Baltic Dry Index New High
We haven't look at this in a while: Since March, the Baltic Dry Index keeps making new highs: This is reflecting in large the global growth, especially Asia and to a lesser degree, Europe.
Minyanville points to this FT article, that posits the growth in the BDI reflects a shortage of shipping vessels as much as it does demand for shipping:
"Commodity prices may be soaring on record demand for raw materials but so too are the prices for shipping these goods around the world.
This week, the Baltic Exchange’s dry freight index, a composite of prices for shipping dry commodities, hit a record high of 6,248. The index has risen 41 per cent this year.
The voracious appetite for raw materials in China and India, whose rapidly expanding economies have fuelled the current commodity boom, has stoked demand for the transportation of these goods.
Meanwhile, port congestion has led to delays and extra costs that shipping companies are passing on to customers."
Here's the most recent chartage:
Short Term Chart
Long Term Chart
Charts courtesy of InvesmenTools.com
>
Sources:
Shipping rates rise on shortages of vessels
Neil Dennis
FT, May 1 2007 19:49
http://www.ft.com/cms/s/0a1ab362-f80e-11db-baa1-000b5df10621.html
Wednesday, May 02, 2007 | 01:49 PM | Permalink
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Comments
I give up.
I should just buy a big basket of stocks and shut up. 50% S&P and 50% Emerging markets. I also should buy a big house in California on the coast and shut up.
The bulls have been right all along.
There is no use waiting for a 'correction' in the stock market or the housing market. Because it isn't coming. The world is awash in liquidity. Liquidity begets liquidity.
Clearly the market has demonstrated to me that my cautious approach over the past few years has been just plain dumb.
I'm getting killed on all fronts: shorts, reduced emerging exposure, rental housing...
Posted by: Mr. Beach | May 2, 2007 2:00:23 PM
Insane, isn't it? I go into a catatonic state when I see another green day... it just doesn't bring a response anymore.
Can we have a flat day for a change? Doesn't have to go down. Just flat. Please?
Posted by: mhm | May 2, 2007 2:40:47 PM
Buy Mortimer BUY -- turns those machines back on TURN THOSE MACHINES BACK ON!!!!
Posted by: SF | May 2, 2007 2:49:07 PM
good to know that in spite of signs of inflation everywhere, the BOJ, the pirate bank of china and the fed can continue to support it. what a relief the bond vigilantes have left town!
Posted by: ferd mertz | May 2, 2007 2:58:13 PM
Mr, Beach,
Stocks I can understand but the big house in California, that one you probably made the right decision to stay away from. Thats what doesn't make sense to me, these NOD's and foreclosures are going up everyday. This is shaping up to be one of the worst housing downturns literally on record and the markets go up everyday. REO's in California are literally clogged in the pipeline because lenders were slow in reacting to the rapidly declining market. This is insane.
Posted by: yourkillingmelarry | May 2, 2007 3:06:38 PM
Anybody following the BDI the last several months wasn't too shocked by the recent pickup in manufacturing.
Posted by: Steve | May 2, 2007 3:08:06 PM
Mr. Beach,
Perhaps you're a contrary indicator? When the bears throw in the towel, it's time to short?
I have to agree with your sentiment. But I have to always remember that markets are made up of people, and despite the impression they'd like to give, some of the most emotional people on the planet.
Posted by: greyhair | May 2, 2007 3:08:25 PM
Hey Barry, help me out here on the preliminary March Manufacturing Orders numbers released this morning.
I'm keying in on this, in particular.
Nondefense Aircraft and Parts
Up 38.1% Feb to Mar
Up 16.6% YoY
The headline number for All Manufacturing Industries (March Preliminary) is $400.2 billion dollars. For Feb, revised it is $388.3 billion. Ex-gains in nondefense aircraft and parts, the numbers are $379.5B and $373.4B ... or a 1.65% gain. Woo-Hoo!
What stands out to me is how significant the aircraft component is to the March numbers. Wouldn't be that a weak dollar has led to significant orders at Boeing? Wouldn't be that Boeing has a basically new aircraft (787) with no meaningful competition?
This is what gave the markets a high octane boost? If manufacturing was so superb, the risk would be a Fed Rate Hike next, and I fail to see how that could possibly be good for the stock market.
Posted by: Momo Fader | May 2, 2007 3:08:48 PM
Clearly the market has demonstrated to me that my cautious approach over the past few years has been just plain dumb.
I'm getting killed on all fronts: shorts, reduced emerging exposure, rental housing...
I'm largely short, but I'm doing OK because I've been focusing on US real estate related stuff for a year or so.
Have been through the NASDAQ thing I just always assumed this thing (the US bubble economy that's now gone global) would exceed expectations so I stayed away from broad-based shorts (except for a couple of "feelers" I set up just to keep an eye on things).
Even though I'm not long in this market (because I don't have the tools, information, or time to manage the risk), I'm cheering it on - I want to see broad indexes get to the point where I'm "forced" to short them. We've got a while to go before I feel that way though.
People who are shorting stocks now might be in the positions of those who shorted tech stocks at NASDAQ 3000 - they still did the right thing... if they survived.
Posted by: super-anon | May 2, 2007 3:10:43 PM
China Hard Landing....Come soon to a market near you.
Posted by: Mike M | May 2, 2007 3:16:49 PM
Whoops, I backed out all nondefense aircraft numbers from the top line. I meant to back out just the gains.
All manufacturing industries
Mar (prelim) $400.2B
Feb (revised) $388.3B
Gains in nondefense aircraft and parts (20,690 - 14,984) = $5.7B
Mar (ex-nondefense aircraft gains) $394.5B
I believe it works out to a 1.59% gain, when just the gains in nondefense aircraft and parts are backed out.
Posted by: Momo Fader | May 2, 2007 3:18:37 PM
I'd still like to know where Barry stands on the markets. Stocks, bonds, currency and commodities.
I don't want to infer his opinions from the macro posts here. Are these opinions only for clients? If so I surely respect that, but I'm curious, nonetheless.
~~~
BR
Fred: Post a real email address and maybe you will get a private answer.
Posted by: Fred | May 2, 2007 3:21:27 PM
ex aircraft (defense and non defense) is still -6.8% year over year and 0.6% above the 3 month average for new orders.
Posted by: Josh | May 2, 2007 3:23:08 PM
mhm
I know what you mean by the catatonic state having experienced it myself multiple times the last 6 months.
Posted by: js | May 2, 2007 3:23:19 PM
Looks like the Baltic Dry index tag along well with china stock market.
At least the when index plunged in 2005, US stock market and economy was different from that trend.
Posted by: shawn | May 2, 2007 3:23:40 PM
China Hard Landing....Come soon to a market near you.
The Shanghai stock market has gone exponential. That can't last. I wonder if a Shanghai crash could be the trigger that collapses a number of other markets.
Oh the suspense...
Posted by: super-anon | May 2, 2007 3:32:21 PM
"the growth in the BDI reflects a shortage of shipping vessels as much as it does demand for shipping"
The reason there is a shortage of shipping vessels is due to the demand?
Posted by: David | May 2, 2007 3:33:54 PM
Josh, I was trying to isolate on the one biggest number in the data that could be most easily attributed to a single manufacturer. Defense aircraft and parts were down significantly, but I don't know if that's an indication of anything.
I realize there is more to nondefense aircraft manufacturing in the USA than Boeing, but how much?
So the weak dollar is helping Boeing get orders for their 787. Does that really bolster the economy to such a degree that the DJIA and Nasdaq should rally 1%?
Posted by: Momo Fader | May 2, 2007 3:40:46 PM
Do not panic - there's a big drain coming tomorrow from the Fed.
Interesting they closed shop on the 3-year bond; surely it wouldn't be to try to force down the yield on the 2-year bond, would it?
The market is just following Einstein's understanding that energy cannot be destroyed - that it has to go somewhere. You remember all that inflation that the Fed doesn't acknowledge but everyone feels? Well, now you know where that unreported inflation energy is going. And when the market's upward drive hits the speed of light squared....well, you know what happens then.
Posted by: Winston Munn | May 2, 2007 4:01:36 PM
Welcome to the speculative/euphoria phase of the cyclical bull within the secular bear. The "smart money" is so glad to see Joe Sixpack and the foreigners finally show up.
Posted by: S | May 2, 2007 4:21:35 PM
Joe sixpack is nowhere near this market. The drive by media has scared them away. I've spoken with many retail brokers and the phones are DEAD. Daytraders are a different story. Foreigners would be foolish NOT to buy our stocks, given their inflated currencies.
Posted by: Fred | May 2, 2007 4:30:26 PM
"Anybody following the BDI the last several months wasn't too shocked by the recent pickup in manufacturing."
Steve, the BDI has little to do with US manufacturing. The dry bulk ships are headed to China. I've heard of 2 month waits for ships to get filled outside of Aussie ports. These ships aren't headed to the US. In fact, if you look at rail road volume, components such as iron ore are down YoY.
Posted by: lloyd | May 2, 2007 4:45:24 PM
"The reason there is a shortage of shipping vessels is due to the demand?"
David, the China buildout is beyond massive and why not? If money is free, they might as well build factories and destroy profit margins. I bet the Olympics has a lot to do with this build-out. Another reason for the shortage of ships is due to shipyards turning away dry bulk ship business for the more profitable LNG, LNG and containership builds. Of course, Chinese shipyard capacity is ramping up and new dry bulk ships will floud the market next year. Just like VLCCs will this year and containerships have done. Hey, money is free...order a ship!
Posted by: lloyd | May 2, 2007 4:49:55 PM
Barringo,
Know what?...
This market is sayin' you can take'ye Baltic Dry Index and stick it up'ye Baltic Dry Ass.
Posted by: Eclectic | May 2, 2007 4:57:09 PM
Hey Winston,
Did I overwrite?
Posted by: Eclectic | May 2, 2007 4:59:54 PM
