Economics - again -

[I have WHAT in my yard?]

Anyone else who is interested in econ getting that hinky feeling that something ain't right??

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??

 

[Ridgerunner]

I don't know if you have a correlation or not. For a while people were correlating what the market was going to do based on whether the American or National conference won the Super Bowl. Can you tell I am a cynic?

I think right now with the recommendations from the committee to balance the budget, the uncertainty of possible tax cut extensions, the uncertainty about what message the voters actually sent and what message was received, the uncertainty in Europe (think Ireland this week), and all the other unknowns, the institutional investors that drive the Dow don't know what to do.

 

[I have WHAT in my yard?]

Yeah, which is why its climb is unnerving.

The main reason I watch the Baltic is because it is one of the few market indicators that cannot be manipulated. Either things are shipping or they are not.

 

[Ridgerunner]

I wasn't familiar with it, but Baltic Dry is a look at dry bulk shipping rates. I agree things are either shipped or not, but shipping rates can change based on supply and demand.

Suposedly several new build dry bulk carriers were to come on line this year, specifically Chinese, Japanese, and South Korean. I don't know if they did or not. Perhaps the demand for bulk carriers is down because the supply of bulk carriers is up. In other words, shipping rates drop because there are more vessels competing for the same contracts, even if the overall tonnage shipped is growing.

The worldwide grain harvest is down several metric tonnes this year. Less grain to ship means less ships are needed to ship it. Instead of the fleet being at capacity, some vessels are idle. It costs a lot of money to maintain a supertanker, whether it is working or not. To keep one working, you go in with low bids. Shipping rates drop. The Baltic Dry drops.

Looking at simple indices is very risky. A whole lot of institutional investors look at what I call funny money. Earnings is a great example. If earnings drop, investors run. Disaster is striking. But if a company takes money out of cash flow, which hammers earings, to build a new manufacturing plant or fund a surge in R&D, the stock price drops significantly. Once that plant or R&D is ready, earnings and profits can take off, really raising stock proces and dividends. But investors are not looking at the long term. They are looking at next quarter's dividends or stock price, not predicted longterm results.

 

[welsummerchicks]

I hesitate to rely overly on indexes, I like to look at many different measurements, including indexes.

And too, right now, everyone knows that we are not exactly jetting to Eden. More like still trying to climb out of a dark hole.

And I also keep track of which market watchers, and how many, think we're in for a double dip, and how many think we aren't. To an extent, deciding if we are falling back into the pit or just slipping a little on our way out, is opinion more than anything else.

I also look at how easy it is for me and my friends to get a job. When the market looks bad, they can't get a job because there are no interviews to go to, or because someone doesn't like how they answer one question, or they comment on the color of their socks should be closer to the same blue shade as their suit. When the market is good, they can go in there and talk like Kal Pen talked to Fred Willard in his medical school interview in H&K Go to White Castle, and still get a job.

I think any index can be misunderstood, and I think all have pluses and minuses, Baltic as well as everything else.

 

[bakerjw]

IMHO there is a lot of market manipulation. It used to be that the DOW was an indicator of performance but seems to be a tool to drive public opinion about the economy. People see numbers going up and think that things are going well.