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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Today, I’d like to play make believe by pretending we’ve just won $100 million with a Powerball ticket. I only suggest playing the lottery in Fantasy Land, of course. In real life I consider it the world’s most popular voluntary tax. But let’s just say we played, and things went our way. Our next big question should be how we’re going to invest our windfall. Oh, you’re worried about taxes? You shouldn’t be. This is Fantasy Land — there are no taxes! Back to our wonderful dilemma of how to invest the cash. Sure we could just keep it in cash equivalents. Heck, we should be able to scrape by even if we only make 1 percent a year on our lousy $100 million. Still that seems rather unfulfilling. So let’s ...

Is the rally over?

Not at all! The world’s bankers say the economy is recovering. Investors believe them; they’re bidding up stocks.

The Dow rose 155 points on Friday. And today, stocks are rising in Asia. Oil is over $74. Gold rose $13 on Friday…to close at $954. And the dollar is killing us softly…sinking to $1.43 per euro on Friday.

Stocks and oil are at their highest levels so far this year. With such profits at hand people figure they don’t need the dollar. Investors run to the safety of the greenback when financial storms approach. But now…they think it will be clear sailing.

“Worlds bankers suggest rebound may be under way,” says a headline at The New York Times.

Is the world economy really recovering? Should you buy stocks now to take advantage of this new bull market?

You already know the answer, dear reader.

After a fall comes a bounce. And along with the …

Is the rally over? Not at all! The world’s bankers say the economy is recovering. Investors believe them; they’re bidding up stocks.

The Dow rose 155 points on Friday. And today, stocks are rising in Asia. Oil is over $74. Gold rose $13 on Friday… to close at $954. And the dollar is killing us softly… sinking to $1.43 per euro on Friday.

Stocks and oil are at their highest levels so far this year. With such profits at hand people figure they don’t need the dollar. Investors run to the safety of the greenback when financial storms approach. But now… they think it will be clear sailing.

“Worlds bankers suggest rebound may be under way,” says a headline at the New York Times.

Is the world economy really recovering? Should you buy stocks now to take advantage of this new bull market?

You already know the answer, don’t you, dear reader.

After a fall

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GoldDrivers 2009 - Extraordinary Bullish Outlook For Gold Eric Hommelberg

Gold proves itself as only true alternative for the dollar Confidence in currencies shaken to the core Gulf countries are keen to break away from the link with the US dollar Chinese appetite for US debt in decline Former Bank of England official expects dollar collapse Investors fleeing into gold as US prints trillions HSBC, Citigroup, Merril Lynch, Goldman Sachs all turning bullish on gold Senior gold shares ready to move higher after impressive 100% bull run since October 2008 Junior gold shares waking up - bottomed out in December 2008

This piece is an update on “GoldDrivers

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by Edward Hugh: Barcelona"The Kazakh government is ready to step in,'' Kazakhstan's Prime Minister Karim Masimov said this morning in a telephone interview with Bloomberg "The Kazakh banking system with the support of the government and central bank will fulfill all obligations to international investors.....We have our own specific plan to survive without any external support....I don't think we need support from the International Monetary Fund or overseas.'' Well that is good news, so at least we know that one of the CIS and CEE economies won't be looking to the IMF for bail-out support in this crisis which is presently growing by the day. So Kazakstan, that country which is reputedly host to reserves of approximately 95% of the elements in the periodic table, with a population of around 15 million housed on a surface area greater than the whole of Western Europe, is going to be able to look after itself. But hang on a minute, just where is Kazakhstan, and just what have they been getting up to over there, and why the hell should I take Karim Masimov's word for it, when just about all the other Iceland Look-alike show contestants seem to be saying the same? After all, didn't those extermely bright and able young people over at RBC Capital Markets in Toronto say in a report only last week that, along with Latvia, the country's $100 billion oil-led economy is among the most vulnerable to the present global credit crisis and the skid-row economic trajectories that go with it simply because of its excessive reliance on short-term foreign borrowing. And isn't it the case that the cost of protecting Kazakhstan government debt against default has more than doubled this month - to over 1,000 basis points (or 10%), the level for borrowers that investors term ``distressed,'' according to CMA Datavision credit-default swap prices. Only Ukraine, which as we know is already seeking IMF support, is classified as being a bigger risk among European emerging-market governments. Surely all those highly dedicated, bright, and extremely able young people who are doing all that trading know what they are about, don't they?

Fresh off one of the most-volatile months ever for U.S. stocks, investors can’t be happy that they’re facing another October - the poster child for U.S. stock market crashes. Thanks to the stock market crashes of 1929 and 1987, October has a reputation for being a horrible month for stocks. But once you dig into the data, you find that October’s reputation as the "jinx month" might just be undeserved.

I am not sure why so many of you are bullish and for sure that you are “missing out” on some of the new gains of a fresh new bull market but last time I checked we have amazing charts in good strong bull markets. We don’t normally see the amount of distribution that litters the charting landscape right now. Normally, many charts, if you have hit a bottom, will be rallying on strong volume, with green to max green BOP, and with nice tight price action signaling that the weak flippers have left the stock market.

I know some of you do not like to hear this but China has been the leading index for years now. There GDP trumps our GDP and they are the industrial powerhouse now. The fact their index has fallen so much since the November top should be all the news. But I don’t here

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There is certainly a lot of commotion at the moment not least surrounding the rescue plan to shore up the two biggest US mortgage lenders Fannie and Freddie Mae, but also, and if we stay in the US we had the collapse of IndyMac, in Spain Martina-Fadesa is in the ropes and in Denmark we have Roskilde Bank. Especially, the last event prompted me into action as I decided to have a closer look at the Danish economy and where it might be heading. In many ways Denmark is similar to other credit crunch struck economies not least in the context of experiencing a severe unravelling of a housing boom. As we saw last week this is now beginning to have collateral damage. Yet, Denmark is also a bit different not least because the economy is going into this crisis with a positive balance both on the ...

by Claus Vistesen: CopenhagenStagflation, credit crunch, bank bails-outs, and housing market busts are all concepts that are unfortunately now becoming all too familiar to the current Danish economic discourse and indeed even to the Danish public at large as they read their morning paper over breakfast, or listen to the radio on their way to work. And not of course in their United States version, but rather in their homegrown variant. But just how serious is the construction and banking problem in Denmark?A quick initial glance at the short term data definitely suggests that a serious batch of storm clouds may well be gathering above the economy. Not only did Denmark claim the dubious honor of being the first economy in Europe to exhibit a technical recession but it was also recently handed its very own banking crisis à la Bear Stearns and ...