If you live or have been to Athens, you might be familiar with the promenades and the parks on the seafront of the southern suburbs of Palaio Faliro and Alimos. They are arguably a lovely place for a walk, particularly associated with late afternoon strolls at sunset and now, following our recent experiences with lockdowns and our collectively revived interest in outdoors exercise, cycling (and skateboarding, for those brave enough). Dotted with colourful marinas and cafes, one can find some welcoming tranquility and peace of mind, isolated from the bustling city, in the aisles of catamarans, deck boats, bowriders and of the more traditional sailboats – among a true forest of masts – beneath the pink-red evening sky of Attica.
The marina in Floisvos in particular, renowned for its restaurants and open-air cinema, is also a site where history meets leisure. A once mighty warship, the armored cruiser ‘Georgios Averof’, now a museum ship, is berthed there. Built in Livorno, Italy and launched in March 1910, its purchase by the Greek state was partly financed by a significant bequest that the Greek Navy received from Georgios Averof, a businessman of the 19th century who made his fortune, amongst other places, in Alexandria and eventually became one of the most prominent national benefactors of the early modern Greek state. The ship’s role was instrumental during naval operations in the First Balkan War, and it continued its service during the tumultuous interwar years and until the end of World War Two (nearly avoiding being scuttled by its crew in the face of the advancing German forces in 1941 but eventually escaping to Egypt, where the Greek government had also found refuge).
Among the many displays on the ship’s main and lower decks dedicated to life onboard and early 20th century naval warfare, one that may baffle the visitor as having no place in the company of sabres, various small arms and footage of the ship firing its main battery is a miniature model of a Liberty class cargo ship donated by its captain’s son to the museum in October last year to be displayed along with other World War 2 memorabilia; homage to the Liberty ships’ well known history in the Allied supply runs and, then, becoming the bedrock of the Greek shipping miracle of the 1950s (interestingly, a commemorative publication of the American Bureau of Shipping estimates that of the approximately 1,200 Liberty ships sold, more than 800 passed through Greek hands).
The inscription beneath the Liberty ship in question, the ‘S/S Kapetan Dimitrios’, strikes as being particularly peaceful given the context of its surroundings. It reads: “In Durban, South Africa, on the 6th of December 1974, the day I was first given my own command, the departing Captain, an 84-year-old from Chios; a true seadog who spent most of his life at sea, gave me the following wish that I have treasured all my thirty-eight years as a Master: ‘Capt. Tryphon, may you have a safe voyage and the sea be as soft as cotton on your bow‘.”.
The captain’s farewell message made an impression on me. In a ‘ship sale and purchase’ context, it would have been a fitting and lovely wish to offer to clients who just got delivery of a ship. In a literal sense, it is a wish for fair and calm seas; for Godspeed; for a journey unhindered by headwinds, gales, and tempest, a wish that has been in the lips of mariners since time immemorial. It can also be taken for a blessing to stable ongoing uninterrupted business unimpeded by adversities and mishaps.
Whilst thinking about the above, the secondhand market for bulk carriers to which we dedicate most of our time, energy and efforts can also appear dead calm at times of little reported sales activity, but appearances are certainly deceiving. This market is as far from a tranquil and serene place as it gets.
Whether in the past, here and now, or in the days to come, it will always be an inherently arduous and demanding task for anyone to study, make sense and take an investment decision in an environment that features countless variables and ‘moving parts’, conflicting interpretations of events, and great systematic (e.g., the COVID-19 pandemic) and unsystematic risks (e.g., China banning imports of Aussie iron ore… wait, can this not be looked at as an opportunity?).
Although we like to argue that the dry bulk market and, by extension, ship sale and purchase, can be an example of a perfectly competitive market as described in the textbooks of classical economics, the environment we operate in is not ‘perfect’. Where ‘imperfections’ manifest the most, and cause the most stress, is the lack of having accurate and complete market information, a still unattainable and fanciful hope.
To draw an analogy from science and the physicists’ quest for a complete unified theory (the Theory of Everything) that will provide a thorough and sound theoretical framework explaining everything from the movements of minuscule particles to the formation and expansion of our cosmos, the more variables one adds to their calculations, the less accurate their model of prediction may become. It might therefore be safe to assume that there will never be an accurate prediction of either future earnings or secondhand values.
Uncertainty about the trajectory of the market, asymmetric information and the actions of other market participants constantly altering the landscape (we will call that landscape ‘last done’) make for a restless and highly competitive ship secondhand market. Again, expanding on the example from the world of physics, coming up with a single theory that can describe the whole universe (in our case the secondhand market for bulk carriers) in one go is nigh impossible.
To prove this, Stephen Hawking wrote in his A Brief History of Time “[…] if you believe that the universe is not arbitrary, but is governed by definite laws, you ultimately have to combine the partial theories into a complete unified theory that will describe everything in the universe. But there is a fundamental paradox in the search for such a complete unified theory. […] if there is really a complete unified theory, it would also presumably determine our actions. And so, the theory itself would determine the outcome of our search for it!”
The Theory of Everything remains one of the major unsolved problems in physics, a holy grail so to speak, similar to brokers’ desire for perfect market vision. As in physics, scouring the shipping markets for correlations between multitude events and seemingly unrelated data to build the necessary framework for an investment decision to be taken with as nearly as possible ‘perfect information’ at hand is a noble exercise but might be a priori vain.
In engaging with the secondhand market, one should break up their probes into smaller bits that can be dealt with separately (e.g., Is this a ship that charterers will employ? Would we have money and a ship after the purchase?). To paraphrase Hawking, if everything in our market depends on everything else, it might be impossible to get close to the full picture by investigating parts of the market in isolation. Nevertheless, it is certainly the way that humans have learnt to make progress.
The ‘S/S Kapetan Dimitrios’ was built as the ‘S/S Jonathan Grout’ in September 1942 in California and available bibliography suggests that it was not among the first one hundred Liberties purchased by the Greek shipowners in 1947. The ship’s history and fate remain unclear (at least when one’s sources of information are confined to written entries in books). At the end, we would like to imagine that the ‘S/S Kapetan Dimitrios’, and many of its sisterships, enjoyed many peaceful decades of soft cotton seas.
Albeit the reality might well be different as the second half of the 20th century was also a period fraught with conflicts and great superpowers’ rivalry. However, this is not the late 1960s nor the early 70s. The world today is an altogether more peaceful place, but one still dotted with flashpoints, challenges, and developments, be it geopolitical, economical, demographical, or technological, that challenge the status quo.
Whether in shipping or in life, an ocean of cotton can only be our calm mindset when dealing with business and personal affairs, our capacity to make the most out of available information, resources and opportunities, our attitude toward facing and overcoming challenges and adversities.