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Dry Baltic Rate

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September 29, 2008 – Comments (6)

I did a search on caps as I know I have written on shipping before and low and behold, I found someone else's blog, my comment, and an accusation that I'm an American who thinks the world revolves around me, I guess.

Summary --  The author was praising the shipping industry and in my comment I didn't think that was a good idea, specifically:

"It isn't going to take long once the movement of goods that were servicing over heated sectors result in a huge drop in demand for shipping.  At the same time, all of these shipping companies still have new ships on order.

It isn't going to take long for shipping rates to implode once the effects of the housing bubble work their way through."

Well, you've gotta see the graph of the Dry Baltic Rateon Yves's blog.

All things equal, income will plumment by 2/3rds from peak because of the decline in the rates.  But, I doubt all things are equal.  The flow of goods is slowing so there will also be a decline because of reduced capacity.

 

6 Comments – Post Your Own

#1) On September 29, 2008 at 2:27 AM, dwot (75.87) wrote:

Another post on topic...

"This is looking like one very periless bubble.  In the short term shipping rates more than triple because there isn't supply, and heck, if you are getting $127/barrel for oil, you can afford the shipping rates.  However, eventually the costs of storing oil in ships is going to catch up in a not so good way with the practice.  Talk about misallocation of resources and that is what happens in bubbles."

I guess the short term is over...

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#2) On September 29, 2008 at 6:00 AM, abitare (63.42) wrote:

I am short DRYS. There are a bunch of garbage shipper IPOs to consider. SB, PRGN, TBSI, GNK etc....

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#3) On September 29, 2008 at 6:21 AM, saunafool (98.81) wrote:

dwot,

If you're not an American who believes the world revolves around you, then what kind of an American are you?

sf

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#4) On September 29, 2008 at 8:40 AM, dwot (75.87) wrote:

lol saunafool, I am Canadian...

I guess you didn't see the bison in my front yard.

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#5) On September 29, 2008 at 11:54 AM, lquadland10 (< 20) wrote:

Lol on the bison. How is life treating you? Well if we Vote in mc cain or obama you can bet the shippers are going to go full blast shipping all the goods where ever the need is. May Ron Paul Win.1776

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#6) On September 29, 2008 at 3:33 PM, angusthermopylae (39.24) wrote:

dwot,

Very nice find.  It's the law of unintended consequences in almost pure form, in my humble opinion.

Computer geeks took up the term "emergent complexity", and use the computer game called Life as a great example (You can run it at the link given).  Basically, you only have three or four rules, but the combinations and results can vary widely, and some very unusual patterns emerge, difficult to predict, but very obvious once it happens.

My point?  A lot of the "rules" in the economic game are very simple ("supply and demand," "leverage," "inflation," etc), but the resulting effects can go way beyond what a straight forward analysis would predict.  Bailout or not, subprime or not, ban shorting or not, these (in)actions have a wide reach and can...will...cause disturbances throughout the economic world.

Right now, everyone is worried about the poor weather in their own back yard and ignoring the tornadoes ripping through the neighborhood.

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