Navigating Trends: Exploring the Baltic Dry Index Chart

Deciphering the Baltic Dry Index Chart

Examine the Baltic Dry Index Chart Displayed Below. Despite Greenspan’s efforts to inject money into the system, the amounts were insufficient to alter the landscape significantly. How can we deduce this? The BDI continued surging to new highs until May 2008, when that trend abruptly stopped. What caused this? Free market forces were extinguished.

The BDI’s indication is clear: the US economy, and by extension, most Western-based economies, have never truly recovered. The patient is ailing and should have perished, but it is being artificially sustained through massive infusions of chemicals (in this case, cash) to extract as much as possible from the system. Real-time inflation, not the misleading data issued by the Fed and the BLS (Bureau of Labour Statistics), soared after that period.

Suppose one examines the economies of most Western countries. In that case, it becomes apparent that wealth revolves around the stock market, with many companies producing little in the way of tangible products – things essential for survival, such as food, energy, and essential medicines.

Taking a broader perspective, it becomes evident that despite the numerous cash infusions into the economy, the Baltic Dry Index (BDI), a prominent economic indicator, continued its upward trend until it peaked in 2008. Subsequently, even with trillions of dollars added to the system, the BDI performed like a sick creature.

Baltic Dry Index Chart: Tracking Trends from 1988 to 2023

In May 2008, it achieved a high of 11,793. The next peak occurred on October 4, 2021, reaching 5,650, after the US injected 5 trillion dollars to address the COVID-19 crash. This fact is worth pondering: despite this massive infusion of cash before and after 2009, the BDI could not recover even 50% of its losses. This indicates that the BDI has been in a bearish state since 2008, and the global economic recovery is nothing more than an illusion, albeit an elaborate one.

In summary, this chart forewarns that, at some point, the consequences of our actions will catch up to us, resulting in an event reminiscent of the 1929 crash, wherein immense wealth will be obliterated. Our only recourse against this impending disaster lies in continuously monitoring the psychology of crowds and world governments.

Navigating Market Resistance and the Allure of NVDA

However, for now, the markets are resisting the Fed and all the proclamations from the Doctors of Doom. So, until bullish sentiment reaches or surpasses the 60 mark, strong corrections should be viewed through a bullish lens. However, we fear that NVDA, much like the internet darling CSCO in the past, is destined for a day of reckoning. At this stage, everyone seems to only see the bright side of the picture.

It’s essential to remember that NVDA sells shovels (graphic cards that everyone wants), which is a prime position to be in. However, the shovel makers must start generating profits, as many are spending recklessly without considering that they operate in the rapidly evolving AI sector. Similar to the dot-com era, companies investing in AI often overlook one critical aspect: at some point, the hype must translate into profits. Without profitability, the hype can only carry you so far before you hit a brick wall.

Conclusion

While the Baltic Dry Index chart suggests long-term economic concerns, the stock market presently disregards this. The index hasn’t come close to its May 2008 highs, and inverted yield curves in many countries haven’t affected the market yet.

However, it’s worth noting that recessions typically begin 6 to 24 months after the Fed stops hiking rates. The last significant rate-hiking cycle started in the summer of 2004, with 17 hikes of 25 basis points each, reaching 5.25%.

The subsequent bear market and stock market crash didn’t happen immediately. The debt and equity markets were strong even a year after the final Fed hike in June 2006. Signs of trouble only emerged in late 2007, with things falling apart in 2008.

Prudent investors should shift from FOMO stage stocks to NCA (Nobody Cares About) stage ones. A market crash is unlikely until bullish sentiment reaches and stays at 60 for two consecutive weeks.

While market volatility is expected, we anticipate the next pullback will be a buying opportunity. Bullish sentiment dropping below its historical average of 38.5 for two consecutive weeks supports the idea that markets will trend higher post-pullback.