Tuesday, April 29, 2014

Dry Bulk Rates

Worldwide dry bulk shipping rates continue to grind lower. Last summers rise has evaporated and the continued grind to the downside must say something about the state of the world's economies. The bulk rates are influenced by the supply of ships of course, but after all this time the ships should have been scrapped as companies that were hard hit liquidate assets.
The straw that broke prices some time back was political developments in South America. One of those countries, I don't recall which, banned exports of ore and that sent the bulkers down.

The reason I mention this is that we may indeed be overpriced in the equity markets. Any strength in the world economies is almost certainly due to the stimulus of zero interest rate policies. (ZIRP)
And zero real interest rates are an attempt to stimulate consumption on top of a glut of debt that occurred in previous years. People need to save for awhile, and pay down their debt before there can be a REAL rebound in the broader economy.
Housing remains weak. The strength in automobiles is probably related to the replacement cycle that was put on hold in '08-'10. That will end.
Gadgets are strong. The little phones and computers that people can buy will run out of steam, just as the Nasdaq is running out of steam. How do these gadgets increase productivity anyway?
We have a big El Nino coming this summer. And the world population is still growing.
Russia has a madman at the helm who is not content to be a part of the world economy on economic terms only.
Is energy plentiful? The price keeps rising.
But dry bulk rates continue lower......

Chart from Dryships

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