Firstly take a look at the following: http://www.bloomberg.com/apps/cbuilder?ticker1=BDIY%3AIND . There does appear to be a minor recovery in this dry freight shipping index, and as a result we have seen a turn around in the AUD and to a degree in equities.
The huge amount of leverage that has been unwound on a global scale led to a sharp dip in demand for dry freight containers as large capital intensive projects were abandoned. It would seem obvious that trade will not end, but going forward may just have to return to more subdued levels that are consistent with consumers and corporations that are paying down debt. This does not mean that container ships will never sail again, just fewer of them. Maybe folk will wait for their fridges to break before buying a new one. You get where I'm going....
It is worth noting this turnaround in the index as it may also signal some kind of rational behaviour is returning to the market place. Although I am not convinced that we have seen a short term bottom in equities, the price action is interesting and I do believe that there is scope for a short squeeze higher in equities, hence my piece on AUDUSD which will follow shortly. In any case food for thought.
Sunday 8 February 2009
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