Baltic Dry Shipping Index Drops to 3 Month Low

posted by Nima

August 21, 2009 · Posted in Investing 

Today the Baltic Dry Shipping Index dropped to a 3 month low:

baltic-dry-index-200908

This certainly does not bode well for commodity bulls. On a related note, please consider Commodities Poised to Crash Again Soon?.

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Comments

6 Responses to “Baltic Dry Shipping Index Drops to 3 Month Low”

  1. Daniel on August 21st, 2009 4:14 pm

    Commodity bulls can be bullish for two reasons. One reason is that commodity supplies are dropping and, once the economy prospers again, there will be a huge demand for commodities. The other reason is inflation.

  2. Nima on August 21st, 2009 4:18 pm

    And what if

    a. the economy does not prosper again for a long time?
    b. inflation simply ain’t happening, but instead its opposite, deflation, keeps persisting and accelerating?
    c. commodity demand falls faster than its supply?

  3. Daniel on August 21st, 2009 4:35 pm

    a) That’s not necessarily a reason to not be bullish. But it does bring into question the preferability of opportunities elsewhere.
    b) Inflation is happening but the banks havent lent the money out, thus, the price deflation. The question is: will Bernanke raise interest rates when prices go through the roof after the banks do start lending? Commodity bulls are calling his bluff.
    c) It has, but will it fall more than what is has?

    Also, the assumption is that commodities will go through the bull/bear cycle.

  4. Nima on August 21st, 2009 4:53 pm

    Just one thing regarding deflation, which is another thing some Austrians are confused about:

    There is not price deflation here, bank money inflation there, this inflation here, and another deflation there. There is only credit inflation/deflation and monetary inflation/deflation. Together they form inflation/deflation proper. Thus right now we are in deflation, plain and simple, along with all its effects on prices, interest rates, consumption, etc…

    For more on this see http://www.economicsjunkie.com/inflation-deflation-revisited/
    and http://www.economicsjunkie.com/total-us-credit-and-loans-how-much-contraction-since-peak/

  5. Daniel on August 21st, 2009 8:42 pm

    What are you talking about? “Price deflation” is a euphamism for falling prices. By saying that there is not “price deflation”, you are implying that prices do not fall.

  6. Nima on August 21st, 2009 11:12 pm

    What are you talking about? “Price deflation” is a euphemism for falling prices. By saying that there is not “price deflation”, you are implying that prices do not fall.

    - Come on, you know better than that … where in the world did I say prices are not falling? I was merely questioning the term price deflation, that’s all.

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