Thursday, January 15, 2015

Doctor Copper Caught The Flu

He caught it on the high seas. No, not from one of the cruise lines. He picked it up from global trade. You see, dear reader, the Baltic Dry Shipping Index reflects world trade. If you need coal in China, it arrives on a boat. When Japan imports natural gas to make up for the closing down of its nuclear reactors after the disaster of March 2011 at Fukushima, it has to import. It does not have natural resources. They are not alone. Global trade is done from port to port. When things are looking good and everyone is working like busy bees, the shipping index is at highs and conversely, when the hive has little honey, the index sinks like skipping a rock on water.
...all my troubles seemed so far away... Dr. Copper was giving interviews back in July 2012. He talked on-and-on about the housing recovery, consumer spending and how miners were ramping up supply to meet the needs of the industry. Copper was hitting highs at $4.25 a pound.
...don't give me no dirty looks...takeout the trash...yakety yak, don't talk back...the doctor is confined to his bed. No house calls and please, don't phone. Copper just hit $2.42 a pound this week. The doctor called in a specialist, my good friend Sebastian. My buddy says the doctor actually caught the flu back in winter of 2013 when he was doing all those talk shows. The decline was sharp and the doctor inscribed to himself a flu shot after falling to $3.29 a pound. He recovered to $3.95 a pound, but the medicine of low interest rates wore off. He has been getting sicker and weaker ever since.
Sebastian tried to explain to him that the shipping index is also sick and the idea to take a cruise, to breathe in the salt air for a cure could cause more complications. My friend demonstrated the strain of flu is highly contagious and spreads from port-to-port. Back in the good old days, the Baltic index sailed at $2337 for day rates, and today, it is under water at $709 per day. Shippers are trying to make money by storing oil, but that is another story. The doctor fired my friend. He called for a second opinion. Mr. Lumber gave him a similar prognosis.
Sometimes you win, sometimes you lose
but lumber is quite stable and it usually has the right medicine to cure a flu, but his anti-biotic is not working this time. The virus of low wages and demographics are too resistant to the old medicine. Back in March 2013, the price of lumber was $3.56 and now, it is $3.10 which is a decline of 16% and falling. Mr. Lumber also mentioned the shipping index and to the dismay of Dr. Copper, the medicine that he administered last August sparked a recovery from $723. to $1484. However, resistance overtook the biotic and as stated by Sebastian, it is down to $709 per day and falling into deep do-do.
Yes, Mama and Papa, ...all the leaves are brown and the skies are gray...Good time Charlie has got the blues...