Posts Tagged ‘Economic


All Eyes (including APM) on Asia

After the global crisis in 2008, many companies tightened the wallets and held back on investing in anything or anywhere. Despite the pull back, that resulted in a year where the Dow Jones Industrial Average lost 37%, shipping lines were still running and people still required the goods and services that they consume to go about their daily lives. In that year Pacific Tycoon made 23% for our container clients. Container companies are profiting handsomely from the boom in Asia.

Made in China

Good Results

The company announced last week that their profits for the first 6 months increased 6% over the same period last year. With forward thinking and confidence in emerging markets, APM has increased its holding’s in Asia and that has paid-off for them handsomely.

Specifically, in Asia, in the first half of the year new operations commenced at the recently completed 1.1 million TEU annual capacity deep-water Cai Mep International Terminal in Vietnam. APM also began operations in Liberia and the Republic of Georgia.

APM Terminals CEO Kim Fejfer, said “We achieved very good results for the first half fiscal year and our key business metrics continue to trend positively. I am delighted to see our client portfolio expanding, our new business activities performing well, opening new markets in line with our growth strategy. Our investment in new terminals continues to drive APM Terminals strong market leading position.”

More Investment Coming

“We are actively looking for investment opportunities in emerging Asian markets such as China, Vietnam, India and Indonesia,” said chief operating officer Martin Christiansen.

Expanding intra-Asia trade volume has been largely fuelled by China’s increasing appetite for imports and closer ties with the Association of Southeast Asian Nations (ASEAN), he said.

The Netherlands-based company owns stakes in 10 container terminals in China, which have not received further investment since 2009 because of the 2008 global financial recession.

The company sold its shares in the ports of Kaohsiung, Taiwan, in 2009 and Yantian, Guangdong province, in 2010 on the Shenzhen Stock Exchange to China Ocean Shipping (Group) Co (Cosco). APM Terminals plans to sell half of its 50 percent stake in Xiamen port to Xiamen International Port.

While stressing the Chinese market remains a priority, Christiansen admitted that there are some potential investment challenges in China, such as the rising costs of labour and property. But the valuation of ports is yet to offset rising costs, with nearly no increase in tariffs in recent years.

Most importantly, “the growth rate of China’s container volume in the future is expected to be lower than the past, particularly China’s export volume to mature markets such as the United States and the Europe”, Christiansen said.

The dwindling growth rate is partly attributable to rising costs and yuan appreciation, which are posing a threat to China’s reputation as the global manufacturing base. The country’s coastal cities, which support a variety of labour-intensive manufacturing sectors, have been particularly hard hit.

Some investors have shifted investments into neighbouring countries where the cost of labour is lower. In 2010, Vietnam replaced China as the largest production base for Nike Inc, prompting widespread concerns that China might lose its attractiveness as a global manufacturer.

Growth in Other Countries

The investment in the Cai Mep International Terminal in Vietnam, looks to be a good one. Last year GDP for the entire country of Vietnam was 6.7%, whereas in the Mekong River Delta that number was almost double at 12.2%. The region exported 6.8 million tonnes of rice in 2010, the highest volume so far. Ho Chi Minh is the business center of the country and growth from both foreign and local investment is increasing.

China is Difficult to Replace

“China’s vast manufacturing industry is difficult to replace. We do not see a big risk of a massive sourcing shift out of China in the near future,” Christiansen said. “China will remain one of the most important markets for us.”

For APM and Asia and the expanding countries in Africa, as well, China is an important piece of the puzzle. China is aware that wages and standards of living inside the country are climbing higher and higher. All of this puts pressure on the country to remain at a competitive advantage in terms of pricing for companies needing manufacturing solutions.

This is another reason the country is eagerly awaiting 2014, when the new set of Panama Canal locks are set to open. The larger Post-Panamax ships of today which carry twice (almost 3 times) the cargo and cut annual operating expenses in half are a much needed boost to China’s shipping industry.

Image: VNBrand

Source: CargoNewsAsia, VietnamBusiness, CargoNewsAsia2


Don’t Let Inflation Erode Your Savings

These days to save is to lose.

For most of the last century, one’s savings were considered part of an investment portfolio. That savings would take the form of extremely safe instruments that carried different rates of return depending on liquidity. Certainly, they were not aggressive instruments, but to save a substantial enough amount of money would provide a considerable nest egg.

Today, such a conservative approach does not represent a true investment. Investments are made to increase principle or generate income. Today, savings means an erosion of principle. Today’s low rates of return are offset by inflation that erodes the value of money faster than interest rates grow it. But with world-wide economic difficulty, there are few good alternatives.

Except ours. Owning shipping containers is just as safe as money in the bank, since you own a true, useful and insured asset. It is also aggressive enough to generate a revenue stream that will substantially grow your portfolio at several times the rate of inflation. Finally, its resale value increases with inflation as well as the additional value provided by market demand.

A safe, simple and profitable way to generate unearned income in today’s difficult economic world.


Will the Latest Middle East Upheaval Disrupt the Asian Economy?

As the Middle East continues its upheaval, The world’s eyes are now focused on Israel and its relationships with The Palestinians and others in that region. Those of us in East Asia can’t help but wonder what impact it will have on us. With the exception of some inevitable growing pains that accompany a strong economy, the Pacific Rim is enjoying prosperity. We would hate to have the rest of the world’s disruptions inhibit our growth.

It would seem that unless Iranian and Israeli relations devolve into outright war, it is no more likely to have an impact on Pacific prosperity than did events in Egypt and Libya. And the Egyptian situation included a trade route as important as the Suez canal.

The Pacific region has been blessed with prosperity because the economies that make up the area were determined to do so. Less than five years ago, most of the world was plunged into a recession. We brought ourselves out of it, despite the fact that classic economic powers like the U.S. and Europe continue to lag behind.

We have withstood one of the world’s worst natural disasters happening in Japan, one of our most important but vulnerable economies. We have withstood the falling like dominoes of Arab countries in the region. It will take more than this latest controversy to slow down this powerful region.


Unearned Income Moves You from Savings to Wealth

From savings, to unearned income, to this

The one question most asked of people who become wealthy is “What is your secret?” However, the answer is no secret at all. Obviously, most of us cannot sell what we do for a living for enough money to become truly wealthy. There are only so many hours in a day, and we can only command so much money per hour. Those who earn a salary tend not to fare much better, and often worse.

The secret to wealth is in the income for which you do not toil, also called unearned income.

It begins as savings. We save some money which earns a meager interest rate. Once we accumulate enough, we invest it. Typically, our investments are made through traditional channels. We buy shares of corporations though stocks, or shares of aggregated companies through mutual funds. Perhaps we invest in real estate, or even in the crazy world of derivatives.

All of those systems are set up to benefit those who run the systems most. The value and income from corporate stocks are determined by how much of a company’s earnings the company decides to keep. The rest goes to you, minus what the broker takes for executing the transaction.

Unearned income with Pacific Tycoon is different. You are not at the mercy of a board of directors. Your return is not watered down by an allowance provided you, from which commissions are deducted.

The shipping containers you purchase through us are yours. The income that those containers generate is yours. When you sell the container, the profit is yours.

For sure, you hire us to conduct the purchase, generate the leases with shipping companies, and manage the logistics, but any company would have to pay people to do that anyway. We will agree to those terms before the transaction takes place.

With shipping containers, you own the asset. You own the revenue. You own the wealth created by “unearned income.” And that is the secret to growing true wealth.


President Hu Jintao Visits The United States

This week, Chinese President Hu Jintao visited several American cities. The two super powers have had a cool relationship, and this visit signals a significant warming of that relationship. If only for the mathematics of it, their improved relationship helps us all.

A couple of charts accompany this blog entry. They show the relative size the U.S. and Chinese economies. Clearly, they dominate the world’s economies. In fact, if the U.S. were a mere 1% larger, it would be as if we added a whole new economy the size of Singapore to the international marketplace.

Over the last few years, many of the largest economies on the chart have been stagnant in their growth. Even as Asian economies have enjoyed substantial growth, the lethargy of those large economies has held the world back from where it could be today.

We applaud both China and The United States for taking this step. We are anxious for the day we can report that all of the world’s economies are growing comfortably. We  hope that some day we will look upon the January 2011 visit of President Hu Jintao to America as the day the world’s economy started to grow again.


Asian Commerce – Strong and Comfortable

Asia understands the value of commerce.

One of the most confusing, yet comforting things about our Asian business is the nature of the Asian marketplace. The economies in the region go from incredibly large like China, to small, as in North Korea. Some are dynamic, with growth rates nearing fifteen percent, and others working just to keep the economy moving forward.

Some currencies struggle with inflation, some have infrastructure issues that mitigate even the most friendly trade policies. Regulation, politics, customs and language all bring challenges to commerce in the region.

The advantage of this wide mix of circumstances is that they all blend together to form a strong and consistent picture. The region’s growth is undeniable, and it is fueling the revitalization of the U.S. and Europe. Sure there are stock market rises and falls on each exchange, but for every bad day in Japan, you will find positive days in China and Vietnam.

We can see how each country works to solve its individual growing pain. We can also see how each economy learns by what its neighbor does to combat its issues. We see each country now face its own challenges with the benefit of the experiences of other countries, and so far, it is serving the region very well. It has become a comfortable and inviting place for commerce.


For True Investment Security Avoid Human Capital

Invest in things that do work, not people who do work.

Few forces of nature are less predictable, and therefore less reliable than the behavior of individuals. Although behavior of masses can be anticipated, it is impossible to predict how any one individual will respond given a set of circumstances.

Why then, do we gamble our fortunes on how humans will run companies? That is what we are doing when we buy company stocks as investments. We are trying to predict that the company will be run at its greatest potential, that each department within the company will run at its greatest potential, and that each individual within each department will conduct themselves to maximize the company’s greatest potential as well. Every action by any individual within the organization to the contrary reduces the value of our investment. Surely, that high potential is significant. Given a good economic environment, friendly technology and a company staffed with competent people, there is a lot of money to be made.

The opposite of the human dynamic is gold. Gold does not degrade over time, nor does it produce more one day than the next. Instead, the value of money fluctuates around it, changing the monetary equivalent of gold from day-to-day. In poor economic times it is worth more money than in good economic times. But no matter its monetary worth, gold is a constant. Its productivity never changes.

There is one way to achieve the upward potential of the human dynamic (without the uncertainty of the individual) while enjoying the rock solid stability of a precious metal, thereby getting the best of both. That is through owning a capital asset. In our case, it means shipping containers.

A container is a container. It doesn’t do more one day than the next. It doesn’t make bad decisions. It is always necessary, and more so during strong economic times. With its dynamic upside potential and having no real downside, we see it as the perfect investment.

Gain unearned income. Own shipping containers and lease them to us. We contract with companies who need to ship materials.

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