The More Things Change…

To quote Bon Jovi*, “The more things change, the more they remain the same.”   We view those lyrics in light of the GameStop short squeeze in the last weeks.  In the 1920’s, there were pools.  These were coordinated groups of investors who would buy stocks together.  The increasing volumes would whet the appetite of speculators that something big was going on.  The public would jump in for fear of missing out.  As the stocks rose, more and more investors bought until the pool operators exited at high profits.  The investing public was left holding the bag.  In the 1930’s there was legislation passed to protect investors and ban market manipulation.  The first SEC commissioner was the noted pool operator, Joseph Kennedy, father of JFK, RFK and Teddy Kennedy.  When Roosevelt was asked why he had appointed such a crook, he replied, “Takes one to catch one.”

The coordinated buying of GameStop and meme equities are similar flavors of market manipulation facilitated by technology.    It will likely end badly for most of those participating.  In the meanwhile, if you are long only and investing with a time horizon of six months to three years, which by the way I believe is necessary to be consistently successful in investing in shipping debt and equities, the GME brouhaha is mostly noise.

More importantly, we have been taking advantage of policy changes.  We’re seeing the benefits of the decarbonization mania.  The lack of a new engine technology prevents substantial ordering of new vessels. Ten percent of the order book in VLCC’s was cancelled this past week, while new orders are few and far between. Container ship feeder rates and duration of charters are rising, while there aren’t replacement ships on order as older vessels age out.  It is a wonderful set-up for higher rates as the supply of ships is constrained in dry bulk, containers and tankers.   The best solution for reducing ship emissions short term is slow steaming, which will further tighten supply of vessels. While social media has developed a new way of manipulating stock prices, they haven’t yet repealed the laws of supply and demand.

* In 1849, French writer Jean-Baptiste Alphonse Karr wrote “Plus ça change, plus c’est la même chose,“ which translates into Bon Jovi’s lyrics. However, it sounded too pretentious to start this month’s observations with the original quote.