"The transition from investment to consumption in the Chinese economy, together with a shift towards cleaner energy sources, has caused a sharp deceleration in dry bulk trade. After expanding at an average annual rate of 7% over the period 2005-14, seaborne demand in iron ore, thermal and metallurgical coal is set to increase by only 2% in 2015 to 2.5 billion tonnes as these trends persist," Goldman says, before warning that freight rates aren't likely to recover until at least 2020.
While global equity markets hover near record-er highs, global GDP growth expectations have erased their February dead cat bounce hopes and tumbled back towards cycle lows. This is all confirmed by the latest data from Goldman Sachs whose Global Leading Indicator remains mired in "contraction" for the 4th month in a row...
And against this disatsrous backdrop… investors are completely bullish!
"Shipping freight rates for transporting containers from ports in Asia to Northern Europe fell 12.4 percent," for the week Reuters notes. This is seventh consecutive week of declines and puts us squarely back at levels last seen in 2013.
It may come as a surprise to some that across from the stark Greek economic calamity is an industry that has swam, so to say, while everything else has sunk, because while virtually every other aspect of the Greek economy is in shambles, its shipping industry is not only the pride of the nation, but has created more Greek billionaires than any other aspect of the economy. As Bloomberg recounts, Greeks have long dominated the shipping business. The nation’s fleet, numbering 3,669 vessels in 2013, is the largest in the world, according to the annual report of the Union of Greek Shipowners, making up more than 7 percent of the Greek economy and providing 192,000 jobs in 2013. And, perhaps most relevant, Greek shipping has also made billionaires of the country’s four largest ship owners by tonnage: John Angelicoussis, George Prokopiou, Peter Livanos and George Economou. The quartet control a combined fortune of $7.6 billion. It is these billionaires that are now suddenly sweating...
The establishment has done everything in its power to hide the most foundational of economic realities, namely the reality of dying demand. Why? Because the longer they can hide true demand, the more time they have to steal what little independent wealth remains within the system while positioning the populace for the next great con. For now we will only say that the program of manipulation we have seen since 2008 is clearly changing. The fact of catastrophic demand loss is becoming apparent. Such a loss only ever precedes a wider fiscal event.
For this commentary to make any sense to most readers; it’s necessary to address the two questions which immediately come to their minds: “what is the Baltic Dry Index?” and “why should I care about it?” Dealing with these questions in order; the Baltic Dry Index measures the prices paid to ship various forms of cargo, in the form of an index.
As Søren Skou, Maerk's CEO, admitted when he warned that global trade growth could slow this year from recent 4% growth ratnes, as Chinese, Brazilian and Russian economies disappoint, the Baltic Dry is still not only relevant and accurate but telling the real story of global growth, or lack thereof. “The economies in Europe are still very sluggish. Brazil, Russia and China: those three economies used to drive a lot of growth, and right now we are not really seeing that to the same extent. The only real bright spot is the US, and even the US is good but not great.” He added that: "To my mind volumes were sluggish. There is nothing in container volume numbers that suggest that the global economy is just on the verge of starting a new growth trend.”
Despite the well-managed collapse of Equity, FX, and Rates volatility in February, the Oil complex is exhibiting Lehman-Depression-like levels of implied vol still as central planners seem unable (or unwilling) to manipulate the energy complex (rock of inflation and hard place of 'consumer tax cut'?). As WSJ reports, this volatility is roiling market makers, luring fast-money traders (and algos) and discouraging long-term investors from hedging/positioning. As one asset manager noted, "we like volatile two-way markets... but this is too high for us."
Although it may be unrealistically optimistic, I believe my paraphrase of a Churchill quote:
With more than 60 percent of all Americans are living paycheck to paycheck, and a whopping 24 percent of the country has more credit card debt than emergency savings, when the coming economic crisis strikes, more than half the country is going to be financially wiped out within weeks. If you are trusting in the government to save you when things fall apart, you will be severely disappointed.
Record Low Baltic Dry Casualties Emerge: Third Dry-Bulk Shipper Files For Bankruptcy In Past 3 WeeksSubmitted by Tyler Durden on 02/23/2015 09:39 -0400
The unintended consequences of a money-printed, credit-fueled, mal-investment-boom in commodities (prices - as opposed to physical demand per se) and the downstream signals that sent to any and all industries are starting to bite. The Baltic Dry Index has plunged once again to new record lows and the collapse of the non-financialized 'clean' indicator of the imbalances between global trade demand and freight transport supply has the real-world effects are starting to be felt, as Reuters reports the third dry-bulk shipper this month has filed for bankruptcy... in what shippers call "the worst market conditions since the '80s."
We would do well to consider the possibility of war strategies when it comes to the global stockpiling of petroleum reserves. In the years leading up to the German invasion of Poland, the world witnessed dramatic decreases in the price of oil as well as massive increases in petroleum inventories, especially as the Texas fields began to produce. These shifts in the global oil markets ran parallel to the deflation which had begun in October, 1929, and as such, we can see the same pattern repeating today as oil prices collapse, inventories are growing, and world wide deflation is deepening.
The signals are clear: the world has already entered a downturn in economic activity. Therefore we can expect accelerated money-printing and the imposition of more negative interest rates in a forlorn attempt to avert economic reality.