Dow and Baltic?

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land2341's picture
land2341
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Dow and Baltic?

 

http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm

 

Baltic Dry and commodities/gold/oil/and DOW

 

http://www.bloomberg.com/apps/quote?ticker=BDIY:IND

 

Baltic Dry and dow over 5 year time span

 

 

Am I misreading this?  It seems to me that when the Baltic Dry is not getting along with the Dow it is because the Dow is running on magic again.  The  Dow managed to pull an almost two year divorce from the Baltic just prior to the crunch,  but reality eventually caught up and they got back together.

 

It looks like counseling is in order,  because the Baltic and the Dow have begun to not get along again.  Is this a viable pattern or am I over extrapolating??  

 

 

 

I am getting that “hinky” feeling in my gut that says the Dow is in liar land again.  Do I have indigestion??

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SagerXX
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Re: Dow and Baltic?
land2341 wrote:

I am getting that “hinky” feeling in my gut that says the Dow is in liar land again.  Do I have indigestion??
 

Put down the Mylanta, land.  The Dow is in Super-Duper-Ultra-Mega-Liar Land, and has been for over a year and a half now.  If you'll look at the Dow closely, you'll notice its pants are on fire.  And you know what that means...

Viva -- Sager

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Dogs_In_A_Pile
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Re: Dow and Baltic?
SagerXX wrote:

The Dow is in Super-Duper-Ultra-Mega-Liar Land, and has been for over a year and a half now.  If you'll look at the Dow closely, you'll notice its pants are on fire.  And you know what that means...

.......the Tao of Market Neutrality is good.  Cool

Doug's picture
Doug
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Re: Dow and Baltic?

The market can stay irrational longer than you can stay sane.

Don't know the author, but I love that expression.

Doug

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goes211
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Re: Dow and Baltic?
Doug wrote:

The market can stay irrational longer than you can stay sane.

Don't know the author, but I love that expression.

Doug

It was actually John Maynard Keynes that said...

Markets can remain irrational longer than you can remain solvent

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yobob1
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Re: Dow and Baltic?

The BDI has divorced itself from everything.  A rebound from the lows of 2008-2009 would have been expected and that "naturally" occurred, but then something funny happened on the way to the docks.  Even though prices are signaling demands commensurate with a super duper recovery rate, the shippers aren't being overwhelmed with shipments of raw materials.  IN fact the same scenario is also displayed in the shipment of oil.  To be fair, some of this "disconnect" is due to a large number of ships that were ordered and too far along to cancel when demand collapsed and in the case of the oil tankers, at least for now, some of it is related to a change in the routes which is causing the shipping cycle and route distances to be shorter meaning some of the tankers are making more round trips in a given time.  However that certainly can't explain the enormous divergence we see at present.

I would say that it is not only the Dow, but every "financial" asset including all commodities which have long since become very poor representations of final demand due the myriaqd of ways that allows huge speculative positions to build up.  Especially onerous are ETFs that take down physical supply without having any true intermediary function in the real market place, but are enormous side "bets" that to a degree become a self full filling sort of thing.

In the end what we are AGAIN seeing is way too much liquidity that is trapped in the financial markets that can and will have no spill over into the real economy.  As such, the markets will of their own structure of "expenses", quietly chew away that liquidity which is why they have to keep coming back and asking the kindly ole central bankers, "More, please". Of course if everyone had to suddenly come clean on their balance sheets (including bringing all "off balance sheet" items on board) and "mark to market" everything they hold, the amount of extra liquidity that has been added over the last 3-4 years would look pitifully small.  For now though everyone is staying firmly on Fantasy Island and praying like hell that the volcano doesn't go off.  It will eventually go off, of course.  When it does, nearly everyone will be killed other than a tiny few who piled into the one row boat on the beach while everyone else was golfing and laughing about all those silly little earthquakes that upset the tiny few left bobbing about and witnessing the end.

Two questions everyone would like to have answered - "When does it "erupt" and "What is that row boat made from?".  I can't tell you other than it will happen when it is least "expected" and the boat will not be made of the material that currently and at that time is the "obvious" choice.  Life and therefore markets just don't work that way - you don't end up with 90+% being winners or 50% for that matter under these conditions.  If 10% get out alive, it would be  a high number.  This is more of a long term game where the winners will be the ones who lose the least.

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Re: Dow and Baltic?
yobob1 wrote:

Two questions everyone would like to have answered - "When does it "erupt" and "What is that row boat made from?".  I can't tell you other than it will happen when it is least "expected" and the boat will not be made of the material that currently and at that time is the "obvious" choice.  Life and therefore markets just don't work that way - you don't end up with 90+% being winners or 50% for that matter under these conditions.  If 10% get out alive, it would be  a high number.  This is more of a long term game where the winners will be the ones who lose the least.

Yobob

An interesting post as always.  Could you be a little more specific? 

What are your thoughts on gold and silver as financial life boats? 

If they are too "obvious" what alternatives might be better besides a farm that is set up to be sustainable?

By "get out alive" do you mean financially or literally, or both?

I'd appreciate any further thoughs you may have.

Travlin 

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yobob1
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Re: Dow and Baltic?

If I could be more specific you would be paying for my advice. Sealed

I think some gold and silver (physical in hand - NEVER in a safe deposit box) are always appropriate as a permanent part of anyone's assets.  Most "eggspurts" suggest 10-20%.  Gold was as low as $250 and silver $4 just 10 years ago and at that point there was no question that 20 years of abuse had relegated them to a "joke" and no one would have suggested them as an investment.  In other words a "hated" asset that had become grossly undervalued.  Now?  Everyone is on the gold train - buy, buy, buy and the wild prognostications are afoot.  For me that's a warning sign. 

I don't have a crystal ball and I doubt TA is a great deal of help other than in the very short term, like 60 seconds - a lifetime by Wall Street investment standards these days. ( I find most TA "backward looking" for rationalizing the current).  I think the Euro is in big trouble and probably headed for the dustbin of history - it won't go without a fight, but if and when it does go, the world will once again be with no obvious choice for a replacement for the ever pervasive dollar.  There is little question that there are some new influences politically in the US which may serve to squelch the Fed's potency and possibly even reign in some spending - if so it will help stabilize the dollar. Those calling for the immediate death of the dollar need to recognize that it would also effectively destroy the government.  There aren't too many examples of a sovereign currency "expiring" and the government staying in power.

The primary thesis of the all gold portfolio is that all the fiat on the planet is severely debased by "printing".  Yet away from a few examples, Zimbabwe for example, there is no excess physical printing.  Instead what we have seen is theoretical digital money (debt) creation. (IMO "inflation" is a debt or credit phenom compounded by fractional reserves).  This all works as long as the amount of debt is constantly expanding.  As always with any Ponzi scheme you eventually reach a limit and a contraction begins.  When you begin to run a highly leveraged system in reverse something called cash flow begins to rear its ugly head.  In most cases a default rate of 10% effectively will wipe out all of the "value" of a portfolio.

Most will say that the amount of sovereign debt being issued will replace the loss of private debt expansion.  It cannot - government is an expense not an addition to the economy. On that basis government debt creates no production with which to repay its debt.  It must rely on taxation of the private sector with which it is now directly competing for "investment" money.  In our current situation there is no conceivable scenario under which all of the current private and government debt can ever be repaid.  Huge amounts of debt have already been written off and there are huge sums which will have to be written off.  There is very little information or acknowledgment of debt deflation.  It is very real and it was the primary cause of the Great Depression.  They fought it in the early 1930s, but not to the globally interconnected extent we see today.  In the US it took about 3 years for the economy to bottom.  A gradual recovery was already in place before FDR went nuts and devalued the dollar by raising the price of gold from $20 to $35. Unemployment was rapidly dropping prior to FDR's experiment.  It spiked much higher jsut prior to implementation and then resumed its decline at a slower rate.  No doubt just as we see today, there was some "front running" by the economy caused by the uncertainty of the effect of the experiment which in the end failed miserably as the economy was again n the toilet by 1937 with no signs that inflation was around after FDR's wild "printing" over the entire economy.  Arguably, the economy would have recovered faster and more sustainably without FDR's insidious scheme.

We are 10 years and 2 major "bubbles" into this mess.  The "hangover" from those bubbles is simply too large to overcome and gravity holds sway. Unless we can entice investors from another galaxy, we're screwed for a long time to come.  Some are worried that we are becoming "Japanese" and Burnyankee seems hell bent on following the same policy that created Japan's problems when he assures us that we won't suffer the same problems.  I see he was out saying that unemployment would be a problem for 4 or 5 years.  I guess that means that QE II should have been 6 trillion instead of 6 Billion.

What of the inflation and gold as a hedge? It failed that test badly for the 20 years between 1980 and 2000.  The question is how much inflation is there in reality?  Yes fuel, health insurance and a few other items are notably higher, but there's a whole bunch of stuff that has no pricing power and some pretty significant stuff with nominal price drops - check your home value lately? I prefer a purchasing power index using gold at $20 per ounce.  Compare what an ounce would buy in 1931 when prices had collapsed to what an ounce buys today.  Then 20 ounces for a Model T Ford - now 20 ounces gets you a nice mid-sized sedan - not a base level puddle jumper.  My number crunching yields a fair value price on gold at about $800.

Gold and to a lesser degree silver are the ultimate financial backstops as they are very unlikely to go to zero.  However it is entirely possible that other things will outperform gold /silver.  I can't say with any degree of certainty what those items will be yet, though I have my hunches. (Only subscribers receive that information Wink)  You need to understand my perspective - I tend to look at 10 year time frames as "blocks" to make real and realized gains. 

As to getting out alive, I was primarily speaking financially, though in the end you need to enjoy life as it comes as you will not get out of it alive.  I would be more concerned with my physicality the closer I was to urban centers. What we see in Europe in terms of civil unrest is just as likely to happen here, though we are not as socialized as Europe and therefore fewer of us are reliant on government for our daily bread.  I expect some push back by the productive sector causing government to shrink - more so at the state and local levels which were the ones that really bloated beyond the expansion rate of the federal.

 

 

land2341's picture
land2341
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Re: Dow and Baltic?

yobob said:

The BDI has divorced itself from everything.  A rebound from the lows of 2008-2009 would have been expected and that "naturally" occurred, but then something funny happened on the way to the docks.  Even though prices are signaling demands commensurate with a super duper recovery rate, the shippers aren't being overwhelmed with shipments of raw materials.  IN fact the same scenario is also displayed in the shipment of oil.  To be fair, some of this "disconnect" is due to a large number of ships that were ordered and too far along to cancel when demand collapsed and in the case of the oil tankers, at least for now, some of it is related to a change in the routes which is causing the shipping cycle and route distances to be shorter meaning some of the tankers are making more round trips in a given time.  However that certainly can't explain the enormous divergence we see at present.XX

I am hearing strange things coming from the captains of some of the oil tankers and others who know where the ships are.  The strikes and unrest in Europe stalled alot of the oil/petroleum products shipments and made some dosi-do around the ocean for a while.  Some of that stuff is time sensitive and was rerouted to other ports.  But, there are a sizable number (no one can give me a solid #)  that are literally circling going no where.
Things have opened back up in Europe haven't they??  So what're they waiting for??  Prices to go higher?  That actually does not seem to make as much sense as the obvious answer as the costs related are staggering and much of this material is contracted already.  Whose is it and why is it waiting?  One captain expected to be home for the holidays and has not only not gotten home,  but is not permitted to hit any port of call.
Thoughts?
Travlin's picture
Travlin
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Re: Dow and Baltic?
yobob1 wrote:

Most will say that the amount of sovereign debt being issued will replace the loss of private debt expansion.  It cannot - government is an expense not an addition to the economy. On that basis government debt creates no production with which to repay its debt.  It must rely on taxation of the private sector with which it is now directly competing for "investment" money.  In our current situation there is no conceivable scenario under which all of the current private and government debt can ever be repaid.  Huge amounts of debt have already been written off and there are huge sums which will have to be written off.  <snip>

We are 10 years and 2 major "bubbles" into this mess.  The "hangover" from those bubbles is simply too large to overcome and gravity holds sway. Unless we can entice investors from another galaxy, we're screwed for a long time to come.<snip>

However it is entirely possible that other things will outperform gold /silver.  I can't say with any degree of certainty what those items will be yet, though I have my hunches. (Only subscribers receive that information )<snip>

As to getting out alive, I was primarily speaking financially, though in the end you need to enjoy life as it comes as you will not get out of it alive.<snip>

Yobob

Thanks for the many additional thoughts.  There’s a lot of good stuff to ponder there.  I don’t have anything of note to add, but the ones above closely match my thinking  Where do I go to subscribe to your investment advice service?  I could pay in drugs.Wink

Travlin 

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yobob1
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Re: Dow and Baltic?
land2341 wrote:
I am hearing strange things coming from the captains of some of the oil tankers and others who know where the ships are.  The strikes and unrest in Europe stalled alot of the oil/petroleum products shipments and made some dosi-do around the ocean for a while.  Some of that stuff is time sensitive and was rerouted to other ports.  But, there are a sizable number (no one can give me a solid #)  that are literally circling going no where.
Things have opened back up in Europe haven't they??  So what're they waiting for??  Prices to go higher?  That actually does not seem to make as much sense as the obvious answer as the costs related are staggering and much of this material is contracted already.  Whose is it and why is it waiting?  One captain expected to be home for the holidays and has not only not gotten home,  but is not permitted to hit any port of call.
Thoughts?

Hard to figure having them cruise in circles.  We've all heard the reports at various times of tankers moored and being used for storage and near as I can figure there isn't a whole lot of storage left on land.  It is tough to get current info on how many are at anchor as storage.  Maybe the shipping companies said you have to take crew and all if you want to rent it for storage?  Pretty doubtful.  Maybe they're waiting for storage to open up on land? 

One thing I'm pretty damn confident of is that real GGP (gross global product) is far lower than it was in 2006.  There is a very positive correlation between energy and GDP.  Of course the government share of GGP has climbed pretty significantly.  While government is gross and global it is not productive in any conventional sense and therefore its impact on energy consumption is muted as compared to actually obtaining raw materials and converting them into a salable form and delivering them to market.  I'm reasonably sure that the global demand figures are artificially inflated and are part of the "plan" by certain parties to maintain an artificially inflated price that is more related to bankers and the debtors ability to pay.  If you'll recall the oil crash in late 2008 - it was followed by much howling over ME debt.  They are trying to make sure that doesn't happen again.  However they are dealing with a real product that is subject to real supply and demand pressures.  You can only fool mother nature, gravity and your Mom for a while.  Sooner or later you become subject to those forces regardless of of your fight against them.

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