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Friday, September 12, 2008

Baltic Dry Index: Smashed, Global Demand Falling

The Baltic Dry Index (BDI) was the last refuge of the last few Bulltards. The argument went something like this: “The US may be in trouble, but the rest of the world isn’t. Look. The Baltic Dry Index is still in an uptrend signaling strong demand overseas.”

The Baltic Dry Index was an integral part of the global Decoupling Theory. In December of 2007 I argued it was nothing but GARBAGE. Simplified:

“This is a global economy. This is a global credit bubble. This is a global credit crunch. Therefore, the consequences will be GLOBAL.”

Nouriel Roubini was arguing the same as early as 2006: Recoupling rather than Decoupling: the Forthcoming Contagion to China, East Asia and Emerging Markets

A falling Baltic Dry Index will also result in falling commodity prices. Those hoping for a resumption of the commodity Bull are going to get nothing more than a bounce or two. This party is over.

Dollar Rises to One-Year High Against Euro on Growth Outlook: “The currency will slide 2.6 percent to 78 U.S. cents by year-end because a slump in the Baltic Dry Index, a measure of shipping costs for commodities, signals demand for the raw materials Australia exports is waning, said Koukoulas.”

Soybeans Rise on Speculation Shipping Cost Drop May Spur Demand: “The Baltic Dry Index of costs for international trade routes shed 133 points, or 2.7 percent, to 4,893 points, according to the Baltic Exchange in London yesterday. That was the 17th straight decline and marked a 46 percent slide for the year.”

Shipping Costs Signal Aussie Dollar to Drop, TD Securities Says: “The currency will slide 2.6 percent to 78 U.S. cents by year-end because a slump in the Baltic Dry Index, a measure of shipping costs for commodities, signals demand for the raw materials Australia exports is waning, said Stephen Koukoulas, London-based head of global foreign exchange and fixed-income strategy for TD, a division of Canada's Toronto-Dominion Bank.”

China's Stocks Retreat; Merchants Bank, Zijin Mining Decline: “China Cosco, the country's largest container line, slumped 9 percent to 12.26 yuan. China Shipping Development Co., the nation's biggest oil carrier, fell 5.9 percent to 11.10 yuan. The Baltic Dry Index tracking transport costs on international trade routes fell 4.4 percent to 5,026 points, the lowest since March 9, 2007, according to the Baltic Exchange in London.”

Related Posts:
Dollar Smile, Global Decoupling, Oil Super Spike and Yields
The Dollar Smile Theory, Overbought Euro
The Dollar Smile Theory
Oil and Global Decoupling Theory
Global Decoupling Theory, Correlation Contagion
The Global ‘Decoupling Theory’ is Garbage
Asia Tanks


Anonymous said...

Good posts Ben.

The banks have so much "crap" on their sheets, no one wants to get into bed with eachother...which is the fundamental law of banking (loaning $ to eachother).

If Korea doesn't want some LEH action, then US banks sure as heck won't either! BAC is just one of many banks that will stand on the sidelines and watch LEH go down.

Its like the Carnegie's of the world trying to save the market before big crash. Eventually they had to let the economy run its course. We know what happened after that.

Why SKF is not at 200, I don't know. What gives?!?!?

peterthepainter said...

this is realisation week. coming soon capitulation week.

yo! ninja dude. good posts man...ptp

Anonymous said...

Any thoughts on AIG?

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