The Baltic Dry Index/Shipping

Mon Feb 06, 2012 8:04 am by OldNorseman

The reason why the BDI is plummeting is not due to cratering demand, but because of surplus capacity, here are some of the reasons:

1. Shipowners typically orders more ships when they are making money. Due to a few years lag, this new supply often comes online when the industry is in a slump. (Shipowners are sheeple, too!)

2 IIRC China has decided to import more of their commodities on their own keel, creating even more supply. (China is of course THE major player in importing, they take for instance about half of the worlds copper.)

2. A lot of the ships (don’t have any numbers here) are contracted on year-long contracts, making the movements in the spot-market BDI-index even more volatile.

This is from jata, an industry insider for many years:

2010 - Dry bulk demand +12% BDI dropped 46%

2011 - Dry bulk demand +5% BDI dropped 25%
BDI is only relevant when it's going in the direction of your current trading thesis.

http://tickerforum.org/akcs-www?post=201280&page=1

Conclusion: Don’t ever use the BDI uncritically as a ”Canary in the coal mine” for the general economy, or I’ll tell your mom. :mrgreen:

Mon Feb 06, 2012 8:19 am by ralfy

Thanks.

"Unprecedented Global Monetary Policy As World Trade Volume Craters"

http://www.zerohedge.com/news/unprecede ... me-craters

Press release from 2010, with forecast for 2011:

http://www.wto.org/english/news_e/pres11_e/pr628_e.htm

UNCTAD 2007 data for world trade by sea, with estimates for 2008 onward:

http://www.marisec.org/shippingfacts/wo ... de-sea.php

Mon Feb 06, 2012 10:18 am by mcgowanjm

OldNorseman wrote:
This is from jata, an industry insider for many years:

2010 - Dry bulk demand +12% BDI dropped 46%

2011 - Dry bulk demand +5% BDI dropped 25%
BDI is only relevant when it's going in the direction of your current trading thesis.

http://tickerforum.org/akcs-www?post=201280&page=1

I followed the links and it stops at Jata1........Are you Jata? :twisted:

I will now require you to search out that DATA. Right now it looks sorta meaningless.

Like, for ex. What %age of the BDI is Dry Bulk?

Conclusion: Don’t ever use the BDI uncritically as a ”Canary in the coal mine” for the general economy, or I’ll tell your mom. :mrgreen:

Don't ever use ANY measure uncritically. And you can talk to my Mom in Heaven.
I do it all the time....

Mon Feb 06, 2012 10:20 am by mcgowanjm

The BDI is the Most Relevant because there are ZERO specs in the BDI.

It cannot be manipulated, any more than reports of gas prices around the USSA
can be.

Mon Feb 06, 2012 10:21 am by mcgowanjm

The problem with the BDI is that it is little understood and often dismissed by less thoughtful economic analysts as a “volatile index” that is too “sensitive” to be used as a realistic indicator of future trends. What these analysts consistently seem to ignore is that regardless of their narrow opinion, the BDI has been proven to lead economic derision (sic) in the market movements of the past. That is to say, the BDI has been volatile exactly BECAUSE markets have been volatile and unstable, and is a far more accurate thermometer than those that most mainstream economists currently rely on. If only they would look back at the numbers further than one year ago, they might see their own folly more clearly.

Mon Feb 06, 2012 10:21 am by mcgowanjm

Bring it.

Mon Feb 06, 2012 10:24 am by mcgowanjm

As opposed to the BS BLS NFP Report. Noting that the World Markets treat IT
like your proverbial 'Canary in the Coal Mine' and I don't think I've seen much from you, Norseman, on that?

You'll correct me I'm sure... :twisted:

Stoneleigh wrote:Friday's NFP number brought us some altogether unprecedented BS from the BLS. Much has already been said about the filthy stench emanating from these "data points", so I will just review the most important points here. First thing to note is that squeezing a record 1.2 million people out of the "labor force"(people who don't waste time looking for jobs that don't exist) is apparently a sure fire way to get the headline unemployment rate down to only 8.3%

ZeroHedge, as usual, does an excellent job deconstructing the self-contradictory nonsense that is known as the NFP jobs report.

Mon Feb 06, 2012 1:55 pm by OldNorseman

Hi Mc, sorry if I upset you,
my posts were never meant to be personal. Believe me, as a rule I really like what you post. It was not directed only at you, there are a lot of people who “like” the BDI, both here and elsewhere. Because it moves so violently, I suppose. There’s one more thing with the BDI I forgot to mention: It is priced on the margin. Just like housing and gold. Makes a big impact on volatility, of course.

What everybody wants are indices that can tell where we are, and where we are heading. My point is that BDI is a poor one. Many believe that it is a leading indicator, since it in a way measures commodities that will be made into goods perhaps a year later. But it gets distorted every time a ship is scrapped or commissioned.

I’m not Jata1, so I don’t have access to what %age of the BDI is Dry Bulk – or other numbers. But everyone living in the industrial world can only go into a hardware store or supermarket and be convinced that world trade is functioning. No empty shelves. World trade has not cratered with the BDI. Of course trade volume is down: Parts of Europe is on the brink, unemployment on the rise, riots in MENA. Rising food and energy costs calls for less discretionary spending. Aging population in the richer parts of the world. But it is not bringing any understanding of the situation if we point to an index that is down 98 (?) percent.

That is to say, the BDI has been volatile exactly BECAUSE markets have been volatile and unstable, …

Perhaps it can be used as a volatility-indicator, but then I suppose you’d have to do some math on it. I’ve never seen it as such. BDI is mostly used as a scarecrow, I’ve done it myself.

It cannot be manipulated, any more than reports of gas prices around the USSA
can be.

That is of course true. My favourite indicator would be unemployment, but those numbers are easily manipulated. Youth unemployment in Spain is >50 %. That is both a lagging and a leading indicator – of some eerie sort.

As opposed to the BS BLS NFP Report. Noting that the World Markets treat IT
like your proverbial 'Canary in the Coal Mine' and I don't think I've seen much from you, Norseman, on that?

Does the World Markets treat it like the Canary in the Coal Mine? I’ve never seen it. Some authors treat it like the proverbial, but that is something completely different. If the financial authors had the ability to get rich on the markets, they wouldn't have had to write those pesky articles. "Those who can, do. Those who can't, teach"

Perhaps we can agree that: “The problem with the BDI is that it is little understood”

Thanks for great charts Ralfy.

From the linked ZH-article:

While the 25 year low in Baltic Dry is explained away by the simple over-supply of ships (as if that is a good thing) with little thought as to the near-record high inventories of Iron Ore and so on around the world, the reality as shown above is a world in which trade volumes are down dramatically.

Note that the author does not even try to explain why the BDI is important/measures anything useful for the public. He instead attack those who are critical to the index' useability. He then goes on to say something about abundant iron ore inventories. If the case for low trade volumes has to do with surplus iron ore inventories, why not make an iron ore-index? Very weak argumentation.

Mon Feb 06, 2012 7:26 pm by mcgowanjm

Do what you're gonna do, Norseman.

I'm happy with what the BDI does. And just like Iraqwar being
totally correct on US maneuvers Feb/MAr/April 03 to 05,
I enjoy that no one sees any usefuness in the BDI.

Makes my life that much easier...

http://alt-market.com/articles/540-balt ... t-collapse

Global demand is waning, yet prices are holding at considerably high levels or are rising (a blatant sign of monetary devaluation). Indeed, the most practical conclusion would be that the monster of stagflation has been brought to life through the dark alchemy of criminal debt creation and uncontrolled fiat stimulus. Without the BDI, such disaster would be much more difficult to foresee, and far more shocking when its full weight finally falls upon us. It must be watched with care and vigilance...

You can believe the PPTMOMOMarkets/USSAtv, or the BDI and the fact that the US
is using 3.5 MMBD oil less than in 2007.

Note that No One Anywhere is bragging about how Amerika is weaning itself from Foreign oil :?:

Kunstler wrote:America needs a prayer, all right, but I don't think they'll find it by calling Madonna's name.

Tue Feb 07, 2012 12:32 am by ralfy

Another from Zero Hedge:

"Shipping Rates Go... Negative"

http://www.zerohedge.com/news/shipping- ... o-negative

The Baltic Dry Index/Shipping

The Baltic Dry Index/Shipping

Re: Why the Baltic Dry Index is irrelevant

Re: Why the Baltic Dry Index is irrelevant

Re: Why the Baltic Dry Index is irrelevant

Re: Why the Baltic Dry Index is irrelevant

Re: Why the Baltic Dry Index is irrelevant

Re: Why the Baltic Dry Index is irrelevant

Re: Why the Baltic Dry Index is irrelevant

Re: Why the Baltic Dry Index is irrelevant

Re: Why the Baltic Dry Index is irrelevant

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