Strategies & Market Trends : The Aristocrats(tm): Bellwether's Shipping Stocks Revue

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To: sense who wrote (4)2/3/2012 12:11:29 AM
From: sense  Read Replies (1) of 23
Baltic Dry Index = "Bad Banking and Stupid Ship Owners"

Dennis Gartman: Ignore the Baltic Dry Index

Once considered a key gauge of global economic activity, the Baltic Dry Shipping Index has withered to its lowest levels in 25 years. But the indicator has outlived its usefulness, investor Dennis Gartman said Wednesday. “I used to look to them as an indicator of economic activity. Now I look at them as an indicator ship owner stupidity,” publisher of the widely followed Gartman Letter said on “Fast Money.”

The index has long been used by market insiders to gauge demand for dry commodities.

But Gartman said that correlation no longer holds true.

A couple of years ago when the Baltic index approached 11,000, “every ship owner in the world build new ships,” scrapping small ships for “monstrous” ones, he said.

“It has nothing to do with the global economy now. It has everything to do with bad banking and stupid ship owners.”

Contrarian trader and Veracruz founder Steve Cortes issued a broader warning beyond Gartman’s point.

“Shipping stocks are definitely names to be avoided, even if he’s right that Baltic dry is not indicative of the global economy these stocks have traded as poorly as the Baltic index,” he said.

Names to be avoided, Cortes said, include Diana Shipping [DSX Loading... () ], which traded at $8.32 midday, down 29 percent year over year, and Frontline [FRO Loading... () ], trading at $5.02, down 80 percent year over year.
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