For several months now I have been thinking about what we should call today's economic environment. "The Crisis" is too generic and not descriptive enough; I reject "Great Depression II" for reasons I have previously explained (essentially, the Fed and Treasury injected trillions into the system and averted a banking meltdown). Conversely, "The Great Recession" is too mild a term for what is quite obviously something far greater and consequential than a few quarters of very low or negative GDP growth.
I have come up with "The Great Reset". By that I mean that the world as we know it, including finance of course, is not facing a simple reduction in economic activity due to a temporary inventory-demand imbalance, or a transient panic in financial markets. These are mere symptoms of a far more serious condition, or rather a series of conditions, that when taken together point to The End of Permagrowth. Too numerous to analyze here, they include resource depletion, climate change, overpopulation and, crucially for finance, too much debt vs. earned income.
I came up with today's Reset idea because I am hearing that a couple of investment banks are putting together "opportunity" funds to purchase distressed shipping loans, and perhaps even dry bulk and container ships outright. Now, I'm the first one to lambaste brokers when they hawk "hot" stocks or sectors right at the top (e.g. during the dotcom craze) and should applaud this latest move, as it is happening after a precipitous drop (see charts of ship charter rates and vessel prices below).
On the face of it, now should be a great time to invest in shipping, kick back and wait for the cycle to turn. Aaah, but... what if this is, in fact, The Great Reset?
Consider just this: Americans are the world's biggest consumers. With just 5% of the population they go through 25-30% of it's resources, from crude oil to copper.. and autos, sneakers, t-shirts and La-Z-Boy recliners. They have lately started saving again, reversing a three decade decline in the personal saving rate (see chart below).
An increase in saving means a decline in consumption and results in a much bigger backlash for shipping today than any other time in history, since so much US and EU manufacturing has been off-shored to China. A prolonged period of increased saving, therefore, will spell trouble for shipping for a long, long time.
Thus, the "opportunity" may be nothing of the sort - it may, in fact, be just another money trap.