Skip to comments.The Baltic Dry Index Has Exploded Higher And The Silence From The Bears Is Deafening
Posted on 08/23/2010 7:48:26 AM PDT by blam
The Baltic Dry Index Has Exploded Higher And The Silence From The Bears Is Deafening
Vincent Fernando, CFA
Aug. 23, 2010, 10:27 AM
Earlier this year when the Baltic Dry Index (BDI), a measure of shipping rates for dry bulk commodities, was plummeting, many were to quick to point out that this 'signaled' an end to the global recovery, even though the Baltic Dry Index is lousy, if not completely useless, as a leading indicator for the global economy.
Yet now the index has rebounded extremely hard over the span of just two weeks... and the silence from the bears who earlier touted the BDI as 'evidence' is deafening:
So what's going on? Let's step back to July 27th, which you'll note is the first date shown on the chart above.
The Money Game, July 27th:
Iron ore forwards have had an extremely strong week, according to data from the Iron Ore & Steel Derivatives Association. August 2010 forwards have had the largest gains, indicating expectations of a near-term rebound:
Despite concerns about Chinese demand growth, higher stockpiles of steel, a global growth slow-down, and Chinese plans to consolidate its steel industry into fewer players, iron ore and steel are rallying.
Where there's demand for steel, there's demand for many other commodities as well. There's also demand for ships. This, combined with a stabilized Baltic Dry Index and today's overall stock market rally, means it's a sea of green for dry bulk stocks today.
August & September could get interesting for the commodities space.
The bullishness shown in the derivatives market has proven correct, and China has begun increasing its imports of iron ore once again. In addition, an Indian iron ore export ban has forced Asian
(Excerpt) Read more at businessinsider.com ...
Grain shipping is exploding.
I suppose that's because the media coverage isn't really tied to any measurable evidence of reality. But, of course, it may be because the Baltic Dry Index doesn't provide as much clarity and insight as some believe.
Probably a mixture of both.
” Vincent Fernando, CFA “
I think this menas we should all buy gold.
After all, I think that ANY thing that happens in the market is a signal that we should all buy gold.
At least that’s what they told me. Gold is going to double or triple from it’s current price, whatever that price is.
His articles all have the same themes. They all basically say ” All is well in the economy, no need to panic, everything is fine and going according to plan
Well go ahead and invest your cash, because the worse is apparently over.
If we “bears” are wrong, then we will have a ton of savings, no debt, and a surplus of stored food.
If we are right, then we will have a ton of savings, no debt, and a surplus of stored food.
I like my odds.
I think the global economy outside the USA is not that bad. Germany, Brazil, Canada, Australia are all doing fairly well. They are not dumb enough to elect a muslim.
Is this a seasonal thing? Emptying the bins before the harvest?
That is my thought as well. The rest of the world basically gave Obamanomics the heave ho and did what they needed to do to get their economy moving. Only we are stupidly clinging to failed economic theory rather then dealing with it’s obvious failure by changing course.
The other major economic players have reformed themselves and adapted to the point where their economies are on the up and up. America? Sitting still spinning its wheels bogged down by too much government regulation and financial mismanagement.
From where, to where?............
Or is that two questions?.................
Positioning themselves for a GOP takeover of the House and possibly the Senate? And the resurgence of Free Enterprise and the shackling of the government monster?
the resurgence of Free Enterprise and the shackling of the government monster?
And don't point out the platform. I'll read that if you can prove any of the candidates have read it let alone feel bound to it.
Off 75% from precrash highs, definately the summer of recovery /sarc
Perhaps this is due to the following reasons:
1. The media is filled with opinionated editors, "talking heads (without much intelligence of their own)", and biased, untruthful reporters.
2. The media is still trying to figure out where the Baltic is.
3. Since the media intelligencia is aware that - tho they don't know where exactly the Baltic is (many are thinking it may be very near "Baltimore"), they do know that it is a sea and is therefore wet (see?? bright folks, our MSM).
4. They are now desperately confused as to exactly how a sea can be "dry" and have called upon algore to study the issue and perhaps win yet another "No-Bell Piece Prize (he needs to cover attorney fees for the divorce).
You have a muslim detroying America thanks to idiots who are easily manipulated by TV. Fox/Saudia News is no better anymore. They support the Victory Mosque. The other netwrosk are far far worse. If you have cable or sat TV - you are supporting the regime.
Never heard of the Baltic Dry Index before. Is this development going to have any impact on the forest fires in Russia?
I adore the gold commercials.
Their big pitch is that gold has gone up a bunch lately, which of course means it can only go higher.
This worked so well for dot.com stocks and housing in CA.
I would think the time to buy a commodity as an investment is when it has gone down a bunch and therefore just may be underpriced.
I think part of what is going on is Wheat being sent TO Russia (because of their poor harvest) is increasing the bid rate for shipping.
The chart is much more instructive than the writer. The BDI looks to be range bound, and the range has been moving between terrible and lousy for about a year.
The Russian grain crop problem was my first thought as well. I'm not so sure this is a general trend. It may be a reaction to a specific crop failure.
China continues to grow its economy. Russia has to import wheat to survive. How do these events portend economic growth in the USA for anyone but our wheat farmers?
I looked but could not find a similar report on container shipping volume/demand
Do you know of such?
My little business’s volume is a function of container shipping. So Far, it looks like August ‘10 is the worst month in 15 years and that includes the month it began.
” I looked but could not find a similar report on container shipping volume/demand “
I would imagine that your “boots-on-the-ground” experience is a more accurage measurement than any ‘bent/folded/stapled/mutilated’ Government ‘report’...
” accurage “
Should be ‘accurate’...
That’s why I don’t have a TV!
The BDI is a little misleading.
Yes, the index is up, but that is because the number ships that have now been mothballed and in storage has caused an increased demand for ships still operating.
Ghostship creek: The fleet of huge ships mothballed by the recession on a Cornish river that has become an unlikely tourist attraction
I may be wrong about this, but I believe this is one of the biggest factor influencing dry bulk shipping right now.
I've seen one posted on FR before but I don't know what it was.
Thanks for that little tidbit that puts the numbers into proper perspective.
Here's an even longer perspective
So the BDI is at the 2003 level.
Apparently yes. Notice the rapid, near vertical rise.
Guess what? The rise is very close to the April 2003 announcement of the Bush tax cuts.
Grains are plentiful in one part of the world and in short supply in others - Russia for one.
Wildly speculating here - but can we trust Putin when he says their grain harvest is smoked? Are there independent assessments available?
Are those the same tax cuts that will sunset at the end of this year? If so, watch that BDI drop vertically.
Interesting isn’t it.
Yes, I’m pretty sure they are the same tax cuts
Yep, foods, especially, went up. We’re safe. ;-)
I’m afraid I’m not following.
Russia is either 1) short on grain due to fires and drought, or 2)they’ve decided to punt on making money off exports or 3) are involved in a conspiracy to drive up worldwide shipping prices.
I’ll vote #1.
There is some good news here because the U.S. will pick up a lot of the export slack created by Russian decision and because of weak crops by traditional exporters Canada.
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