Eugene Seroka 0.8 13 ideas

Seroka stated ship fuel costs have more than doubled, and the cost surge will be "a big hit to the truckers" who move the majority of cargo, with these costs needing to be absorbed. Transportation is the first-mile and last-mile of the supply chain. A direct, massive increase in its primary input cost (fuel) immediately pressures margins for shipping lines and trucking firms, which will eventually be passed to consumers. WATCH because the sector faces a near-term, severe margin squeeze from an exogenous shock. The duration of the shock will determine if it leads to bankruptcies or sustained higher freight rates. A swift reopening of the Strait of Hormuz leads to a rapid normalization of fuel prices.

Yet the cost of the fuel has doubled over the last ten days. The Strait of Hormuz is a primary global chokepoint for crude oil and refined products. With thousands of vessels stuck and companies refusing to transit due to insurance and safety risks, global energy supply is severely constrained. This supply shock drives up underlying commodity prices, directly expanding the profit margins and asset valuations of major energy producers. LONG major energy producers and energy sector ETFs, as they are direct beneficiaries of constrained Middle Eastern oil supply and spiking fuel prices. A sudden diplomatic resolution or military de-escalation that reopens the Strait of Hormuz, causing a rapid drop in fuel prices.

There are thousands of vessels that are stuck in the Arabian Gulf... The companies do not have an interest rate now, nor is there enough money for insurance to transit those ships through the strait. When thousands of container ships and bulkers are trapped or forced to cancel transits, global shipping capacity is artificially and drastically reduced. This supply-demand mismatch historically causes spot freight rates to skyrocket. Shipping companies operating outside the conflict zone or those able to charge premium rates for rerouted voyages will see massive revenue boosts. LONG global container shipping equities, as trapped vessel capacity leads to higher global freight rates and expanded profit margins. The vessel backlog clears faster than expected, or Asian factories slow down production, reducing overall global shipping demand.

"Soybean shipments from the United States to China last year were down 90% and down 80% from our port alone." Seroka notes that buyers have moved to Brazil and Argentina with contracts locked for "three, six and 12 months." Agriculture is a transactional business heavily reliant on export volume. The loss of the primary buyer (China) to South American competitors—who now hold the active contracts—leaves US soy producers with a massive demand void that cannot be filled domestically. Bearish US agricultural commodities, specifically soybeans, due to structural loss of market share. A sudden trade deal or "phase one" style agreement mandating Chinese purchases could reverse this, though Seroka views this as unlikely in the immediate term.

"We've also seen exports decline nine out of the last 13 months... exports have been left behind." While the US consumer continues to import (fueling the trade deficit), US manufacturing is struggling to sell abroad. Seroka notes US manufacturers only export 1% of their output. Without export growth, the industrial sector is capped by domestic demand, which is facing affordability headwinds. Avoid US-centric industrial exporters until trade policy shifts to favor outbound goods. A weaker US Dollar could suddenly make US exports more attractive.

While China's share of imports dropped to 40%, the Port saw a "net increase in imports to the United States from Vietnam, Indonesia, Malaysia, Cambodia." The "China Plus One" strategy is no longer theoretical; it is showing up in hard shipping data. Manufacturing capacity and capital investment are flowing into Southeast Asia to bypass tariffs and geopolitical friction. These markets are the direct beneficiaries of US-China decoupling. Long Southeast Asian Emerging Markets as they capture manufacturing value added previously domiciled in China. Infrastructure bottlenecks in these developing nations could cap their ability to absorb further volume.

The "De Minimis" loophole (allowing packages under $900 to enter tax-free) was pulled, raising taxes dramatically. Seroka explicitly mentions "activity on the legal side today from Federal Express based in Memphis." The closure of this loophole hurts the high-volume, low-margin direct-to-consumer shipping model (e.g., Shein/Temu flows). If taxes rise, volume drops. FedEx's legal involvement signals this is a material risk to their cross-border parcel volume. Watch for volume compression in international small-parcel segments for major logistics carriers. Domestic volume growth could offset international declines; carriers may successfully pass costs to consumers.