Book-review: The shipping man

An easy to read book telling the story of a hedge fund manager stumbling in the shipping industry, which is very cyclical.

If you prefer to read the pdf version click here. (links may not work in pdf)

(as in my previous book review I focus more on my learnings/insights/personal summary vs writing style etc.)

There are three ways to make money in a commoditized shipping market: buying ships cheaper, operating them cheaper, or obtaining cheaper financing. One has to buy cheap and get the timing right.

Owning ships in a strong market can make you rich, because a tripling of charter rates only slightly increases the cost of shipped goods (commodities) since ships carry such vast amounts. On top, financial and operating leverage set in.

A lot of players providing capital make the shipping industry rather efficient. There is no hidden value.

Old ships earn almost the same day rates as new ships. But their remaining life is obviously shorter, and their can be more negative surprises.

Insurance and other expenses are costly items. Bearer shares are old paper based documents in a traditional industry, enabling owners to get rid of papers, if necessary.

There is a lot more OpEx to take into consideration, and potentially hairy haircuts to optimistic revenue estimates.

The credit cycle in shipping is just the same as in general: the worst loans are made during the best of times, with lowest spreads when perceived risks are low but indeed high. Non-recourse / structuring is important.
Insurance, pirates and salvage claims.

Many shipping man cannot afford to be in the spot market. Or can’t they afford NOT to be in the spot market?
The are no economies of scale beyong a flert of ten ships. The spot market doesn’t care if you are big or small.

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