BDI Crash Alert

Reading time: 335 words, 1 ½ pages, 1 to 2 minutes.

The Baltic Dry Index (BDI) has crashed for the last 13 days forecasting a major global economic downturn. Being a long-time logistics specialist, I have a special fondness for the BDI. Although money may be the life-blood of commerce, logistics feeds the world.

The Baltic Dry does not measure global shipping costs of finished goods on container ships. Instead, it measures shipping costs of raw materials that are the precursors to production like grain, cement, coal, iron, etc. As such it is an accurate barometer of global production and growth.

That makes it a reliable leading economic indicator. Because it changes before economies change, it predicts the direction and performance of economies. Unlike other leading economic indicators such as employment rates and Consumer Price Index (measures inflation), the BDI is unmarred by government statistical manipulation. And, unlike bonds or the stock markets, the BDI is devoid of speculative content. That’s why it’s the world’s most reliable leading economic indicators.

Yesterday, Zero Hedge’s Tyler Durden headlined it as, “Baltic Dry Collapses To Worst Start To A Year On Record” when the index plunged to 1061. Today it sank to 1029. See the chart below.

BDI 4-10-14

The BDI’s and the global economy’s trend is down as you can see from the chart above.

On January 30, I posted a “Collapse Forecast 2014”. On March 19, I warned about “China’s Collapsing Economy” and on March 23, I also warned about “Canada’s Next Great Recession”. And, on April 6, I wrote that “Demography + Debt = Doom”.

I take no pleasure in being right. Since 2007, I’ve been warning about global “Economic Collapse”.

Govern yourself accordingly.

Gerold
April 10, 2014

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About gerold

I have a bit of financial experience having invested in stocks in the 1960s & 70s, commodities in the 80s & commercial real estate in the 90s (I sold in 2005.) I am appalled at our rapidly deteriorating global condition so I've written articles for family, friends & colleagues since 2007; warning them and doing my best to explain what's happening, what we can expect in the future and what you can do to prepare and mitigate the worst of the economic, social, political and nuclear fallout. As a public service in 2010 I decided to create a blog accessible to a larger number of people because I believe that knowledge not shared is wasted.
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15 Responses to BDI Crash Alert

  1. Feb 2015, BDI below 500!!!
    Still the fed market engineering continues to prop up markets.
    Incredible.

    • gerold says:

      That’s almost surreal.

      I wonder how much longer they can prop up the markets? Time will tell, but when it lets go it’ll be an almighty crashing sound.

      Gerold

  2. gerold says:

    On another thread, Ken, wrote, “Is the below information correct regarding Canadian bank accounts? My only other question is when this train wreck ends will any bank account go untouched or would everyone’s hard earnings be wiped out in a collapse and what happens to those individual’s that are holding debt, mortgages, lines of credit etc. ?”

    “Technically, when people deposit money into a bank they are turning over their property to that institution in return for a debt claim. The money is no longer theirs: it belongs to the bank. They become an unsecured creditor holding an IOU. This means that banks can legally refuse to return someone’s money on the spot, at least until the conditions of their agreement (that fine print when you open an account) have been completed.”

    Gerold’s response:
    Good questions, Ken. Nobody knows the specifics and they will vary depending on country, account and type of debt. The last so-called Financial Crisis saw insolvent banks (including Canadian) bailed out by taxpayers. The next one will probably be bailed-in by bank depositors and pension accounts.

    In the Cyprus beta-test bail-in, high-percentage bail-ins were restricted to $100,000 or more. This effectively killed small businesses and much employment. Smaller depositors, after being locked out for weeks, were then restricted to small withdrawals. However, the currency remained the same and so did debts.

    Next time, during what Jim Sinclair calls the ‘Great Levelling’ (about 2016), bail-ins and pension confiscation (conversion to failing bonds) will rob most people of financial assets. In other words, we need to take money out of the banks, financial instruments and pensions, and convert to hard assets that governments cannot confiscate.

    During what he calls the ‘Great Reset’ (about 2020 i.e. after 4 years of turmoil and theft) they’ll issue new ‘funny muney’ at an unfavorable exchange rate. This will effectively turn debtors into life-long debt-slaves because the unfavorable exchange rate will INCREASE the size of debts, loans, mortgages, etc. when converted into the new fiat currency whose life expectancy will be measured in years rather than decades because ultimately it’s all based on confidence which is rapidly disappearing. Then, rinse & repeat.

    Impulsive Amerikans will riot and die; complacent Canadians will write letters to the editor. Neither will do any good. Best to keep a low profile, mouth shut and get along with the neighbors.

    This is why we need to get out of debt and into hard assets like food, durable essentials, gold, silver, guns, ammo, fishing, hunting & survival gear, bicycles, gardens, paid-off mortgages, farmland, etc. etc.

    Forget retirement. Don’t bother learning to speak Mandarin because China will crash harder than Japan did. Learn to play a musical instrument.

    Be of good cheer. Life will go on, but it’ll be interesting.

    – Gerold

  3. GBV says:

    Gerold,

    Some “chart porn” from the Automatic Earth for your consideration:

    http://www.theautomaticearth.com/debt-rattle-apr-11-2014-manipulated-markets-and-the-empty-bag/

    Summer crash or no, I believe I’ll start increasing the timetable on my plans to remove as much of my wealth from the system before it collapses…

    Cheers,
    -GBV

    • gerold says:

      Thanks, GBV. Excellent article!

      And, “chart porn” … never heard the phrase before. I like it.

      A picture is worth a thousand words. The article has some scary charts.

      – Gerold

  4. Ken says:

    Hi Gerold
    I would like to add the below paradox, It speaks so clearly about the time we live in today.

    The Paradox of Our Time

    We have taller buildings but shorter tempers; wider freeways but narrower viewpoints; we spend more but have less; we buy more but enjoy it less; we have bigger houses and smaller families; more conveniences, yet less time; we have more degrees but less sense; more knowledge but less judgement; more experts, yet more problems; we have more gadgets but less satisfaction; more medicine, yet less wellness; we take more vitamins but see fewer results. We drink too much; smoke too much; spend too recklessly; laugh too little; drive too fast; get too angry quickly; stay up too late; get up too tired; read too seldom; watch TV too much and pray too seldom.

    We have multiplied our possessions, but reduced our values; we fly in faster planes to arrive there quicker, to do less and return sooner; we sign more contracts only to realize fewer profits; we talk too much; love too seldom and lie too often. We’ve learned how to make a living, but not a life; we’ve added years to life, not life to years. We’ve been all the way to the moon and back, but have trouble crossing the street to meet the new neighbor. We’ve conquered outer space, but not inner space; we’ve done larger things, but not better things; we’ve cleaned up the air, but polluted the soul; we’ve split the atom, but not our prejudice; we write more, but learn less; plan more, but accomplish less; we make faster planes, but longer lines; we learned to rush, but not to wait; we have more weapons, but less peace; higher incomes, but lower morals; more parties, but less fun; more food, but less appeasement; more acquaintances, but fewer friends; more effort, but less success. We build more computers to hold more information, to produce more copies than ever, but have less communication; drive smaller cars that have bigger problems; build larger factories that produce less. We’ve become long on quantity, but short on quality.

    These are the times of fast foods and slow digestion; tall men, but short character; steep in profits, but shallow relationships. These are times of world peace, but domestic warfare; more leisure and less fun; higher postage, but slower mail; more kinds of food, but less nutrition. These are days of two incomes, but more divorces; these are times of fancier houses, but broken homes. These are days of quick trips, disposable diapers, cartridge living, thow-away morality, one-night stands, overweight bodies and pills that do everything from cheer, to prevent, quiet or kill. It is a time when there is much in the show window and nothing in the stock room. Indeed, these are the times!”

    • gerold says:

      Indeed, Ken, we live in paradoxical times.

      This particular piece has been variously attributed to George Carlin, the Dalai Lama, Jeff Dickson, an unnamed Columbine High School student and Anonymous.

      According to Snopes.com http://www.snopes.com/politics/soapbox/paradox.asp it’s author is Dr. Bob Moorehead, former pastor of Seattle’s Overlake Christian Church.

      He certainly captured the paradoxical nature of our Zeitgeist and it’s worth contemplating.

      – Gerold

  5. GBV says:

    Martin Armstrong seems to be pushing a 2015.75 (i.e. September 2015) downturn, but I could certainly see stock market crashes occurring before then.

    Gerold, just curious why the call of July? I usually find everyone farts off to their cottages and summer homes and defers any issues until September. There’s a great chart out there somewhere that shows the frequency of financial crashes by month and September is a doozy.

    Cheers,
    GBV

    • gerold says:

      You’re right, GBV; summer is an unusual time for a stock market crash which is why I haven’t issued an alert yet.

      There seems to be a recurring pattern with the fractal number 64 (months) that requires more investigation before I sound the alarm (or not).

      Several contradictions at work here. Our owners through the President’s Plunge Protection Team are working overtime to expand the money supply (albeit to less and less effect which is why they’re ostensibly ‘tapering’) and keep interest rates low which drives yield-seeking investors out of bonds and into risky and, presently over-priced stocks.

      Working against that are;
      a) Thin volumes
      b) Record high margin debt
      c) Expansion of Wi-Fi and on-line trading diminishes cottage-bound brokers and increases the likelihood of panic

      I will continue investigating.

      – Gerold

  6. Ken says:

    Hi, Gerold
    I was wondering if this below article is credible regarding Russia, China and the Bricks discontinuing trade with the Petro Dollar. Will this not have a huge impact going forward? As these countries are moving at rocket speed to discontinue its use and you know how in Canada we are in bed with our largest trade partner, which I assume means we are attached to the USD at the hip.

    The Reckoning: “All Evidence Points to US Economic Failure in 2014″
    http://www.shtfplan.com/headline-news/the-reckoning-all-evidence-points-to-us-economic-failure-in-2014_04112014

    • gerold says:

      Good points, Ken and good question.

      Some background: the ‘petro-dollar’ U.S. reserve currency was created when the U.S. convinced Saudi Arabia followed by other OPEC nations to sell their oil in U.S. dollars. You’ll notice that all commodities are priced and sold in U.S. dollars.

      This increases the demand for the dollar and artificially makes it strong. It artificially created history largest middle class which artificially supported the massive U.S. economy, 70% of it based on middle-class consumers. It artificially finances the Amerikan global military machine, advances U.S. imperialism, financial speculation and corporate takeovers. Central banks world-wide recycle U.S. dollar inflows into U.S. Treasury bonds thus artificially financing Amerika’s burgeoning debt.

      That’s a lot of artificiality! With the U.S. dollar weakening, all this has begun to reverse; it fueled the last recession which is still continuing, the decline of the U.S. middle class, loss of global military power and U.S respect, etc. Amerikan economic sanctions against Russia are backfiring as the EU realizes it has the most to lose and Amerikan abuse of their reserve currency is driving allies away.

      Here’s a perspective you won’t hear from our ass media. Iraqi dictator Saddam Hussein created a ‘gold dinar’ and started selling Iraq’s oil for gold rather than U.S. dollars. Libyan dictator Muammar Gadhafi created gold coins for pan-African trade. Both small countries were invaded under artificial pretexts supported by the ass media (non-existent weapons of mass destruction, brutal dictator, etc.). Their leaders were hunted down, captured and murdered as a warning to other nations to support the U.S. reserve currency.

      It bought some time, but didn’t last long. Russia and China are starting to trade in their respective currencies. This bilateral ruble/renminbi trade weakens the U.S. dollar. Other countries like India, Iran and Brazil will jump on board. Small, weak countries like Iraq and Libya could be invaded but invading all the BRIC’s would start WW III. In both cases, Amerika loses.

      All the artificiality is unravelling. Countries artificially created after both World Wars are splitting apart. Globally, we see protests against even democratically elected governments due to austerity, rising food prices and lowered living standards.

      Shale fracking is temporary, expensive and output declines fast. Most U.S. petro-majors are on the sidelines waiting for higher oil prices to make future production profitable. This will drive up energy costs, make distant suburban McMansions worthless, hurt the so-called housing recovery and increase job losses.

      Yes, the U.S. is still Canada’s largest trade partner. As goes the U.S. so goes Canada. The U.S. middle class is disappearing and so are Canada’s customers.

      2014 will see the cracks widen and deepen. I expect a stock market crash this summer, but the massive U.S. economy still has a lot of momentum that should carry it beyond 2014. Jim Sinclair expects the Great Leveling in 2016 and the Great Reset in 2020 but these things are difficult to predict to an exact year.

      Keep preparing for the inevitable.

      – Gerold

  7. Michael says:

    I’d also have to agree with you and Ken Gerold. The fact that both margin debt for stock traders and covenant lite loans for companies are well over 2007/08 levels and still rising, tells me that major crash (correction according to the ASS media) is already pre ordained, all that is needed is a catylyst (Japan?). I’d also think that because of this, a major correction would be self sustaining due to the amount of margin calls and company bankruptcies that would occur. It will be interesting viewing when (not if) it occurs. Thanks for the posts and keep up the good work.

    • gerold says:

      Michael, you’re right on both counts of margin debt and cov lite loans.

      In fact, I’m doing some research on the fractal number 64 where we seem to have stock market crashes about every 64 (sometimes 65) months. That would put the next one in June (or July at the latest). I’m leery about the timing of a crash, so I need to do some more work on this but if it’s not imminent, it is inevitable and the next one’s gonna be memorable!

      – Gerold

  8. Ken says:

    Hi, Gerold
    You definitely can see the freight train coming. I think we are very close to a Global and societal collapse, I hear struggles from people of all demographics daily, most are not even getting by pay check to pay check any longer. As the old saying goes when people loose everything, they loose it. My grocery bills alone tell me this cannot go on much longer.

    Take Care My Friend
    Ken

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