“Strange things are afoot at the Circle-K” – Ted Bill and Ted’s Excellent Adventure.
One of the indicators I like to keep an eye on is the Baltic Dry Index. this keeps track of the bulk carriers and just before the 2008 crash it dropped like a rock. It’s dropping now, there was even a story last week of shipping rates going negative, but some of that was bullpucky. (The shipper cut someone a break on the fuel because they needed to re-position the ship to the destination port anyways.) There are millions of tons of shipping capacity idle – just like 2008. This is a very strong indication to me that really bad things are around the corner.
Shipping is such a great indicator because nothing is made locally anymore and to move these raw materials (grain, ore, etc.) you use bulk carriers. I would wager that if nothing is being shipped, then nothing will be produced fairly soon. These factory yards can only hold do much in the way of raw material as inventory. The same point in time inventory our supermarkets use is also used by just about every supply chain.
I’m expecting another crisis/downturn/whatever to happen very soon. There are to0 many tennis balls in the air for the global economy to juggle.
Which leads me to the next subject, Greece. By the look of Athens it was if they won an NBA World Championship, or lost to the Bruins in the Stanley cup. Reports are that 150 stores were looted, and 45 buildings were gutted. They rammed the “austerity measures” bill through their government this weekend to show the EU that the Greek government is playing ball.
This “Greek Crisis” is important for a number of reasons: EU stability, it’s a blueprint for the rest of the PIIGS, and the effects on the world derivatives markets. To me, the most important reason is that Greece is a microcosm of America. What happens there, will happen here when the “austerity cuts” start when municipalities, counties, and states start to bankrupt. Since the Greek police and troops are out of tear gas, things are not looking well for us. How crazy is it that they dumped so much tear gas that they have run out and there are still rioters in the streets? What would the historically poor city of Compton be like if welfare was cut in half? The answer would be just as bad as Tampa, Florida — A “white ghetto.” I’ve been to both, and neither one is a place I’d go back to.
Ultimately, the Greek government has no connection to the will of the people. The People don’t want “austerity measures” and are angry enough about it to riot. Do you think the American government has any connection to the will of the people? Didn’t think so. I find this schism fascinating, and I’ve resorted to reading non-US papers online to try to gain some insight into the Greek situation so I might better understand our own problem. (A big thanks to Google Translate.)
As for the rest of Europe, things are not as rosy as they let on. Turns out the mighty industrial Germany, is starting to stumble. Or has been stumbling and they have been hiding it. March 20th is when the next EU bond payment is due from Greece, and I’m very curious if Greece is going to be able to pay, or have the stones to tell the EU to “get stuffed.” The EU knows that Greece is only the first of many headaches, so they need to be tough to keep them in line. The Greek government knows this, and also knows that there are many other countries on the chopping block, or will be soon. Greece can position themselves as the first domino and milk the IMF to keep them liquid.
So many economic bombs are up in the air, I am having a lot of trouble keeping track of it all. the big question is if one of these bombs are dropped and it goes off, does it cause a chain reaction, or is it an isolated explosion?
Another leading indicator is gasoline taxes and gas station deliveries. From our busy bureaucrats in D.C.: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103600001&f=M
Gas consumption in the US has dropped like a rock. Given the American attitude about automobiles, the only logical reason I can think of is that folks don’t have money to buy gas with. Which reminds me that I need to figure out a better way to protect the gas in my old F-150, because someone’s been getting by the standard locking gas caps I have on it now.
I would say Oil more so than gas, but an excellent point. I’m expecting $5 real soon, and I have already told the boss I’m working from home once a week. I love my Jeep, but spending $25 to go to an office and back is pointless.