Baltic Dry

Forget The Hindenburg Omen and The Hilsenrath Omen, today we have the real deal as The Baltic Dry Index hits the ominous 666 level - the lowest print for this time of year on record. Of course, just like with oil - this is brushed off as over-supply (not under-demand) and we are sure someone will opine how positive this drastic deflation of shipping rates is for global business... but still - this is the lowest print since September 2012 (and practically the lowest since the recession).

Must be over-supply too, right? Just like oil prices... The Baltic Dry Index - which apparently is only relevant when it is rising - has never been lower at this time of year. Perhaps GDP expectations, bond yields, crude oil prices, and credit risk are on to something about the global economy after all?

We are sure it's nothing - since stock markets in China and The US are soaring - but deep, deep down in the heart of the real economies, there is a problem. The Baltic Dry Index has fallen for 21 straight days, tumbling around 40% since Thanksgiving Day. This is the biggest collapse in the 'trade' indicator (which we should ignore unless it is rising) since records began 28 years ago...

We are far too speechless to even comment on the latest Goldman "leading indicator" swirlogram, which we can only assume was made public after another unprecedented "North Korean hack" at US "recovery" propaganda central, so here is Goldman's own take:

Just a few short months ago, investors were "buy buy buy"-ing the fact that The Baltic Dry Index had resurged off multi-year lows 'proving' China's renaissance and that world economic growth will re-approach Nirvana. Simply put, with collapsing commodity prices (iron ore for instance) and massive fleets of credit-driven mal-investment-based vessels, it should surprise no one that the shipping index just plunged back below 1000, now at its lowest for this time of year since 2008. Furthermore, the seasonal bounce always seen in Q3 was among the weakest ever. But apart from that, buy stocks...

"... the admissions of financial danger by internationalists, the sharp drop in stocks at the beginning of fall, the reversal of the political theater, and the fact that mainstream investors now recognize the illegitimacy of the markets yet continue with the scam anyway, signals the last gasp of the global economy. I expect increasing market instability from this point on, as well as numerous geopolitical distractions which will be blamed for the fiscal chaos. Needless to say, the coming storm is a deliberately engineered one, meant to achieve very specific goals, including a fearful and panicked populace, easy to manipulate as the system goes off the rails for the last time."

Nothing to see here, move along...

From exuberant escape velocity 'expansion' hopes and dreams in June, to 'slowing' in September, and 'drastic downward revisions' in early October, the Goldman Sachs Global Leading Indicator has had a very troubled recent past (as QE is just 4 POMOs away from coming to an end). But nothing could prepare the avid reader for what happened to the infamous Goldman "swirlogram" this month - an epic, total collapse. As Goldman 'politely' notes, "the October Advanced reading places the global cycle deeper in the ‘Slowdown’ phase, with momentum (barely) positive and declining."

Shipping freight rates for transporting containers from ports in Asia to Northern Europe - the world's busiest route - fell 10.2% to $738 per container in the week ended on Friday, according to Reuters. This is the 4th weekly drop in a row and is the lowest level since Oct 25th 2013. Confirming this global trade volume collapse, the Baltic Dry tumbled back below $1000, down 50% from a year ago, and is hovering once again at post-Lehman crisis lows. But apart from that, the global economy is doing great...

Unlike the QE-lite-driven exuberance in Chinese stocks of the last few weeks (which faded dramatically overnight), China's industrial commodities (with near-record inventories) and seeing prices collapse. This may shock some who espy PMIs and government-created trade data and proclaim, China is fixed. In fact, as JPMorgan's China Sentiment Index (JSI) shows, things are anything but bright as it fell to the lowest since June last year (at 48.3 in August). Sales and margins are tumbling - despite supposedly lower input costs. Lastly, those focused on spot Yuan movements (strength in recent weeks) have suggested this also confirms China strength - inflows - but looking out 12-months shows the market is expecting a dramatic devaluation from current levels in the Chinese currency is coming.

There is much hope pinned on continuing economic recovery in the United States despite a deterioration of the global economy virtually everywhere else. While it was not surprising to see a bounce back in activity after a contractionary first quarter, there are several economic data points that suggest that sustainability of the bounce is unlikely. Expectations are very likely well ahead of reality at the current time. This increases the risk of disappointment in the months and quarters ahead which could be a negative for the markets.

As long as people remain obsessed with false paradigms and faux enemies, the establishment's goal of complete centralized dominance will be predictably attainable. If we change our focus to the internationalists as the true danger instead of playing their game by their rules, then things will become far more interesting...

The bulls will ignore it, shrugging that it's merely over-supply of ships that the resurgent world economy will quickly soak up as it 'recovers'... However, World GDP growth expectations are collapsing, trade volumes are slowing, and the Baltic Dry Index has continued to slump to its lowest since the start of January 2013 (a holiday period). For some context, this is the lowest July level for the Baltic Dry since 1986... "noise"

Goldman's June Final GLI came in at 3.1% year-over-year, down from the revised 3.3% year-over-year reading in May. Momentum came in at 0.15% month-over-month - flat from last month’s revised reading. Ever optimistic, Goldman views this results, as continuing to locate the global industrial cycle close to the ‘Expansion’ phase but has yet to signal positive acceleration... oh so close... The 3 big drivers of the deterioration were Japan's Inventory/Sales ratio worsened, US Initial Jobless Claims were marginally higher, and as we have been vociferously noting, The Baltic Dry Index continued to come in softer as well.

The Baltic Dry Index - so admired when it is soaring and supportive of all things great and good about credit creation and rehypothecation - has collapsed over 60% year-to-date. At $867, the index is at one-year lows and hovering near post-crisis lows as the hope-strewn surge of last year now lies torn asunder by the reality of China commodity ponzi probes and a 'real' slowing global economy. Of course, we will hear the echo chamber of 'over-supply' of ships rather than any 'under-demand' of actual aggregate product argument but the circularity of this argument is entirely lost on status quo huggers who viewed rising dry bulk commodity prices as indicative of growth (and built more ships) as opposed to the ponzi-financing scheme it really was... mal-investment writ large once again in a manipulated (and mismanaged) world.