A few weeks ago when I was spending time in Panama I stayed over at Calvin’s guesthouse in beautiful Boquete.
We used this opportunity to discuss why we both invested in Ecopetrol (the Colombian national oil company) which went viral on Twitter.
We made another video together on another topic.
Essentially, he views everything from the prism of world trade. He specializes in gathering shipping data for his subscribers, and uses this data, which he gets and analyses early, to gain insights he can act on before anyone else.
I know we talk about his subscription service, but don’t focus on this. Focus on the way he views the world. It’s a different perspective.
Calvin was kind enough to offer a coupon to my subscribers who want to sign up to his subscription service Marhelm. Use coupon WANDER to get 20% off.
Members also get access to a Discord which is intensively used by some heavy hitters.
I have to say it’s not cheap, but there is an option for monthly subscriptions, which limits the risk of reviewing / trying Marhelm.
2023 promises to be another eventful year
I just retweeted this chart:
This means only one thing: that the cost of things will keep going up unless there is a massive recession that kills demand.
Short term (Q1/Q2 2023), consumers may get a reprieve from high inflation due to baseline effects (high price of oil in Q1/Q2 2022), but ultimately, as long as the powers that be continue to do everything they can to complicate exploration, mining and drilling permits as well as financing for new projects, then these costs will go up.
It will inevitably trickle down to the whole economy.
Happy New Years,
To a World of Opportunities,
The Wandering Investor
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Full transcript of “Marhelm Review – On the importance of understanding Trade Flows”
LADISLAS MAURICE: Hello, everyone. Ladislas Maurice from thewanderinginvestor.com. So today, I’m in Boquete in Panama with Calvin Froedge from Twitter. How are you?
CALVIN FROEDGE: Good.
Marhelm subscription service review
LADISLAS MAURICE: Cool. So Calvin, if you follow Calvin on Twitter, he’s prolific on the platform. And you launched a subscription service approximately two years ago. And the results as you post them on Twitter, absolutely breathtaking, I’d say. You’re pretty much beating everyone. And it focuses a lot on shipping, commodities, energy, etc.
CALVIN FROEDGE: Right.
LADISLAS MAURICE: Can you elaborate a bit on the service and why you believe that having such data in terms of shipping is so important for investors?
CALVIN FROEDGE: Yeah. So I got into the shipping markets several years back, and just really got interested because of my exposure to energy. And I just started figuring out that it was really relevant to what was happening in the rest of the economy and the rest of global trade to know what was happening in shipping, because 96% of global trade basically happens by seaborne means for physical exchanges, right? I mean, grains, oil, products from China that make it into our stores, the LNG, the gas that Europe’s burning for electricity, the cooking gas that they burn in India and Kenya, South America to cook their food, all this stuff comes on ships. Well, some of it comes on pipelines, too, but a heck of a lot comes on ships.
So you follow shipping, you are essentially following commodities, right, you’re essentially following global trade. You know how all these things move, you start looking at inventories, you start looking at trade balances, you start looking at different economies. So I think that you see things that other people don’t see. You see the world no longer from a very sort of nationalist local lens, you see the world as almost a top down analyst, scientist, planner, insert the word that you want. And just when you start looking at global trade flows every day and every week, it changes your interpretation of the world.
So I think that’s why my service has been successful and why my subscribers have been successful and why I’ve been successful in getting above market returns. So this year, I’m at around 85% year to date in a year when the S&P 500 is down, what was it, 17%, 18% after a big rally?
LADISLAS MAURICE: I can’t say my portfolio is doing as well as that, that’s for sure.
CALVIN FROEDGE: But I think that we’ve done well. We don’t only trade shipping stocks, my platform covers about 50 maritime equities in dry bulk, product tankers, crude tankers, LPG, and LNG. So you can–
On the importance of understanding macro
LADISLAS MAURICE: And I think I’ll cut you right here. And I think this is really important, is when you were talking about understanding the trade flows, in today’s environment, macro investing has become much more important than when there was stability in the world.
CALVIN FROEDGE: Right.
LADISLAS MAURICE: When there’s instability, when there’s uncertainty, when there’s chaos–
CALVIN FROEDGE: Yeah, it’s a great point.
LADISLAS MAURICE: understanding the macro environment is more important than ever. So, like moments like this, I hadn’t made that link, you helped me make that link right now. And it’s making me think this is probably the sort of service, because I primarily focus on macro, this is potentially the sort of service that I could benefit from.
CALVIN FROEDGE: Yeah. So for example, we looked at why did the riots in Sri Lanka happen. How did the government respond after that? I mean, it was essentially an LPG crisis, right? Well, LPG and fertilizers, right. And so then you start looking at other countries–
LADISLAS MAURICE: And you could see it coming.
CALVIN FROEDGE: You could see it coming. Like, I was talking about diesel shortages, and diesel inventories going the wrong way, evidence of stress. I was seeing diesel cargoes go from weird Point A’s to weird Point B’s. I was seeing trade flows change. So I knew months and months in advance that, for example, we had big problems developing with diesel. And I already knew a greater context for why we would have systemic diesel issues because I follow fuel regulations, I follow refinery economics. I knew that IMO 2020, which were the fuel changes that were instituted a couple of years ago, were going to fundamentally alter the way that the global oil market and global fuels market works.
I just got back from a fuels conference. I shared a lot of these insights with my subscribers. I was hanging out with the guy who’s the lead engineer for the number one ship engine builder in the world that designs 90% of all the engines that go into new ships. I got to talk to this guy about where he sees fuels going. One of the big insights that I got from going to this conference, based on all this other context because of these things I follow, was that we’re going to stick with liquid fuels, and the alternatives for non-petroleum based liquid fuels, if that’s the direction that the world goes in, they’re all less energy dense, you’re going to need more tank infrastructure, you’re going to need more pipeline infrastructure, more storage infrastructure.
I went and told my guys, I was like, hey, buy some Vopak stock. Vopak was at a low because the market has been in backwardation instead of contango. Storage rates go up during contango. Vopak pretty much, soon as the next report came out, popped 25%. So that certainly paid for my plane ticket and my resort fee and whatnot at the conference.
LADISLAS MAURICE: Miami isn’t cheap, right? [laughs]
CALVIN FROEDGE: Yeah, Miami is not super cheap. But we follow things, through Marhelm, we follow industries that are very important and that are very opaque to most people. Most people think the economy is Apple, and Tesla, and Microsoft, right? When really these things, these guys, they’re important, but they’re kind of consumers of commodities, right? They sell consumer products, they don’t do any of the hardcore extraction, refining, transportation, that people that invest in Apple wouldn’t have any reason to follow how much capex is going into coal mining or, cobalt mining, or manganese, or any of these other metals that, in the end, are important for these companies in the end. So people that invested in these companies, they missed out on what are now historic coal prices, historic diesel prices.
The tanker segment, which is a segment that we were really bullish on, I want to say that the average return in the past year for a tanker stock has been 150% our top. At the beginning of the year, we made a lot of different picks in shipping. I think we’ve made about a dozen picks this year of saying, “Hey, buy this. I’m buying it. This is why I’m buying it.” I think the average return on those recommendations is about 75%. The shipping company that I have the largest position in that was my largest position until getting heavier in some of the South American oil names was Hafnia, which is a Danish product tanker company. I got into that stock at like 15 kroner, and it’s at about just under 60 kroner now, and is paying 7, 8 kroner per quarter in dividends. So I’m literally going to get in my cost basis back within single years in dividends what I paid on the shares.
LADISLAS MAURICE: That’s insane.
CALVIN FROEDGE: So you’re not going to get those kinds of returns unless you follow these cyclical, volatile industries that everything else relies on. I mean, right now, energy stocks are at a historical low weighting in the S&P 500. The rest of the world, the rest of the capital class, the rest of the economy, they’re saying these things are evil, they’re not important, we can do without them. But the trading economics, the actual physical commodity prices for these things, the political focus shows you that’s not the case. I mean, how important has the Strategic Petroleum Reserve been to the Biden administration, to international discourse around energy, to US politics?
I mean, if you’re somebody living in a retired town in Arizona, you might not know anything about it. But anybody that knows the first thing about energy markets knows that it’s, Joe Biden has probably spent more time thinking about the Strategic Petroleum Reserve than anything else this year. Right? It’s extremely important. And so these are the kinds of things that I cover. In my data platform, I cover about 50 maritime equities. I have tools for analyzing trade flows, for showing the rates, how the rates are changing. So you can–
Review of proprietary software used by Marhelm subscription service
LADISLAS MAURICE: You run your own software and analyze the data yourself, etc.
CALVIN FROEDGE: Yeah. Yeah, my background was in software development. So I built my own platform. So you can, in my platform, for example, if there’s a big disparity between the equities and the rates that they’re earning, the economics, because the economics can change in shipping overnight. Like, companies can go from losing money to earning their market cap in a few months literally overnight because of some change, like, the Russia-Ukraine war, for instance.
So I look at everything from, a recent thing that made it into the weekly roundup, which is the weekly review that I do of the shipping and commodity markets was that in Kenya, they had decided to approve a new LPG pipeline because the government was kind of anti-fossil fuel, they didn’t really want to invest in this, they believed in energy transition, etc. And so this was a project that was kind of on the ropes. And then they heard that people in the slums in Nairobi were cooking their meals with plastic bags. They were burning plastic bags, black smoke inside their homes to boil water.
So you can say that fossil fuels are evil, but the reality is that the entire world has a kind of a minimum bar for how much energy that we need to live the kinds of lifestyles that we live, to power our cars, to heat our homes, to cool our homes, to cook our food. Boiling water is a very underappreciated problem that is out of sight out of minds for most Americans, most Europeans, but it takes a lot of energy to boil water.
LADISLAS MAURICE: Yeah.
CALVIN FROEDGE: Right. So we even look at examples like that. We look at kind of conference call transcripts, we look at earnings reports. I sort of just spend a couple of days every week just going through as much news, as much information, as much data as I can, and taking those two days of my time and consolidating them into something that can be consumed in 30 minutes. So that’s my weekly report. The data platform is what I draw a lot of that data from, which is rates, equities, ship ordering, ship buying, ship scrapping, fuel pricing, lots of different factors.
And then we have a discussion forum, where a lot of people who are shipping insiders, I’m talking we’ve got three people in our chat room who individually control more than 100 tankers. So these are, let’s say, $10 million to $100 million capital assets, right? That this is big money, and we’ve got these guys sitting around shooting the shit with us. And so it’s a lot of shipping guys, a lot of hedge funds, institutional investors, but also a lot of private investors like me. So yeah, the subscription fee, it’s pricey at this point. I’ve raised the price because I want to deliver a lot of value to a close circle of people, I don’t really want to dilute the value of what I offer. So I’ve gradually raised the pricing. I’m only ever going to allow a thousand people in this group. We’re about halfway there now.
We’ve seen people sort of develop rapport with each other. We know each other’s background, we know what people’s specializations are. So Twitter is kind of like a fire hose, right. And what I offer is a little bit more refined.
LADISLAS MAURICE: Cool. Fantastic. Well, thank you very much for your time today. Calvin was kind enough to offer a coupon to my subscribers who want to sign up to his subscription service Marhelm. Use coupon WANDER to get 20% off.
CALVIN FROEDGE: Yeah.
LADISLAS MAURICE: Calvin, always a pleasure. Thank you.
CALVIN FROEDGE: Yeah. Thank you.
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