Daily Market Watch - Week of 2/23/09

Here is some good info on the BDI for you Bill.

The BDI is one of the purest leading indicators of economic activity. It measures the demand to move raw materials and precursors to production, as well as the supply of ships available to move this cargo. Consumer spending and other economic indicators are backward looking, meaning they examine what has already occurred. The BDI offers a real time glimpse at global raw material and infrastructure demand. Unlike stock and commodities markets, the Baltic Dry Index is totally devoid of speculative players. The trading is limited only to the member companies, and the only relevant parties securing contracts are those who have actual cargo to move and those who have the ships to move it. [1]



The run up from 2005 to the end of 2007 was primarily due to Chinese demand for industrial precursors to production and its shift from coal exporter to importer. There was also a shortage of supply for dry bulk cargo ships and a large backlog at shipyards. The combination of these two factors caused a nearly 200% gain in the index. From June through October 2008, the index lost 85% of its value as demand for shipping plummeted. This is due to a simultaneous convergence of several factors. Chief among these is the rapid slowdown in the "global growth" phenomenon. In addition to this, credit has been nearly impossible to get for the purchase of goods and the payment of time charters on the vessels.

Economic Implications

This index is one of the purest leading indicators of economic activity. It measures the demand to move raw materials and precursors to production. Consumer spending and other economic indicators are backward looking, meaning they examine what has already occurred. The BDI offers a real time glimpse at global raw material and infrastructure demand. This could also be gleaned from looking at commodity prices, but there are substitution effects and futures contracts that make it difficult to interpret the impact of commodity price fluctuations. Additionally, nearly all commodities are seeing severe increases in prices in 2008 regardless of supply situations as investors seek to hedge their inflation exposure with hard assets.

Dry Bulk Shipping Stocks

When an investor buys a dry bulk shipping stock, they are effectively buying into the Baltic Dry Index. The amount of exposure depends on the individual stock. Some companies, such as DryShips (DRYS), have most of their ships contracted out at the spot Time Charter Equivalent. This means that the contracts are directly correlated to the daily price of the BDI. Thus, their revenues are directly tied to the index. In times of increasing prices, this set up will yield greater profits for the shipper. Other companies, such as Diana Shipping (DSX), have contracts set at the period Time Charter Equivalent. This means that they enter into a contract, usually 2-5 years in length, which pays a fixed daily rate. This set up provides less volatility, hedges risk against falling BDI rates, and guarantees cash flows.


http://www.wikinvest.com/wiki/Baltic_Dry_Index

http://www.wikinvest.com/wiki/DryShi...Ships_Revenues

A lot of info on these wiki's, just be careful and confirm the info for yourself!!

Happy B-day Tony!!! :)

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Originally Posted by dread

Here is some good info on the BDI for you Bill.

The BDI is one of the purest leading indicators of economic activity. It measures the demand to move raw materials and precursors to production, as well as the supply of ships available to move this cargo. Consumer spending and other economic indicators are backward looking, meaning they examine what has already occurred. The BDI offers a real time glimpse at global raw material and infrastructure demand. Unlike stock and commodities markets, the Baltic Dry Index is totally devoid of speculative players. The trading is limited only to the member companies, and the only relevant parties securing contracts are those who have actual cargo to move and those who have the ships to move it. [1]



The run up from 2005 to the end of 2007 was primarily due to Chinese demand for industrial precursors to production and its shift from coal exporter to importer. There was also a shortage of supply for dry bulk cargo ships and a large backlog at shipyards. The combination of these two factors caused a nearly 200% gain in the index. From June through October 2008, the index lost 85% of its value as demand for shipping plummeted. This is due to a simultaneous convergence of several factors. Chief among these is the rapid slowdown in the "global growth" phenomenon. In addition to this, credit has been nearly impossible to get for the purchase of goods and the payment of time charters on the vessels.

Economic Implications

This index is one of the purest leading indicators of economic activity. It measures the demand to move raw materials and precursors to production. Consumer spending and other economic indicators are backward looking, meaning they examine what has already occurred. The BDI offers a real time glimpse at global raw material and infrastructure demand. This could also be gleaned from looking at commodity prices, but there are substitution effects and futures contracts that make it difficult to interpret the impact of commodity price fluctuations. Additionally, nearly all commodities are seeing severe increases in prices in 2008 regardless of supply situations as investors seek to hedge their inflation exposure with hard assets.

Dry Bulk Shipping Stocks

When an investor buys a dry bulk shipping stock, they are effectively buying into the Baltic Dry Index. The amount of exposure depends on the individual stock. Some companies, such as DryShips (DRYS), have most of their ships contracted out at the spot Time Charter Equivalent. This means that the contracts are directly correlated to the daily price of the BDI. Thus, their revenues are directly tied to the index. In times of increasing prices, this set up will yield greater profits for the shipper. Other companies, such as Diana Shipping (DSX), have contracts set at the period Time Charter Equivalent. This means that they enter into a contract, usually 2-5 years in length, which pays a fixed daily rate. This set up provides less volatility, hedges risk against falling BDI rates, and guarantees cash flows.


http://www.wikinvest.com/wiki/Baltic_Dry_Index

http://www.wikinvest.com/wiki/DryShi...Ships_Revenues

A lot of info on these wiki's, just be careful and confirm the info for yourself!!

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Hey Dread,

Really good information. DRYS is the best indicator to economic growth or slow down and that everything follows. The DRYS don't move, the world is at a halt and vice versa.

Lately they have been picking up, which is a really good sign.

I find that the problems associated with dry bulk shipping is pretty amazing also, especially port and vessel congestion where they cannot offload or backload. To me this kind of stuff is really interesting. I guess it takes a certain kind of mind to get turned on by something like this.

This is the reason that I keep screaming dry bulk shipping. Ya, a person might not make money today or next week, but when it happens it will be big. My idea is to invest as much as I can while the price is still down. It is currently climbing.

I studied some charts earlier this afternoon and now I have a good handle on them. It wasn't as tricky as I first thought. I got on to Wiki Investments and did some studying there.

There still is a lot to learn and I will now live by those charts for longs.

One thing that I find fascinating...take (DRYS) for example, when you look at a chart for a year period the price goes along on trends for a good period of time and then makes a big shift...like all of the sudden...it can be either up or down and then it will trend for a while and then make another really quick bounce either direction.

Lots of money to be made there. Now if a person looks at the BDI today, he would see it going up, which is contrary to our economic outlook on Wall Street and Main Street.

So I am going to pursue as much as I can learn about Dry Bulk Shipping.

I really appreciate your information.

So, what in the Hell are you doing tonight?? Drinking Bud Light?? I am getting ready for the Maker's and am watching the fights on HBO. I love boxing!

TTY in a bit,

Thanks,

Bill

Yeah, drinking Bush beer tonight Bill!!! Tripp loves to hear that!!! :)

Speaking of whiskey, its been a while since I have had a shot of Jack Daniels!!!

The BDI is really interesting to say the least, I love the fact that its void of speculation.

I guess the reason DRYS follows it so closely is the fact that they don't have a lot of long term contracts on freight.

I would love to go long on DRYS but, I am concerned about their dept, and just like SIRI, if the credit markets are not fluid, then they may have trouble.

Dilution and other words are popping up around DRYS so be careful!! I have yet to research the stock. But in a normal market DRYS is worth 20/share.

As far as oil stocks are concerned, I like and have for a long time NOG but, no volume anymore, and that goes for the market as a whole!! NOG is a small company, but very clean and well managed.

If they pass this cap n trade crap, say goodbye to the free market system!! The government will regulate/control the whole market!! 98% of our market is carbon based!!! So keep your head up and one eye on these clowns!!

Back to the BDI, I want to come up with my own system on how to read what is being shipped where, then focus on those companies to possibly buy stock in.

I think it was Tony that mentioned trying to keep things simple a while back. Sometimes it is the only way to go. Focus on maybe 1 or 2 commodities and watch for cyclical trends on where and when and why they are being shipped out.

Bad example: Say China wants to start a war, and they order boat loads of iron ore and steel.

Who is going to be awarded the contracts for building of tanks, ships, planes, and munitions?

If you can figure out a head of time, or speculate what companies are going to build China's armada, then you can stay ahead of the curve. Again, bad example!!

But you get the idea!! :)

China was the major engine behind the massive pop in the BDI, along with all of the shipping stocks. If they continue to regress economically, then we have plenty of time to load up on this sector.

I love the VIX because it's a psychological indicator, but the BDI is really cool!! I am going to spend my free time researching strategies on how to use this turkey to my advantage!! That is until cap n trade destroys our economy!!!

Good luck everyone this coming week!!

And enjoy the makers Bill!!! Sorry to hear about Rocky Mountain news!! Hope you got the last print!!!

I read that China was the main reason for the big spike in the Bulk Shipping Industry and they have declined on the import of raw materials because of their economy.

Now, with that in mind, there has to be something other than that.

We, the United States, are borrowing all of these trillions from China and printing money on our presses with nothing to back it up.

China has money...at least somebody there does. They cannot afford not to manufacture everything that is in everybodys' homes. Everything is made in China...even Harley Davidson parts (I am ashamed to say).

So what is the gig?

This is confusing to me....

I agree with you to the fact that watching where the goods are going is of utmost importance and will really give a feel as to what is going on in the sub-current of raw material trade.

It would be well worth it to have both of us and anyone else dig in and post what they find. There has to be a source as they don't try and hide anything in the dry shipping industry.

The advantage with these stocks, like you say, is that there is no speculators involved. It is very cut and dry. It is a direct index and that is comforting.

Even as bad as it has been for (DRYS) in particular, they just bypassed the nonsense and carry on. When it was at its worst a few weeks ago and everybody was having a tizzy, the stock went up....lol

Now even the smaller shippers, like SBLK are acquiring new ships of different classes and moving forward.

The reason that I like SBLK is because it is cheaper and the gains are pretty proportional to DRYS.

The reason?? (a no brainer). They are all on the same index and reflect the same proportional gains or losses. Am I wrong?

Even if a dry shipping company went tits up for a while, they would just dock and wait it out. The ships owned by these companies are mostly paid for.

Credit was tight and people couldn't get money to cover the cost of shipping per day a while back and that contributed to decline in stock price...

Since that has loosened up...the BDI is climbing...so all in all, it is probably one of the most secure sectors that a person can invest in.

Now compare this to the Wall Street darlings....BAC, C, etc...there is money to be made there and I have done it just like everybody else, but they are extremely volatile stocks (as you know) and anything can happen. You can get in on 1.50 gains in a day or two or you can lose your ass. It is fun though...lol...a guy has to have a little adventure in him.

But on the other side...I believe that dry shipping stocks are the real rock for medium to long term investment.

Say hear! Please comment....

Bill

http://www.reuters.com/finance/stock...?symbol=SBLK.O

I like what I see here, small company, room for growth!!

The one major thing right now that is really bugging me is this crap n trade deal.

The current administration wants control of the markets, and it stinks!!!

If crude oil goes up again this summer, so will this sector and the BDI. The more it costs for fuel, the more they charge and are going to make In the process!!

You run a business Bill, you know how it works!!!

Hey, I am now the president, so I am going to raise taxes on the wealthy, well dear leader, the people you are raising taxes on, just pass it on down to the rest of us!!!

If diesel fuel goes up!!! So do my fees as well!!! The little guy gets squeezed!!!

I like that pick Bill!! I just wish that these clowns would get out of our market!!!

There are a few economists that I follow, Jerry is one of them, he is good!!! http://www.jerrybowyer.com/

O.K....... Here in America we have farmers. They go to the bank and get money every year for what they project their needs will be. They have good years and they have bad years, but the banks carry them even in the bad years where they take a loss.

The dry shipping industry is the same....Now when you add in the factor that no credit is available in the majority of industries, the dry shipping arena still gets lent to. Yes, there was a short period where people couldn't pay to have materials shipped. It did get really tight, but looking at the index, the credit has loosened up, because the index is on the rise. The financial institutions have realized how important this sector is.

Blah blah blah, lol...I am tired...just some observations. I am going to dig into this deeper. Anybody with any opinion, or even knowledge, please comment and have a beautiful day.

My final question is: why don't they make a peace sign icon, or do they? If you know of one please let me know.

Thanks,
Bill

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Originally Posted by billhart22

O.K....... Here in America we have farmers. They go to the bank and get money every year for what they project their needs will be. They have good years and they have bad years, but the banks carry them even in the bad years where they take a loss.

The dry shipping industry is the same....Now when you add in the factor that no credit is available in the majority of industries, the dry shipping arena still gets lent to. Yes, there was a short period where people couldn't pay to have materials shipped. It did get really tight, but looking at the index, the credit has loosened up, because the index is on the rise. The financial institutions have realized how important this sector is.

Blah blah blah, lol...I am tired...just some observations. I am going to dig into this deeper. Anybody with any opinion, or even knowledge, please comment and have a beautiful day.

My final question is: why don't they make a peace sign icon, or do they? If you know of one please let me know.

Thanks,
Bill

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Hey Bill, do you know where to get data on imports vs exports?

I am just brain storming on how much more we import vs export!!

Thanks in advance!! And have a good night, I am out!! :)

Nevermind!! Sorry LOL!! http://en.wikipedia.org/wiki/Gross_domestic_product

I will look tomorrow.....too tired tonight....

Have a great one,

Bill

Hey Everyone... Thanks for all the Birthday greetings...
Had a Good Time in Atlantic City... Didnt make a killings Gambling, but did get a chance to meet up with a Highschool buddy that I havent seen in years...and we drank, smoke some cigars, ate and did some catching up..
and a littls gambling too! Thats about it...I just getting back home right now and Im ready for a nap! Talk at you all Later!:cool: