[Bernard L. Madoff]

Baltic Dry Free Fall Accelerates

[savagegoose]

same zero hedge page they has story about oil going up, can the BDI drop so bad and oil go up?

[Bernard L. Madoff]

savagegoose, on 22 December 2010 - 03:55 PM, said:

same zero hedge page they has story about oil going up, can the BDI drop so bad and oil go up?

BDI is dry goods (Coal, Wheat, Iron ore etc)

[savagegoose]

yeah i mean the correlation of oil price to BDI. i recall last big drop we went from $150 / barrel to $40 or so .
ill find a chart

http://www.investmen...x.htm#crude_log
hmm the log one fits nicely, other chart price of oil is just going opposite,.

[Bernard L. Madoff]

Supply and Demand.
http://www.bloomberg...ities-says.html

[Mr Medved]

Baltic Dry Index Slumps To Lowest Since January 2009


http://www.zerohedge...st-january-2009

[cobran20]

MB: Is the Baltic Dry worth listening to?

Quote

The correlation between the 3mth changes in the Baltic Index (unadjusted) and the China PMI is pretty decent (0.60+), and a basic single variable regression would argue that the China PMI, after bouncing above 50 in Dec to great reception, is likely to soon drop to a new low below Nov’s reading (something on a 48 handle). To this extent, it could still have a very big hand in shaping market’s blunt opinion, with excess optimism giving way to potentially more seasonally inflamed pessimism.

[Ruffian]

Another sceptical approach, but perhaps not quite so closely argued -

http://blogs.wsj.com...wn-but-so-what/

[savagegoose]

I must admit im thinking any old arse could become a ships captain. its gotta be easier than a plane captain, i mean how hard is it to dodge rocks?

[Solomon]

savagegoose, on 20 January 2012 - 08:02 AM, said:

I must admit im thinking any old arse could become a ships captain. its gotta be easier than a plane captain, i mean how hard is it to dodge rocks?

Looks like its harder than you think.
Aren't these things supposed to float???

This post has been edited by Solomon: 20 January 2012 - 12:15 PM

[savagegoose]

hehehe thats what i was thinking of. i looked up ships captain training and it doesn't look like any old arse canbecome a cap'n..

This post has been edited by savagegoose: 20 January 2012 - 12:27 PM

[Solomon]

On a serious note.
What ever the reason for the BDI's current position, you have to admit, that it is nowhere near the highs leading into 2008.
That should tell us that even if there is a glut of ships, no one is making too much money out of it.
So, do we see bankruptcies and companies going to the wall, or do we see countries not importing or exporting, anywhere near the extremes we previously saw.
Either way it bodes ill for the economy.
I regard it as an indicator that's worthwhile noting.
Afterall, I guarantee, when it starts to rise again, the soothsayers will be advocating that the trade is improving.

[cobran20]

Still no floor to be found! It will probably take a few months to know if this is a precursor to something big in China's/world economies.

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[Solomon]

cobran20, on 01 February 2012 - 01:29 AM, said:

Still no floor to be found! It will probably take a few months to know if this is a precursor to something big in China's/world economies.

Whoa! That's some drop!
We'll have to get to the bottom of this!!

[cobran20]

Don't worry, Goose tells us the Commodity Boom II is underway!

Baltic Dry Index reflects falling demand from China

[wulfgar]

Don't forget that a strong element in the prices is the amount of ship building from China over the last decade. China's master plan would be to undercut other shippers and drive them out of business, capturing a market.

Good old state loans won't foreclose on redundant business.

A solution might be to send submarines out to sink obsolete vessels and there by drive the price up!

[cobran20]

wulfgar, on 01 February 2012 - 11:29 PM, said:

A solution might be to send submarines out to sink obsolete vessels and there by drive the price up!

Perhaps we can sell them our Collins class failures to recover the zillions spent on them!

[wulfgar]

That's a relief, it's only bad for Europe!

http://www.zerohedge...-european-banks

Quote

Shipping Loans Go Bad for European Banks
Submitted by ilene on 01/31/2012 13:37 -0500


As we noted in Stock World Weekly, the Baltic Dry Index, a benchmark indicator for global economic activity (an index of global freight rates for shipping dry commodities, e.g., metals, coal and grain), has been in free-fall since the beginning of the year and has analysts buzzing about whether the decline in the index was reflecting a precipitous drop in demand, or an unusual oversupply of shipping capacity. The index is down from its 12-month high of 2173 in October - now in the low 700s.

"A quirky canary-in-the-coal-mine indicator for global economic activity is in freefall, but market experts can’t agree on whether it’s a sign of danger or an accident of recent history on the high seas.

.

"The Baltic Dry Index – an index of global freight rates for shipping dry commodities such as iron ore, coal and grain – had fallen for 23 consecutive days as of last Friday, cutting its value in half in the space of a month. The last time the index was this low, the world was in the depths of a credit crisis and a major recession. (Baltic Dry Index springs a leak)"

Chart from Bloomberg:



In Russ Winter's view, the problem is two-fold - a drop in demand and oversupply of shipping capacity. Here's his take on the situation. ~ Ilene


Shipping Loans Go Bad for European Banks
Courtesy of Russ Winter of Winter Watch at Wall Street Examiner

In 2008 the markets got very worked up with what at the time I was relentless calling a China commodity bubble. A search under the term “China Bubble” from Winter Watch turns up 75 articles mostly in 2007-2008 and also in 2011.

A bubble can be defined as speculative activity not well related to the real economy, in short, a maladjustment. One of the consequences of this was the ramp up of shipping construction to feed the China boom. When commodities came back in late 2009-2011, shipping construction surged forward unchecked. Now with China rolling over, the shipping that was produced during this period is increasingly lined up and stacked in Asian harbors around the world. Shipping rates have collapsed, another event which the markets continue to largely ignore.

I have been feeling for some time that this would bite the players involved. Although the shipping company stocks have become very depressed of late, the story as it relates to shipping lenders has been relatively overlooked. Now the IHT is out quoting industry observers stating that European banks may be facing write-downs on these loans on the order of $100 billion, which is even more than their Greek losses.

At my Actionable site I am now recommending a bearish strategy using a big poorly capitalized European bank that is not only exposed to European sovereign debt, but also to the double impact of inflated commodity lending in general. The market thinks LTRO, I think multiple lending blowups in tandem. In addition to shipping, I am including shale nat gas, which is also maladjusted. Natural Gas was discussed separately on Jan. 23 in the “Natural Gas in Maladjusted Feast and Famine Mode” report.

[Solomon]

Quote

As we noted in Stock World Weekly, the Baltic Dry Index, a benchmark indicator for global economic activity (an index of global freight rates for shipping dry commodities, e.g., metals, coal and grain), has been in free-fall since the beginning of the year and has analysts buzzing about whether the decline in the index was reflecting a precipitous drop in demand, or an unusual oversupply of shipping capacity. The index is down from its 12-month high of 2173 in October - now in the low 700s.

I don't care how you interpret it, it points to the fact that someone is going broke!!!
Further, that the amount of cargo isn't there at the levels before the GFC.
Surely there couldn't have been the increase in fleet, in that short of time, sufficient to drive the index down that far.

It comes back to my theory, that the world economy is trying to find the new level, where equilibrium can occur again.
Each indice is searching for that new "normal", since the economy nose-dived in 2008.
We may lurch from one to the other for some time, but a whole heap of people are dismissing it, thinking that we can guage everything on where we were in 2007-2008. We may never see that again in my life-time.

On this, I actually can find some alliance with Martin Armstrong, who suggests that the world hasn't yet worked out, that they have a solvency crisis, not a liquidity one. The plebs are broke, and until they get some money back in their pockets and can afford debt again the world is standing still.
The rich certainly aren't going to fork out, their hard-earned to get the wheels turning again.
They prefer to steal it off the plebs.

This index, I believe is giving us a head's up of where we should be considering the normal to be. Maybe a fraction higher, but not much.

[cobran20]

No need to panic. On further inspection, it is not a leading indicator.

One More S&P 500 Vs. Baltic Dry Chart...