Ripped From The Headlines

As shipping equity investors, we know all too well what it is like to be whipped around by headlines. To be successful, investors must be discerning. Much of what is reported is amplified by social media and repeated endlessly, whether it is true or not. This is frustrating, but it also creates opportunities for investors who focus on fundamentals and filter out the noise. A recent episode of the excellent BBC program More or Less illustrated this point.
Bloomberg reported on July 15 that CIA Director John Ratcliffe said: “Our intelligence is consistent with some of the open-source reporting you may have seen in Ukraine: the average life expectancy of a Russian recruit right now, arriving on the battlefield in Ukraine, is estimated to be between 20 and 30 minutes.” In its July 8 episode, More or Less investigated a similar headline that had recently appeared in The Independent, a British newspaper. The Independent claimed that Russian soldiers survived an average of only 20 minutes on the front line because of drone attacks. More or Less found that the claim rested on almost nothing. The newspaper cited a Foreign Policy article by historian Peter Frankopan, who cited the Russian Telegram channel Astra. Astra, in turn, cited a roughly 5,000-subscriber channel called House Among the Laurels, which vaguely recalled a “study” by an anonymous author known only as “N.” BBC Monitoring could not locate the study, which may never have existed. Military historian Mark Galeotti also demonstrated that the numbers did not add up. If recruits really died after only 10 days to three weeks of training, Russian deaths would exceed 50,000 a month, compared with actual estimates of roughly 35,000 dead and wounded, including at most approximately 20,000 dead. Russia also could not simultaneously be gaining territory. Galeotti noted that modern drone-era assaults unfold over days through small infiltration teams, not in a matter of minutes. More or Less concluded that although Russia is genuinely feeding barely trained troops into a lethal drone kill zone, the specific survival-time figures are implausible.
We see similar kinds of inaccuracies weekly if not daily when it comes to shipping. In our market, however, they create opportunities, especially for investors with a long-term focus. We avoid trading on headlines; instead, we buy and hold. Right now, although our largest exposure is to tankers, we have been putting new money to work in dry bulk. Ton miles are increasing and demand for coal is booming in Asia. There is no one right way to produce alpha as a shipping investor and we are always vigilant that we may be wrong. Focusing on fundamentals and being discerning just increases the odds in our favor.