On Tuesday, the Baltic Dry Index suffered its biggest single day crash since record keeping began in 1984. What could be causing the index to drop? Fears of a recession, of course. This index is very important as it provides a benchmark for the moving price of major raw materials by sea (cargo shipping).
Commodities such as oil, copper and lumber are well below their highs and are a sign of coming economic slowdown. Now, the Baltic Index is also 'letting us know' that things are slowing down and rather abruptly if the sudden crash in the index is any indication. The chart below shows the index has been on a downward trajectory since the fall of 2021.
The Baltic Dry Index measures the costs of shipping goods worldwide and according to TradingEconomics.com, was down for the fourth straight session on Wednesday. The index is actually a composite of three sub-indices, Capesize, Panamax and Supramax.
Capesize measures cargoes of about 150,000 tonnes usually consisting of iron ore and coal. Panamax typically carry coal or grain cargoes in the 60,000 to 70,000 tonne range. The smallest sub-index is the Supramax index at capacities ranging from 48,000 to 60,000 tonnes. Together, the Baltic Dry Index accounts for 23 different shipping routes around the world which can include iron ore, coal, grains and other commodities.
While all thee sub-indices are down with Capesize at its lowest in 4 weeks and Panamax at its lowest since the first week of September, Supramax is hardest hit after shedding 56 points, sending it to its lowest level in 2 years.
As you can see from the long term chart below, the index was relatively stable from its inception in the 80s through the 1990s and into the 2000s. Things started getting really wonky as the index inched closer to what would became the Sub-Prime Loan Crisis and Panic Of '08. The sudden drop from its unbelievable highs over 11,000 all the way down to below 1,100 happened right around the time Lehman Brothers collapsed.
'Wonky' is putting it nicely.
After relative calm from 2011 onward , the 'wonkiness' reappeared in early 2019 and since then, the index jumped to a high over 5,000 and as you can see from the chart above, has only happened a few times in its history. The Baltic Dry Index is usually a bellwether of things to come. The historic drop of 17.5% it suffered on Tuesday is yet another sign that things are slowing down.
In a post I published yesterday titled, 'Jim Rickards: Rare convergence ahead', I wrote of how he sees a convergence of a severe recession and global liquidity crisis hitting at the same, hence 'convergence ahead'. He believes the grossly over-leveraged $1 Quadrillion derivatives market is teetering on the edge and could blow up anytime and it could happen this year. Central banks raising interest rates heading into a slowdown is not helping either.
Now, the Baltic Index is letting us know something is up. Never before have we faced such a crisis of global proportions. We could be facing a depression, 1930s style. A good way to make it through the coming turmoil is to educate yourself on how to survive and thrive in such times. Did you know that mining stocks went through the roof during that time, especially gold mining stocks?
Everything that is happening right now suggests to me that a commodity super-cycle is on the way. I'm keeping a close eye on silver which just yesterday and overnight, crashed for no apparently reason. Did the sudden drop in the Baltic Index have something to do with it? Maybe but likely had more to do with price manipulation by the paper markets. Regardless, the drop in the silver price presented yet another great opportunity to add a couple more ounces at reduced prices to my stack.
Silver went down a little further this morning as U.S. private payroll numbers have just been released with a 'surprise to the upside' per a breaking news article from Kitco News out this morning. I never believe their numbers. Did somebody say, 'cooked'?
Speaking of 'cooked', regarding the paper silver market, did you know they trade 100 years worth of mined silver every year? In other words, just like 'fake news', the paper silver market is also fake! It is physically impossible to trade real silver in such amounts. Why are they allowed to do this?
That's a good question!
Consider investing in precious metals, especially silver as it is underpriced by a factor of 75:1 against gold. Check out OwnX. I make small monthly purchases and cost average over time and so far, after many years with them (since their inception), I can honestly say they are reliable and trustworthy. They've held silver for me long term and I've 'cashed out' a few times and my silver was delivered to my door safely. Give them a try today and start stacking.
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