Lim Weixiang - Zeitgeist Photos/E+ via Getty Images
Listen here or on the go via Apple Podcasts and Spotify
J Mintzmyer of Value Investor's Edge talks global tensions and trade wars in the context of shipping (1:30). More bullish on tankers and dry bulk, oil rigs (5:40). Israel/Iran; Russia/Ukraine possible scenarios (7:35). Russian oil sanctions (11:20). Oil price movements and reactions (12:55). Shorting Walmart - a brief update (18:30).
As part of Seeking Alpha's current sales event, Value Investor's Edge is offering a 20% introductory discount for both new and returning subscribers.
Transcript
Rena Sherbill: J Mintzmyer, shipping expert extraordinaire, not just at Seeking Alpha, but across the globe from Value Investor's Edge. Thank you so much for taking the time. Appreciate you coming to Investing Experts right now.
J Mintzmyer: Absolutely, Rena. Thanks so much for having me. I think it's been a few months since we've last spoken, and there's been so much going on in in the world, environment, just Iran and the Middle East tension alone, and that's not even - that's not even half of it. So I'm excited to talk about what's going on and hear your great questions as you always have.
RS: I appreciate that. Yeah. We need your take. I mean, last time we were on talking about how the shipping sector used to be a somewhat boring sector, but now it's, like, nonstop.
Catch us up. How are you thinking about world events, ever-changing world events? How are you thinking about in the context of shipping and, by and large, as an investor?
JM: Well, just from the last time we spoke, and I can't remember exactly when it was, but I think it was the spring of '25, so a few months ago.
And just from when we last spoke, we've seen all sorts of different directions on tariffs and the trade war environment.
We got the temperature turned way up in April. Right? And now we're bound to a simmer on the trade war tensions.
In fact, I think everyone's kinda forgotten about it. We have a deadline coming up here on the trade war. We have a deadline of July 7, Rena, that we're recording on the 26th of June in the late afternoon, so Thursday here.
That's only ten days away, that big trade war deadline. And so we could potentially have a lot of excitement in the market, and I think everyone's just forgotten about it.
I don't see anyone in the news saying, hey. We got ten days left of this ninety day reprieve. And not to say that we won't get another sixty to ninety day reprieve, but it is a catalyst, it is an event.
That's part of it. And the other part is the Middle East tension, which, I mean, I'm glad we're talking today and not a week ago because everything would be everything would be - and who knows? Maybe we would have said some smart things together, but we might have also been totally wrong about where things were going.
I don't wanna prognosticate too much on what's gonna happen in the Middle East, but I am happy to talk about shipping and what we're looking at.
RS: By the way, just for those marking time, the last time you were on was mid-May, and it feels probably like six months ago, three months ago. It was just a little bit over 6 weeks.
JM: That's funny. It feels like it feels like three or four months ago.
RS: I mean, I think that's the year that we're in and probably the last couple of years for that matter and maybe even since COVID for God's sakes. I don't know. But, yeah, time is very much subjective in terms of processing it properly.
Talk to us first about the trade war and what do you see coming? We saw an announcement out of China. I don't know if you've had any time to digest that, a supposed announcement in regards to China and the US. What are your thoughts in terms of the trade war?
JM: Well, we're certainly in a much different position than I would have said six weeks ago or I did say six weeks ago, feel free to pull up the podcast and see what I got wrong, and maybe I got one thing right.
But, you know, the tensions have certainly turned down, and they're simmering. And in fact, I think the tensions that we could see or the explosive headlines or the things that could be disruptive are less likely, ironically, less likely to be about US and China and more likely to be about the US and alternative countries like Vietnam or India or the European Union.
There actually might be more tensions there. Because I think with China, you know, there's an understanding that there's gonna be a level of tariffs regardless.
There's an understanding that this is a national security concern, and there's an understanding that both countries do at some point we're symbiotic. Right? We need each other at some point. So I think there's room for a deal to be made there. I'm more optimistic about that now than I was a couple of months ago.
And you look at the S&P 500 (SP500), which I don't wanna talk whether or not I'm bullish or bearish in the broad market. Spoiler alert, I'm a little bearish, but that's not my lane.
The S&P 500 just hit a fresh all-time high today. So I think the market is already pricing in a lot of enthusiasm, a lot of optimism about the US and China facing something.
So back to shipping, what that means for shipping, it's gonna be good for overall global GDP growth to have trade deals done, to have the tensions come down a little bit.
Because if the trade war went out of hand completely, we could be looking at a global recession. Some might even have said a global depression, which would be bad, not just for shipping. It would be bad for everything. Right? And I think we're further away from that today.
And so that does make me more optimistic in certain parts of the shipping market. I think one part where I'm a little bit more optimistic today than I was a few months ago, one would be tankers.
I was already bullish, but now I'm more bullish. And another one would be dry bulk. I was kind of like, oh, I don't know if I wanna get there. Too much China exposure. I'm a little bit more selectively interested in certain dry bulk companies today than I was a couple of months ago.
RS: And are those companies similar in terms of the ones that you've been bullish on in the past? Are you more bullish on those, or have they changed completely?
JM: I try to stick with the management teams that I trust and the situations I understand.
So I don't think I'm gonna be here today and have a vastly different list of favorite picks. I'm pretty sure last time we talked, I liked International Seaways (NYSE:INSW), and so I still like those on the tanker side.
On the dry bulk side, I still like Star Bulk (NASDAQ:SBLK). I don't think that's changed tremendously, but I would say I'm slightly more bullish today on both of those names than I was a couple of months ago. And so that's a favorable shift, I think, for both of those names.
And then the other sector arena, and this is a little bit of a newer segment for us, on Value Investor's Edge.
We've only been in the oil rig offshore market for about two years now. I have fifteen personal years in shipping and value investors. I just hit ten years in May. So when we talk about oil tankers and bulk and containers, I can say me personally, I have fifteen years.
Our combined team has over fifty years of experience in that segment. In oil rigs, we don't have that experience, Rena. So sorry for the big long lead in there, but we are more bullish on the oil and oil services stuff as well.
And so, one of those good companies that we like is Noble Corp (NYSE:NE). They're an oil rig provider, and so we're bullish on them. And they trade about $27, and they are just significantly below where they were last year.
Last year, they were almost 50. So they're down 40% year over year, and a lot of that is due to, first of all, lower oil prices. Sure. But a lot of it is due to concerns with Chinese economy falling apart, with there being global recession, global depression.
And if we get these trade deals and if we get some lowering of the tensions, we should see a lot stronger result for some of these oil service firms as well.
RS: So speaking further about the tensions, we have the Iran, Israel, US conflict. We have Ukraine, Russia. We have a bunch more that aren't discussed as much. But talk to us about how those conflicts are affecting the shipping sector, are affecting shipping investors, and what you see maybe going forward, what this, hopefully, the end to the fighting, but what that means.
Basically, the possible scenarios you're running through your head and how you're thinking about them.
JM: And, of course, I have to be really careful here because as a human and as just a global citizen or a US citizen, any citizen of anywhere, we obviously want the tensions to come down.
We obviously want peace in the region.
Amen.
And so you have to be careful with that.
The twins are getting a little antsy in the background. Those who don't know, Christina and I had twins about three weeks ago, and they are at home with us now. They had to stay in the NICU a little bit. They're at home with us now. Christina, my wife, she's a superhero. She's taking care of them.
So this will probably be a little bit more abbreviated podcast than normal. I can actually hear one of them. I think it's Isabelle. She's crying in the background. So, anyways, sorry for this.
Do what you need to do.
No. We'll be good for now. Christina's a rock star. She's got it handled. But just for folks that if they ask you, if folks wonder why we're only on for thirty minutes instead of an hour, that is why.
His time is precious.
Yes. So circling back. Sorry. New dad. I got distracted. I'm sleep-deprived.
We should all wish, right, for the outcome that I think that we generally have had the last couple of days. Right?
Iran said, hey. We've had enough. Israel said, okay. We got our targets. We don't really want any more citizens to die from these rockets. Let's have a ceasefire. Let's come to terms. And so I think we should all be happy with that.
But from a shipping perspective, shipping generally benefits from disruption and chaos.
So the idea that the Strait Of Hormuz, maybe not closed because you don't want the shipping lanes to be turned off, but that the whole thing of, ships are uneasy and ships are delaying and ships are diverting, like, that was very bullish.
So that was good for shipping. And the Houthis attacking ships, not the fact that they're attacking the ships. That's a different thing. But the fact that people are scared to go through the Red Sea and through the Suez Canal, that is very good for shipping because the ships have to go all the way around Africa, and demand is measured in ton miles.
The amount of cargo plus the times the distance. And so the Houthis, as weird as it sounds, the fact that they were shooting rockets at ships was actually really good for shipping rates. It was really bullish.
And so I have to be careful because We shouldn't be sitting here and cheering that on. That's a really gross way of looking at it.
But if you're trading these names and trading the themes, chaos in the Middle East is generally good for shipping.
So the last couple of days, we saw - and we're happy to see it - but we saw Iran and Israel come to at least some sort of limited ceasefire, limited terms.
And we saw the tanker rates come down a little bit. We saw the tanker stocks come down a little bit.
That is the market reacting, I believe, rationally. I believe correctly.
But I'm not the kind of guy that trades week to week. It's too fraying of the nerves, and there's too much chance to get it wrong.
I'm more of a twelve to twenty-four, maybe thirty-six month type investor. So not Warren Buffett. We're not buying and holding forever, but we're doing twelve, twenty four, thirty six months.
And so when I look at tankers twelve, twenty-four, thirty-six months, like I said, about five, ten minutes ago, I'm more optimistic today than I was a couple of months ago.
And I think the Iran/Israel thing's really just kind of a blip in the overall investment case for tankers.
RS: And what else are you do you have top of mind geopolitically or globally when you look around? What else is top of mind for you as a shipping investor?
JM: I think by far and large - we've already really talked about the trade deals. I think that's been covered well enough.
By far and large, the number two item we're looking at is the Russian sanctions. The sanctions on Russian oil and product exports.
And so there's a belief in the market that and again, we should wish for peace and a ceasefire or some sort of terms in Russia and Ukraine, but there was a belief in the markets that President Trump was going to sort of force a deal, no matter what it was, that Russia was gonna get everything they wanted, that Ukraine was gonna basically be sold out, and that all the sanctions against Russia were gonna go away, and everything was just gonna go back to normal.
And so there was a belief in the market that this would make tanker rates go down because tankers did benefit, and they are benefiting from the sanctions regime.
And the reason they're benefiting is because Russian oil can no longer be sold directly to Europe. That's a pretty short transit route. And so now it has to be sold to China and India, so it's a lot further.
And on the other hand, China and India are buying more of their oil from Russia because it's cheaper because it's like illicit. It's on the dark fleet, and they're buying less from the Middle East. So it's further to bring it from Russia than it is to bring it from the Middle East Gulf.
So that's why tankers have benefited from the sanctions, and they've also benefited from the fact that the Houthis are lobbing rockets at ships because ships are - about 30% of the tanker fleet is going around Africa, which adds to those ton miles.
And so I think number one is the trade war and the tensions, the tariffs. Number two would be the Russian sanctions, and then number three would be the Red Sea, and what are the Houthis gonna do. And so that's what we're looking at right now.
RS: Anything that you would say about the movement in the price of oil and how it's reacted to these events and how that's affecting anything, if at all, your investment thesis?
JM: It was pretty remarkable to see how far the oil prices (CL1:COM) moved and then how quickly they plummeted. It just instantaneously focused on the fact.
And I think they weren't necessarily focused so much on the Iran/Israel conflict itself. I think they were more con focused on the edge case of if Iran would try to close the Strait of Hormuz.
20% of the global oil goes through that choke point, and so if Iran would mine it or shoot rockets or do something to stop it or blockade it or even just attempt to blockade it, if you take 20% of the oil off the world market, the price goes from 65 to 100 plus overnight.
And so I think that's the oil market was kind of hedging that. And if you say, well, the oil should be $60, 65, and it's 100 if they close it, and there's a 25% chance they close it, that's how you get to what we have, like $75 in a while for a bit of oil. 77, I think. And so the market was basically saying, hey. There's a 25% chance they close it. At least that's how I read it.
For shipping in particular, we did have a lot of oil tanker companies say, hey. We're gonna respect the safety and security of our crews, and we're gonna stay away from the Strait Of Hormuz for a couple of days.
And because there are a lot of tanker companies, good companies that cared about the safety of their crews and cared about the safety of their ships, they stayed away.
So that allowed a few other companies that were sort of profiteering to seize rates that were over $100,000 a day. A normal tanker rate's about $25, $30,000 a day. And so, for a brief period of time, for about a week, rates got as high as $100,000 a day.
But that's very selective. We're talking about like a dozen ships. It'd be 15 ships got rates like that. I'm not on here on the podcast today, and if you would have had me on last week, I wouldn't have been saying this either. I'm not gonna go out and tell people you need to load up on tanker stocks because of Iran.
I think that's a little disingenuous. Right? Now I think it is legitimate to say, hey. Look at what could happen in these disruptions.
But to try to make a day trade or a week trade, I think with tankers, we need to focus on the longer-term picture, which is over the next twelve to eighteen months as the dark fleet starts edging out.
And that's why when I talk about Ukraine and the Russian sanctions, I think it's time, hopefully, that President Trump could get a deal done, and hopefully these sanctions can be brought down or at least negotiated down.
I don't want to see Ukraine get sold out, either. I think there's a middle ground there. But if we can get rid of some of these sanctions, this dark fleet can finally get removed. And it's got to the point where we have 21 of the global tanker fleet is over 20 years old.
And twenty years is pretty much rusted, outdated, unsafe, for an oil tanker. And the only reason there's 21% and not, like, 2% of the fleet over 20 is because of the dark fleet is supporting them.
What I was saying earlier is that the oil tanker companies have benefited from the sanctions. I was saying that. Right? But it's gotten to a point where those sanctions have been on so long that the markets have adapted.
That's what markets do. Free markets adapt. And it's gotten to the point where the sanctions are almost turning into like a negative on the tanker market.
Almost like an overhang because there's so many of these old outdated ships that need to be demolished, but they're not getting demolished because China, Iran, Russia, they're paranoid about these sanctions, and they wanna make sure they have tanker capacity.
So they're holding on. They're supporting these ships that otherwise are unsafe and dangerous. So if the sanctions eventually go away, I think in the next twelve to eighteen months, we'll see a period where these old ships are removed, and they're demolished, and they're taken away from the trading activities, and then we're gonna see a very tight tanker market.
We're gonna see strong healthy rates, and it's gonna be better for overall global safety as well.
Because every one of these tankers that's out there, that's twenty years plus, the dark fleet that's not getting regularly inspected, regular maintenance, all these kinds of things, it's a potential environmental catastrophe just waiting to happen.
And thank God we haven't had one yet, but it's really a matter of time if we keep going this way.
RS: Anything else that shipping investors should be aware of these days or to keep in mind as they assess the near term future?
JM: Normally, in shipping, and you know this, Rena. Normally, in shipping, I'll be talking about some choke point or I'll be talking about some fundamental, little aspect to the market or, oh, you haven't heard this before.
With shipping, I think right now, we're in sort of a sideways market where it really does depend a lot on global growth and global macro.
And so that that's rare for me to say that. I don't think I've said that on a podcast in five years at least.
But we are at a point in time where the outcome of these trade deals, these trade negotiations, the outcome of the overall global economy, whether or not that's the Fed cutting rates or how the US economy goes, that is gonna impact a lot of these shipping companies.
So we are sort of in a sideways market where global macro matters more than it ever has in shipping. And that's, I can't believe, I'm saying this, Rena, because I don't think I've ever said that on a podcast.
But we really are in that type of market where the trade deals, the Middle East tensions, the sanctions, all these sorts of events from a macro perspective, they matter a lot more than the microscope into the company's balance sheet, if that makes sense.
RS: We're having a whole bunch of paradigm shifts, aren't we? I mean, it's time to change our, approach, I think, in so many different ways to your point.
I was curious, and feel free to add anything else that belongs in this part of the conversation. But last time you were on, you were talking a little bit outside of your lane in terms of shorting Walmart (WMT) and in terms of the trade war and these global discussions.
And I'm just curious if you would give us, like, a sixty-second update, if you would care to, on your Walmart positioning or how you're thinking about that thesis.
JM: Of course, Rena. Well, first of all, I will say it's been unsuccessful in the sense that I haven't really made any money on it, but I think the stock is generally flat. I think last time we talked, the stock was, like, like, 97, $98.
I think today it's 96. So it's a generally flat stock, but the thesis has not panned out in the sense that the market doesn't care. The market doesn't care that this company trades at 40 times earnings.
The market doesn't care that their margins are gonna be crimped in the late summer or early fall. I maintain a small, short position in Walmart, but I'll be honest, it hasn't been profitable.
The market just doesn't care. I'm gonna maintain it for at least another two or three months and see how their next quarter results go and how their guidance does and what the market says.
But I think if they report another mediocre quarter or a mediocre guidance and the market just shrugs it off, I think I'll just move on. I mean, I'm a little bit outside my lane here. Well, actually, way outside my lane.
It's a big cap stock. So I guess we're kind of in the same position. We're just kinda waiting. Hasn't been really a failure in terms of the thesis, but we're not making money. And if you're not making money and investing, what are you doing? Right?
RS: Psychology of markets at play. Full effect. J, I'd love it if you would share with listeners, again, for those that don't know, how to get in touch with you.
I'd also really appreciate it if you would. We're approaching July 4. You've talked on the show before about being a military man. We've talked about these global conflicts today. How would you best leave investors today? What would your message be in general and in life? I would be happy for you to share those thoughts if you would.
JM: Wow. Well, thank you, Rena. That's a heavy one. So a lot of stuff here. We'll wrap up on an optimistic note, I guess. So first of all, how to find me, how to get in touch with me, I am on Seeking Alpha. You can type in J Mintzmyer or Value Investor's Edge and find me there.
Also, super easy, you can type in vieresearch.com. It'll take you right to our landing page. It's also on Seeking Alpha. Just sometimes easier for folks to get there that way.
Vieresearch.com will take you straight to the landing page. We have one-month trials available, so folks can just pay a discounted price and see all of our research for a month and see if it's right for them.
Our big selling point, obviously, we have deep dives across the shipping space. We cover almost 50 firms, including some infrastructure companies. But over the last ten years, we have 39% annualized returns across our model portfolios.
We are, despite all the chaos of the last couple of years, we are handily beating the S&P 500, this year as well as the shipping index and, obviously, small caps as well.
So we're happy with that. So that's how you can find me. That's the selling point. I encourage folks to reach out and get in touch if they'd like to. I did wanna mention a couple of names.
I think they're the same names generally I've talked about in the past, so no surprises. They're the same names that I've already disclosed or mentioned on this podcast.
But for tankers, that's International Seaways, (INSW). For dry bulk, it's Star Bulk, (SBLK). And then for the oil raises, a new one, I haven't mentioned this one before, it's Noble Corp (NE). I am long all three of those positions, all three of those are covered names of Value Investor's Edge.
And so those are the names that I would be adding to or buying, or at least very happy to invest in today. Even though I said it's kind of a sideways market, those are the three names I still really like and believe in.
To end on a positive note, it's a very positive day, a very positive time for the Mintzmyer family. We just welcomed the twins to the house here. Marcus and Isabelle, they are doing well. They will be three weeks old tomorrow.
As we approach July 4, you know, look, it's an uncertain world, but I am optimistic that America will get through all this and will be stronger than ever before.
I think we are seeing some positive fruits of some of the trade negotiations. I was skeptical. I still am. I think from an economist's perspective, the ideal tariff is zero. Tariffs don't really benefit anybody, in the long term they don't.
But I understand the need from a national security perspective. You mentioned I'm in the Air Force. I'm very sympathetic to the national security, drivers of tariffs. Sometimes they do make sense in that realm.
I just hope we don't get carried away. It seems like we're getting more pragmatic, so I'm optimistic about that. And I'm very optimistic and pleasantly surprised with how the conflict in the Middle East has gone so far.
I don't wanna see any strikes or anybody dying or anything like that, but we can't have more nuclear powers out there, and we have to have some sense of stability. And sometimes, as President Trump said, it's not the quote that I'm gonna frame on my wall. But as President Trump said, sometimes they have to fight it out.
And sometimes we just have to get to a point where reality sets in and both countries say, hey. Peace is better. Let's do peace. So I'm optimistic there, and, we'll see how things go. I really appreciate you having me on.
I'm sorry for folks that this is a little bit more concise, but please feel free to add a comment underneath where this is posted, underneath the transcript and recording, or go ahead and go to vieresearch.com and check out all you want about the shipping sector.
As part of Seeking Alpha's current sales event, Value Investor's Edge is offering a 20% introductory discount for both new and returning subscribers.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
