Dow Transports And Oil Revert To Old Normal?

Tyler Durden's picture

Since the peak in 2008, the Dow Transports and the price of crude oil has been extremely highly correlated. Whether this is due to the inextricable factor of central bank liquidity flushing 'money' into each and every market around the world - or an increase in the link between demand for energy and increasing transportation needs - it seems something has recently changed. Oil prices have been stymied in the last year as global growth slowed and in spite of a plethora of hot-spots for geo-political risk flares has been unable to see premia rise. On the other hand, the Dow Transports have screamed higher. Different this time? It would appear so... or is this a return to the anti-correlated (somewhat more sensible) energy-cost-to-transports world that existed before the crisis?

Post-Crisis - extreme correlation...


Pre-crisis - anti-correlated...


Charts: Bloomberg

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GNWT's picture



Party like it's 1999... 


with the Silver Liberation Army


bugs_'s picture

As US production continues the amazing ramp up - the risk premium associated with oil should evaporate.  I think the transports are seeing a stable to lower price for the long term.  The risk premium is nearly gone.   Mele' in Mali - shenanigans in Syria and Oil just shrugs.

orangegeek's picture

Transports tanked today.  Down over 90.

khakuda's picture

The world is enamored with US shale oil supply story and that has probably done a lot to keep prices down, in addition to demand concerns. Personally, I don't care. As long as the global money printing festival goes on, I'd rather own oil than fiat. Every time Ben prints, oil and interest rates rise and slow the economy. Somehow, he feels that is good.

DaveyJones's picture

you mean you can't print energy?

you mean all the financial bets on ever expanding production will hit the wall?

Every time Ben prints, we move farther away from the things we should be doing

"peak oil production is the equivalent of 22 billion slaves working around the clock" - Dr. Colin Campbell

khakuda's picture

Well, he already said that printing money reduces the deficit, so it isn't a big leap for him to claim he is printing energy.

"Although I am creating money electronically, we have a technology called the printing press. Alternatively, I can print actual dollars on paper, which though, as you may know, are increasingly worthless monetarily, they are highly flammable. A few hours printing can heat a small community for hours. In this way, the Fed remains committed to doing it's part to foster the recovery."

ReptilianSlaveMaster's picture

This must be what 2008 feels like, such a brutal sell off this week, I dont think my portfolio will ever be able to recover its value now. .. just btfd already

Being Free's picture

such a brutal sell off

I know what you mean, couldn't take any more of it today so put in a btfd omc order, folded up early and went to Hooters for a beer.  Plunging necklines and tight shorts are much better than all that red on the screen.

(sarc/ is this necessary?)

Clint Liquor's picture

All sectors of transports has have been contracting, except for rail in the area of where the XL Pipeline would have been built. Without the Pipeline they have to move that oil somehow. Crony captitalist Warren Buffet has a big stake in that particular Rail Company. Payback for support of Obama? It's a twofer, Environmentalists and Crony Capitalists.

Anyway, the big runup in Trannies is bogus, short it.

Freddie's picture

Hey Buffett - go take a dirt nap!  Scum bastard.

OutLookingIn's picture


Lets look at the past 5 year Baltic Dry Index.

Since the first week of June 2010, with the BDI sitting at almost 3500.0 it has made lower highs and lower lows since then. To now sit at 767.0 and trending lower.

Transports? Being pumped. Look out for the dump.  

Tom Green Swedish's picture

Hint: some of the transports make money on oil.