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Baltic Dry Index 187 Away From Triple Digits
The freefall in the BDIY is just ridiculous: following a steep plunge it has now gone in freefall, and is down 3.9% overnight to 1,186. And to all who are claiming that the index is merely indicating a supply glut from the onslaught of new ship arrivals, well the entire orderbook (in progress) has been public and transparent - to claim it is a surprise is about as "naive" as stating that 5 computers and a bunch of NYU kids control the US stock market. As for how much longer it will keep dropping? Well: he post Lehman low was 663. There is still a lot of pain. Especially if one is a non-chartered dry bulk shipper... With leverage.
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I managed to upload the Jim Grant interview from yesterday that Bloomberg for whatever reason did not put up - it is audio only and the audio quality is beyond horrible - The first minute of the interview is missing as my crappy voice recorder was full - it starts about 20 seconds into the clip
http://bit.ly/ec9ucu
I am as bearish as bearish can be but the BDI has not been telling the whole story lately -- the BCI, BHI show a slightly different story although they have been sliding lower in the last 30 days too. Meanwhile, Korean manufacturers of large ships are getting hurt very badly as shippers turn to smaller ships.
I'm not sure what this is telling us, but go to stockcharts.com and chart $INDU:$BDI for 3 years. It looks as if something is on the horizon.
sunny
some clearer charts
http://investmenttools.com/futures/bdi_baltic_dry_index.htm
Thanks for the heads up - here is the trascript, per Bloomberg:
>> coming up in just a few minutes time, he is struggling to
eurocom of bailouts, and the possibility of default in
europe. now many other central banker has as many national
leaders to deal with. that is jean -claude trichet. stay
tuned for that. right now you are back "in business." we are
back with jim grant. we got the headline today from the cbo
that the deficit will climb from 1.3 up to 1.5 trillion
dollars this year. timothy geithner says you have until the
end of march to up the debt ceiling because we're looking at
real problems in the debt market. what is your read on the
reality?
>> the underlying trouble with our public finances is that
they're so easily finance. this country enjoys the privilege
of having a credit card when nobody else does. it is called
a reserve currency. we condition these. other countries take
these dollars more or less gratefully. they wind up on the
balance sheet of china and japan principally. two of sort
dollars these foreign countries print local currency. the
effect of all look this is a great uplift of liquidity
worldwide. it is inflationary for stocks, bonds, depending
on the cycle. imagine which country in the world would not
run these deficits not only without tears but also without
smiles? if paraguay were acceptable globally, they would be
sitting in a pretty great position.
>> you are advocating a return to the gold standard?
>> i am, indeed. it is is only prudent approach to the
problems. -- it is the only proven approach to the problems.
it was bad for many reasons, but among all for giving the
central bankers lexss flexibility. -- i am all for giving
the central bankers less flexibility.
>> well, one of the reasons it was abandoned and the
flexibility was needed because of times of extreme dressed
like the crisis we just went through.
>> to resduress is in good part due to monetary policies. we
will always have depressions and business cycles. this time
was something special. without the g.d.p. really going down,
the entire financial system came close to collapse. how does
that happen? what is it in the monetary and financial
structure that pushed us to the press of this was so little
of it pretexts? that is the issue.
>> that is an idea. we will see big gains in
>> from bloomberg world headquarters in new york, you are
"in business."
>> welcome back to "in business." i am margaret brennan.
take a look at where we are two hours into the u.s. trading
session. where do we stand?
>> we have definitely come off the highs. not by very much.
11,973. what you will see is poking above 12,000, above it
for a little bit, and since then consolidating before the
key level. in terms of the other benchmark s, they are still
positive. the nasdaq at 0.7%. the s&p 500 at 1295.
>> thank you very much. a new poll has some grim news for
the euro. more than half of the investors surveyed say one
or more nations will drop out of the eurozone within five
years time. that cannot be reassuring to learn next guest.
francine lot what is in london with the president of the
european central brank, jean- claude trichet.
>> he has plenty to think about. thank you for joining us.
in the past to have been willing to get clarification to the
market. do you think the markets have gotten ahead of
themselves? a lot of market participants thing you were
ready to raise rates before they saw it a couple of weeks
ago.
>> what i already said on behalf of the governing council,
we consider our present interest rates are appropriate. as i
said, there is nothing new there. we always take the
decision that permits us to deliver price stability. as you
know, we are very proud because after 12 years we have
delivered an average yearly inflation of 1.97%. it is close
to 3,2, and that is very important. it is the best track
record in close to 50 years. it is also something that is
very important in terms of credit given to the central bank.
we trust it is a necessary condition for a country during a
recovery.
>> the german inflation expectations as measured by bonds
have dropped to 1.97%. are you satisfied with this or is
this still a level too high?
>> all 17 countries on the average about 1.97%, which is a
track record, -- speaking of fax and figures, i would also
say that for germany in particular, the average inflation
has been 1.5% over the same period, because they were
working on their own unique economy. it to go how big are
you on inflation at the moment? --
>> how big are you on inflation at the moment? to go to the
present interest rates are appropriate. --
>> the present interest rates are appropriate. we are never
free committedpre-co committe-committed. we do what is
necessary. we do not do it by chance, it is because we took
the necessary decisions when it was necessary. i would say
our credibility is based on that doctrine.
>> i understand that very clearly, but worse markets have
expectations. have they gotten the wrong expectation in the
past week and a half?
>> their expectations are based upon what they think it will
be based on inflation. what is whatmuch more important and
you mentioned it a moment ago, they know that we will
deliver and they trust us to deliver, and that is of course
something that is extremely important for them. they trust
we will deliver over the medium-term price stability.
>> they also hung on your every word at a press conference.
is there danger they are misinterpreting again?
>> i will not comment on what the markets are doing with
what we say, but what counts is not words. we have a track
record. that is the reason we are credible for the future.
>> are you concerned about the fact that some large banks
remain at shut from the market? -- remain shut out from
tehhe market?
>> we are calling all banks to do what you can to
recapitalize through various means, be prudent and cautious
in regards to your own wages and salaries and packages and
so forth. we're telling them they have to go to market
whenever it is possible and necessary, and we also tell them
go to the government'ss. this is our permanent goal for the
banks.
>> in the last couple of months has the situation gotten
better or worse or stagnated?
>> if i look at what has been done by a large number of
banks, i would say a large number have improved their
balance sheet. i also see when i look at the figures that we
have as we got outstanding credit growth, i see we are now
in the mode of much more dynamic than before -- much more
dynamic growth of the credit. and for the the non-financials
where we were negative, and now we are at zero. i expect
that we will continue to go in the right direction i will
also mention the fact that as since the start of the
recovery, namely the third quarter of 2009, we have quarter
after quarter been positively surprised, not fantastically,
but there have been a number of surprises. the last figures
i have, the survey figures are confirming that we are month
after month experiencing that recovery, which started
several quarters ago. so we never claimed victory. we are
always very prudent and cautious. we have to remain again it
prudent and cautious, but again, it is good to see the
recovery is confirming the success.
>> would you be favorable of putting a condition that the
banks would need to pay a higher interest rate because that
would be a pretty easy way to wean them off of the cheap
money? the proble
>> the problem we are looking at is a more general problem.
the banks have to go to the market and avoid that they would
be addicted, and we also have the important issue, which is
for governments to do their job of their own recovery. now
we have all the countries in europe with the adjustment
program, and we're calling on all of them to be very, very
strict in following what has been decided in what they have
fixed in regards to their own target.
>> i want to talk about the eff.
>> they have said on behalf of the governing council that
they would call upon the governments to improve the
functioning of this position from the quantity and the
inequalitquality. quality means flexibility and deciding a
new doctrine, which would be more flexible.
>> ken i understand you would be in favor of them to be able
to buy these bonds or am i misinterpreting?
>> it is complex. there are a number of tools they can
utilize and never up possibilities. i would certainly not
exclude that one, which i would consider useful in certain
circumstances.
>> that would take burden off the ecb to calm the markets.
>> we have a number of standard measures we have in the
past. this approach to securities is part of the measures,
and we do that to help restore a more normal functioning of
our monetary policy transition. it is something that we
consider important in some cases to permit that money to the
transmission to be correct. as correct as possible and under
the circumstances.
>> should also be able to recapitalize banks?
>> the recapitalization of banks is something that as part
of practically all the programs that are followed by the
various governments and certainly part of the programs that
are followed with the help of the european governments and
the imf's, so it is part of those programs of course.
>> do you think this comprehensive plan will be part of the
program we have been waiting for?
>> each responsible individual has to be up to the
responsibility. the times are demanding. they are demanding
for all of private sector as well as the public sector. it
is in the case in japan and the u.s. this crisis is the
worst since world war ii, could have been the worst since
world war i had we not taken very bold decisions,
particularly government itself. this is why we have the
problem to gain control of their own finance, but i would
say, yes, indeed, all authorities have to be up to their
responsibility, and as i to say, we are in europe and we
have to review the european functioning as well as japan and
the u.s. has to review their own functioning. we are
responsible for every monetary union. we have done what was
called upon us. we deliver. i mentioned the track record pd.
i call
>> if we concentrate on this, do we need to seek lower
interest rates for the countries that have --
>> i do not want to enter into any details. maximum
flexibility -- that is our own message. that is the message.
>> we had quite a worrying poll that was done on bloomberg.
56% of investors that we spoke to are expecting some kind of
restructuring or default by one of the peripheral countries
by 2016. are you surprised by this?
>> i would say they have programs. we have programs in case
of this. with the judgment of the commission and of the
council. there is both. there are both judgment of the
international community as a whole and judgment of the
european union. we are calling this country to follow the
plan, and we control every quarter very cautiously and
attentively the implementation of the plan. that is what we
are doing.
>> so far do think they are following the plan? what happens
if a country has to restructure? with your region be able to
survive that? -- would the region be able to survive that?
>> we have the progress and limitation of the decisions that
are difficult to take. and have to be implemented. i am not
surprised to see the facts and the implementation of the
plan, but this is decisive. what is decisive is you do the
job. it is true for all of the as the economies. you do the
job.
>> in five years from now, will the eurozone have more
members or less members?
>> those questions i have gone from the very beginning. we
were supposed to only have a handful of members. then we
started with the 11 members, which is something that has
been can stuttered as absolutely impossible by a lot of
observers. then from 11 we came to 17. only 12 years
afterwards because it was the beginning of this year that
estonia joined us. it is a process that is going on. i will
have to say those that are betting on the fact that we could
not do the job, proven [inaudible] we will see hard work and
how many additional members are there. those were called to
enter because they have signed the treaty, it is very
serious. you have to be sure you meet the requirements to
enter means you are prepared to do that, and i expect, of
course, that there will be more members and five years'
time. of course.
>> you are stepping down from the ecb later this year. do
you have any plans of what you will do?
>> we will see. i do not have any plans at the moment.
>> thank you so much for your time. that was the president
of the ecb, jean-claude trichet.
>> in australia we are looking at a national holiday, but a
bit of worry today because of a tropical cyclone is bearing
down on the country's mining carlin heartland. the coal
mining industry is trying to recover from the devastating
floods that have hit the country hard over the past month.
we're joined now by australia's minister for energy and
resources. but start with the tropical cyclone. a third of
the world i yourn or comes from this region of -- iron ore
comes from thsi region.
>> it is the monsoon region. we back down the hatches. we go
out of the way to make sure we protect the local
communities. sometimes a blowout and sometimes they float
through. it is part of working in northwestern australia.
we're waiting to see with this iphone ends up. we are
normally pretty well prepared for these types of events.
>> this storm getting a lot more attention because of what
has been happening this past month with the floods. we have
prepared a graphic to put it in terms for armed american
international viewers. -- our american international
viewers. the size that has been hit is the size of
california and texas combined. a massive part of the country
impacted here. can you give us a sense of the economic toll?
>> it represents quite a significant challenge, but the
flood waters are receding. volunteers on the ground have
done a huge job in helping local communities get back on
their feet. the cold chain has been disrupted, but there are
still exports proceeding. -- the coal chain has been
disrupted, but there are still exports proceeding. the ports
are not affected. we are not going to see much here. we're
going to make sure we prioritize the rehabilitation. we're
back on our feet. brisbane airport. you can go to the coast.
clearly some businesses are affected. but it is the right
time to come to australia and have a holiday.
>> tourism is up for billion dollar industry. -- is a 4
billion dollar industry.
>> we are highly efficient sector. we use a lot of
technology from a mining perspective. we will turn around
the coal corridor very quickly.
>> how will this impact supply?
>> we have not focused on making that assessment at the
moment. it is about helping people entire toward doing what
we need to do from an infrastructure point of view. we
probably lost with the impact of price and food -- we were
in position to have a bumper season after a few years of
drought. we lost that, but our mining community is a
determined community, as is the agricultural community. we
have had these difficulties in the past. never as big as
this, but the whole community is absolutely committed to
fixing the problems as soon as possible.
>> give me a sense of what the cost to business will be in
terms of taxes. is it going to cost business is more?
>> not just businesses but households. we have had this from
time to time at the national interstate level. the prime
minister will have something to say later on today in
australia, and i think there is an understanding that when
there is a natural disaster we all have to pull together to
help those affected from a business perspective and
household perspective.
>> it is so interesting to get to talk to you. the rise of
australia and asia. we will keep an eye on the supply
question. good luck with the cleanup. we appreciate it. back
in a moment. more "in business."
>> mcdonald's is expanding and china appear yen -- in china.
>> here at hamburger university in shanghai, to graduate
means better jobs and more pay. with this election rate of
less than 1%, it can be harder to get into the harbor. --
than harvard. at the beginning it was very challenging
because there were around 1000 applicants and the only take
eight. mcdonald's pays $5,000 per person to attend a
five-day course. they learn about leadership, communication,
and teamwork. plans to increase investments in china by 40%
this year. they want to graduate 5000 from the academy in
the next five years and double the amount of restaurants by
2013. with china's rise to the world's largest auto market,
half of the new restaurants will have drive- throughs.
>> now is a really good time to grow. the pipeline is ready.
it is not just about rest route pipelines. -- about
restaurant pipelines.
>> overall it will be harder and harder to hire people in
that industry. the main reason mcdonald's has put this in is
to professionalize the sector, thereby making it easier to
recruit better people for the long-term.
>> this class stepping up to fill a tall order for the
franchise.
>> i wonder about this of the economy of this university.
>> we were just talking about the australian minister for
resources about what is happening in their backyard. china's
growth has been australia's win.
>> there is a correlation there definitely.
>> let's take a look at the fastest-growing terms on google.
another recall at for iottoyota. almost 2 million vehicles.
most of them are minivans in japan. if you look at the
number one spot it is about a odd pet. my 8-month-old puppy
met this. that is a kangaroo. it is on a dog leash with a
harness on third avenue in manhattan. that is my puppy right
there. the owner came into gekkpetco to buy a dog collar for
his k kendrew. my puppy's name is maddy. she wanted to run
up and say hi. i did not even know it was legal to have a
kangaroo in manhattan. apparently in the number one spot is
monitor lizard. they are apparently popular right now.
>> and kangaroos.
>> who knew? had to show that. it shocked me. stay tuned to
bloomberg. we're done with "in business."
that's great, did you get that off a terminal or their public site? any chance you could post the first half of the interview as well? thanks
Terminal - couldn't find the official video/audio either! Reading through the text, seems confusing who is speaking, though - does the text tie in with the audio you recorded? Or is it just mislabeled as Jim Grant?
the transcript sort of ties but it looks machine generated and only includes the second half after the commercial break - he was pretty aggressive in his criticism of the Fed even as Margaret was trying to defend the Fed.... go figure
Bloomberg will edit their video content removing stuff they don't want broadcast, which is why I started to record it, I just wish I got the very beginning
here is an updated link for the audio
http://bit.ly/fTGC8E
( Grant has huge credibility and perhaps it was he who did not want the segment put up on video but that doesn't make sense - maybe just a technical glitch at their end)
This is bullish, yes?
the word bearish has been taken out of the 12th edition of the Newspeak dictionary. There will not be words left to even entertain the idea of a market going down. The phrase stock market will be synonimous with to the moon
this would be deflationary, right? i still believe the deflationary crash is coming. its just been delayed by the massive amounts of money (new debt) the govt's around the world are using to prop EVERYTHING up.
You could be right but...
this may lead to less goods in the system as less are produced and shipped. With many many more dollars chasing few and fewer goods... this is the essense of inflation.
Just different points on the same time line... durable goods and real property remain, regardless of whether deflation or inflation has taken hold. I think you're right terminus, for sure in the short term... but, eventually, those assets go bidless because there is literally no one to pay for them...
I believe you are both right, you're just describing the different leading partners of a dance that lasts the whole night through. The only way to make sense out of the debate is to assign a frame of reference (e.g. a time period) to your assertions.
If Bernanke and Trichet think they've seen consumer and small/medium sized business deleveraging thus far, THEY HAVEN'T SEEN ANYTHING YET.
Wait until they get a load of what's to come, spawned by their very actions - how ironic.
if its not moving. its not selling.
claims soar - wheres harry
Renegotiating his shipping deals
Filing for unemployment. Food stamps too.
Making AAPL stock more attractive.
http://www.youtube.com/watch?v=03FIqPk_rBM
Poppycock and fiddle faddle
+ 1 belly laugh.
Thanks.
ORI
Then we are a 188 BDI points + 3 or so weeks from DOWner days.
Three digit BDI, in conjunction with everything else going on is not good at all.
Export slump for exporting nations in an export driven world.
Pfffffft! House of cards!
ORI
http://aadivaahan.wordpress.com/2011/01/27/wisdom-for-warriors-6/
Insider footage of Bernanke and an NYU kid pressing the start button on their buy program.
http://www.youtube.com/watch?v=FEgGE81joB8
Results predictable.
However, closing the Suez will certainly aid the DBI. How much of the BDI does Egypt have hedged?
OOPS.
Supply is inelastic so unless a plethora of ships commissioned back in 2007/2008 has recently come off the yards then the cause is demand related .
@RECOVERY
Mark all Indices, and you get the BIG picture:
http://navigatemag.ru/indices/
We live in a post-shipping economy.
So this time it's different.
/BS
The problem with phony economic recoveries is that eventually, after all of the fake stimulus has worn off, the global economy will collapse back to where it was -- but with much more debt saddling the sovereigns. Anyway, this bogus "recovery" was fun while it lasted.
BEnron was absent that day it was taught in the higher I.V. leega edge-u-makashon skewls he was taught in. His excuse- "I had a bar mitzvha to attend"
Thus we now see the results of said I.V leega edge-u-makashon. It pays.
EVIL EGYPTIANS I TELL YOU!!!
CURSE OF THE MUMMY!!
Look at it this way, soon enough, we'll be able to charter cape size ships to cruise around the world for the price of a few oz of gold.
Party boat, bitches!
Or at least a nice(r) suit!
I don't think the Baltic index is meaningful to commodity investors. As the US continues to print, those commodities will continue to rise....QE3 anybody?
Commodities rise but no one but speculators buy them (food excluded).
Commodities rise but no one has money to buy them... they still increase.
BDIY is 1186 from the low of 663 - S&P is 1296 from the low of 666? Is S&P "only" 110 points overvalued?
Ironically, a criminal syndicate Wall Street banker was just on the Blow Horn telling folk to load up on shipping stocks.
We definitely need more syndicate members in our society. MORE BANKERS!
Thanks TYler for talk about this index.
http://www.financialchat.com/blogs/baltic-dry-index-mystery
Hello Cdad¡
Can someone post a graph of a railroad index, I have a STRONG feeling, it would be going up up and up as SOME companies are bringing production back home.
Look up Dow Transports if you're into that. It's been dropping a tiny bit, might be printing a lower high into a Dow Theory sell signal, we'll see. But nothing like the $BDI.
Similarity to the Jan 2009 $BDI number is a bit scary, but you might want to show me where international trade is disappearing otherwise I don't buy it.
Thanks Tyler. My favorite chart on ZH. Different time ranges would be cool. Thanks again ZH.
Ha!
No wonder we have run away inflation in China. Not whole alot of shipping. Just paper supply and demand.
What about S&P 500 earning story. Can the earning grow through the roof without shipping and delivery?
Someone mentioned a while back that the BDI is less relevant and that we should look at the Harpex, which covers the shipping of finished goods. Which is fine, except that the Harpex hasn't been updated as far as I can tell since December 18. (why is this font so large?)
BDI reflects suppy vs. demand. Supply is through the roof, panamax and capesize deliveries for ships ordered three years ago are coming online at a rapid clip.
Hmmmm, where did my first post go to?
Not only was it my first post, but it was the first post on this thread.
Anyway, as stated before, I have heard a lot of chatter on the relevancy of the BDI other than long term historical perspective.
Apparently the BDI can be down simply because of new ships being added (which is what is happening as we speak/write)
And things like Cheeena buying up copper and such to warehouse it (and get rid of U.S. dollars) caused the BDI to pop up in a rather artifical manner.
I like looking at other transports in association with the BDI to determine a trend.
Interesting, 187 is the police code for a homocide.
That's because Bernanke murdered the economy, and any semblance of rationality and sanity that remained.
I still think that most of this is a supply glut of ships. So I'm not putting as much stock into it as I was in 2009.
Baltic Dry means absolutely nothing until it means something. Treat it like a heads up but don't trade on it until something somewhere anywhere confirms.
I truely don't know why people follow anything else. If you wish to know how the global economy is doing, there is no better indicator around. Period. This is how I knew we never came out of the global recession and why it is a depression and not a simple restructuring recession. When larg escale goods are not being exported (and this means commodities too ladies and gentlemen which is why the precious commodities bubble is fake too) it means just that, reduced demand, regardless of home much funny money finds its way into the commdities markets. When you only have buyers what happens?
Cheers.