Australasia and the Baltic Dry Index

Robert Kiyosaki: “Sell Aussie”

Gold Survival Guide,

9 February

However the counter to this was a short post we read by Robert Kiyosaki in the past week.   It wasn’t directed at NZ as such but rather Australia, however being our largest trading partner the maxim is that where Aussie goes we follow.  Anyhow, Kiyosaki’s post was headlined “Sell Aussie” and was discussing a recent seminar he attended and how a couple of charts caught his eye (you need to sign up to read it but it's free)..

"The two indexes [Baltic Dry Index and the Harpex Index] measure ocean freight, indicators of world trade, and the world economy. They caught my eye because my education is in ocean transportation. I learned to be a merchant-ship’s officer at the U.S. Merchant Marine Academy. 

Both indexes are important because the Baltic Dry Index measures raw material transported by sea, and the Harpex Index reflects finished products shipped in containers. Both indexes look like a black-diamond ski slope. If they don’t change direction and head back uphill, depression is imminent. 

I’m concerned for Australia because the Aussies ship in bulk which is measured by the Baltic Dry Index. Countries such as South Korea, Japan, India, and China ship refined manufactured products via containers which is measured by the Harpex Index. If this trend continues, Australia, India, and South Korea will follow the rest of the world into the recession—a double dip. This is not good for anyone. If I were in Australia today, I would use their strong dollar to buy gold and silver." 

I did read a slightly contrary article this week too on the Baltic Dry Index (BDI) (I can’t recall where it was now unfortunately).  But from memory the author was saying that the low price of shipping was also a function of over supply of shipping.  

Basically too many ships were ordered at the height of the good times a couple years back and these continue to come on line now.  Meaning more ships chasing the same or lesser amount of goods to ship, therefore lower prices. 

However they also said that even a rise in the number of ships did not account for the massive fall in the BDI over the past month. 

Anyhow, if Kiyosaki is correct it doesn’t bode well for us here either, given our interconnectedness with Australia.  With our high kiwi dollar at present, his parting advice could be easily applied to us too.