If you believe the GDP numbers, the better than expected unemployment numbers, and talk of recovery, then we highly recommend watching the following news report about dry ships container movement.
Looking for a leading indicator on the state of global economies? One of the best ways to tell if consumer consumption is increasing is by looking at cargo transportation via trucks, trains and boats. Ocean-bound shipping is not looking so good.
On a positive note, however, if you plan on moving to a safe haven outside of your home country, it should be pretty dawg-on cheap to get your stuff there. In fact, it’s probably cheaper to ship your household furniture from the USA to Europe* via a boat, then it is to pack up a U-haul and drive one-way from New York to LA (26 foot truck @ $2,600.00 USD).
Submitted by Rick Blaine
*Note: This is an example. We are not suggesting that Europe would be a safe haven.
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I’m not sure of the date of this video, but the Baltic Dry Index (BDI) has recovered to approx 2800 from its low of <1000 at the end of 2008. Â Actually it recovered recently to ~4200, but has since declined again. Â It’s certainly nowhere near its former peak of ~12,000, and IMO, likely will not get back there again for many years if not decades. Â That collapse from 12000 to <1000 was shocking and dramatic. Â However, it has recovered quite significantly from its low. Â Anyway, the video just felt strange to me, like maybe it was from the time period around the very bottom, but I don’t know.
http://investmenttools.com/futures/bdi_baltic_dry_index.htm
The third image down the page is interesting, as the pennant formation looks to breakout to the downside due to a steeper slope than the uptrend line. Â (This same type of pennant formation was recently seen in Au). Â However, the slope on the downward pennant line is not dramatically steeper than the uptrend line, so it’s no sure thing… time will tell.
BTW, don’t get me wrong, I’m definitely not confident in a robust and speedy recovery of global trade and world economies.
The post date on that video is October 13, 2009, so I must assume it is somewhat recent, though it’s hard to say whether that is January 2009, June or October.
I considered adding the Baltic Dry Index chart to this as well, so I thank you for the link to the charts. No doubt the index has recovered in the last 6 months. And, since the BDI is not an index based on “stocks” like the Dow Jones, there is definitely a semblence of recovery in cargo traffic according to the BDI. Perhaps when the real crisis hit late last year, buyers simply stopped placing orders and thus, we had what I would consider a total collapse in dryships. Anything over 90% down, I would call total collapse.. it’s not ZERO, but pretty darn close.
From a personal perspective, I can say that our company inventories went way down in early 2009, but in June, we placed some large orders with our manufacturers, in fact, the orders were twice the size of orders past. We did this for several reasons 1) to stock up while we had cash to do it now 2) to take advantgae of low shipping costs 3) to take advantage of manufacturing costs, which are now slightly lower than 2007.
I wonder if other businesses did the same thing?
Saying that consumption is dead may have been a little bit overboard. The retail numbers as of today look like they are showing some positive gains. And, dryships seem to be pricing higher now than in early 2009 per the BDI, but could this be a “christmas bounce” of some type? Stores and distributors place there orders roughly 6 months ahead of time (especially with international manufacturers)Â and delivery usually takes place some time in October/November.
This brings me to question why the BDI is not moving up right now, when ships should be moving Christmas inventory around the globe. We should be seeing a spike in cargo shipping price this month and next, but the BDI is down 2000 points from the June 2009 high.
Honestly, I do expect to see some sort of recovery here, but I am not sure if this is going to last past February of 2010.
If the Christmas retail numbers come in low, as Gerald Celente has suggested they will, then we are going to be in some serious trouble. This will be the final proof that consumer consumption has hit a brick wall.
With credit lending trending down, people losing their jobs left and right, I just don’t see where the consumption is going to come from in Q4 2009 and beyond.
We need credit to buy, and it has just about dried up on the consumer side.
Mac
Ok, i took a closer look at the video, and just wanted to post an update.
They mention the pricing as “May”, which i am going to assume is May 2008. The report also says, “Back in June.” Again, assuming this is June 2008.
So, I would say this video report had to be prior to June 2009, more than likely in the Dec 2008 – Feb 2009 time frame is my guess.
Nonetheless, we can take those prices, and let’s assume we appreciate them 250% to account for the upmove in the BDI since Nov 2008 to now. We’re still looking at significant price declines.
http://www.searates.com/news/3962/
“The Paris-based agency said laid up fleet is now the biggest ever.”