The –39% Baltic Dry Problem

What the hell is the Baltic Dry problem and why are we being harangued about that on this fine Tuesday morning?” 

The Baltic Dry is an index of ocean shipping activity  (by Dry Ships) that shows up most places on a delayed basis.  You can see it updated yourself at  www.dryships.com (see the market info) and then it lands in charts like this one over here with the symbol BDIY.  .  With a bit of clicking, you can get to the one month view and discover (to your presumed horror, although you may not be awake enough to feel it just yet)  the Baltic was up around 2,277 just three weeks back.  On Monday, the index was reported at 1,395.  This morning it’s down another 5 points to 1,370.  Which means the Baltic is at only 60.3% of where it was recently.

What’s worse is that the Baltic was as high as 2,337 in the previous 12-months, so the index is down more than 41% when you get right down to it.

And often times, we see the Baltic decline ahead of other indices.  But with the Dow dropping more than 179 points yesterday and the tech sector down nearly 1.5% for the day, we have to wonder whether the next key support zones will hold, since the Baltic is hinting at something much larger and much more terrifying…a return to 2009 lows is where it’s trending.

When the market opens today, I will likely switch our present long position which has been in place for 13 months, save one week in 2013, over to the short side.

My hope is that this will only be a “wave four” decline and that should stop in the S&P 1,640 area, or 1,540 area.  But if those let loose, then things will go from bad to worse. 

Still, the Baltic could have something to do with New Years in China, or seasonal factors.  But seems to me that there’s a long ways to fall if earnings disappoint and the Baltic keeps urging us to be cautious.

Look for a minor bounce, but just that today.

Longwave Look: Your Crazy Checkbook

What does it tell you when you look at the size of the federal budget hit $1.1 trillion, which will be in the vicinity of 7% of all economic activity?  Oh, sure, you can see the data in stories like “Dozens of trade-offs in !$1.1 trillion budget bill.” 

But that’s really a very short-term perspective and just damn near useless in terms of having a life and planning it properly.

imageFor that we need to look at how the Federal debt is stacking up as a percentage of Gross Domestic Product:

As a little inspection will suggest, the federal debt has not been so high, as a percent of GDP since the Second World War days.  And even then, the pay-down was quick despite the pause during the Korean conflict.

What we ought to be wondering about is where are the jobs not in government to keep things rolling?

As I’ve told you countless times previous, “Hello Houston?  We have a problem…”  And yet no one wants to actually do a damn thing about it. 

Instead, here we are 17 years of UrbanSurvival later and people in Washington are pulling the same crack-head policy moves that cause issues.  They export jobs, maintain a tax system that favors machines and is anti-human at it’s core.  And when all that heads for the rocks, what do they do?  Spend more money, a bigger fraction of GDP and then they want to throw open the gates to larger immigration.

Voters can’t hold Washington solely to blame for failing to pass IQ tests en masse.  They need to look in the mirror and say high to the persons who are demanding yet another free lunch.

imageMonday saw the release of the latest Treasury data that shows some marginal improvement in the Nation’s financial position.

The good news is that the size of the budget deficit is smaller.  Good.

It has declined from 6.8% of the GDP in 2012 to 4.1% of GDP in the forecast period for 2014.  But don’t believe it till you see it.

And don’t ask a 99’er if the budget reduction is a good thing. 

All it will take is for recession to reassert itself, and we’ll blow back up to, and beyond, that 6.8% level.  And let’s not forget that we still have that continually accruing pile of past federal debt to deal with.

The further good news (this is good so far?)  is that detail sales are up 4.1% on the year, but remember, that’s measuring dollars not units. So again, while we may see some positive spin from this in markets short-term, the units may be tumbling down and we could discover in the CPI report due later this week that inflation is starting to reappear.

When that happens, then the rates will edge up, the carrying costs for gold will increase, metals will take, markets will tank, and the bond players will feel the pain as well.

imageIt’ll be another case of flipping over from  the virtuous cycle to it’s ugly half-brother *(the reciprocal):  That’s called Crash.

Not yet, but if you know where to look, you can get lots of lead time before the storm appears.

Oh, one more thing to mention in here:

Even though auto sales cratered in December, this recovery has been driven by the auto industry and that’s hardly a healthy way to grow an economy.

More after this…

The Big Quake Porn Rant

Yes, there was a 6.4 quake in the area north of Puerto Rico Monday.  No injuries, no damage, no tsunami, and despite what charlatans may tell you, it was hardly out of the ordinary.

Well, I knew it would be coming.  A reader (mojo) forwarded one of the most ridiculous emails I’ve seen in a good while on the matter of earthquakes. 

“The Luciferians are attempting to blow out the Caribbean plates…”

And attached was details that included items like weather radar rings and other pseudo-science.

The Caribbean is having quakes all the time.  From the earliest recorded biggie, the Port Royal Jamaica quake of 1692 that killed about half the population, to the more recent Haiti quake in 2010…quakes like this happen throughout recorded history.  In the Caribbean, islands of which are what?  Tops of mountains….d’oh!

imageIt’s a bitch being a data-driven, sober-minded realist.  But here’s how the data rolls:

Since January of 1963, there have been 5,865 earthquakes globally that hit 6.0, or better, on the Richter scale.  And, in that same period, 584 quakes at 7.0 or larger.

Here, let me give you a histogram that puts all this into perspective.

As you can see, the likely number of 6.5 quakes is likely in the 1,800 to 2,300 range in this period of time.  And if we assume that “the Lucies” are really trying to blow plates, there shouldn’t be time for them to do much of anything else.

OR, as science might offer, there could be something else going on…you think?  You mean other than shaking down people at the collection plate or driving web traffic?  (There’s something else?)

We live, as Carl Sagan reminds us, in The Demon-Haunted World: Science as a Candle in the Dark, in a curious land where people will believe damn near anything if it’s attached to the the right buzzwords, concepts, or cultural programming. 

That said,.I’m sure there’s one thing the Luciferians should be held accountable for if the numbers on quakes don’t wash:

My last MegaMillions lotto ticket didn’t hit. Or, is that too much of a statistical reach, too? 

Look, 1918 saw a 7.5 in Puerto Rico, and this stuff happens.  It’s the way the world works and to ascribe it to anything as improbable as Luciferians lands you in the same camp with people who swear quakes are caused by undersea nuclear detonations  by rogue military adventures.

“Right, monPass de duchy to de right and side…”  and hand me the ViceGrips, while you’re at it.

Short Takes

I got a little deep into the econ stuff this morning, sorry.  But the rest of the world is out there.

Voting in on in Egypt so we should now tomorrow how strong the MuBros area.

The next big scandal to hit the Obama admin will be when AIPAC comes a calling to wonder about reports that there is a “secret side deal with Tehran” in the Iranian peace plan.

When have to wonder if Christie and Obama went to the same school of government transparency & candor?

This comes as the US Supreme Court seems leaning against “recess” appointments by the Obama administration.

Hint of the Day

If you roll out a big pot farm, might not be too smart to put a vid of it on YouTube.   If you live in Bidenville.  Colorado?  Oh, maybe a different deal…

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