Baltic Dry Bubble?

[zoog]

The Baltic Exchange Dry Index has been on an impressive tear this year.

http://img505.imageshack.us/img505/3889/bdiif9.gif (http://imageshack.us)

more charts here (http://investmenttools.com/futures/bdi_baltic_dry_index.htm)

Agora Financial a few days ago said (http://www.agorafinancial.com/5min/asian-markets-soar-the-baltic-drys-amazing-run-gold-900-foreclosures-double-and-more/):

The Baltic Dry Index quietly cruised through the 10,000 mark on Tuesday and furthered its record high to 10,281 today.

Unbeknownst to the average investor, this gauge of dry bulk shipping costs has rocketed an incredible 125% this year.

“In my opinion, ocean freight costs directly reflect global commodity demand,” said our resource man Kevin Kerr. “Even in the face of surging oil prices and the subprime meltdown, the Baltic index has skyrocketed. The index has been busting through records since May, all on the back of gigantic demand for natural resources in China and India. Not to mention there is a serious shortage of ships.


“I do not expect to see any dip in the upward curve for the Index,” predicts Kevin. “I expect 2008 to be an even stronger year for Baltic Dry index.”And from SafeHaven (http://www.safehaven.com/article-8600.htm):

While the bulls would claim that the new highs in the Baltic Dry Index (http://en.wikipedia.org/wiki/Baltic_Dry_Index) is still signaling immense growth, subscribers should keep in mind that the Baltic Dry Index is merely a coincident indicator of the global economy at best - as it is just a representation of spot shipping rates of dry, raw materials. That is, it is a representation of shipping rates for dry, raw materials that is being shipped right at this instant - raw materials that were bought as long as a few months ago, when prices were still high. The recent decline in base metal prices suggests that the Baltic Dry Index will also start to reverse and decline over the next several months.Ok, maybe not a bubble as iTulip defines one (:rolleyes:), but a short-term spike that looks unsustainable to me.

[FRED]

The Baltic Exchange Dry Index has been on an impressive tear this year.

http://img505.imageshack.us/img505/3889/bdiif9.gif (http://imageshack.us)

more charts here (http://investmenttools.com/futures/bdi_baltic_dry_index.htm)

Agora Financial a few days ago said (http://www.agorafinancial.com/5min/asian-markets-soar-the-baltic-drys-amazing-run-gold-900-foreclosures-double-and-more/):

And from SafeHaven (http://www.safehaven.com/article-8600.htm):

Ok, maybe not a bubble as iTulip defines one (:rolleyes:), but a short-term spike that looks unsustainable to me.

The first question we'd ask to determine whether it's a bubble is: How many trillions of dollars of securities out of Wall Street are riding on the Baltic Dry Index? If the answer is zero trillions, then no bubble.

Seems to us shipping got expensive because at $80+ a barrel energy made shipping expensive.

[Tet]

The first question we'd ask to determine whether it's a bubble is: How many trillions of dollars of securities out of Wall Street are riding on the Baltic Dry Index? If the answer is zero trillions, then no bubble.

Seems to us shipping got expensive because at $80+ a barrel energy made shipping expensive.
I think people are getting out and passing the bag, I'd say not bubble but blow-off top. How much of this is either China or Korea and from there you've got to ask the question will it be replaced by the new Siberian Railroad and I'd say it's a not a bubble but a blow-off top. South Korea and North Korea signed agreements to transit goods by rail through Russia, this knocks off one week of transit time for Korea to European markets. Those in the know are scrambling for the exits at higher prices, which is how Jesse Livermore made his living.

SKorean president calls Putin to explain inter-Korean summit

In the telephone conversation, the South Korean leader also told Putin that he believes last week's summit talks created "a new momentum" for efforts to link the inter-Korean railway to Russia's Trans-Siberian railroad, which many experts say will significantly cut delivery time for freight that now requires sea transport.

The two Koreas have reconnected two rail tracks and two adjacent roads on each side of the peninsula as part of reconciliation projects launched after their leaders held a breakthrough summit in 2000.

http://sg.news.yahoo.com/ap/20071009/tap-as-gen-koreas-russia-d3b07b8.html

[zoog]

I think people are getting out and passing the bag, I'd say not bubble but blow-off top.

Ah yes, this is the term I should have used. Fred seems to get a little twitchy when I casually throw around "bubble" for things that don't meet a rigorous definition. Though I'm tempted to substitute something inane like "turnip" a la Alfred Kahn's banana = recession.:)

Interesting info on the potential Korean rail link-up with Russia.

[GRG55]

The first question we'd ask to determine whether it's a bubble is: How many trillions of dollars of securities out of Wall Street are riding on the Baltic Dry Index? If the answer is zero trillions, then no bubble.

Seems to us shipping got expensive because at $80+ a barrel energy made shipping expensive.

I am not familiar with dry bulk shipping, but the bunker (fuel) charges for blue-water tanker shipments are usually pass-through to the customers and not a direct part of the ship charter costs. Someone should verify this, but I suspect the Baltic Dry Index is ship charter costs only and excludes bunker charges.