Last week’s events certainly surprised us as well as confirming certain opinions. We did not expect a major US bank failure, as well as the upending of years of previous FDIC policy. On the other hand, it did confirm for us that most end of year market forecasts are worthless. In December, no CNBC commentator expected the FDIC to rescue Silicon Valley Bancorp’s depositors, nor the effect this rescue would have on the entire US banking system. Unfortunately, today we are told by many of the same commentators what to expect. Ignore them or flip a coin. You will be better off.
On the other hand, following shipping, one can make informed decisions looking forward. I just finished the earnings call of a publicly traded product tanker company. Rates are up because ships are traveling farther, due to factors including not limited to significantly longer journeys and a lack of new vessels. Switching segments, China being open versus China being closed makes a big difference to the dry bulk trades. Consequently, rates have risen significantly from January.
The challenge currently is market rotation. Investors believe that if interest rates fall, one needs to own tech. “Buy secular growth and sell value”. We are seeing it in equity prices, with certain shipment segments under pressure despite high rates and improving fundamentals. Then it gets down to your time horizon and comfort level. At times of stress, investors feel the need to do something. However, the best course may be to do nothing. In any event, pay attention to what is said at the 17th Annual Capital Link International Shipping Forum. It will make you a more informed investor than 99% of CNBC or Bloomberg commentators.
