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Baltic Dry Dips Below 2,000

Tyler Durden's picture





 

Does anybody else notice the very close correlation between the Baltic Dry and the stock market/myths of economic recovery? Neither do we. Oddly enough, the BDIY did predict the late August S&P surge by about a month. And incidentally, we are back to early August levels all over again. Just as incidentally, the market was about 15% lower back then. Then again, our advice is to pay no attention to this index which tracks nothing relevant, and has no bearing on the world economy (and certainly not markets) whatsoever. And ignore the data on the Bberg chart: the value of the BDIY as of this morning is 1,999.

 


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Fri, 12/17/2010 - 12:48 | Link to Comment Ray1968
Ray1968's picture

Hello triple-dip

Fri, 12/17/2010 - 13:28 | Link to Comment Brother Revegen...
Brother Revegend Magoun's picture

L type depression... 

Fri, 12/17/2010 - 13:45 | Link to Comment hugovanderbubble
hugovanderbubble's picture

Look Tyler and colleagues

Oil getting expensive...higher costs...lower margins...

 

Credit Agricole CDS.---

Credit Agricole IS TRAPPED WITH GREEK SHIPPERS DEBT

Also u can appreciate in US GENERAL MARITIME GMR IS SELL OFF MODE....So attention to Bulkers and tankers, cos real world is not running like the politicians are telling us, NO maritime commerce.Thats the real thing.

MARKET COMMENTARY - Here we go another bank burying not so good news on a quiet day. This time its Credit Agricole and its after the close, so get down to the Pub and have a beer. The company has just announced an end to joint Board representation with Intesa which means that the accounting treatment of their stake will change from being an equity affiliate to an available for sale asset. As such it is no longer treated at cost and gets marked to market as required under the available for sale rule. The negative impact to capital is expected to be €1.25 billion in the fourth quarter of 2010, with an impact on the Tier 1 capital ratio and on the Core Tier 1 capital ratio, as published at 30 September 2010, of -10 basis points and – 38 basis points respectively. The book value will also go down and the hit book value is some 54 cents a share and reduces tangible book value by 5% for 9m 2010 TBVPS. The market has known that the Intesa stake has been under water for a while so this should not come as a surprise. That said, the timing is a bit earlier than flagged given the fact that the agreement was planned to end when by 30th June 2011. Finally, whilst the company has no plans to sell the stake in the short term, having taken the hit it will facilitate the process and in a way is good for Intesa, as once placed it removes one of the remaining overhangs on the stock. So two surprises today, they say things happen in three's, I just wonder who will announce before I go to bed.

Fri, 12/17/2010 - 12:50 | Link to Comment gwar5
gwar5's picture

The ships are hitting the fan

Fri, 12/17/2010 - 19:52 | Link to Comment bugs_
bugs_'s picture

LOL

Fri, 12/17/2010 - 21:28 | Link to Comment Lionhead
Lionhead's picture

I've heard of "dry ships," are there going to be "wet ships" after the rotating member hits the dry ones?

Fri, 12/17/2010 - 12:51 | Link to Comment firstdivision
firstdivision's picture

I have been watching that, but the most relevent number would be 1700 as that was support last time.  Then again, what do real numbers mean in a Fed-quidity environment. 

Fri, 12/17/2010 - 13:13 | Link to Comment A Man without Q...
A Man without Qualities's picture

I don't think "support" has much meaning in this market, it is not a traded index, rather actual prices paid.  I suppose at a certain level, the ship owners can simply refuse the charter, but the price will still be an average of those that do.  What would be interesting is knowing if the shippers have moved to longer charter contracts, so the BDI is becoming less relevant.

Fri, 12/17/2010 - 13:21 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

I sure wish there was a containerload equivalent to the BDI (the latter measures bulk goods like corn and iron ore).

Not only would that be useful for our business, it might also be useful to better track higher value goods moving around the world in containers. 

And I would bet that containered cargo is worth more in aggregate than bulk dry cargos.

Any expert please comment on my hypothesis!

Fri, 12/17/2010 - 14:10 | Link to Comment macholatte
Fri, 12/17/2010 - 12:54 | Link to Comment aint no fortuna...
aint no fortunate son's picture

its been predicting an imminent increase in China interest rates, maybe in January, for 6 weeks now as inflation goes full batshit.

Fri, 12/17/2010 - 12:52 | Link to Comment IQ 145
IQ 145's picture

 Oh well. It was such a nice dead cat bounce, too.

Fri, 12/17/2010 - 12:56 | Link to Comment RobotTrader
RobotTrader's picture

No doubt, many hedge funds sitting on massive gains on retail and tech stocks will eyeballing the shipping stocks, getting ready to start bottom fishing on some beaten down names.

Money never leaves the casino.  Like a swarm of locusts, they simply swarm over to another craps table.

This one has decent relative strength, prone to making straight up vertical moves:

Fri, 12/17/2010 - 13:02 | Link to Comment Variance Doc
Variance Doc's picture

Most of my money has left the casino a long time ago:  physical PMs.

Fri, 12/17/2010 - 13:23 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

+++

Yeah, mine too.

Fri, 12/17/2010 - 14:43 | Link to Comment DavidRicardo
DavidRicardo's picture

You can check out of the casino any time you like, but you can never leave.

Fri, 12/17/2010 - 13:03 | Link to Comment IQ 145
IQ 145's picture

 "Money never leaves the casino"  See, that's your problem, right there. Mine did leave the casino, a long time ago.

Fri, 12/17/2010 - 18:53 | Link to Comment TexDenim
TexDenim's picture

I like Dryships, DRYS

Fri, 12/17/2010 - 21:44 | Link to Comment rocker
rocker's picture

There have been many on the 52 Week low list for many weeks. Like GMR, KSP, TRBR, FREE, NNA, and TRMAD. Guess what the D stands for. Catch a falling knife.   Can't stand with you here. Surely more to come ! 

Fri, 12/17/2010 - 12:57 | Link to Comment Gordon Freeman
Gordon Freeman's picture

Imo get Baltic on yo ass...

Fri, 12/17/2010 - 12:57 | Link to Comment zurakowg
zurakowg's picture

I've been watching the BDI for a long time. It integrates a lot of things internationally. International cargo/shipping/trade is fading, regardless of posturing from many quarters to the contrary.

Fri, 12/17/2010 - 12:58 | Link to Comment RobotTrader
RobotTrader's picture

With sentiment on China being so negative heading into this weekend's RRR hike....

Guys sitting on massive gains on some of the IBD Top 100 mo-mo stocks will be looking to take profits and look for other opportunities.

I'm expecting to see this thing bottom out today. 

Fri, 12/17/2010 - 14:54 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Required Reserve Ratio?  Fractional reserve lending is circular, and holds no proof of work.  What if the initial loan is demanded by the proprietor?  The whole scheme that is fractional reserve lending is a ponzi.

Fri, 12/17/2010 - 16:00 | Link to Comment cocoablini
cocoablini's picture

Whos expecting the shipping stocks to bottom today? Remember when the BDI went down like 25 weeks in a row? It just kept plunging and plunging.
Good idea to hit up these stocks when the BDI starts flattening out- but its seems a touch early after last Years shipwreck

Fri, 12/17/2010 - 12:59 | Link to Comment Milton Waddams
Milton Waddams's picture

They say two thousand zero zero party over ... Oops out of time.

We're runnin' outta time.

So tonight we gonna, we gonna ... tonight I'm gonna party like it's 1999.

Fri, 12/17/2010 - 13:03 | Link to Comment paddy0761
paddy0761's picture

Stockcharts P&F has a target of 1520. Definitely doable.

Fri, 12/17/2010 - 13:09 | Link to Comment Chartist
Chartist's picture

I think China built a bunch of dry bulk ships in the last few years...This may account for the depressed level of the Baltic index.

Fri, 12/17/2010 - 14:49 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Meh.

Fri, 12/17/2010 - 13:11 | Link to Comment luigi
luigi's picture

I'm a total amateur in those things, but wouldn't it be reasonable to expect the index to bemore active facing Christmas holydays?

Maybe we should start re-reading those forgotten parts of economic theory relating to "steady state" (if we are lucky...)

Fri, 12/17/2010 - 13:16 | Link to Comment Sancho Ponzi
Sancho Ponzi's picture

Seasonality isn't important. What's important is how closely the BDY tracks the S&P. Any divergence should be closely watched.

Something's about to snap.

http://freakingclueless.com/SPToPanamax.jpg

Fri, 12/17/2010 - 15:38 | Link to Comment Haywood Jablowme
Haywood Jablowme's picture

I'm a total amateur in those things, but wouldn't it be reasonable to expect the index to bemore active facing Christmas holydays?

Shipments, primarily what we in the u.s.s.a. would see as imports for the holiday season, are typically shipped in over the summer.  So you'd want to compare the Q2 and Q3 to the same numbers the years prior if you want to get a feel for what retailers are doing.

 

Fri, 12/17/2010 - 13:16 | Link to Comment Thoreau
Thoreau's picture

Next stop: the Mariana Trench.

Fri, 12/17/2010 - 13:18 | Link to Comment Midasfinancas
Fri, 12/17/2010 - 13:26 | Link to Comment bob_dabolina
bob_dabolina's picture

That looks like shit.

Fri, 12/17/2010 - 13:26 | Link to Comment Brother Revegen...
Brother Revegend Magoun's picture

Tyler, May I ask you to publish BDIY chart covering 2-3 years from now? Thank you.

Fri, 12/17/2010 - 15:03 | Link to Comment Temporalist
Temporalist's picture

You can go to Bloomberg.com and select 3yr on the BDIY chart.

Fri, 12/17/2010 - 13:45 | Link to Comment h0ff13
h0ff13's picture

The glut of new ships has really reduced the effectiveness of the BDI as a guage of world trade activity.  Anyone interested in this topic can follow the posts of audiophule on the yahoo finance message boards.

Fri, 12/17/2010 - 14:04 | Link to Comment Clapham Junction
Clapham Junction's picture

Ah, so there are more ships skewing the data. Upward or downward?

I'm not very bright, and Bob hasn't commented on this yet, so could you explain further?

Thanks.

Fri, 12/17/2010 - 14:19 | Link to Comment h0ff13
h0ff13's picture

Dry bulkers have a lifespan and under normal conditions, they are replenished roughly at the rate which keeps to capacity in line with world's dry bulk cargo needs - supply/demand keeping the charter rates in a range that makes building ships profitable.  Well a few years ago, the supply of ships was far below the booming Chinese economy needed to supply them with raw materials.  That forced the day rates into the stratosphere.  With those incredible rates, everyone put in orders to build new ships.  It takes years to build ships and now they are all coming into service here in the recession.  Massive over-supply of ships keeping the BDI supressed and not a very good indicator relative to the past on world shipping demand.

Fri, 12/17/2010 - 17:00 | Link to Comment bbtrader
bbtrader's picture

Sounds right, the last I'd read, the drop has been due to a glut of ships.  I also read that COSCO now controls a big part of one of Greece's largest ports.  It is to their benefit that shipping prices stay suppressed.

Fri, 12/17/2010 - 17:00 | Link to Comment rosiescenario
rosiescenario's picture

...right you are...the BDI is a measure of rates which are driven by supply and demand...demand could be very good, but if supply is even higher, you get a lower BDI reading....

Fri, 12/17/2010 - 14:23 | Link to Comment Threeggg
Threeggg's picture

Are they paper or tungsten ships. (Hauls)?

Just askin..........................

Fri, 12/17/2010 - 13:57 | Link to Comment Don Birnam
Don Birnam's picture

One of Kudlow's favorite indicators -- or at least used to be, when it provided convenient affirmation for Larry's "green shoots" thesis. The ( formerly green ) Baltic Sea grass shoots are looking rather russet these days.

Fri, 12/17/2010 - 15:41 | Link to Comment traderjoe
traderjoe's picture

I haven't heard "green shoots" or "mustard seeds" uttered in quite some time...

Fri, 01/21/2011 - 09:59 | Link to Comment Clapham Junction
Clapham Junction's picture

(d)

Fri, 12/17/2010 - 14:07 | Link to Comment ironymonger
ironymonger's picture

VIX has some weird down-spikes in it today. WUWT?

Fri, 12/17/2010 - 14:11 | Link to Comment Windemup
Windemup's picture

They can print all the paper they want. It's real goods in physical volume that counts. Labor hours, barrels of Oil, Kilowat hours of electricity, etc. They can't change physics by printing paper. The best they can do, and they are doing it well, is change ownership of the product.

Fri, 12/17/2010 - 14:17 | Link to Comment oddjob
oddjob's picture

BDI<2000 with Copper @ $4+

scary.

Fri, 12/17/2010 - 14:38 | Link to Comment mirac
mirac's picture

LOL

Fri, 12/17/2010 - 15:42 | Link to Comment traderjoe
traderjoe's picture

But I thought Harry's business was going gangbusters?

Fri, 12/17/2010 - 15:58 | Link to Comment Thoreau
Thoreau's picture

The BDIY seems less an indicator of where we're headed than a follower of the newest, greatest bailout/stimulus package. Pure adrenaline surges that will eventually wear out the collective adrenals.

Fri, 12/17/2010 - 17:15 | Link to Comment bingaling
bingaling's picture

Price of fuel seems to be hovering at new highs along with other commodities yet the price of shipping is dropping with a very weak dollar and China having an inflation problem. Seems things are a bit screwed up . But again the BDI is an economic indicator not necessarily what markets are following of late .

Fri, 12/17/2010 - 17:16 | Link to Comment markmotive
markmotive's picture

There are 2 sides to the BDI.

Ship supply is just as important as demand for transport. And I have heard over-and-over that there is an onslought of new shipping capacity as projects started during the resource boom (2007-2008) are now being completed.

I'm no expert so maybe I'm wrong.

Fri, 12/17/2010 - 18:02 | Link to Comment rosiescenario
rosiescenario's picture

....you are right....there could be a booming world economy but if there were a glut of ships pushing down rates, the BDI would be down....it is a suspect indicator....it would be better to hav a count on the containers coming into Long Beach...which is on the tail end of the BDI pipeline in a sense.

Fri, 12/17/2010 - 17:25 | Link to Comment gkm
gkm's picture

The other indicator is natural gas.  As the most heavily used industrial fuel and the only one that is really domestically oriented, it's a good indicator of true industrial activity.  Except it continues to languish.  Although, it has started to perk up somewhat lately.  Unless this starts to get going, the recovery is on hold.  

Fri, 12/17/2010 - 21:06 | Link to Comment squexx
squexx's picture

Recovery?!? There IS NO recovery! It's all spiked statistics, smoke and mirrors.

Fri, 12/17/2010 - 20:18 | Link to Comment Gimp
Gimp's picture

This sort of news can be construed as "anarchy" to the leadership. Secretary of State recently stated the "Internet is causing discontent and a breeding ground for anarchists". Expecting ZH to be disconnected any......

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