Thursday, January 29, 2015

BDI Baltic Dry Index Weekly Chart Collapses to 666

The Baltic Dry Index plummets to an ominous 666 in recent weeks reflecting a sick ocean shipping environment. The BDI is a key global economic bellwether since ships transport coal, coke, iron ore, steel, cement, powders, resins, grains and many other cargo's that grease the wheels of the global economy. If the global economy was strong, the BDI would be far higher. Shipping rates are negatively impacted by an over-capacity of ships (shippers purchased many new ships over the last three years) but a bludgeoning down to 666 is clearly reflective of an extremely sick global economy. The weakness also highlights the impact from China's economic activity falling off a cliff.

The BDI is in the cellar so there is no where to go but up. The weakness, however, indicates that a global economic malaise would be expected to continue for a very long time. The red lines show how the drops in shipping rates correlated to stock market pull backs. Note how over the last two years the charts strongly diverge with the BDI predicting market weakness but the stock market remains buoyant and prints new all-time highs; clear evidence of the power of the central bankers especially the Fed and BOJ. Banks and companies are using the liquidity to buy stocks and perform financial engineering such as buyback programs to pump stock prices higher. Sadly, the easy money is not used to buy equipment, expand factories or hire workers. The central banker money is making the wealthy and elite classes, that own stocks, filthy rich. The stock market is due for a large pull back a la the 2008-2009, 2010 and 2011 selloffs and the BDI is cheering for this outcome. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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