Friday, March 11, 2016

Everyone is Wrong: World Trade Has Not Dropped Anywhere

Here is a brilliant article out of Australia, regarding the "drop" in int'l trade.  Int'l trade is reported in dollars.  Volume has not dropped, only prices.  Hence, a mistake that trade is falling.
The question of price versus volume was highlighted in a note to clients by fund manager Mike Mangan ahead of the Chinese numbers. The graphs tell the story: trade by US dollar value has indeed fallen, approaching GFC crisis levels; trade by volume has slowed, but it hasn't fallen.
Naturally, in negative interest rate, deflationary times, prices would drop on commodities first, and that is what we see, no drop in volume, just in prices.

But but but... the Baltic Dry Index is screaming depression!  No, it is screaming China is putting out 20,000 TEU megaships faster than the scrapyards can make razor blades out of older ships.  New ships, even unneeded, are counted in the index.  And captains can't wreck them fast enough either.

I'll take special care now to observe the right hand five year trends on trade analysis where the quantity is reported on my analysis, as opposed to the left hand where the dollar amounts are reported.  Gotta adjust to the times!

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