Waiting Out the Downturn with Idle Assets

"Since he did not need a floating warehouse but very much wanted to own a ship, he came to the conclusion that it would be sound busi¬ ness to buy a bunch of secondhand ships cheaply at this time of economic depression but—most important—to keep them laid up for one, two, maybe three years, and move them (the technical term for operating ships) only when the economy picked up and the risk of loss had receded. Ships were constantly in his mind. With his friend Costa Gratsos"

"He gave the press a lesson in shipping economics. To have a steady source of income, he said, a major tanker operator needed to keep only 40 percent of his ships on medium or long-term charter. “If you manage that, you can go to sleep and laugh about the other sixty per¬ cent.” Smaller operators, keeping their ships on the outside chance of making a profit, were bound to get into trouble, but owners like him could afford to sit tight until the storm was over. Asked how much it cost him to sit tight, he threw out a figure: “Forty thousand dollars a day, I guess.” But one reporter seeing him presiding over a gay party at the Monte Carlo Sporting Club, noted that he did not look like a man who was losing all that money."

"In his mind’s eye he visualized a ship with a capacity of half a mil¬ lion cubic feet of grain, which might have cost one million dollars to build in 1919 or 1920, that is, ten years earlier. Now, in the year 1930, such a ship could be bought for thirty thousand dollars, al¬ though it had run less than half its life span. As an importer always concerned with storage, he calculated that it would cost six or seven times that amount—at least two hundred thousand dollars—to build an open-storage hangar, just a roof without walls, not counting the price of the land. A ten-year-old ship good for another decade would be a floating warehouse for the price of a Rolls-Royce. To Onassis, recalling his reasoning, it had a sound built-in safety factor. Even if his arithmetic proved faulty, nothing was lost, because at that time the ships could have been sold for scrap and would have fetched twice the amount invested."