Baltic Dry Index

Justacommeman · February 1, 2012 11:07AM

This was an index I followed religiously when I was day trading. It actually was a percurser to the market crash in 2008. It measures the shipping rates for commodities sans oil. It's a non spec index. Rates have plummeted. It usually foreshadows future demand several months out. Rates down, less cargo, less demand. I have not been following this closely but the beating it has taken recently is breathtaking. Thanks to a fellow board member for a timely e-mail.

FWIW the last time it hit this level stocks went into the free fall as did pm's and the dollar strengthened. The banking community follows this index pretty closely.

Any thoughts? MJ

Baltic dry index

Goldbully · February 1, 2012 11:11AM

MJ, you are scaring me....that is an interesting index.
Is it best to be in cash, and of course some PM's, come this Spring to summer season?....typically not good season for stocks, am I right?

Thanks in advance.

Justacommeman · February 1, 2012 11:19AM

GB

Here is an alternative view on the drop. A different POV. A much rosier outlook .More ships online. Anyways, worth taking note of. MJ

link

derryb · February 1, 2012 11:19AM

I posted this yesterday in the January trading thread:

Richard Russell: "I think we’ll see selling of gold to cover losses (particular losses by the short sellers), but ultimately gold will be the last man standing. But most important — GET OUT OF STOCKS."

Baltic Dry Index signaling major market crash

Justacommeman · February 1, 2012 11:23AM

I've been neglect in my reading and research. My busy season for my day job. MJ

Wingsrule · February 1, 2012 12:11PM

"I think we’ll see selling of gold to cover losses (particular losses by the short sellers),

Am I missing something here (referencing the part in parentheses)? I would think short sellers would love to see a huge hit to the markets.

CaptHenway · February 1, 2012 1:12PM

<< "I think we’ll see selling of gold to cover losses (particular losses by the short sellers),

Am I missing something here (referencing the part in parentheses)? I would think short sellers would love to see a huge hit to the markets. >>

Good point.

Baley · February 1, 2012 1:21PM

...but ultimately gold will be the last man standing. But most important — GET OUT OF STOCKS."

for reals, playa? every single one?

derryb · February 1, 2012 3:03PM

<< "I think we’ll see selling of gold to cover losses (particular losses by the short sellers),

Am I missing something here (referencing the part in parentheses)? I would think short sellers would love to see a huge hit to the markets. >>

I believe he's referring to hedgers who are short paper gold who will have to sell physical gold to cover there short losses.

derryb · February 1, 2012 3:06PM

<< ...but ultimately gold will be the last man standing. But most important — GET OUT OF STOCKS."

for reals, playa? every single one? >>

They're Richard Russell's words but I believe his answer would be "unless you be real good at pickin da winnas in an extremely bear market, why take da chance?"

I think you missed the part where he and Granville are predicting CRASH. But what do they know - they've been doing this longer than most anyone in the business.

NumbersUsacom · February 1, 2012 3:32PM

Compared trough to trough on Silver vs $BDI over past two years and can not come up with any correlation, its rather spoadic.

Maybe over a much longer term there is some general correlation in regards to silver, but ti does not appear to correlate during the last two years.

The BDI has had its ups and downs rather dramatically above and below the 200 day ma. It sure would be good to trade.

sbfinley · February 1, 2012 4:01PM

Edited. Received the answer to my question.

RedTiger · February 2, 2012 11:51AM

Old timers might remember Granville's most famous sell everything call in 1981 that caused a temporary blip in the market.

Russell, I respect more, but his mind seems to wander at times.

Personally, I see little chance of a stock market crash (30% decline in three months or less) this year. Here's my thinking: President Goldman Sachs is still in office along with Goldman alum Geithner at Treasury. The chief wants very much to get reelected and a stock market crash would damage his chances, and the bundled off-the-books money flowing to his campaign from big Wall Street donors. Given those parameters, the plunge protection team and their allies, will not permit a full on U.S. stock market crash to occur. Sure a "meteor" news event could hit and cause a crash, but barring that, easy money and modest fluctuations in stocks are more likely.

Now a 10% correction is another thing entirely, but for most long term investors 10% is not worth trying to time in and out, because no one except liars and the extremely lucky gets the timing perfect.

Justacommeman · February 2, 2012 12:05PM

GS ain't what it used to be. MJ

57loaded · February 2, 2012 1:37PM

GS has had a "presidental position" for at least 13 years.

good points RT

roadrunner · February 2, 2012 9:38PM

<< GS has had a "presidental position" for at least 13 years.
good points RT >>

Probably longer than that if you consider Robert Rubin coming into the Clinton administration in the early 1990s along with his sidekick Larry Summers.
Rubin's days at GS helping to suppress the world gold price in the 1960's via the London Gold Pool came in very handy during the last 15 yrs.

The worst is probably behind us with the BDI as it has perfectly matched the price objective of the 2 yr head and shoulders formed from 2009-2010.

fishcooker · February 2, 2012 10:50PM

Republicans have a vested interest in being re-elected too. I vote no crash. However, instability in their candidates could make the markets interesting...

derryb · February 2, 2012 11:34PM

According to the NYT:

“Basil Karatzas, the chief executive of Karatzas Marine Advisors, a ship brokerage and finance advisory firm in Manhattan, estimated that European banks hold about $500 billion in shipping loans on their books and face nearly $100 billion in losses to restructure them.”

And from ZH:

"there is also a massive over supply of ships – due to orders put in during the boom period in 2008 which are only just being completed now (the equivalent of 22.7% of the cargo shipping fleet is due be produced this year alone). This suggest a combination of supply and demand issues which means this could become a lasting problem and will not just be tackled with a boost in growth in Asia."

bluelobster · February 3, 2012 12:18AM

The Dry Index is a good index to watch, I'm not sure it means demand will go down in the future, because the index is low now, but If Russell and especially Granville are predicting a crash, based on that index, I would definitely not follow. Granville is a charlatan, imo.

One thing about these folks making bold market calls, where you go all in or sell everything, I generally discount them, they profess to know with certainty what they don't . they get publicity and sell more newsletters but more often than not these types of "analysts" are neither right or credible. Sure, occasionally they're right, Garzerelli or Whitney, come to mind, then they become even more convinced of there super x ray vision of the future, but then they usually just become characters in their own tragic comedy. For myself, when I have become convinced of something in the investment world, I have learned the hard way to step back, because hubris will invariably deal you the joker. Human nature being what it is, most people never get that.

streeter · February 3, 2012 12:27AM

What will happen is that a lot of the older less efficient ships will get scrapped.

Right now, IN CAL, you could make a million dollars with your eyes closed in scrap steel........but it is just not out there to be gotten. Scrap( non #2) is $280/ton right now if you are on a decent provider contract and most of us are looking for a significant increase in the next 30 days. Everybody I know is holding their inventory back. The price of the red and white metals is heavily suppressed so that only the hungriest have to let go of a little to feed the larger fish.

If you understand how the recycling world works, everybody has their front door open, hardly anybody has their back door open to move the metal further up the line. Everybody is ...waiting...for the Chinese to resume production at the end of the holiday. We shall see. If metal pops in 30 days...a lot of those old ships meet the torch and over capacity in the shipping world starts shrinking.

JMHO

cohodk · July 28, 2015 1:52AM

Any thoughts 3 years later?

roadrunner · July 28, 2015 2:04AM

Now working on the 4th or 5th time in the past 2 years to try and get above the 200 dma. I stopped paying attention to BDI back around 2012-2013.

bluelobster · July 28, 2015 2:31AM

My thoughts are exactly as I postulated 3 years ago

streeter · July 28, 2015 2:15PM

What a difference three years makes. The largest and oldest scrap dealer in Riverside County just closed his doors. 60 years and threw in the towel.

I see quite a few retail businesses struggling to keep the doors open.

Baley · July 28, 2015 2:24PM

<< What a difference three years makes. The largest and oldest scrap dealer in Riverside County just closed his doors. 60 years and threw in the towel.

I see quite a few retail businesses struggling to keep the doors open. >>

Just 60 years? Where's his stick-to-it-ive-ness? Quitters never win.

ebaytrader · July 29, 2015 12:07AM

<< Any thoughts 3 years later? >>

Still a great harbinger. The index hit its 4 year low on 2/20/15 and has doubled since then and is yet not even approaching 50% of its 10/2010 high.

As an indicator of a mushy world economy it was, and is, spot-on. Earlier today, LaGarde (IMF) commented that the world economy is still shaky. Hard to disagree, or make a case otherwise.

Edited for accuracy: The word she used was "fragile" to describe the world economy.

cohodk · July 29, 2015 12:21AM

<< Now working on the 4th or 5th time in the past 2 years to try and get above the 200 dma. I stopped paying attention to BDI back around 2012-2013. >>

Looks to be about 40% above the 200dma to me. And both 50 and 200dma maybe trending higher.

Baltic Dry Index

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