Investment Clues Sailing the High Seas: Author
GUEST AUTHOR BLOG by Lori Ann LaRocco author of "Dynasties of the Sea: The Shipowners and Financiers Who Expanded the Era of Free Trade."
Looking for a compass to navigate the uncertain waters of the markets? There is an industry that can help guide investors. It's the shipping industry. Shipping experts say 92% of all the items in a home have been transported by vessel. Investors normally use the Baltic Dry Index as a gauge of economic health, but by looking inside the containers and tankers and seeing the volume and the quality and quantity of the products that are being transported, the shipping industry can be a forward looking indicator for the various economies. This can then help investors make decisions on where the next land of opportunity may be and what resources, materials or products these countries will need to fuel their economic expansion.
So in a world where the sovereign debt crisis is a growing problem, which areas of the world have shipping leaders excited?
Charles Fabrikant, CEO of SEACOR Holdings is optimistic on the collective populations of the Philippines, Brazil and Indonesia explaining these countries pack an economic punch of a half a billion people,"It all adds up. It doesn't mean that every year you get some kind of increase in finished product or raw materials, but demand will grow from these countries as they develop."
What's behind this boom economists say is free trade.
"It is not only access to the U.S., but it is also arguably the single most important thing for the development of emerging economies," said Austan Goolsbee, former chairman of the Council of Economic Advisers and an economics professor at the University of Chicago. Rajaish Bajpaee CEO of Bernhard Schulte Shipmanagement echoed the opportunities he sees because of the transformation in the trade flow, "Now there is growth in Asia; their disposable incomes are increasing, and the appetite for consumption is increasing... China's government, for example, wants to have a greater proportion of its GDP mix as domestic consumption."
The trade patterns of shipping have greatly changed as a result of a combination of several factors: the entrance of the emerging markets, the slow down of the mature countries and America's energy boom. The changes in the trade routes show the story of the evolving economies — less oil is now being transported from the Middle East to the United States because of the country's discoveries in oil and natural gas but the flow of crude is now going in a different direction with Japan. As the country turns away from nuclear power and using more fossil fuels like oil, the tankers are now traveling from the Gulf of Mexico to the sunrise country.
Then of course there is China and India. "Between China and India, you have almost 2.7 billion people." Fabrikant explained. ".. and assuming those two countries continue to try to offer their population improved standards of living, better domestic economy, and better local distribution, I would expect them to be the locomotive that pulls the general community trades and also the movement of finished goods."
Gerry Wang, CEO of container leasing company Seaspan described container shipping as the ocean highway connecting manufactures to consumers. "If you look at containers coming from China to the U.S., they ship a lot of iPhones, iPads, appliances, home decor items, and clothing. Pretty much anything you see at Wal-Mart has been made in China. Then when you look at exports from the United States to China, it is starkly different. Around 80 percent of the goods we ship from the U.S. to China are waste paper and scrap metal materials."
These long-term prospects in China have Wang excited but he said investors are misunderstanding the country's growth strategy. "In the U.S. they want housing prices to go up. Whereas, in China, they want house prices to go down. Because they're talking about the social equality. They're talking about the developers making too much money. They want their house prices to go down. So when you see the Chinese house prices dropping, it is a positive sign! It's what they want! Short sellers like Jim Chanos don't understand that. They have a different agenda. They misunderstand China's strategy. They are short sellers of the stocks of Chinese companies so they can make huge profits from talking China low."
Turning to another part of the globe, the natural resources and mineral discoveries in South Africa and Columbia have caught the attention of one ship and port owner, Robert Yuksel Yildirim- CEO of Yildirim Asset Management Holding, "When I go to Africa, I know there are many opportunities. They are 50 to 70 years behind the United States. So you don't have to be too smart to see there's great opportunities to make successful business and investments."
So the next time you see a container ship or tanker, think of the growth stories its contents can tell you.
About the Author: Lori Ann LaRocco is a Senior Talent Producer at CNBC and is the author of "Dynasties of the Sea: The Shipowners and Financiers Who Expanded the Era of Free Trade," "Thriving in the New Economy" (Wiley, 2010) and the upcoming book, "Opportunity Knocking" (Agate Publishing, 2014). Lori Ann has been working at CNBC since 2000. Prior to joining CNBC, Lori Ann was an anchor, reporter and assignment editor in various local news markets around the country.