Tuesday, February 28, 2012

The consumer is next.

This morning when I saw these headlines, I had to ask myself - if headline 1 and 2 are true, how can headline three be true? Headline 1 and 2 should be making the consumer feel anything but confident.

After the market crash in 2008, I absolutely grew to respect the consumer confidence numbers. If consumer confidence is down, basically, the market goes down. If I trust the numbers on the way down, I have to trust them on the way up. Right?

The other market indicator I grew to fear is the Baltic dry index. Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers. From Wiki. During the 2008 crash, we had all these ships floating around filled, with no place to offload them.

So at the beginning of the year when the Baltic dry index fell for 27 days in a row, those of us who watch this stuff felt a little panicky. Source.

Here is a longer horizon chart, because I hate those guys who just provide a small snapshot to reinforce their position. You can see we have seen a small uptick in the last couple of weeks.

Some people say that new ships have come on line and this is why the index is down. It takes roughly 2 years to build a new ship. However, with durable goods now falling so sharply - you can see that if it takes them a month or two to compile the data, it would roughly coincide with the fall from December to January. What becomes frightening is January to February.

So, I would expect to see by next time the consumer confidence numbers comes out, who is right. I think the consumer is lagging this time, and good weather is making everyone feel happier than they should be.


  1. Yeah. That is why I find it hard to believe that the full dive in the Baltic Dry Index is due to an oversupply of ships.

    No one creates so much oversupply that it caves the whole sector. Unless you are the government. Then, well...never mind.

    Love your nym.