Revisit a Simple Time in Investing

Not Exactly Maersk potential, but it was state-of-the-art in its day

We often simplify our lives in order to eliminate inefficiencies and clutter. Many of us fast for periods to cleanse ourselves physically. We meditate or pray to do so mentally, or we may attend a retreat to a place where daily comforts are set aside in favor of a more simple existence.

It would be wise to do the same with our investment portfolio from time to time. Trading stocks, bonds and derivatives has become an incredibly complex process. Computerization has made executing the process convenient, but the formulas, calculations, and middle-men required are part of a process that is anything but simple.

However, if we look back at the start of stock exchanges in the 1600’s we find a simple process. An expedition would take off from Europe to the East Indies in search for spices. To fund the expedition, investors would contribute to fund the trip, and share in the profits upon its completion. Simple: The trip costs X, the trip earned Y. Subtract X from Y and split what remains among the investors.

We find it ironic that our simple shipping investment is structured the same as the original shipping investments, but it makes perfect sense. We understand it and our investors understand it. We think it should always be that simple. Perhaps in our industry it always has been.