The Black Swans

We have just returned from a wonderful opportunity in the form of Capital Link’s 14th Annual New York Maritime Forum.  It was in person for the first time since 2019.  There was the usual panoply of panels on various trades, ship classes and new regulations. We always come home from these events happy, having spotted opportunities.  2022 was no different.

One of this year’s themes during the panels was 2022’s unpredictability, from the Russian invasion of the Ukraine to the sudden Covid closures in China that have hammered economic activity.  The world is a very different place than it was 12 months ago, with these changes negatively impacting dry bulk and container owners while benefiting crude tanker, product tanker and LNG trades.  We were struck by the number of speakers during the crude and product tanker panels who said, “The outlook is promising, with the caveat of black swan events.”

We realize that since March 2020, shipping has been impacted heavily by Covid and Russia’s invasion of Ukraine. At the same time, when we reread some of our blog posts from September and October 2021, we identified several trends, from inflation not being transitory to the green leadership of BlackRock and other financiers causing E&P firms to aggressively distribute cash to investors and buy back stock instead of reinvesting in increased exploration.  We did note the high likelihood of rising energy prices and lower living standards although we did not anticipate their severity.  While events can accelerate change, it would not have happened if the relevant conditions were not present.  One of the values of the Capital Link conference is not predicting the future but being aware of the underlying factors impacting the industry, so that one can calibrate when the black swans arrive.