlet…

Its owners will get a massive $14.5 million in charter hire for the 90 days of employment – almost twice the value of the vessel just six months ago.

Unsurprisingly, given its current earning power, VesselsValue has upgraded its valuation of the 16-year-old Panamax [a type of container ship made to travel through the Panama Canal] to $49 million. That’s a substantial bonus for the Greek owners who bought the CSL Santa Maria in 2017 for just $7.6 million.

It’s not just the Santa Maria. Day rates have gone parabolic across the board.

The best measure of this is the Harpex. It’s an index that shows how much it costs to rent a container ship for a day. The shipbroker Harper Petersen publishes it every Friday.

Last week, the Harpex jumped 12%. It was the largest jump in the index’s 17-year history. And it followed another 12% jump the week before and a 9% jump the week before that.

The index is up 160% year to date.

Take a look…

“It’s the craziest market I have ever seen,” said one veteran shipbroker based in Hamburg, Germany.

Too Good to Be True?

“I’m nervous I’m being a sucker here,” I told my son Dusty about the container ship trade.

I’ve been following it in my free Postcards From the Fringe e-letter. And I first recommended it to paid-up subscribers of my Tom’s Portfolio advisory last year.

My wife, Kate, and I are using our investments to finance our lifestyle.

We’ve put 85% of our savings into gold and silver to protect our buying power. And we have about 15% in shipping stocks for income and higher returns.

Recently, we added to our position in container shipping.

I must admit, these container ship investments seem a little too good to be true.

On the one hand, container-ship leasing firms – such as the private company that owns the Santa Maria – are making so much money, you could say they’ve won the lottery.

Drewry, a shipping consultancy and research service, forecasts the global container shipping industry could generate profits of up to $100 billion this year. That’s more than three times the previous annual record.

How long can this last? Perhaps container-ship lease rates are about to collapse?

They probably are. I won’t deny it’s a bubble. But I’m not worried about this in the long-term. Here’s why…

Most of the deals happening at extraordinary rates in the container ship market are for the next three to five years. This is different from oil tankers, which capture only the “spot” rate for however long the voyage is (say, 60 days).

So these deals should rain money on container shippers for years to come – regardless of what happens to container shipping rates next.

Win-Win for Shipping Investors

I’m not the only one who’s noticed this crazy market.

Profits are so high, it’s started attracting attention from politicians. They’re concerned about shortages in the industry.

President Biden announced that the White House is looking into ocean shipping rates.

He’s even created what he calls the Supply Chain Disruptions Task Force.

And next month, Congress will debate amendments to the U.S. Shipping Act. It regulates certain aspects of ocean trade.

It’s not clear what the feds can do about container ship shortages. None of the big container shipping firms are based in the U.S. or pay taxes to the U.S. government.

Besides, it’s Economics 101…

If politicians regulate container shipping prices, they will shrink supply. This will worsen the shortages… and send day rates even higher.

The best fix is to let the free market clear the shortages naturally with high prices.

Either way, it’s a win-win for shipping investors.

Deep Value Investments

Despite these tailwinds, container shipping stocks haven’t been rising.

They’re trading below where they were two months ago.

Stocks in container-ship leasing companies now have such low price-to-earnings ratios… and such high dividend yields… they look like deep value investments.

Many container shipping stocks are trading at one or two times the profits they’re forecast to make in 2021. Some will pay dividends as high as 20% over the next 12 months.

What to make of it all? Am I being a sucker?

I don’t think so. As I wrote in a buy alert last week to my Tom’s Portfolio subscribers, a huge trade is shaping up in the shipping world.

This is one of those times when we must get greedy.

So we’re not selling. We’re buying more.

– Tom Dyson


Chris’ note: Tom has recommended a model portfolio of shipping stocks to his Tom’s Portfolio subscribers. To get the list of his 14 favorite shipping stocks – including the four buys he recommended last week – find out more about a subscription right here.

You can also find the name of the shipping stock Tom recommended in these pages in March here.