Jim Hawthorne

China and the Baltic Dry Index - What's Really Going On?

A comprehensive and well done piece of research! Thanks, Trader Mark!

Just a few points:
1. The Shanghai market is sure to rebound with the kind of government programs announced recently; infrastructure investment is very labor-intensive in China. Also, part of the Chinese stimulus package goes directly to companies in which the Chinese government has a controlling interest. These companies are well-known to invest cash reserves in the Chinese stock market. Is the rise in Shanghai really a good indicator?
2. Yes, there will be a rise in commodity prices sooner rather than later, but there is no convincing evidence of this as yet. As you say, when copper, zinc and lead show steady uptrends in their spots, then there will some evidence that China is recovering.
3. As for the BDI, while it is useful as a confirmation of general health inthe Trans/ship sector, it has become much overused and much misunderstood, and has also become somewhat of a replacement for deeper, disciplined fundamental analysis and due diligence; a lazy man's indicator.
4. As you allude, de-coupling is a myth, and a dangerous one at best. While the growth of a demanding, consuming, and materialist middle class is a fact in China, there is no way at this point that this class can absorb more than a fractional portion of the huge Chinese productive capacity.

It will be most interesting to see how your thesis plays out! I wish you well!