32 Replies to “It’s Probably Nothing”

  2. The Biggest Top in History?
    Written by Richard Russell – Dow Theory Letters
    The 86 year old Richard Russell is Brilliant. Amongst his achievements Richard was in cash before the 2008/2009 Crash and he has been Bullish Gold since below $300.
    Here is his latest comment and chart though as Kate Observes: “Its Probably Nothing”:
    http://tinyurl.com/47lwwmq

  3. people are saving, not spending. Good news, bad news. China and india need to hurry up and become consumer-driven economies.

  4. Geeze Louise, I’m glad I never invested in U.S. Treasury Bonds.
    I’ve got enough food to last now, I just need to buy more Charmin.

  8. It may be something or it may indeed be nothing much. The BDI is not a perfect match for global economic performance. In the 1990s it was not a match at all, with the economy growing strongly throughout the late 1990s but with the BDI dropping throughout the period. It would be more helpful if figures prior to 1995 were shown on the graph.
    The decline noted in the Shanghai exchange by Doug is also worth discussing. The Chinese government has been engaged in trying to restrain an overheated market for over a year now. Inflation is threatening to get out of control. India is taking similar measures with inflation also a serious problem. Many of these measures include increasing bank reserve requirements which serves to shorten the available loan capital. The drop in the Shanghai market is not a sign of oncoming recession but a mere slowing of what would otherwise be growth north of 10% this year.
    This article
    http://noir.bloomberg.com/apps/news?pid=20601012&sid=aGGcrhkk.VPI
    notes some of the reasons for the behaviour of the BDI.
    First, ship sizes are getting much larger for bulk cargo, meaning a drop in cost per ton. For the first time ever, companies are now building bulk carriers over 1,000 feet long. Larger ships mean lower freight rates.
    Second, there was a severe shortage of shipping up to 2007, resulting in a flood of orders for bulk carriers. That shipping is now entering service, resulting in a rate drop. This is the real reason why the BDI dropped. It’s an oversupply of shipping from new construction.
    What was more interesting to me was this report referenced on the BDI site:
    http://www.cphpost.dk/news/international/89-international/47866-maersk-hires-war-ship-to-protect-tanker.html
    Maersk is hiring ships from the Tanzanian navy for dedicated escort service to their tanker shipping. Naturally some idiot from a military studies institute sniffs that this is a very bad thing because it makes “poor African countries dependent upon private companies”. What would you prefer, you moron; that they have no naval protection at all?

  10. syncrodox, I’ve often thought that I could make some money with my Charmin jingle.
    Charmin is Charm’in my ChooChoo,
    What a Great way to pamper my PooPoo…
    (tune unidentified but is vaguely Mexican)
    I think Charmin is a GREAT product and I challenge all those Gold Bugs out there to wipe their butts with their gold ingots better than I can with my Charmin because no matter how much gold they offer me, it isn’t worth a single panel of Charmin.

  11. Construction of new large(!) bulk carriers (ships) is very high according to Bloomberg Business magazine. Capacity is expected to increase by more than 1/3 as I recall. This would certainly affect the BDI …… high capacity driving down bulk commodity shipping costs.

  13. And while I’m asking these “deep” questions about Roman Catholicism, why do you suppose, syncrodox, that the Vatican has a seat at the United Nations but no babies are born in the Vatican, no sex goes on in the “nation” known as the Vatican*, and yet the Vatican is classified, against all reason, as constituting a Nation.
    (*and by implication that the Vatican is a State, all Roman Catholics are dual citizens wherever they may live)
    To me it seems, that like the Cold War (which really isn’t over) the power of the Roman Empire really isn’t over either.

  18. I am not sure how the Catholic church got dragged into this string, but I will say that like all collectives the Catholic church is in the protection racket. You hand over some weekly cash and they will assure you don’t go to hell.
    Hand over a few bucks a week and unions assure you that you won’t get fired.
    Hand over about half of your annual income in one form of taxation or another including, but not limited to their zillions of laws and rules and levies, licenses, permits and fees and that by doing so you won’t go to jail.
    The whole world is one big protection racket funded by various Ponzi schemes and perpetuated by various lies and deceptions.
    So the Markets are no different.
    And you though the world was a nice place.

  19. The commenter “Ralston”, I think, is probably closer to the truth than any prediction of economic doom (except for the ship-owners!). I work in the L.A. area shipping industry (manage a freight forwarding/brokerage office as a licensed customs broker), and I know that there is a tremendous amount of capacity coming on-line. Demand – while expanding – is not doing so nearly as fast. Econ 101…increasing supply, relatively stagnant demand…and you end up with dropping prices.

  21. Hi, I’m pretty ignorant when it comes to stuff like this. I do understand, however, that increased supply usually means lower prices. Can someone sum up whether this is good or bad? Sry for being ignorant. Thx

  23. Ashen, it’s good if you’re one of the folks who still has spending power during a recession, it’s bad if your liquid assets(discretionary funds) are limited.

  24. Answer: The Baltic Dry Index
    Question: What chart, frequently posted on Mark Perry’s Carpe Diem Blog, magically disappears every time it’s down?
    @Ashen:
    The BDI is a price index of bulk dry goods shipments. It’s a proxy for economic activity. It’s based on the essential assumption that global shipping capacity is fixed in the short run, therefore changes in the price index accurately reflect changes in global aggregate demand.
    because the shipments are for important inputs of production, it’s considered a leading indicator.
    The index rose from late 08 through early 10, seemingly indicating a world economic recovery, but has been struggling lately. It’s near the 08 low right now, indicating we may be nearing a worldwide double dip. That’s why people are either worried or having a Roman Holiday.
    There are reasons to doubt the index. First, the assumption of fixed supply is specious. Fleets can and do mothball ships during low demand. Second, the BDI is sensitive to the mix of large ships (which can’t go through the Panama Canal) and smaller ships which can. The high price, big Cape ships are falling fast. The small Panamax and Supramax ship indexes are doing pretty well right now. The trade data next month will confirm whether the current low is really bad news or not.
    But the BDI was rising mainly because China was stockpiling iron ore and coal. They’re done hoarding now with all the inputs they need. Their economy is heated with inflation, so they’re going to have to slow growth. They are also in a pissing contest with Australia’s BNP Paribas over iron ore prices.
    Bottom line: the BDI is a crappy index based on faulty economics, and people who use it frequently tout it when it’s up and ignore it or make excuses when it’s down. It’s a tool for liars and thieves to swindle people or impress them with bogus skills in economic prognostication.

  25. The Baltic dry index is a measure of shipping rates, not shipping volume. As POWinCA notes it is sensitive to the the amount shipped and the ships in service. We do have more new ships coming on line and China is backing off its stockpiling of commodities.
    I still believe the global economy will be sluggish to down for a while, but the Baltic Dry is not a good measure of that.

  26. If the Baltic Index is way down, yet the Port of Los Angeles is not moving it means trade has dried up. In other words lots of shipping capacity but no body is buying. The other good indicator is rail traffic internally. For those who think Public Debt of a Nation doesn’t matter. Japan just got a downgrade from S&P this AM. How long till they catch onto Canada’s dirty little secret. Ontario 310B in the red, Quebec 420B in the hole. Ottawa around 3.5T in the hole.

  28. I’ve been watching this index for several years now. When trying to use it as in market indicator, you have to bear in mind that the BDI is not a simple reflection of dry volume being shipped. There are a number of factors that determine the value of the BDI and those factors get recalculated daily. One important factor is the number of ships versus the volume of cargo. This factor will have the BDI decrease if there are more ships chasing less cargo and vice versa. So, for example, you could have the same amount of cargo as, say 8 months ago, but twice the number of ships now on line and the BDI would go down. Wikipedia has a good reference (if you still trust Wikipedia!).

  29. A lot of people don’t know that the Baltic “Dry” Index (BDI) includes oil. You might recall that oil prices were skyrocketing back in 2008 when the BDI peaked. Futures prices for oil were going even higher than spot, and some bright boys got the idea that renting a (then) cheap supertanker, filling it with a couple of hundred thousand bbls of oil, and letting it float for six months would pay off handsomely. This worked out for a few, and it took a lot of capacity off the market, which, with the last gasp of the boom, tightened considerably. Hence the spike to almost 10,000 in the BDI.
    Go back 5 or ten years, and you’ll see the BDI is about where it was then.

  30. You can stop sending your children to Chinese lessons. The world domination ain’t to happen. Everybody forgets that China was invigorated by sophisticated , yet very hot and unstable western capital. Now, that capital is sipping away, it will leave the paper tiger hanging dry.

Proudly powered by WordPress & Skyrocket Themes

MENU

Navigation