BACK TO THE FUTURE

By Andreas Vergottis and Konstantinos Frangos – Oceanic Hedge Fund

Since the year 2000, firstly the tanker markets and more recently the dry cargo sector have shown a very unfamiliar if not alien tendency for high profitability and robust growth. The operating words are “unfamiliar & alien” as most current market practitioners have had their formative years in the “highly unprofitable low growth” years of 1975-2000. However, over a longer term perspective and for those who believe in long term cycles, any 25 year period may be unrepresentative of the full range of possibilities that can be witnessed over broader spans of time, past or future.

Indeed there is currently a school of thought amongst not only the shipping industry but related sectors such as mining, steel and others that the next 25 years will not resemble our formative “structurally unprofitable low growth” years of 1975-2000 but rather the previous era of 1950-1974. For those with a more extended perspective on shipping history, there might be a vague sense that the years from 1950 to 1974 were years of “robust growth and high profitability,” but hardly anybody can provide in-depth enlightenment beyond such vague broad-brush statements. What was the average return on capital in 1950-1974 and how much did it vary between peak and trough? What were the size and average growth rate of the industry? What were the appropriate capex, gearing and dividend shipping management strategies in such an environment? Did the boom time earnings compensate for the bust phase losses and how does one navigate the latter in order to make it to the former?

This is only an excerpt of BACK TO THE FUTURE

Content is restricted to subscribers. To continue reading please Log-In or view our subscription options.