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Supply Chain Investing During War + Inflation with J Mintzmyer - YouTube
Channel: Seeking Alpha
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i don't know about the rest of you but
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i've been asked a lot recently about
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what's going on this supply chain
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because most of you know that we have an
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expert in the supply chain industry
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that's jay mintz meyer i want to go
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ahead and introduce him into the
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conversation here jay thanks for joining
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us today i really appreciate you giving
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us the time
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yeah thanks for having me on here daniel
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certainly been wild times as you alluded
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to yeah no kidding right so we have
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russia and ukraine still in the midst of
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a war we're hearing updates daily now
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about diplo uh diplomatic solutions
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possibly coming down the pipeline of
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course ukraine doesn't want to give up
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land russia it sounds like there's a lot
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of you know no starters really um but
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the market seems to be you know down
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three percent one day up two percent the
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next um and i can't help but think about
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your service because your service is
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still positive for the year right
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uh yeah actually as of uh earlier this
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morning we're up 29 year-to-date uh so
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we're recording on the on march 9th so
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as up this morning we're up about 29 on
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average here today yeah and that's
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amazing right so i think a lot of people
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are realizing that no matter what's
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going on between growth technology
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nasdaq hitting the bear market i mean
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what is it about the supply chain
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industry that makes you
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or puts you in a position just have a
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continuous green year while the rest of
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the market is red
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well the big thing about i guess supply
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chain and shipping and one of the things
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that makes our service a little bit
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different and of course we have a lot of
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room here to talk about the different
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segments and how they're impacted by
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this conflict
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but the thing that makes shipping
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different is it's not just one little
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you know one monolith it's not all
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shipping's up green one day all shipping
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is down red there's actually about six
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different sub segments that we follow so
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one of those would be tankers you think
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about the oil tankers the product
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tankers with gasoline and diesel another
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example would be dry bulk think coal and
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iron ore and grains and then the final
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example i mean there's more than these
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but the big three that folks think about
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the big one would be container ships and
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that was the huge boom last year on
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retail goods so each one of those
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segments is reacting differently to
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ukraine um whether or not tensions are
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going up or tensions are going down so
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that huge market volatility has really
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given us a lot of opportunities to build
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around our portfolios trade around a
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little bit and of course we're all
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hoping for the best solution
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in this humanitarian crisis um i don't
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want to you know come off it in sort of
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a profiteering angle or anything like
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that it's nothing like that but each
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different sort of news
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update provides a different avenue for
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investors to know where to be
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yeah so that leads me into my first
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question for you ultimately is there's a
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lot of investors that are on seeking
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alpha wanting to know right now
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what should they be doing so if they
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were listening to you what would you say
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to them today
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so right now today we like the core
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positions in each one of the segments so
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starting with dry bulk dry bulk is an
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unequivocal winner of the situation and
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again i hate to use the word winner
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because that's kind of a loaded word but
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if you think about the trades that are
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being disrupted the biggest one is going
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to be grains uh ukraine and russia both
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are among the world's largest suppliers
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of wheat
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and some other agricultural products
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the routes the rerouting of those
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supplies if they get rerouted from the
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black sea area over to china for
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instance china's a big importer of
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grains that's going to lead to a
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significant increase in ton miles and
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that's how you calculate shipping demand
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it's not just total consumption or total
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production you have to look at how much
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volume is moving and how far it's moving
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so historically speaking uh conflicts
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disruptions uh even wars uh can actually
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be bullish for shipping stocks or
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shipping companies which of course leads
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to leads to the stocks so that at first
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you know folks think you know one of the
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generals to reactions gut reactions is
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conflict war
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decreases in global activity that's
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negative for shipping that's a
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generalist reaction to the market
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but in reality some of these disruptions
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can actually be bullish
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yeah and so you're saying they're
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bullish but i'm thinking you know oil's
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made this move i want to go and pull it
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up real quick here on seeking alpha you
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know crew today is at 116 right and we
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know that you follow the oil tankers we
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know that you're in container ships as
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well but is this move already done like
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with a move like this in oil are we
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already seeing the stock moves for oil
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tankers um
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i mean to frankly you know pun intended
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have we missed the boat
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well the thing with tankers is again it
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really depends on the ton of mileage the
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price of oil is kind of irrelevant to a
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certain point obviously if we got
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extremes when i say extreme i'm talking
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like 200 a barrel that could lead to
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demand disruption around the world that
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would be bullish or bearish if it got to
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that extreme but in terms of whether or
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not oil is 110 or 120 or 100 it's kind
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of irrelevant for the tanker demand you
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have to look at the routing of that oil
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and where it's going and with the recent
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news of the u.s cutting off russian oil
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imports and ex and my expectation is
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that most of the european union is going
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to follow suit
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that means that those oil tankers out of
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russia are going to have to be rerouted
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to further uh sell their oil to more
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friendly target markets so think of all
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that oil getting rerouted all the way
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around to china or perhaps india india
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might be a buyer of some of that oil
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that's a lot further than sending that
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oil up to
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northern europe right that's a much
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that's a much further haul for russia
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out of the black sea so that's actually
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bullish for for tanker ton miles and i
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think we've seen some of that reflected
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in the stocks if we look at the tanker
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stocks today they're down but it's hard
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to tell whether or not they're down
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because of first order effects if
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they're just correlating with oil that
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usually seems to be the case and it's
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always been profitable for us because
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when oil's up tanker stocks tend to move
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knee-jerk reaction and when oil is down
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vice versa but what we do is we look
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more so at the longer term impacts of
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the ton mileage shift so just because
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tankers are up one day it might actually
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be a time to buy or time to sell
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depending on those time mileage shifts
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so it's a bit of a roundabout answer
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there daniel but i guess the the take
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away point is is oil tankers are much
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different than the oil price market
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all right well now then if you're
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talking about that's oil tankers let's
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go back to container ships real quick so
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you know over the months we've been
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following the number of ships off the
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coast of california um has there been
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any update there is this going to get
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worse are we seeing that you know get
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better is that going to help bring
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inflation down is that all kind of tied
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together
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yeah it's a little bit different from
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the ukraine disruption it's almost
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completely different story what we're
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seeing on the west coast is more of
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seasonality we had the lunar new year in
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china which leads always every year
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leads to a manufacturing slowdown a
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decrease in exports around the late
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january to about middle of march time
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frame we also had the chinese olympics
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and china pushed really hard to lower uh
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pollution which meant they were also
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doing industrial curves and that sort of
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thing
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on the west coast at the same time
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there's always a seasonal decrease in
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imports right after the holidays right
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you think of all these real uh
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retail companies like you know walmart
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amazon best buy et cetera stocking up
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ahead of black friday ahead of christmas
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there tends to be a little bit of a lull
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january february march and then things
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start to pick up usually april may june
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is when things start lifting back up you
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start getting like the back to school
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stocks and then you get thanksgiving and
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fall autumn you get it back into the
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holiday season so what we're seeing on
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the west coast is is congestion is
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coming down a little bit but it's still
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significantly elevated above normal
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levels this is the chance to get
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congestion down if you don't get it down
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by about middle of april and may
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you're kind of screwed because first of
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all we have a union negotiation that's
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coming up in june which could cause all
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sorts of disruptions and then secondly
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once you get to june you're talking
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about holiday stock for 2022. so this is
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their window and they're doing decently
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at it again it's above elevated levels
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but it is down from the peaks however
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one caveat to that is we've seen
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elevated congestion basically near
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record highs on the east coast you might
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say well you know why is that well a lot
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of shippers realized that la and long
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beach were total nests and so they
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rerouted a lot of their cargos through
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the panama canal over to the east coast
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so now it's kind of like you know
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robbing peter to pay paul because you've
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improved things a little bit on the west
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coast but the east coast is nearing
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record congestion levels and i'm sitting
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here as you know as a us consumer a u.s
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citizen and i'm really hoping we can get
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these congestion levels down by you know
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middle of april because if we don't get
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that done by middle of april we could be
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in some serious hurt in terms of
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shipping costs import prices now as a
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shipping investor
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you know those congestion things can be
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very very helpful i mean as we've seen
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in the stock price performances but it's
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a balance and i would like to see
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throughput improve
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yeah now i just want to take a moment to
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mention real quick you know you are the
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founder of value investors edge a
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marketplace service here on seeking
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alpha and you've always had the
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expertise about supply chains and you
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you've shared that with your audience
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time and time again um and there is a
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free trial that you do offer i would
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encourage everybody to go check that out
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right now um because
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we have a lot going on that we've talked
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about right we've talked about ukraine
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and russia we've talked about container
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ships coming down in volume off the
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coast west off the the coast of the west
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coast of america so what are you kind of
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telling people
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what to what's to expect next right if
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if we see i know there's a lot right
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there's the potential of a ceasefire
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there's a potential of escalation of war
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there's potential for container ship to
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start increasing again but what are you
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recommending to people right now
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yeah so i mentioned earlier that dry
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bulk was one of the core areas we're
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focused on and there's really one depict
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that i've mentioned a few times publicly
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already
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to be fair to the members of valley
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investors edge you know i won't divulge
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of course the entire model portfolio and
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all our top picks but i think one name
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that i have mentioned a few times which
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is a clear beneficiary this entire
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situation is eagle bulk shipping e-g-l-e
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should disclose i have a long and
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trading position in there as well uh so
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folks are aware we're recording on march
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9th that can change in the future based
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on where the stock price goes of course
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but eagle bulk is a clear beneficiary
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because they are entirely in the
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mid-sized dry bulk segment they own uh
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super maxes and ultramax's are the name
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of their ships and these are primarily
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they do everything but primarily heavy
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in the grain trades and a little bit of
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the coal trades and the grains and coals
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are the ones that are being rerouted by
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russia and from ukraine as well through
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the black sea and so there's disruptions
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and of course there's a there's a
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caveat or a spectrum of disruption i
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mentioned that historically conflict and
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even war can be bullish if there's
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disruptions and delays and that's
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because it makes the fleet on the water
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less efficient right you think about
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these ships they're sitting around
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waiting to load the cargos there's more
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inspections they have to take longer
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routes to stay away from conflict zones
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and whatnot um but if it leads to an
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absolute destruction of supplier demand
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that would be bad right so like if crops
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get devastated destroyed and they never
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get replanted for a year or two that
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would be bad so i do want you know
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caution folks that it's a spectrum and
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right now the spectrum we're seeing i
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would say is it from a shipping
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perspective it's very bullish because it
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looks like we're starting to see you
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know dummish tone resuming we're
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starting to see talks uh resuming i
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don't want to get too far ahead of
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myself again march 9th this is such a
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dynamic situation things change every
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few hours quite honestly um but we're
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seeing right now is is it looks like
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these sanctions are going to stay on for
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a long time these cargoes are going to
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be rerouted significantly but it looks
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like some production you know the grains
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and stuff are going to come back online
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and be exported soon
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yeah jay i really appreciate your
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insight i know all of our audience
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members do as well and just a reminder
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for everyone this is jay mensmeyer from
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value investors edge our supply chain
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expert and he has a free trial going on
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for everyone right now so make sure you
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go to seeking alpha.com and you can
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check that out today jay thank you so
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much for your time and have a great rest
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of the week okay thanks daniel
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you
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