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For background on this relatively obscure index of shipping costs in the North Atlantic, see here and here. After spending a year at extremely depressed levels, it is now up over 20% from its year-end '09 lows as of last week. I don't know enough about this to say it's hugely important, but it can't be bad news, of that I'm pretty sure. The strength in the index also makes sense in the context of the ongoing signs of recovery in the US and most other economies around the world.
10 comments:
Alstry: i am going to delete your "broken record" posts because they are a waste of everyones time.
Scott,
I think this chart also bolsters your argument that inflation is something that the FED should be a lot more concerned about.
Shipping rates and volumes are still very depressed yet commodities and oil are moving quickly towards their 2006-08 highs with out the commercial activity, ie demand, to move them their.
We already have the unemployment of the late 70's early 80's now all we need is the inflation .
Regards
Dave
Scott,
Dave brings up something that has long bothered me. How high do you think oil can climb before strangling the recovery in its crib?
Scott,
Would you mind commenting on this article?
http://www.marketrap.com/article/view_article/91207/manipulating-gold-gld-and-silver-slv-a-criminal-naked-short-position-that-could-wreck-the-economy
I value your perspective.
Bob
Paul,
S'cuse me for buttin' in. I too would like Scott's take on the oil thing.
I have read in many places that our oil consumption per unit of GDP (or something like that) has been falling for many years. In other words we are not as vulnerable to high oil as we were, say, ten years ago. That said though, in 2008 I remember paying $5 a gallon for diesel in Key West at my daughter's wedding (no fun when added to those 'other necessities - won't go there). I remember a lot of howling in those days; my voice was probably back there somewhere. I think in the meantime, folks have figured out how to protect themselves better. If you look around you see a lot more small sedans and a lot fewer SUVs, especially the big ones. The Hummer is history and those 12mpg pickum up trucks the GOBs (that's 'good ole boys) run up and down the road in are landing on the used car lots in larger numbers these days. In short, I think folks have figured out there's a lot of frivolous driving that can and has been eliminated. I think this would show up if Scott can dig up a 'miles driven' chart somewhere. It probably looks pretty flat.
This is just my intuition but I doubt the economy gets hit much unless gas goes up another 25-30%, or so. Then you'll likely start hearing the howls again.
Bob: I don't believe it's possible for any small group of short sellers, naked or otherwise, to control the gold or silver market. Derivatives are not well understood by many outside of the professional community, and their ability to wreak havoc is consequently way overstated.
Re oil: I may have a post on this, but the short answer is that I think oil prices start becoming a problem for the economy around $100/bbl, with gasoline at $3.50/gal or more.
Scott:
I just don;t see how you can say that abuot derivatives.
Warren Buffett has experience with derivatives. In fact, one could say Buffett shrewdly unwound General Re's derivative positions (a feat Buffett described as a "descent into hell") while at AIG they fell back on US taxpayers when the flow went the wrong way.
President Bsuh actually asked out loud, "How did we get to the state where the collapse of a single insurance company can tank our whole financial system?"
That strikes me as risky. Bush thought it was bad policy (although it happened eight years into the Bush presidency..but never mind).
We know what LTCM did to the global econmy, especially the Far East.
Moreover, I am unconvinced this manipulation of cash to make cash is what free enterprise needs from our financial system. We need the finance sector to intelligently channel savings into productive investments.
A little less fancy dancing, and a little more basic investment--please.
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