Monday, September 2, 2013

The Big(ger) Picture

I went on a two week sailing vacation away from it all and what do you know..?  No news, no market quotes and no insta-charts to clutter my brain had the usual salubrious effect.  That is to say, the big picture is easier to see, from... the sea!

And what IS the Big Picture? Trade and Energy.  Having shifted just about all of our manufacturing to China and its satellites we can follow the current health of the global economy from just a couple of indicators: shipping activity and energy prices. 

Yeah, yeah.. I know:

  •  Oversupply of newbuildings is glutting the shipping market and keeps charter rates down (see chart below).
Baltic Dry Index

Nevertheless, if the global economy had continued to expand as bubbleconomists projected some years ago the new ships would have found ready employment and rates would not have crashed as they did.

  • Technical advances in oil extraction (eg frac oil) has raised non-OPEC production, particularly in the US, threatening a significant pullback in global petroleum prices.  Thus, in my opinion, the current Syrian crisis.  (I can't get the film "Syriana" out of my mind.  It was released in 2005 and I wonder why the title involved Syria, since the film has nothing to do with the country.)
 US Oil Production

My Big Picture conclusion?  The global economy is held up by a bunch of chicken wire and the duct tape of easy money. 

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