Industrial production moved slightly higher (+0.6%) in July
after June and May were flat; expectations were for a 0.5%
increase. Industrial production picked up 0.6% in July after
slender 0.1% monthly gains in May and June, the Fed said.
Capacity utilization came in as expected at 79.3%, which
remains 1% below its average from 1972 to 2011. Are these
really numbers that bulls can lean on?
The kick in the pants for the bulls was the Empire State
Manufacturing Index that showed an extremely weak reading at almost
negative 6; the expectation there was for a POSTIVE 6.6.
The point is that I am still not convinced that data flow is
overall "positive enough" to justify a further rally
here.
When Steve Reitmeister asked yesterday "what would it take to
change you from a bear to a bull;" I refrained from answering
because it would have taken up too much space in the RTI :)
A Lost Indicator
The Baltic Dry Index has lost its luster over the past year or
so as a market indicator because some folks think the index is
skewed because of the ridiculous prices being paid for commodities
and shipments of goods back in the boom days from 2006-2009. I
disagree; the index is real and it measures the cost and in essence
the amount of shipments moving around the world. It's an
extremely efficient way to measure supply and demand on a global
scale.
With fuel prices through the roof all over the world, one would
expect the cost of shipping to at least be stable or creeping
slightly higher if global economies were stablizing. The reality is
that prices are NOT stable in the index, far from it. In
fact, the index continues to drop to levels only seen twice before
in the last 15 years; 2002 and 2009.
To me, this is a realistic, complete indictor of the LACK of
economic growth and even activity. International trade is the
lifeblood of the world's largest economies and it is barely
flowing.
I believe that the Baltic Dry is the punctuation mark that comes
right behind China's recent weak data that could be the next leg
down for the U.S. stock market.
Do you agree? Do you think the Baltic Dry still has a use
today?
(BDI): ETF Research Reports
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