In the dictionary, next to word "Ugly" — is the Baltic Dry Index: Down 85% peak to trough, down 79% YTD.
Can you say Global Recession? I knew you could!
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof. —John Kenneth Galbraith
Putting aside its incredible product line and pipeline of more, its still attractive valuation relative to earnings, and its $100 per share of cash that may be used for a dividend soon, Apple's stock has gone parabolic. And, parabolic moves always end one way, back to the place where the parabolic move began. Now, AAPL can of course power higher to who knows where in this move but the largest market cap stock in the world has now entered a tenuous phase, strictly technically speaking. But I digress. German investor confidence, the ZEW, in the next 6 months rose back...
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October 16th, 2008 at 12:07 pm
The LOC market is now closed for business. See you next year or five.
October 16th, 2008 at 12:12 pm
“Can you Global Recession”
Is that a dance, like the Monster Mash?
October 16th, 2008 at 12:14 pm
Oh, good! Less cheap crap from China in the stores. Yay!
I hate cheap crap from China…
October 16th, 2008 at 12:16 pm
Funny you should ask that, Barry.
SPECTRE of deflation is announcing The Global Recession on Steroids: Living in Caves on Scraps and Gathering Fungi, Roots and Berries.
Seriously SPECTRE is right about a lot of things. Lending is frozen and it is not going to open up until people can get a much higher return, so the end of the era of easy money is officially here. It’s going to be a good thing to have piles of cash if you want to buy a car. A job will be useful too.
That graph is some serious cliff diving. If only that were the end of it. Unfortunately there are new problems ahead of us and I don’t mean the stock market.
October 16th, 2008 at 12:17 pm
Donna, it will be a real surprise when the cargo ship docks and is ready to be offloaded and we find they literally sent us shit to make a point.
October 16th, 2008 at 12:20 pm
Isn’t that turning into another one of your contrary charts?
Pushing 3-5 year lows there
October 16th, 2008 at 12:21 pm
Undoubtedly, shippers have priced in a global depression that is led by developed emerging markets, ie BRIC.
October 16th, 2008 at 12:22 pm
leftback, ya but my cave has carpet and central air and we eat porcini mushrooms and not fungi. :>)! I also have plenty of cash because anyone who has studied history knows cash is king.
October 16th, 2008 at 12:22 pm
Balderdash! Ex-Wall Street Mortgage Bond traders are stowing away in the ship’s hold – taking up all that space where stuff used to go – to escape to Dubai, Mumbai, Shanghai, etc.
October 16th, 2008 at 12:24 pm
Donna – not likely. The BDI is “dry” freight – ores, oil, grain, etc. Freight shipping is extremely cyclical. Isn’t the rule something like one good year in a 5 year cycle? It boomed in 2007, will be about mid level this year, so 2 -3 years down? Coincides with 2 year estimate some say until recovery.
October 16th, 2008 at 12:26 pm
I can Global Recession! How about you?!
Yeeeeeeaaayyyy Team!
October 16th, 2008 at 12:33 pm
SPY gonna look like that chart, heading for the ’02 lows
October 16th, 2008 at 12:39 pm
Of course, the result of this cliff dive (which is also seen in the price of many of the commodities shipped) will be a rapid drop in capacity investment, which will set up the next cycle.
October 16th, 2008 at 12:44 pm
global recession? Hell, no!
GLOBAL DEPRESSION!!!!
October 16th, 2008 at 12:45 pm
“I hate cheap crap from China”
you mean.. the computer you’re typing on, the tv you’re watching, a healthy percentage of your US corporation profits, the clothes you’re wearing, the hardware all throughout your house…. ?
You are the cheap crap from China Donna… we all are. We made them. Get used to it. Just hope and pray the don’t decide to quit shipping us stuff we can’t pay for.
October 16th, 2008 at 12:49 pm
“DOW SP500 Bottom October 2008 Market alert (signal, call, etc): we interrupt regular blogging to announce that the market has just given a second chance bottom signal for those who missed the bottomed last Friday:
11:14AM, October 16, 2008, we are at a stock market bottom.
A rally is around the corner. We do not know what justification they will give for it, but they usually do give explanations. Markets have nothing to do with those justifications!”
http://www.marketwarnings.com/2008/10/dow-sp500-bottom-october-2008-october.html
October 16th, 2008 at 12:49 pm
Flaccid is the word that comes to mind…
October 16th, 2008 at 12:53 pm
I guess that means people have stopped eating. If people have stopped eating, airfares will be cheaper. If airfares are cheaper more people will leave the country. If more people leave the country, the bankers will have to tax themselves to pay themselves. Works out nicely. . . until the international bankers impose an international tax on the pretext of saving us from some massive global threat.
October 16th, 2008 at 12:53 pm
“”Can you Global Recession”
Is that a dance, like the Monster Mash?
Posted by: a different chris | Oct 16, 2008 12:12:26 PM”
Shake it baby! Shake it!
LOL
October 16th, 2008 at 1:03 pm
It makes you wonder who was on the other side of that trade. Amazing..
October 16th, 2008 at 1:14 pm
That chart is a couple days out of date. BDI is at 1,506
October 16th, 2008 at 1:24 pm
It is certainly not a good sign for the world economy, but I think it is exaggerated: as shipping credit is frozen (as all the rest of international credit finance), the shipping transactions are probably also temporarily frozen.
To be true, also energy has dropped.
Ships are still sailing the seas and transporting goods, probably at sharply lower prices. But not -85% lower than a year ago.
This index is flawed,
This being said, a depression is priced in, the end of BRIC, the end of the world etc. In one year, we will probably look at this indicator and think “how could we believe these end of the world stories”.
Nice contrarian indicator
October 16th, 2008 at 1:31 pm
Steel…shipping..oil… all fantastic trend-trading sectors that every few years people forget and try to make a long term investment thesis around. I get spammed every other day from the Motley Fool focusing on DRYS…MOS…FCX etc..same deep cyclical trend stocks for the last 70% down. The Motley Fools incinerate more capital than 98% of traders out there, but they seem to get a free pass because they pretend their educating the public….marketing…marketing..marketing!
October 16th, 2008 at 1:37 pm
Barry, put up a ten-year chart. It’s still a dive, but you get more perspective.
ScottB
October 16th, 2008 at 1:38 pm
Doh! Scratch that last one. It’s ugly any way you look at it.
ScottB
October 16th, 2008 at 1:44 pm
@ SPECTRE said: “I also have plenty of cash because anyone who has studied history knows cash is king.”
You got that right, bro’. No debt and lots of cash. No arguments from me, SPEC, I have spent plenty of time reading Mish, who has had some brilliant insights, and the guys at Minyanville. I have learned a lot in the process. I have been expecting “peak credit” to happen and saving and planning for this for ten years, and it is playing out so far according to the Japanese deflation experience. I am the most bearish person I know, by the way – at least, I was in August.
We only differ in terms of what we expect to happen next. The crucial difference between us and Japan is they had net national and personal savings and chose to deflate assets gradually and absorb the unemployed into non-jobs as “window people”. But they were still printing and easing at the same time, and so there were problems with prices of everyday items. We have no savings and lots of debt so the only way to limit the severity of the recession is going to be government spending and currency devaluation.
If you think we are going to see 20% unemployed like the 1930s you are dead wrong. I have already lived this movie once in Britain in the 1970s, as sterling deteriorated, inflation reared its ugly head, taxes rose at the high end and the rich emigrated in droves. Still the country muddled along and descended into a kind of shabby gentility as many industries stagnated well into the 1980s. Life goes on, at a kinder, gentler more humble pace.
Carpet and central air? Porcini mushrooms? Most impressive… that’s obviously a quality cave you have there. Enjoy.
October 16th, 2008 at 1:50 pm
A little off topic but I’d love to see a post on how market bottoms form. I really thought we wouldn’t see the true bottom until next year, much lower from where we are now, such as the 02 lows and below.
I’ve heard a lot about backfill, etc and it looks like the market is trying to find a bottom.
Yesterday was odd, yes, the retail numbers were bad but who didn’t know they were going to be? Seems like that only showed up first hour or so of trading, the rest of the day, I don’t know. After all, it was the treasury sec. that said we were f’ed in September. Joe Blow isn’t going to go out and buy flat screens with home equity when he hears that stuff.
it just seems to me that much of the worst case scenario, not all, but much, is priced in.
Anyway, I’d just like to see a post on how bottoms form, I’m sure they are all different, like anything else though wouldn’t they have similar trends.
October 16th, 2008 at 1:53 pm
another way of looking at that chart is that we are unchanged over 3 years…
that’s something people seem to miss about HOUSE PRICES DOWN THIRTY PERCENT!!!!! they were up 100% first…
October 16th, 2008 at 1:56 pm
We know it’s coming:
It’s just pricing in the prrospect of an Obama presidency.
:)
October 16th, 2008 at 2:03 pm
@Ben:
I dont think there is any textbook bottom. No two are the same.
Usually the V shaped ones arent real bottoms.
I’d say key factors:
1. Succesfull retests of lows without making lower ones.
2. Succession of higher lows.
3. Alot of folks look for 3 up days in a row following a deep selloff, on rising volume.
October 16th, 2008 at 2:07 pm
@ Achtung Herr Erscheinung der Deflation! (Spectre of Deflation)
Dummkopf! Papiermarks ist der König!
http://en.wikipedia.org/wiki/Hyperinflation
October 16th, 2008 at 2:10 pm
mmm … I love broiled chicken
October 16th, 2008 at 2:13 pm
ben: subscribe to sentimentrader.com. Jason Goefert has posted numerous historical studies on market bottoms.
October 16th, 2008 at 2:16 pm
I-Man,
Interesting. Seems to me the volume really is a key indicator. All these sell-offs and run ups have been on weak volume.
It seems like that has been going on all year on the ups signaling that we were going back down.
October 16th, 2008 at 2:19 pm
leftback @ 1:44:17 PM
“If you think we are going to see 20% unemployed like the 1930s you are dead wrong. I have already lived this movie once in Britain in the 1970s, as sterling deteriorated, inflation reared its ugly head, taxes rose at the high end and the rich emigrated in droves”.
I agree with the foregoing, except for the last part (rich emigrating). At least in principle, taxes are imposed on “world income”, regardless of where one lives. However, I think the loophole is that if you route your transactions through a foreign corporation, and don’t repatriate the money, you can defer the taxes.
October 16th, 2008 at 2:23 pm
One other thing about volume, read a dougie kass post today, volume trends are similar right now to what they were in July 2002.
Now can some of you bears put me in my place. I’m not ready to move to the cave yet and I’ve got no mushrooms. I do have cash though.
October 16th, 2008 at 2:24 pm
@ Geert said:
“This being said, a depression is priced in, the end of BRIC, the end of the world etc. In one year, we will probably look at this indicator and think “how could we believe these end of the world stories”. Nice contrarian indicator.
Right on Geert, this pretty much describes my state of mind today.
@ I-Man: Are you still in today? Oil is trading down at $69.69 (where is CNBC Sucks when you need puerile immature joke? I miss that guy, he is the best).
Watch out for the late selling wave, I-Man, energy stocks trade heavily in the last hour, up or down, and today it will likely be down.
Agreed on the “bottoming” process, especially:
1. Succesful retests of lows without making lower ones.
2. Succession of higher lows.
Looks like we are getting there. You are welcome to trading tomorrow. I am going to sit it out.
October 16th, 2008 at 2:26 pm
i think the term Recession is too harsh,
when a more accurate term like deppression
should be used given the sickening sell off
in everything that could be liquidated from
July until now.
October 16th, 2008 at 2:46 pm
@ Ben said: “Yesterday was odd, yes, the retail numbers were bad but who didn’t know they were going to be? Seems like that only showed up first hour or so of trading, the rest of the day, I don’t know.”
Spot on, Ben, the last hour has been odd. Large unregulated pools of capital, Ben. Hedgies are still in the process of dumping everything, there were so many funds that have had to unwind spectacularly bad trades with an incredible amount of leverage. Think about trading losses, leverage, no more line of credit, margin calls….
We will see one more substantial wave of this in January after investors get their eager hands on the Q4 results. Trust me on this, you have no idea how bad it is – it’s absolute carnage in Greenwich, they are all jumping out of the windows up there (luckily of course they are mostly 2-floor buildings) – hedge fund redemptions and a degree of 401K panic is the X factor that we have not had in previous bear markets.
Did you see my earlier post on “investing” v “trading” – in answer to your question yesterday? Here it is:
I wonder if Ben still thinks you can “invest” in this market? It’s a great idea to buy low and sell high but it seems to me that longer term investing is something you do when volatility is low, and trading is what you do when vol is high.
October 16th, 2008 at 2:55 pm
Oct. 16, 2008 – It is now official – senior citizens will get their largest pay increase from Social Security since 1982. The cost-of-living increase (COLA) will be an increase of 5.8 percent starting in January of 2009, the Social Security Administration announced today.
Remember, this happened under the Bush presidency. 76 million people are affected. This is very inflationary. The market did not like it. I don’t think this was an election year ploy; it was Berankie who won a battle with Paulson. Paulson is trickle down and Bernakie has become trickle up. Bernakie is smarter than I thought.
October 16th, 2008 at 3:00 pm
The Baltic Dry Index is falling partly because of the problems in the credit market affecting letters of credit. See my comment here: http://humblestudentofthemarkets.blogspot.com/2008/10/data-problem-commodity-rally.html
Also see: http://www.clusterstock.com/2008/10/global-traders-ask-why-ship-goods-if-we-won-t-get-paid-
October 16th, 2008 at 3:00 pm
Hey did you guys notice that the price of oil has dropped?
wasn’t that supposed to have been bullish?
Remember when the market would pop every day at 2:30 because crude went down a dollar?
Those were the days.
What if this volatility drops?
trading is going to be so boring.
October 16th, 2008 at 3:22 pm
Question for the deflation camp…
If the US were to default on its debts, how would that affect the inflation/deflation picture?
Thanks for all of your interesting (and varied) opinions.
October 16th, 2008 at 3:27 pm
leftback,
Yes, the hedge fund stuff is scaring me, much more than the 401k peeps b/c hedge fund investors are still actually reading statements. I feel like deja vu here. I remember early this year all the bank guys saying, we don’t need capital. I’m watching CNBC this morning and hearing about how the Citadel doesn’t need capital then I read about considerations to give these guys 25 billion in the same day.
I’m not sure about the 401k thing, certainly a risk but I think you might be surprised by what people do in there. Investory apathy seems to be setting in and instead of selling I think those folks become more the do nothings.
Case in point, I live in Delaware, when bac bought MBNA here a few years ago it became, I think, the largest employer in this huge state, you would not believe how many people are buying company stock in the BAC 401k because it “has to go up”
No I didn’t catch that other post but thanks for putting it on here. I’ve been sort of busy today so haven’t had a chance read through everything.
I guess my response would be that I don’t think you can “invest” unless you really do have a very long time horizon like I do. I say that because I keep trying and I’m ending up moving out of things quick, like I did Monday and my guess is the average “investor” isn’t paying as much attention as I am.
That said, I’m still going to build small positions here as I discussed so I guess we still call that investing.
Your point about investing working better with low volatility seems to make perfect sense if you use the last 10 years as an example. Lots of big spikes in the VIX, no growth in the market, buy and holders have lots of 10 year negative returns.
October 16th, 2008 at 3:28 pm
@ VT Trader: Look what you did… you started a rally on lower crude prices!!
BTW, air fares are back at fire sale prices, guys. AA has a 2-day sale – $412 round trip fares to Europe. Never thought I would see that happen so fast. Looks like we can heat the house and have a vacation this winter.
October 16th, 2008 at 3:33 pm
One other thing about the 401k investing. I think we sometimes underestimate the power of almost 30 years of being told that buy and hold works. I always notice that buy and hold charts start in or around 1977, almost never before.
Couple this with guys like WB buying an index fund saying it will beat those hedge fund traders over time and people like suze orman telling the masses to buy and hold people then treat a 401k with a passive approach.
All you have to do is look at big Vanguard is to realize how much people subscribe to buy and hold.
This is why the hedge hogs scare me much more than the 401k crowd.
October 16th, 2008 at 4:03 pm
@ Ben: Hedge hogs !! I like it…..
There is nothing wrong with 401K plans per se. The contribution and tax advantages are great – the problem is just the buy and hold mentality that people have for them because they are too stupid or scared to take charge of their money.
I have one with Vanguard and I made money in Europe and Japan funds from 2003-2007, then this summer I moved it into 2-year and 5-year Treasurys where it remained until quite recently. Of course most people don’t even understand the instruments available, so they are completely at the mercy of “professionals”.
October 16th, 2008 at 4:20 pm
@ leftback:
Yes, I’m still in.
I opened the following longs last friday and still have them:
BNI
QLD
Picked up ACI this morning for a day trade, but I just couldnt sell it going into the close.
I’ve been in the bottom camp, and I’m still in it. The touch off of the 2003 breakout that we saw on last Friday in SPY was just too beautiful in its simplicity for me to not act on it. I was surely doubting myself yesterday and earlier today, but I figured why not wait and see if we could retest the low and hold.
Today’s tape makes me feel even more certain that we’ve carved out a short term bottom and are due for a retest of the dominant downtrend. Should we stall there, as I expect, I will be closing my longs and looking to get another taste of SDS/QLD.
October 16th, 2008 at 4:27 pm
@ leftback,
you are exactly right about the 401ks. Vanguard is especially tough b/c a lot of the plans they admin. offer most, if not all Vanguard funds.
I think that is a few hundred options. Most people can’t look at 5 options let alone a few hundred so the end result is they buy the Wellington or Windor II or the Primecap or one of these deadly 2020 or 2030 or 2040 funds.
and then they never look at it.
October 16th, 2008 at 4:28 pm
Woops, thats SDS/QID…not SDS/QLD
On another note:
GOOG quarter looked pretty damn good. I cant remember if they give guidance or not. I think they dont.
Nonetheless, this should provide a nice catalyst for more buyers to come in tomorrow. A nice “organic” catalyst for a change!!!
October 16th, 2008 at 6:03 pm
Baltic Dry Index Heaves
October 16th, 2008 at 6:57 pm
There is nothing wrong with 401K plans per se. The contribution and tax advantages are great – the problem is just the buy and hold mentality that people have for them because they are too stupid or scared to take charge of their money.
I have one with Vanguard and I made money in Europe and Japan funds from 2003-2007, then this summer I moved it into 2-year and 5-year Treasurys where it remained until quite recently. Of course most people don’t even understand the instruments available, so they are completely at the mercy of “professionals”.
Posted by: leftback | Oct 16, 2008 4:03:53 PM
lb,
right you are. what’s worse is, it is a perfect metaphor for our dysfunctioning Republic, as well..
http://www.dominantstar.com/b_ten.htm
October 16th, 2008 at 8:34 pm
I have a question: the index measures shipping rates (prices), right? So does the drop perhaps measure (partly or mostly) the fall in the price of oil?
Or does it also largely reflect a drop in Chinese demand for dry materials?
October 17th, 2008 at 3:17 am
Love the Mr. Rogers reference.