My Investment in Shipping Containers With Davenport Laroche

With the stock market rising to record highs, my fears of a bubble-burst were growing. So, I sold a majority of my stock holdings and invested my profits (not principle) in an alternative investment; shipping containers. Yes, the giant steel boxes you see on ships, trains, and trucks.

My decision to seek an alternative to traditional-type investments came after I considered options like bonds, gold, and real estate. In most instances, those would be my go-to three. Not this time. With interest rates set to rise, the bond market seemed like a risky investment. Gold has been a poor performer and a disappointment for years. And, the real estate market is challenging and subject to political influence; take Brexit for instance. Because of these reasons, none of the usual investments interested me.

Shipping containers, on the other hand, are the workhorse of the global economy. I recently discovered that more than 90% of the world’s trade is moved by the container shipping industry. If countries around the world want to increase their GDP, they’ll need a lot of cargo containers to do it! Consider for a moment the economic potential of China and India alone.

To purchase and lease my three shipping containers I enlisted the help of Davenport Laroche. They are a container leasing company based out of Hong Kong, one of the world’s largest shipping centers. In fact, in 2016 there were nearly 20 million containers moved through the port of Hong Kong. This performance has placed it number five on the list of Top 50 Container Ports in the world.

The kind representative from Davenport Laroche helped me better understand the outlook for the container industry and explained the rising demand for shipping containers, particularly in Asia. She explained to me that with China’s introduction of their One Belt, One Road initiative, container traffic in Asia and Europe is expected to rise significantly, over the next decade. The containers purchased from Davenport Laroche will be participating in, and profiting from, this strong Eurasian growth. Factor in the 12% annual return on investment and a container lifetime of more than 10 years and you have a residual income for more than a decade.

Certainly there are other container leasing companies that offer opportunities similar to Davenport Laroche. However, some investors had a good experience investing with another company, while others questioned whether the whole thing was a scam or not. I decided against the other companies and instead choose Davenport Laroche because of their pristine record and transparency.

Hard Assets Make Gains in The Face of Economic Uncertainty

There is an old saying, “You have to see it to believe it.” This is the strongest argument for an investment in hard assets. The appeal for many investors is that hard assets can be seen and touched, making them tangible and somehow safer to invest in.

The four hard asset investments below have demonstrated the ability to preserve investors’ capital. As well they have shown that they can make gains in the face of economic uncertainty and the rising costs of living.

Precious Metals

Gold has seen has seen a meteoric rise in value. Prices of this hard asset have appreciated over 500% since the year 2000 alone. Buying gold bars, coins, and jewelry ensures that the value of the assets in your hand will move in partnership with spot gold pricing.

The appeal of investing in silver and platinum is two-fold. On one hand, the precious metals are considered to be a worthy hedge against inflation. On the other hand, widespread industrial use is what separates platinum and silver from gold, and really adds to its value.

Farmland

An expanding agribusinesses has caused the price of farmland to greatly appreciated in recent years. Historical data shows us that this hard asset – between 1987 and 2004 – averaged annual increases of 4.8%. Farmland prices averaged annual gains of 15% between 2004 and 2008, demonstrating to investors that this hard asset can deliver returns uncorrelated to broad equity markets.

Shipping Containers

Much like other hard assets, shipping container investments have the potential to generate impressive, uncorrelated returns. This is especially true when stock markets are performing poorly. Directly tied to the global economy, shipping containers are used to transport approximately 95% of the world’s cargo. This consistent demand over the last half century has treated investors to returns as high as 35%, even during the financial crisis in 2008-2009.

Collectibles

Most collectibles, like classic cars and fine wine, are luxury goods that can also be used for personal enjoyment. These hard assets are a viable alternative investment for one simple reason; they can preserve an investor’s capital because they posses intrinsic value given their limited supply.

The Challenge To Owning Hard Assets

The challenge with owning hard assets is that they often require proper storage. Like investing in fine wine for example, careful maintenance is needed to retain and increase the investment’s value. Gold bars must be securely stored, farmland must be mowed, and classic cars and shipping containers must be maintained. If this is something you cannot do yourself, it may become an additional, unexpected expense.

Economists Use Inflation to Describe a Rise in Price Level

Inflation occurs when the general price of the goods and services you are buying are rising and, as a result of the increase in cost, the purchasing power of your money is falling. The term may also be used to describe a rising price level within a narrower set of assets, goods or services within the economy. These include commodities (such as food, fuel, metals), tangible assets (such as real estate), financial assets (such as stocks, bonds), services (such as entertainment and health care), and labor.

Most economists today use the term inflation to refer to a rise in the price level. An increase in prices is called price inflation, which distinguishes it from monetary inflation, which occurs when there is a rise in money supply. Other economic terms related to inflation include:

  • Asset Price Inflation – a general rise in the prices of financial assets without a corresponding increase in the prices of goods or services.
  • Deflation – a fall in the general price level.
  • Disinflation – a decrease in the rate of inflation.
  • Hyperinflation – an out-of-control inflationary spiral.
  • Reflation – an attempt to raise the general level of prices to counteract deflationary pressures.
  • Stagflation – a combination of inflation, slow economic growth, and high unemployment.

The rising costs/loss of purchasing power affects economies in various ways; both positive and negative. As a consequence, there are hidden costs to some and benefits to others. From a negative perspective, the uncertainty about the future purchasing power of money discourages investing and saving. For example, inflationary expectations and interest rates will determine the risks associated with bond investments. Inflation is a bond’s worst enemy; it erodes the purchasing power of a bond’s future cash flows.

Generally speaking, economists favor a low and steady rate of inflation. This is because a low figure, as opposed to zero or negative, reduces the chance that an economic recession will occur, and it reduces the risk that inflation will undermine the performance of your investment portfolio.