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Baltic Dry Index Submerges

Posted by Larry Doyle on July 7, 2010 12:39 PM |

What happens when consumer demand drops off a cliff as it has over the last quarter? Shipments of goods and raw materials will likely follow. How are those shipments measured? Let’s check in on trends and developments within the Baltic Dry Index.

The Financial Times highlights the fact that the BDI is submerging precipitously and writes today:

…worrying signals about the global recovery remained. The Baltic Dry Index, a gauge of dry bulk commodity shipping costs seen by many as a leading indicator for growth, fell for a 29th successive session to its lowest level for more than a year.

Here is a chart of the BDI relative to gold over the last 18 months:

That recent submersion of the BDI is clearly sending a strong signal as to the grinding halt of  the global economy.

Can you spell disinflation if not outright deflation? Start with BDI and go from there. In fact, given these developments in the BDI, I would expect that gold may have further downside from current levels.

LD

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  • Lou

    Wow. That is an amazing decline. A 50% move downward in 6 weeks. That is saying something and it is not very good.

    Great find and post!!

  • whoisjohngalt

    Hi Larry, congratulations on your new job. I have not written you in a while. If you remember, I was sending you notes a year ago about deflation. The amount of wealth destroyed by reduced value of real estate & stock market losses is staggering. Also, earning power is down due to unemployment & lower wages. I have a real job so I have not compiled the #, but the sum of these # is far more than government stimulus. That is why we are having deflation. I hate to say I told you & your readers so, but I told you so.

    • LD

      Believe me, I think of your projections regarding deflation often.

      Additionally, I think another critical point is the time it has taken for all of this to play out. I am not so sure that the continued erosion of buying power does not decline slowly but surely for a protracted period.

      You deserve the ‘hoo-rah’ because you did tell us so. “Hoo-rah” and well done.

      Thanks also for the sentiments.

  • whoisjohngalt

    A couple of other things to watch our for:

    1. Call centers are moving in mass to the Philippines. Their English is good, easy to understand & work for $200-300/month. My company has done this & when I call other company’s 800 numbers I recognize the person on the other end is from Manila. VOIP, Skype or whatever you want to call it is the reason. More lost USA jobs.
    2. I know of 2 European construction equipment companies who are building assembly plants in the south. Investment in Mexico is done. This will help us somewhat, but the Northeast & Midwest are still doomed because of labor unions & hostile attitudes toward industry/capitalism. Atlas Shrugged

    The big issue now the expiration of the Bush tax cut at the end of the yr. A Nov. repudiation of Obamanomics should help what is left of the economy in late 2011. Don’t expect anything good before then.

    I would load up on utility stocks on big Wall Street down days, and there will be plenty more of these. Deflation or a slow economy does not hurt utilities that pay over 5% dividends. Next summer we will see how well I did. JG






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