Wednesday, December 2, 2015

Global Shipping Falls to Lowest EVER!

The media keeps pointing to all the wonderful things happening in the economy...but is it really that good?  If so, how come the global demand for shipping has fallen to the lowest EVER?

I was absolutely stunned to learn that the Baltic Dry Shipping Index had plummeted to a new all-time record low of 504 at one point on Thursday.  I have written a number of articles lately about the dramatic slowdown in global trade, but I didn’t realize that things had gotten quite this bad already.  Not even during the darkest moments of the last financial crisis did the Baltic Dry Shipping Index drop this low.  Something doesn’t seem to be adding up, because the mainstream media keeps telling us that the global economy is doing just fine.  In fact, the Federal Reserve is so confident in our “economic recovery” that they are getting ready to raise interest rates.  Of course the truth is that there is no “economic recovery” on the horizon.  In fact, as I wrote about yesterday, there are signs all around us that are indicating that we are heading directly into another major economic crisis.  This staggering decline of the Baltic Dry Shipping Index is just another confirmation of what is directly ahead of us.

Overall, the Baltic Dry Index is down more than 60 percent over the past 12 months.  Global demand for shipping is absolutely collapsing, and yet very few “experts” seem alarmed by this.  If you are not familiar with the Baltic Dry Shipping Index, the following is a pretty good definition from Investopedia…

A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea. The Baltic Exchange directly contacts shipping brokers to assess price levels for a given route, product to transport and time to delivery (speed).

The Baltic Dry Index is a composite of three sub-indexes that measure different sizes of dry bulk carriers (merchant ships) – Capesize, Supramax and Panamax. Multiple geographic routes are evaluated for each index to give depth to the index’s composite measurement.

It is also known as the “Dry Bulk Index”.

Much of the decline of the Baltic Dry Shipping Index is being blamed on China.  The following comes from a Bloomberg report that was posted on Thursday…

The cost of shipping commodities fell to a record, amid signs that Chinese demand growth for iron ore and coal is slowing, hurting the industry’s biggest source of cargoes.

The Baltic Dry Index, a measure of shipping rates for everything from coal to ore to grains, fell to 504 points on Thursday, the lowest data from the London-based Baltic Exchange going back to 1985. Among the causes of shipowners’ pain is slowing economic growth in China, which is translating into weakening demand for imported iron ore that’s used to make the steel.

So many of the exact same patterns that we witnessed back in 2008 are playing out once again in front of our very eyes.  Below, I have shared a chart that was posted by Zero Hedge, and it shows how the Baltic Dry Shipping Index absolutely collapsed in 2008 as we headed into a major financial crisis.  Well, now the Index is collapsing again, and it is already lower than it was at any point back in 2008…


Booms and bubbles always seem to happen this way....

1999---"Hey Dennis, have you invested in the new Internet stock everyone is buying?  It's up over 800% and they say it's going to do that every year for the next ten years!"

.....and then the crash happens.....

2006---"Hey Dennis, have you bought that 2nd lake home yet?  Real estate is going crazy and the house we bought 4 years ago on Lake Candy has already doubled!  Real estate values are always going to go up because they aren't making land anymore!"

.....and then the real estate crash happened putting millions of Americans upside down and foreclosed upon....

2011---"Hey Dennis, have you been putting all your money in gold yet?  You know gold has been a perfect storehouse of wealth for generations and it's never been worth nothing!"

....and then the gold crash of 2011 through today is still unfolding....

Some day, maybe soon, we will hear, "Wow!!  I can't believe America fell into such a depression! And the rioting in the streets has to stop!!  Who could have guessed that creating money out of thin air using QE 1, QE 2, QE 3, and QE 4 could have led to such a mess!  Shoot, the stock market was soaring for 6 years in a row....yea the banks were at 0% interest for the first time ever....but we thought that was cool because our car loan, boat loan and camper loan were super we can't even give our camper and boat away...."


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