Thursday, July 22, 2010

AFFECTS OF DRY INDEX


Billions invested to buy the toxic assets created wealth and profits for the Wall Street and global market. Pumping of money was made in such forms as if a big hole in the earth is being covered up by dumping soil. Great activity and a brave heart to spend trillion dollars of funds to buy fake deals and useless paper converted assets. Central banks across the globe came up with zero interest rates. Thanks to God since if anything was below zero then they should have applied. Zero interest rates and free flow of funds pumped up the global market particularly the stock market pulled up the funds and made the Indian and emerging browsers to the regime of 2007.Great gamble played and all activities of the culprits were covered up. This is really a fantastic system where if you kill thousand s of people across the world through financial weapons no one will punish you. Great going.
The World Stock Markets gained from US to China with small volumes of financial crisis earthquakes starting from Dubai to the latest one with Europe. We might have to wait and watch for some more countries to come out with similar tremors. Apart from the stock market the god blessed speculators who made their recoveries the world economic is still running very slow and very fragile for another round of dip. Now I am sorry to acclaim that IMF and World Banks are now very old and needs to have an eye operation to look into the real picture rather than simply increasing the forecast of world economy recovery.

Global trade is slowing up after the debacle of Europe. Trade is not slowing up by plummeting. Exports are also on the verge of death. Exports across the world have taken a hit and the biggest shocks will come from China and US. China was over heated so slowdown was eminent. But the global trade shrank more than 60%.

Proof of the pudding is in the Baltic Dry Index. Where the index proceeded to drop by more than 90% in the next six months. The index in question is called the "Baltic Dry Index," or BDI, and it once again merits a closer look: After peaking in May, the BDI has fallen for 35 straight days. So two points get clear that slow down have started way long back and the fall is continuous. A question which comes in the mind is that is IMF and World Bank taking these aspects in mind while generating outlook numbers.

If we check the index in 2008 we find a signal of global collapse was being displayed when the index was below by 90% at that point of time. The importance of the index is that it reflects the international trade in commodities because it measures seaborne freight rates, the cost of shipping bulk goods such as iron ore, coal and grains by sea.
In simple words more ships travelling more business happening if less it’s the sign of slowdown.
This time the number reflects and size of vessels being booked suggest that the fall in prices to transport seaborne freight and, correspondingly, the BDI, reflects weakening demand. If we look historic numbers of the index we will find clear positive correlation with the stock market and global economic outlook. In May of 2008 BDI hit its record high ever, 11,700 points, beginning its steep slope in mid-July. In Dec.5, 2008 it slumped to 663 pts, the Baltic Dry Index record low. In November, 2009 BDI gained 4661pts. As of July low. In November, 2009 BDI gained 4661pts. As of July 1st, Baltic Dry Freight Index settled at 2351 points, 55 points down from June 30th
Slowdown of demand reflects that manufacturing activity is not happening although we get the data of consumer sales etc. We should understand that good keeps in inventory is being consumed that have no connection with manufacturing. The real investments happen in manufacturing which increases the demand of consumption. Stock market is riding on the horse of speculators but there ride will last till the time they quit their portfolios. Once that happens the sell of and slow down trigger will be released.
Even if we ignore the index reading we still land up with some more hardcore analysis. China is slowing down and no immediate reasons are backing up that China will run as it ran in 2009.US is yet to come out and stand independently on its recovery foot. Europe is out of the battle due its frozen economic status for the next 3 years. So, global sales and consumption is now stagnant. The only country left is India and that’s too dependent on FIIs flow of currency .If business slows down in FIIs countries flow funds will get reduced and some pull back of funds will be made from Indian browsers.

The speculators who are seating on the sides and think that India is out of the trouble of slowdown of Balti Dry Index needs to have an operation of their speculative eyes.

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