Baltic Dry Continues Collapse - Worst Slide Since Financial Crisis

Tyler Durden's picture




 

Despite 'blaming' the drop in the cost of dry bulk shipping on Colombian coal restrictions, it seems increasingly clear that the 40% collapse in the Baltic Dry Index since the start of the year is more than just that. While this is the worst start to a year in over 30 years, the scale of this meltdown is only matched by the total devastation that occurred in Q3 2008. Of course, the mainstream media will continue to ignore this dour index until it decides to rise once again, but for now, 9 days in a row of plunging prices is yet another canary in the global trade coalmine and suggests what inventory stacking that occurred in Q3/4 2013 is anything but sustained.

 

Baltic Dry costs are the lowest in 4 months, down 40% for the start of the year, and the worst start to a year in over 30 years...

 

As we noted yesterday...

Of course, we are sure the 'lead' that the Baltic Dry seems to have over global macro will be quickly ignored...

 

Charts: Bloomberg

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Tue, 01/14/2014 - 18:58 | 4332175 Al Huxley
Al Huxley's picture

Not relevant any more - there's one simple algorithm in force since 2009 - if POMO then buy.

Tue, 01/14/2014 - 19:02 | 4332190 fijisailor
fijisailor's picture

Money chasing money = economic prosperity.  Screw reality.

Tue, 01/14/2014 - 19:13 | 4332200 TruthInSunshine
TruthInSunshine's picture

The New Normal. Amazon drone deliveries are killing cargo shipping.

Yellen should monetize some shipyards & ship builders.

Tue, 01/14/2014 - 19:45 | 4332311 DoChenRollingBearing
DoChenRollingBearing's picture

So how come our LTL (less than containerload, Asian ports to Peru) rates aren't going down...?

Tue, 01/14/2014 - 20:06 | 4332372 spinone
spinone's picture

No, this is shipping, not overland.

Wed, 01/15/2014 - 02:19 | 4333352 TruthInSunshine
TruthInSunshine's picture

I was snarking about the Amazon drones.

Shit's gettin' real on the high seas, bitchez.

Tue, 01/14/2014 - 19:07 | 4332205 LawsofPhysics
LawsofPhysics's picture

"paper chasing paper" - fixed.

Tue, 01/14/2014 - 19:34 | 4332278 Winston Churchill
Winston Churchill's picture

Pinks slips chasing vanishing bills of lading is the only paper I'm seeing.

Businesses have no choice but to downsize labor with the inventory overhang,add in

Obozocare ,and its an oppotunity to restructure the workforce into 29 hourers at the same time.

An even bigger  death spiral for disposable income.

Tue, 01/14/2014 - 22:18 | 4332767 Cursive
Cursive's picture

@Winston Churchill

New socio-economic term:  The 29ers.

Wed, 01/15/2014 - 02:15 | 4333347 HardlyZero
HardlyZero's picture

OC deflationary spiral.   With death panels at the bottom to catch the survivors.

Tue, 01/14/2014 - 19:08 | 4332210 max2205
max2205's picture

Somebody knows something. ..neg 1 month bills

Tue, 01/14/2014 - 19:23 | 4332245 SilverIsKing
SilverIsKing's picture

Perhaps the banking system is ready to blow up.

Tue, 01/14/2014 - 19:31 | 4332268 zaphod
zaphod's picture

Exactly, neg 1 month bills can not be understated, just look at Japan

Tue, 01/14/2014 - 21:36 | 4332640 TheRideNeverEnds
TheRideNeverEnds's picture

Considering they are all reporting record earnings this week I doubt that.  

Tue, 01/14/2014 - 20:31 | 4332455 Bunga Bunga
Bunga Bunga's picture

Just some retards, who believe market indications still mean something in central planning.

Tue, 01/14/2014 - 20:59 | 4332540 ILLILLILLI
ILLILLILLI's picture

Having -any- market indications means that Central Planning has failed.

Tue, 01/14/2014 - 19:06 | 4332204 mick_richfield
mick_richfield's picture

I think shipment of goods might still be relevant.

 

Tue, 01/14/2014 - 19:42 | 4332304 Big Corked Boots
Tue, 01/14/2014 - 20:06 | 4332371 DanDaley
DanDaley's picture

Right -BDIY = major raw materials

HARPEX = finished goods

Takes two to tango.

Tue, 01/14/2014 - 21:58 | 4332700 kchrisc
kchrisc's picture

HARPEX seems to tell a better and clearer story than the Baltic. I quit paying much attention to the Baltic some time ago, as it "beats" up and down like an EKG.

HAREX also reveals that, as we all knew, there were no "green shoots," etc. Currently it seems to fading to flat-line.

 

"You got 'guillo' on my 'tine'." "You got 'tine' in my 'guillo'." "Two great things that work great together--guillotine!"

Tue, 01/14/2014 - 22:56 | 4332898 MontgomeryScott
MontgomeryScott's picture

Thanks.

I had been looking at the BDI for about the past 4 years, and have never heard of 'HARPO' (oops, 'HARPEX'). The Baltic Dry Index seems to be far more, um, how do you say it, 'old', as far as the time that it has been in usage to set the freight rates globally. HARPEX seems to have only existed for just over a decade.

I saw a long-term high of 1,839, a long-term low of 275, and a current of 392 (with an average over time of 896). Yeah, it looks pretty shitty over there as well (just not quite as 'volatile', I suppose). How about that 1,404 to 275 slide, during the so-called 'great recession' period? Damned chart FLATLINED for about a year, it looks...

HARPEX looks 'historical' in nature of reporting, while BDI looks 'live-time' in nature.

"Currently it seems to fading to flat-line." No, it has further to drop, I see by the charts. Perhaps it may go lower, or perhaps it will spike (due to the fact that the USD is all but OVER, and is now accelarating it's death-throes of inflation leading to rapid devaluation; and BOTH indexes still seem to be pegging their numbers based on this once-valuable currency. Can you imagine what these numbers would have looked like in 1920's German Marks, or 1990's Zimbabuean currency?).

Valued in the Euro...(oh, never mind. The Euro is the USD lite), or perhaps the Renimbi (Yuan), or perhaps the value of Silver or Gold, these charts might tell a different story.

Waiting for the inevitable 'down-arrows', I sit and watch, and laugh a little. I see, in my mind's eye, SOME people saying, 'HARPEX isn't diving, so BDI MUST be wrong! PROSPERITY IS JUST AROUND THE CORNER! TRUST US, WE'RE FROM THE GOVEERNMENT, AND...'

Tue, 01/14/2014 - 23:05 | 4332924 MontgomeryScott
MontgomeryScott's picture

@DanDaley,

IF the largest producer in the world is CHINA (which it IS), and the shipping prices FROM this PRODUCER are tanking, why does this comparison between 'finished goods' and 'raw materials' make sense? This BDI is an overall average of BOTH 'raw materials' AND 'finished products' in the COST OF SHIPPING, TOTAL.LOTS of ships now, carrying those pre-fab trailer shipping containers from CHINA, costing the same as the BULK ORE CARRIERS (per TON).

NO, your statement is a non-sequitor. The DIFFERENCE is the method of reporting by two competing 'indexes'.

If the DOW goes UP, and the S and P goes DOWN, WHICH ONE is reflecting the DAX (or the price of shipping tea from China, for that matter?)?

 

Tue, 01/14/2014 - 19:38 | 4332288 Pareto
Pareto's picture

+1 Al.  TOTALLY AGREE.  Plus, we've seen the BDI take a dump numerous times before only to resurge just minutes after ZH shows the chart.

Tue, 01/14/2014 - 20:31 | 4332454 CarrierWave
CarrierWave's picture

This article is meaningless. The Index can go up (and did in the past) just as fast as it went down.

Just look at Oct 2013 as evidence.

No crash will happen anytime soon. Not in this Index nor in the Sock Market.

Tue, 01/14/2014 - 23:11 | 4332937 MontgomeryScott
MontgomeryScott's picture

I agree. (sarc)

I have been authorized to assure you that there is NO REASONABLE CAUSE FOR ALARM.

The most patriotic thing that we can do is to GO SHOPPING.

As far as SOCKS go, I have noticed that the riots and factory burnings have caused a temporary spike in the cost of socks, hose, stockings, and other foot coverings over at Jaque Pinney. Of course, once the government gets these raucous upstarts under control, consumers like myself will once again enjoy the freedom to shop at reasonable prices (and watch more sports and sex acts on television).

It's mental masturbation, you know. First you take a dirty sock, then you wrap it 'round your cock...

Tue, 01/14/2014 - 19:01 | 4332183 BuddyEffed
BuddyEffed's picture

Was Xmas sales that bad?

Tue, 01/14/2014 - 19:03 | 4332191 dobermangang
dobermangang's picture

We're waiting for all the 2014 "Going Out of Business" sales.  Coming soon to a mall near you.

Tue, 01/14/2014 - 19:13 | 4332225 TruthInSunshine
TruthInSunshine's picture

Do a quick search on how many B&M retailers and/or retail locations are closing down; I've not seen so many large store closings so widely spread across the country since the deepest part of the 2008 crash.

Tue, 01/14/2014 - 19:22 | 4332240 optimator
optimator's picture

Business is doing great in my state, biggest chain of all constantly expanding with new stores everywhere.  I'd like to buy some stock in the company but I can't find the symbol for Now Leasing.

Tue, 01/14/2014 - 19:56 | 4332340 TruthInSunshine
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4SaleOrLease is the hottest chain going.

I see their signs EVERYWHERE.

Wed, 01/15/2014 - 03:06 | 4333406 AgentScruffy
AgentScruffy's picture

Hadn't seen with my own eyes how many of these "chain stores" have popped up...until I recently moved out of the D.C. area. (True story.)

Tue, 01/14/2014 - 20:07 | 4332379 spinone
spinone's picture

You are dead on. If this is indicating anything, it is the collapse of american retail orders.

Wed, 01/15/2014 - 04:04 | 4333434 Theosebes Goodfellow
Theosebes Goodfellow's picture

But wait! Isn't the US economy 70% consumer driven? Hasn't the Fed, the Treasury and the central banks turned us all into consumerists, saving us all from being selfish "hoarders", (savers)? Surely CNN, NBC, ABC, CBS or at the very least PBS would have covered this if there was a problem, wouldn't they? /sarc

Tue, 01/14/2014 - 23:14 | 4332953 MontgomeryScott
MontgomeryScott's picture

@ BuddyEffed,

"Was Xmas sales that bad?"

Um, compared to what, exactly?

(Another way to respond: WELL, DUH!)

What's the unemployment rate in Greece, by the way?

Tue, 01/14/2014 - 19:02 | 4332187 EscapeKey
EscapeKey's picture

Remember - BDI going down = overcapacity, up = strong recovery.

Tue, 01/14/2014 - 21:04 | 4332546 akak
akak's picture

I feel the need to point out that the chart of the Baltic Dry Index is a nominal chart, with the Y-axis in nominal --- NOT real --- US dollars.

Adjust for inflation over the past 30 years, and it is much more revealing --- and much more ugly.

Tue, 01/14/2014 - 23:20 | 4332974 MontgomeryScott
MontgomeryScott's picture

I missed the 'sarc' tag, EscapeKey.

WHEN goods are IN DEMAND, the costs of shipping RISE, due to the extra PREMIUM that shippers can charge (because people are willing to PAY MOAR for FASTER delivery). For example, if the girl in your avatar needed a COMB for her hair (instead of her fingers), and she said that if you got her one RIGHT NOW, you could have your way with her as long as her mood lasted (and she wanted it NOW), would you be willing to pay someone a little more to bring a comb RIGHT FUCKING NOW?

Tue, 01/14/2014 - 19:03 | 4332193 kaiserhoff
kaiserhoff's picture

This dovetails nicely with what's happening in commodities and short rates going negative.

Serious question for the bond Dudes.  Don't negative rates have the potential to seriously fuck up the fixed income markets?

There is no theoretical problem, and that scares the shit out of me.

Tue, 01/14/2014 - 19:10 | 4332220 LawsofPhysics
LawsofPhysics's picture

All rates are not created equally.  Go ahead, flatline every single (old) person's account with a fixed-rate investment fund and watch how fast these political puppets get executed.  I know several people over 50 and 60 in this boat.  They are survivors for a reason, they are tough motherfuckers.

Tue, 01/14/2014 - 19:15 | 4332231 TruthInSunshine
TruthInSunshine's picture

I expected to see the blue hairs far angrier than they are by now.

Maybe they're just constipated.

Tue, 01/14/2014 - 19:19 | 4332235 LawsofPhysics
LawsofPhysics's picture

Me too.  Of course I may have a different perspective.  My mother did well, is now retired, still lives on a lake in the great white north, grows her own food, makes her own ammo, and still sleeps with a loaded .38 under her pillow.  She is always "packing" as it were.

Tue, 01/14/2014 - 19:21 | 4332238 kaiserhoff
kaiserhoff's picture

Not only that.  There must be regulatory limits. 

How can a fund manager buy into a loss?  How can local banks survive?  The whole thing makes my head hurt.

Wed, 01/15/2014 - 04:18 | 4333438 Theosebes Goodfellow
Theosebes Goodfellow's picture

~"How can local banks survive?"~

1.) They didn't make a bunch of sub-prime loans to start with.

 

My local bank is a CU. I'm proud to be a member. Our "biggest member" is an indian casino. Cash flow doesn't seem to be a problem. Everything should be hunky-dorey until Uncle Sam's scrip ain't no good any more. Then it'll be every last brave for himself, though I'm hoping the said "biggest member" decides to create a safe deposit vault within said CU. It hasn't happened yet though. Then our CU can mint Native American Nation money made from yellow and silver blocks. Ho-hum.

Tue, 01/14/2014 - 19:22 | 4332243 GubbermintWorker
GubbermintWorker's picture

Nope, just been stocking up on supplies. You know, gold, silver, food, no debt, lead and lead delivery systems.

Tue, 01/14/2014 - 22:06 | 4332726 roadhazard
roadhazard's picture

Most don't understand what is happening to them because the media is bought off.

Tue, 01/14/2014 - 23:55 | 4333067 MontgomeryScott
MontgomeryScott's picture

@ kaiserhoff,

I'm not in the Bond market, but I see your question as one that deserves attention. (I would add the 'sarc' tag here, but this is a dual issue, so bear with me for a minute.)

If those who invest in 'bond markets' are on 'fixed incomes' (I assume you are referring to mostly RETIREMENT ACCOUNTS), and their 'investor dudes' are relying on skimmimg a living from shifting their assets in to accounts that 'earn interest' (as well as 'growing' money for the investors); AND, all of a sudden, the interest rates across the board turn 'negative', then, YES, I see an issue. I see a REALLY LARGE issue.

CYPRUS. Do you remember this BETA TEST? How about GREECE?

The issues will really hit home when those on fixed incomes go to the market. A loaf of bread, or pay the electric bill? Some cheese, or make payments for Obamacare?

YES, negative rates will SERIOUSLY fuck up the 'fixed income' market, across the entire spectrum (including those who skim the cream).

NO, of course, you are not referring to those on 'fixed incomes'. You are talking about those who 'fixed' their incomes, instead of 'gambling' on the rises and falls ('guaranteed returns' in 'safer investments').

The DEFLATION in shipping costs indicates that the VELOCITY has stalled; therefore the VALUATION in REAL TERMS of demand is LOWER (or the people who are in the 'workforce' have 'LESS' to 'EXPEND' on 'BULLSHIT' ['expendable incomes' are dropping dramatically]).

The 'CENTRAL BANKS' will term this as 'deflation', and are; even now; ramping up the injections of 'LIQUIDITY'. Even MOAR fiat currency, chasing ever-more expensive goods (as termed by the 'average wage-earner'), shall next lead (and IS leading) to a rampant, uncontrollable DEVALUATION of the CURRENCY (AND, the so-called 'FUCK UP OF THE FIXED-INCOME MARKETS', as you so eloquently describe).

Do you mean to tell us that you DIDN'T SEE THIS SHIT COMING, after all this time over on ZEROHEDGE?

 

 

 

 

Tue, 01/14/2014 - 19:03 | 4332194 IridiumRebel
IridiumRebel's picture

Baltic Schmaltic.....everything will get Amazon Droned for the supply chain....

Tue, 01/14/2014 - 19:25 | 4332251 GubbermintWorker
GubbermintWorker's picture

Amazon is in no position to develop that since their profit margins are goin to shit having to charge sales taxes now.

Tue, 01/14/2014 - 19:30 | 4332266 kaiserhoff
kaiserhoff's picture

Good point.

I guess Bezo's Mars colony will have to wait.

Tue, 01/14/2014 - 19:15 | 4332229 buzlightening
buzlightening's picture

Say it ain't so.  Trouble in the fiat bubble!

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