The Baltic Dry Index: A Solid Gauge of Global Economic Health

Tony Daltorio, Investment U Research

Funny how bulls and bears can look at exactly the same data, yet come to completely different opinions.

Take the Baltic Dry Index, which measures charter rates for ships carrying bulk commodities, for example.

Bulls use a high reading as proof that worldwide demand is picking up, whereas bears see it in a more pessimistic light. And with the index down nearly 50% from its June 3 high, bears claim it shows the fragility of demand in China, which drives much of the global demand for commodities.

But I believe the Baltic Dry Index is a key gauge of global economic activity. And it begs two questions. What is it doing and how can we make money from it?

The Baltic Dry Index & China’s Commodity Demand

The bulls

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The trade deficit in July came in at $32.0 billion -- a significant increase from the $27.5 billion in June. The consensus expectation was that it would be close to unchanged. Since the trade deficit is a direct input into GDP (net exports), this will moderately reduce the expected growth rate for the third quarter. There was, however, some good news in the report: both imports and exports rose, imports just rose faster. Trade now seems to be in a sustainable uptrend, after falling off a cliff in the second half of last year and then stabilizing in the spring. This can be seen in the first graph below (from http://www.calculatedriskblog.com/). A year ago, the trade deficit peaked at $64.9 billion on much higher levels of both imports and exports. The world-wide slowdown has dropped our exports by 22.4% from $164.4 billion to $127.6 billion this year, ...

Perhaps there is no industry more sensitive to global economic activity than the international shipping industry. The financial crisis became a category 5 hurricane last September and blew the entire global shipping industry off course. All sectors of the shipping industry were affected – from oil tankers to dry bulk shippers to container ships.

The sudden drying-up of credit, including trade finance, and collapsing trade volumes have changed the industry’s concerns completely. Only a year or so ago the concern in the shipping industry was whether the infrastructure of many countries, especially port facilities, was expanding rapidly enough to handle break-neck growth in shipping traffic volumes.

As shipping rates have plunged, the concern now is whether the bottom in the shipping industry has been reached or whether there is further to go on the downside. The good news is that “green shoots” are appearing – again ships are waiting in lines at

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Nordic American Tanker – Income and More

Tony Daltorio, The Investment U Research Team

One sector that is extremely sensitive to global economic activity is the international shipping industry.

As the financial crisis turned into a category 5 hurricane last year, it blew the entire global economy off course –and along with it, the shipping industry. The sudden drying up of credit, finance institutions and collapsing trade volumes led to a sharp drop in shipping rates.

Fast forward to today, and we’re now seeing ships being backed-up in Chinese and Australian ports: demand is rising.

If these are indeed signs of a bottom, then we need to look for companies positioned correctly in the right shipping sector. And this is important, because each sector in the shipping industry – container, dry bulk, and oil – is fundamentally different from the

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The markets finally took a long deserved breather today, but not before rallying near the closing bell to cut the days losses in half.  The Dow Jones Industrial average was down 65.63 to 8,675.24 for a loss of 0.75% on the day.  The Nasdaq Composite and Standard and Poor’s 500 lost 10.88 and 12.98 respectively to close at levels of 1,825.92 and 931.76 representing losses of 0.59% and 1.37%.  The broader U.S. equity market had turned in five straight days in the green and many market participants saw this one coming.

The biggest piece of news for the day came from the Federal Reserve’s Chairman Ben Bernanke and his comments regarding the monetary policy, fiscal policy, and national debt levels.  Bernanke gave a speech to the House Budget Committee and urged them to take responsibility when it comes to the handling of the countries finances.  He says that using the

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The world’s shipping industry has been beaten hard over the past six months. But news reports out this week are proving the sector may be on the rise. Excel Maritime (NYSE:EXM) surprised analysts today. Who’s next?

We are just a few hours away from the start of a holiday weekend. Along with about 50 million other Americans, I am headed to the beach. Not only will it be a great opportunity to spend a few days with my family, it will be a shot at an accurate gauge of the nation’s economy.

In case you did not know, I have spent many, many days plying the nation’s offshore waters in search of anything with fins. It just so happens some of the best fishing grounds are smack dab in the middle of the shipping lanes that point to Philadelphia.

One of my time-killing tactics between bites is to study the shipping traffic

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USA, General Motors and the state of California all to go Bankrupt

As GM goes… so goes America…

Uh oh…

Stocks rose yesterday; the Dow went up 50 points. The bear market rally is still on. Oil touched the $60 mark… a sure sign, say analysts, that the global economy is picking up. And the dollar fell further… to $1.36 per euro. Gold held steady, at $912 an ounce.

While most stocks advanced yesterday, General Motors (NYSE:GM) backed up.

The experts say the company is going broke. “Chapter 11 looms,” says a Bloomberg report. Investors sold the stock down to $1.15 – a price GM hasn’t seen in more than 70 years. At that price you can buy the whole company for $700 million. Peanuts. Some fund managers earn that much in a single year.

Meanwhile, the USA follows the same downward slide as GM. Both are dogged by high debts, high costs and low

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The stocks of oil tanker companies are cheap…very, very cheap. But before moving into the heart of this investment observation, let’s gain a sliver of insight about the value of shipping itself.

The dividends of the old spice trade, for example, financed much of the architectural splendor of Venice, Italy. If you stroll the Piazza San Marco, a complex pattern of Istrian stone plays out beneath your feet. Nearby, grand palazzos and public squares show off a dazzling array of tall columns, carved marble, impressive domes and spires.

As William Bernstein tells us in his fascinating book, A Splendid Exchange, Venice’s dazzling look was built up “largely on profits from pepper, cinnamon, nutmeg, mace and clove.” Spices then were what oil is today. At its peak, cinnamon oil traded for its weight in gold. Venetian traders made fortunes. “Profits well in excess of 100% were routine,” Bernstein notes. “A typical

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Selling stuff you bought with borrowed money is a process that’s mostly been confined to the financial markets in 2008. But now we see the behavior migrating into the economy. At the household level, a collective sense of thrift is beginning to set in. People are selling what they don’t need to raise cash.

But let’s start with the financial news first. Macquarie Group (ASX:MQG) told investors yesterday that its profit fell by 43%, thanks to write downs in assets. It was the first time since going public twelve years ago the “Millionaire Factory” has reported an earnings decline. Still, the $604 million profit number was higher than what analysts were expecting ($594 million) and the stock finished up over 16.5% on the day.

In the revenue results and write downs you can see how the decline and fall of the investment banking model has hit Australian shores. MQG reported a

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Brite-Strike Technologies, Inc. (OTC: BSTI) has began to receive the publicity they were anticipating over the past couple months. In August, Brite-Strike formed an agreement with Natick-based BJ’s Wholesale Club, which is significant as sales were previously spurred by word of mouth and trade-show appearances. Brite-Strike recently raised $450,000 for an ad campaign that continues into the fall with 30-second spots on CNBC, CNN, Tru-TV and various other cable networks.

The company’s co-founder, police officer Glenn Bushee, is pleased to report that sales are increasing on different avenues, “Our Web site sales have probably tripled” he stated. The increase in sales can be attributed to the ad blitz via cable TV and a national newspaper began in August.

A bright spot for the company is the new found success with their new Tactical Balls products. The product consists of

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