Tuesday, 10 January 2017

Alliances Play Important Role in Container Shipping Recovery

Several weeks ago I asked for help finding information on Davenport Laroche and shipping container investments. My call for assistance got very little response; in fact, none at all. This prompted me to do my own research into the container shipping industry and educate myself.

This is what I discovered:

2016 was a very challenging year for container shipping lines. Most companies reported consecutive losses and struggled from quarter to quarter. These adverse conditions even resulted in the surprise bankruptcy of Hanjin Shipping Company - a Top 10 container shipping line and one of South Korea's largest transport companies. It seems that container shipping was not alone, many of the world's leading ports shared in the struggles, as well.

After hearing this, most investors would turn-tail and run in the opposite direction. Rightfully so I suppose. But, what about century-old companies like Maersk (1904) and APL (1848)? They are not giving up; they must have a plan to survive the downturn. Certainly international trade is not going to grind to a standstill!

It would seem that the answer they've come up with is partnerships and alliances. These coalitions are becoming increasingly popular among both container lines and shipping ports. Starting from the top of the industry, Maersk Line, the world's leading container line, has partnered with the Mediterranean Shipping Line - who is ranked number two in the industry - to form the 2M alliance. APL joined the world's largest shipping partnership - the OCEAN alliance, with number three ranked CMA CGM, as well as China Cosco Shipping, Evergreen Line, OOCL and Neptune Orient Lines.



These alliances allow the participating container shipping lines to make better use of the group's resources and thus operate more efficiently. This doesn't necessarily make them more revenue, but it certainly saves them money. That still means more profit in the end! "A penny saved is a penny earned."

Looking ahead to 2017, it would seem to me that the shipping alliances formed will play an important role in the industry's recovery, and lead to profitability in the future. Left to fend for themselves, many of the industry's major players would have eventually perished in an increasingly competitive sector. Mark Shields once said "There is always strength in numbers. The more individuals or organizations that you can rally to your cause, the better."

The only real threat I see to the container shipping industry in 2017 is President Trump's economic plans. If introduced as he promised on his campaign, they could bring about an era of protectionism and possibly start a trade war with economic giants like China and India.

Thursday, 22 December 2016

An Amateur Investors Guide to Private Equity and Hard Assets

I am a cautious investor; not at all interested in the risks involved with stocks and bonds. I like to invest in the alternatives; investments that have little or no correlation to the bond and stock market.



Although there is an ever-increasing number of alternative opportunities to invest in, two of my favorite alternative investments are private equity and hard assets.

Private Equity


Private equity is money made available to private companies or investment firms.

Using private equity, investors and managed investment funds make investments directly into private companies. In some instances they conduct buyouts of public companies and make them private.

If invested directly into the company, the funds raised through private equity investment are often used to develop new products/technologies, expand working capital, make corporate acquisitions, or strengthen the company's balance sheet.

In most instances, private equity firms will work with the partner companies, typically over several years, to “turn them around” with the intention of selling them for a profit.

Private equity deals fall under a Securities and Exchange regulation that requires investors be "accredited" or "qualified." For an individual to be accredited under the SEC rules, he or she must have income of more than US$200,000 per year for the past two years (US$300,000 for a married couple) - and have a reasonable expectation of making the same or more in the current year - or have a net worth, excluding primary residence, of more than US$1 million.

Hard Assets


I was once told that "hard assets are at the center of a wise investor's portfolio". Heal assets have fundamental, intrinsic value. In the event of currency devaluation or inflation hard assets can hedge against any losses.

The hard asset I find the most interesting is cargo containers. Making an investment in shipping containers could be regarded as the ultimate hard asset.

In the last several years, Warren Buffett has purchased the Burlington Northern and Santa Fe Railroad. Why buy a railroad? A railroad, like shipping containers, is nothing but hard assets that make money by moving other hard assets; such as coal, wheat, corn, steel, etc. So, Warren Buffett is investing paper money into hard assets, so that if the dollar drops to zero it has no effect on him; he still owns a railroad.

Final Thought


If your portfolio is primarily composed of so-called paper assets, like stocks, bonds and most financial instruments, then your financial security hinges on the value of your country's currency. If the currency devalues, so does your portfolio.

Monday, 12 December 2016

A Strong USA Dollar Creates Domestic And International Risks

A strong U.S dollar creates challenges for the USA and other countries. If the U.S dollar strengthens, then goods and services in the USA become more expensive.

a strong usa dollar


The U.S. currency has strengthened 4.3% since the U.S. presidential election on November 8, 2016, approaching a 14-year high. If the U.S. dollar strengthens against another currency, then goods and services in the United States become more expensive for people using those other currencies outside the USA. Therefore, businesses in other countries may buy less American-made goods and services, which is bad for American producers.

The currency headwinds are very real. Because when the dollar is strong, our goods are more expensive overseas. - Meg Whitman, CEO of  Hewlett Packard Enterprise

A strong U.S. dollar creates headaches for countries too. The countries most at risk from a strong dollar are those with hefty dollar-denominated debts. Although the use of foreign exchange reserves can be used to prop up national currencies or pay off debt, doing so gives the appearance that money is fleeing the country. This can lead to "capital flight" as investors follow the money out.

China is one of the countries most at risk. The Chinese yuan has been devaluing against the dollar for the last year-and-a-half. This has caused the government to spend a considerable share of its foreign exchange reserves. A strengthening U.S. dollar will continue to put pressure on China to burn through its remaining reserves even faster. This significantly reduces the financial safety net the country has built up over the last two decades.

There are five other countries, India, South Africa, Indonesia, Turkey and Brazil, that have been deemed to be particularly at risk because of their large current account deficits and dollar-denominated debts. The so-called Fragile Five are not alone. Many emerging markets are saddled with significant dollar-denominated debts too, and do not have abundant foreign exchange reserves to rely upon.

In the ever-changing foreign exchange market, events anywhere in the world, at any point in time, can seriously influence performance. As the dollar's value rises, countries will find it more difficult to repay or refinance their debts, especially as the cost of swapping dollars on the open market rises. U.S. exporters should brace for tough times too. Their goods sold overseas have become more expensive in many places, and their foreign earnings are worth less when translated back into U.S. dollars.

Monday, 5 December 2016

Looking For Information About Davenport Laroche

I am looking for investing information about Davenport Laroche; a shipping container investment company from Hong Kong.



A friend of mine suggested that I begin a “blog” to connect with other investors who are already investing with Davenport Laroche. So, I will begin “blogging” by sharing what I know, in hopes that you will share what you know.

I know that ...

The company offers investors an opportunity to invest in shipping containers. The containers that are purchased by investors (through their investment) are leased to shipping lines, manufacturers and logistics companies via Davenport Laroche. The container owners earn a monthly income from the leasing of the shipping containers.

With the company being located in Hong Kong, it seems like an ideal location for Davenport Laroche to manage a fleet of shipping containers from. The region is bustling with shipping activity. One example of this is the Port of Hong Kong, which moved 20.1 million TEU in 2015!

port of hong kong

According to the company representative I spoke to, Davenport Laroche manages a fleet of nine million cargo containers. These containers are employed at many of the world's busiest shipping ports; especially those along the Chinese “One Belt, One Road”. If I were to invest with Davenport Laroche, my containers would be added to their fleet and employed in the same regions.

From what I have heard from the company and read in the reviews of Davenport Laroche, I would characterize this as a low-risk investment. The shipping containers have an identification number for tracking and unless they fall of the ship I shouldn't loose them!

I would really appreciate hearing from other people who are investing in containers with Davenport Laroche. Also, I would like to hear from investors who have invested in other investments that carry little or no risk.