A bottom with no near-term upside catalyst.
I’m afraid that fits the global economy, the U.S. stock market, and the Baltic Dry Index.
The Baltic Dry Index, a widely followed, but very volatile, indicator of global economic activity, is showing signs that it bottomed last week. On Friday, Oppenheimer reports, the index moved up for the first time since late May.
The index tracks the daily prices for shipping cargoes of raw materials such as rice, coal, grain, and iron ore on 26 routes using a weighting that accounts for ship size and the percentage of dry bulk traffic that class of ship represents. Since shipping costs move up and down in anticipation of the shipping needs of commodity producers ad consumers, the index gives an indicator of the volume of global trade and thus of the state of the global economy.
The index had been in a strong rally off the bottom–set in the days when the global economy seemed to be shrinking by the moment. But that rally peaked on May 26 at 4209. Since then the index had dropped daily to close at 1700 on July 15. That’s a drop of 60% from May 26. (I said this index was volatile, didn’t I?)
The losing streak that ended on July 15 was the longest in almost 15 years.
The index actually climbed on July 16, however, and while one day and one 1.2% gain in the index, doesn’t make a trend, I think we’re likely to see the index stabilize here. Iron ore prices, for example, have dropped for three consecutive months on worries about falling Chinese demand.
But I wouldn’t get too giddy here. While the index may have stabilized, I don’t see much signs of a catalyst that would lead to a strong upturn from here.
It’s likely that the index is stabilizing because at current shipping rates some ship owners are simply withdrawing their vessels from the market. Speculation says that a few owners have started to look to anchor ships in Singapore, for example. Removing ships from the market would stabilize prices, but it’s sure not an indicator of an impending upturn.
But it’s also likely that the Baltic Dry Index will lag the global economy in the coming months. The price of shipping isn’t just a function of global demand but also of the supply of ships and the total bulk fleet is forecast to grow by 16% in 2010 as ships that were ordered in boom times are delivered. That will keep shipping prices under pressure no matter what the global economy does.
Huh? The BDI freefalls for weeks, and a tiny uptick is a bottoming process?!! Surely there’s some other indicator more worthy.
Jim, what gives, is MSN money messing with you and us. 07/19/10 MSN presents a video as released 07/16/10 “Global Stocks – Approaching Another Buying Opportunity”, then do not recognize my log in and require entire new e-mail and log in and address, fill out a form and disclosures statements and rights to mail statements. Then finally get to see the video and it was old old news, dated 05/11/10. What a waste of our time.
Why not just do a real update?
When do we get to pay for and receive your new service?
HARPEX is an index that deals with the shipping of finished goods as opposed to BDI that is concerned with the transport of bulk stuff like iron ore, grains, etc. Let’s be aware that HARPEX is forming a top…
http://www.harperpetersen.com/harpex/harpexVP.do
Jim,
Off subject, what are your thoughts on TC since they announced the merger?
Off-topic, but for those following RIG and BP, there are reports of leakage even with the cap in place, indicating the casing is blown. If so, the experts are reporting the relief wells won’t work. To make things even more dicey, a terrifying prospect: http://www.helium.com/items/1864136-how-the-ultimate-bp-gulf-disaster-could-kill-millions?page=2
3 Gorges Dam is the World’s largest dam. Completed in 2008.. China not going to do any big projects , so I suspect BDI & commodities not going to recover for some time to come..
So Jim, what sector going to lead us for next bull??? tech, biotech…Any advice will be appreciated.
The shippers and the homebuilders must go to the same fortune teller.
The Journal of Commerce has done some work on this, and their suggests blog suggests it is oversupply that is the problem.
http://www.joc.com/mublog/20100708
China export and import growth, railroad shipment, and port container numbers all contradict the Baltic Dry Index.