After reading in the Wall St. Journal that this book was ending up in the offices of many hedge managers, I decided to give it a try. Since I have been involved in finance and investments for 35 years I enjoyed this glimpse into the world of shipping, but my sense is that those who lack a background in finance may find it a bit of a slog. The writing is not particularly strong but the story moves along. As satire of the capital markets it can be a delight, if occasionally overwrought. Characters are a bit more emotional I imagine most hedge fund managers to be (at least on the surface) and certain incongruities arise. For example, how is a fund manager fired from his own company and forced out of his own office by his largest client? Granted, not great to lose the whale, but there are others to be tended. Still, some interesting insights and amusing moments. 310 Outo yhdistelmä romaania ja merenkulkumarkkinaoppikirjaa. Jälkimmäinen oli kiinnostavampaa sisältöä. Tässä meni vuosi, ja sain kipinän lukea kirjan loppuun kun lapseni heitti nukkuvaa puolisoani kys. kirjalla silmään. Nyt se ei enää pyöri luettavien kirjojen pinossa makuuhuoneessa. 310 One of my favourite books - both very educational as well as highly entertaining. Also an easy read. Best of all worlds! Below are my notes on the book, more summaries can be found at www.libraryof.xyz
Matthew McCleery is an advisor at Blue Sea Capital and has been a board member of two Greek NASDAQ-listed shipping companies, a hedge fund and several shipping organizations. The book, which is fiction, is about the fictional Robert Fairchild’s journey from a smooth hedge fund manager to an experienced and rugged shipping man. Fairchild accidentally stumbles across the Baltic Dry Index, which is the start of a global shipping adventure. In a drunken state, he buys his first ship (a 35-year-old “old lady”) from a Greek. Fortunately he starts in a strong market, is rescued from Somali pirates by a Norwegian shipping magnate and then takes a job with him.
STRONG MARKET DUE TO CHINA’S BOOM. When China joined the WTO in 2002, one of the strongest shipping periods in world history began. China’s thirst for raw materials combined with huge export flows led to a rarely seen imbalance in supply and demand for ships. With the high freight rates that followed, new investments could be rationalized and the world’s shipyards was running in overdrive. In the same vein, the Greeks took the opportunity to list their shipping companies on Wall Street – a total of 20 were listed between 2003 and 2008.
A GAME OF COST’S. Shipping is about (1) paying the least for the vessels, (2) having the lowest operating costs and (3) having the lowest cost of capital. There are no economies of scale in the sector – it’s all about the spot market. Everyone except the shipowners have a stable earnings. Ship brokers, investment banks, shipping banks, charterers, operators, lawyers and flag states all gets paid well for their services.
THE FREIGHT COST IS NEGLIGIBLE. The shipping cost for an item that costs EUR 20 for the end customer is often only a few cents. As a result, the market is not particularly sensitive to a doubling of the freight price. But for the owner of the ship, ten cents can mean bankruptcy, twenty cents survival and thirty cents immeasurable wealth.
FLAG OF CONVINIENCE. Everything in the world of shipping takes place offshore and the sector has a “Wild West” character like few other. A large part of the world fleet is registered in “flag states” such as Panama, Liberia, the Marshall Islands, Malta, the Bahamas, Cyprus, Antigua and Barbuda and Saint Vincent. What these countries have in common is that they offer convenient regulations (for everything from ship safety to personnel issues) and non-existent tax levels.
ANONYMOUS BEARER SHARES. In the shipping sector, the instrument “bearer shares” is sometimes used. The holder of these is entitled to the company to which they relate. If you lose the shares, you lose the asset. Within the world of shipping, the “lose” option can have a great value, as you do not want to be the owner of, for example, old ships that break down and release large amounts of oil into the sea.
LAST MAN STANDING. When freight rates are low, it’s all about survival. The faster competitors’ scrap their ships, the faster the market improves. Everyone is patiently waiting for the weakest player to let go. In a bad market, a ship can have a value far below the liabilities it carries, but still have a large option value since a strong market can be just around the corner.
VALUED ON PERCEPTION. The value of a vessel is dictated by the market’s estimated future cash flows. Current earnings are not important, it is the future that matters. The option value is often a large part of a vessels value. The best buys are usually vessels that have a weak or negative cash flow. A cheap ship with a strong cash flow does not exist – then it is not cheap, then the market is good.
AMEND & EXTEND. New vessels are often financed with 25% equity and 75% debt. This can seem sketchy in a world where asset values can double or halve overnight. However, the accounting rules are generous and vessel values very rarely need to be written down. A vessel can be valued based on aggregate undiscounted future cash flows over the next ten years, based on average rates over time.
A CONTINOUS CASH SWEEP. Skilled shipping magnates empty their companies through dividends in good times to have secured capital for new investments in a bad market. In a bad market, lenders constantly carry out a “cash sweep” so as not to be forced to set companies in default – and thus write down their loans. In this way, strong balance sheets are never built up over time within the sector.
THE SPOT MARKET DICTATES. Many US investors have been burned in the shipping sector by investing based on historical financial figures. A shipping company’s book values say no more than what the company paid for the vessels. Even week old financial figures may have become useless. All that matters is the market’s current and future status. Where the previous quarter was good, the coming may be the worst ever, or vice versa – the spot market decides. 310 Pretty fun read. But overall fairly poorly written and not realistic. Hedge fund managers are not that dumb... 310 A great introduction into the business of shipping from the finance guy's perspective. Although it is a novel, a lot of things surely ring true. 310
When restless New York City hedge fund manager Robert Fairchild watches the Baltic Dry Cargo Index plunge 97%, registering an all-time high and a 25-year low within the span of just six months, he decides to buy a ship.
Immediately fantasizing about naming a vessel after his wife, carrying a string of worry beads and being able to introduce himself as a shipowner at his upcoming college reunion, Fairchild immediately embarks on an odyssey into the most exclusive, glamorous and high stakes business in the world.
From pirates off the coast of Somalia and on Wall Street to Greek and Norwegian shipping magnates, the education of Robert Fairchild is an expensive one. In the end, he loses his hedge fund, but he gains a life - as a Shipping Man. Part fast paced financial thriller, part ship finance text book, The Shipping Man is 310 pages of required reading for anyone with an interest in capital formation for shipping. The Shipping Man (Robert Fairchild #1)
While I found this book entertaining and certainly educational in matters of international cargo shipping, I was constantly perplexed by the main character's ignorance and stupidity. For someone who was a hedge-fund manager, supposedly wise at least in the ways of the financial world, he came off as a completer idiot. He entered into complex multi-million maritime contracts without legal review or advice with people of dubious ethics and then is repeatedly blindsided by clauses in the contract which he didn't bother to read or understand. Seems the height of idiocy, but maybe that's the upper echelon of the Masters of the Universe.
(Just as side note, this was first Kindle book I read which was loaned to me through the Amazon Kindle program. It worked extremely well. I read it using the Kindle app on my iPad.) 310 This book is probably only for die-hard nautical fans like myself who love Max Hardberger's books. You have to be really weird like me to enjoy the arcane twists and turns of the shipping industry. If you do, and you enjoy sardonic writing, you'll love this book.
Robert Fairchild is a New York hedge fund owner/manager who becomes intrigued by the possibility of making money in the shipping industry. He's a total neophyte, completely unaware of the hazards and complications of an industry ostensibly stateless but subject to a myriad of regulations, all of which cost money and time.
Succumbing to the desire to be a ship owner and against his better instincts, he decides to buy an old freighter from a Greek broker and that's where his troubles begin. (The truth was stark; Robert had willingly gotten drunk and made a very costly mistake for which he could blame no one but himself. This was one of the few downsides of having a one man investment committee.)
The market for charters, thanks to fires in Russia, seems to be moving his way so, greed taking over, he uses his personal funds, well maybe a few dollars, too, from the fund, to creatively finance the purchase of the ship. Then things get really hairy. “Yeah, that figures,” he laughed condescendingly and shook his head back and forth. “Look, Mr. Fairchild, I hate to spoil your quaint little illusion, but in the shipping business everything is negotiable all the time. A word is only a man’s bond if the market is moving in his direction. And just so you know, you haven’t earned the freight until you’ve been paid the freight – and the demurrage. . . Now it appeared as if he were the ATM machine, spitting cash at the ship. In fact, the only difference between him and the lanky Indian guys in the orange jumpsuits smoking cigarettes directly beneath the massive NO SMOKING sign painted on the rust-streaked accommodation building was that they were making money. He was spending money.
Robert's travails will lighten your day. Guaranteed. And convince you NEVER to buy a ship.
310 The great thing about being president of a maritime publishing company is that you can get your own book published without having to seduce a mainstream publisher. The down side is that no-one will tell you your book isn't very good. And the down side of being a freelance maritime publisher (like me) is that you'll probably never work for Marine Money if you give the president's book a bad review. Still, one has one's principles.
I was given this by the director of a major maritime institution who thought it was hilariously bad. But a Greek shipfinance colleague who saw it on my desk said it was very good, so there are mixed opinions in the industry. What's most annoying is that it could have been quite good, if only McCleery had hired a professional editor. The plot and the character arc are both pretty good, and the story clicks along nicely after the clunky first few chapters and before the unsophisticated last chapter.
McCleery has clearly studied novel-writing; unfortunately the only writer who seems to have influenced him is Dan Brown. Every noun has an adjective and every verb an adverb. Most writers would simply say that Robert parked his car. Not our Matt:
Robert downshifted the mighty engine and brought the $20,000 car to a complete stop in the dusty parking lot.The whole book is littered with repetition and unnecessary detail. How many times do we need reminding that Robert's surname is Fairchild? Or that the child Oliver is his son? Or that Grace is his wife … sorry, his beautiful wife? And so it goes on.
The characters are simplistic, bordering on the stereotypical: Robert (Fairchild, in case you'd forgotten) is too gullible and impressionable to have become a hedge-fund manager. Grace (his wife, who is also beautiful, remember?) is a simpering doormat. Coco is too naïve to be a shipowner. Alex is a stereotype of the young, blonde, beautiful New York financier. Spyrolaki is the epitome of the shipping wheeler-dealer, but here my Greek friends say the stereotype is accurate.
There are a few typos too, and these grow in number as the book nears its end. Ultimately, this has all the hallmarks of a promising book self-published before it was ready. 310 If you're invested in the global trade and the shipping industry in some capacity and are familiar with financial jargon pertaining to debt and capital markets, you will find this to be a breezy read that lays out volatilities in a turbulent trade. It's educational like a textbook and largely easy to read at the same time. Given that the people who are familiar with the industry are busy making money and don't have time for a novel on the industry, and that normal people wouldn't generally want to read about an obscure, complicated and esoteric world, I wonder who it was written for. Given I'm a part of that ridiculously small target audience comprising a bunch of weirdos who are not making money and have time for this crap, I quite liked it. But if you don't dig finance or shipping, don't even bother reading this. 310 I give this book 1 star as an actual novel and 3 stars as an introduction to the shipping industry (a shipping textbook as others have said).
As far as a shipping introduction, I feel like the basics were covered well and it piqued my interest in doing some additional research on the subject.
As far as a novel, the character interactions are contrived, there are needless name dropping instances (his Hermes tie, the shrimp from Nobu, etc) and then some cringe-worthy dialog such as the following:
[while watching his son's soccer match]
Stunned by the possession, Robert watched as Oliver kicked the ball away from the group and began to chase after it. Moments before the sole opponent in the vicinity extended his foot to trip his son, the boy tripped over the orange cone demarking the sideline
Are you okay? Oliver turned around to ask his opponent who was examining his grass-stained knees.
Forget that kid, Ollie! Robert shouted aggressively, attracting the attention of the other parents. Keep moving!
But Dad! the boy pleaded. That's Georgie.
So? Robert said.
So Georgie is in my class at school!
I'll buy you a frozen hot chocolate at Serendipity after the game if you score a goal! Robert shouted back.
Later, dude, Oliver said to the fallen boy and immediately resumed his journey to the small goal at the end of the field.
It's a quick read, though, so I'd recommend it if you are at all interested in learning about the finances of the shipping industry. 310
