The Coming Global Ship Shortage
We can’t just “stay back and watch” by holding cash. We also need big holdings of precious metals and other hard assets to protect our purchasing power from the inevitable ‘easing’ that’s coming.
Chiswick, West London
Wednesday, June 4th, 2025
By Tom Dyson, Investment Director
Crude oil tanker rates have corrected over the last few weeks.
This chart shows VLCC rates on the key Middle East to China route. Still, rates aren’t bad for this time of year. We’re in the low season for tanker earnings. The important season is Q4, the peak season. That’s where we’ll earn most of our annual dividend.
Weirdly, the Q4 boom never showed up in 2024, which was one of the reasons tanker stocks fell 50% late last year. Hard to believe it’ll happen two years in a row...
Greetings from London!
We’re at a weird moment in the markets. Uncertainty is off the charts. The three-month grace period for importing goods to the USA with minimal tariffs expires on July 9. Then what? Are tariffs coming back? Or are they going away? Markets usually hate uncertainty...but not this market.
It’s one thing if you’re getting paid to take risk, but to buy stocks with the S&P 500 near its all time high? There doesn’t seem to be much upside. But who knows? The market could keep climbing the wall of worry, making us feel like we're missing out. Oh well. We have one job and one job only... to get to the other side of the debt crisis with our purchasing power intact.
Since we launched this newsletter our advice has been “stay back, get to a safe distance, and watch.” Maximum Safety Mode we’ve called it. This applies now more than ever.
The complicating factor in following this advice is — of course — the money isn’t stable. The US government is hurtling towards insolvency and won’t even try to correct its course. Right now, things are calm. But when the next black swan arrives, then what? They won’t be able to afford the bailout. That’s when we see the reckoning...in the next recession, banking crisis, pandemic, or war.
Financial conditions are quite tight at the moment. The real, inflation-adjusted interest rate on the 10-year Treasury is 2.07%. So if you buy an inflation-protected treasury maturing in 10 years, you’ll receive 2.07% plus the CPI growth rate, which is currently between 2% and 3%.
I personally wouldn’t lend my savings to the Treasury for 2.07% plus CPI, but I can tell you, that’s an attractive interest rate for big money managers on Wall Street... and a good alternative to buying stocks at record valuations or lending to other borrowers.
Even with high real interest rates, the dollar continues to make new lows against a basket of other major currencies...
So looking a few years into the future, it’s easy to imagine them loosening financial conditions again, which means lower real interest rates, more Quantitative Easing (QE), a lower dollar versus a basket of other currencies and high growth in the cost of living.
This may not appear to have any immediate consequences. But it's the gradual degradation in the quality of the money... and in the confidence of lenders. Think of it like a man hammering away at the base of the Hoover dam with a sledge hammer. Bit by bit, chip by chip, crack by crack...with all that pressure behind...waiting to be released in an instant.
Sort of how that glacier in Switzerland collapsed last week and buried the village. The sensible villagers would have known it was going to happen...and left. You don't procrastinate. You leave.
All this is to say, we can’t just “stay back and watch” by holding cash. We also need big holdings of precious metals and other hard assets to protect our purchasing power from the inevitable ‘easing’ that’s coming.
We’re currently at 60% hard assets and 40% cash. Let’s see what happens next...how long until they ease...and how creditors to the US government react. And of course, we can always adjust our course as conditions warrant.
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