Thursday, October 16, 2008

Drop Some Knowledge at the Watercooler...

Impress your friends with a discussion of the Baltic Dry Index. Talk about the Dow and the Nasdaq is so, last week. If you want to really get someones attention point them to the BDI - the Baltic Dry Index is according to Wikipedia:

an index covering dry bulk shipping rates and represents an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a timecharter and voyage basis, the index covers Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain.

In essence, when this index moves higher it is an indication of strong global growth and when it falls it points to a weaker global economy. As a point of reference, the blue line represents the Baltic Dry Index. It's down 85% THIS YEAR!

Also, I've been mentioning this for some time but the charts are starting to back me up. All of the Federal money spent bailing out the financial industry is pushing up rates on the 10 yr note. This is having a pretty dramatic effect on mortgage rates which are now sitting at/or near 5 year highs in New York State. You can assume that every 1% rise in interest rates, knocks roughly 10% off the value of your home. The rising mortgage rates are going to further depress the housing market and likely offset any improvement in the financial system derived from the various bailouts.
Finally, the markets rallied sharply on rumors that Microsoft might look at buying Yahoo again.
A) Of course they would. Yahoo has fallen from $30 to $12.
B) It doesn't fix Microsoft. This isn't as bad as Sears and Kmart merging, or Netscape/AOL, but it's in the ballpark. Two weak businesses never can beat a strong business.
C) Why did this rally the market? I have no clue. Maybe somebody thinks this will create another Merger and Acquisition binge? They are tired of selling? ???

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