[Newfie]

Recent news was not about the BDI.

Read back through gcaptain

[Tanada]

It seems a major Korean shipping firm has filed bankruptcy. Looks like there could be some fallout.

"The events of the last few days arguably represent the biggest ever threat to the supply chain and could bring down hundreds of businesses and service providers in countries around the world."

http://gcaptain.com/hanjin-captains-ord ... oid-arrest

"The cost of shipping a 40-foot container on the Busan-Los Angeles route has jumped about 55 percent, from $1,100 to around $1,700, according to South Korea-based freight forwarder Pantos Logistics. Rates between South Korea and the U.S. east coast via Panama have risen about 50 percent to $2,400, it added"

http://gcaptain.com/more-hanjin-ships-s ... ners-fret/

I wonder if any of that South Korean product is taking the northern route? It is shorter than the Panama route which means less fuel and less crew pay, and the Russian fees are smaller than the Panama canal charges.

[Outcast_Searcher]

Recent news was not about the BDI.

Read back through gcaptain

Huh? Both stories have the same root cause. The collapsed Baltic-index price and a specific shipping-company failure are both a consequence of a glut of large ships and a dearth of consumer demand. I know ennui, it's tough call as to which one came first, the camel or the camel crap. But seeing as this is a peak oil web site, we can be certain just how its going to get explained. Right?

And this is nothing new in principle. For decade or so now, every time the BDI gets low, the doomers crow that the end is nigh, real soon. And every time, they're completely wrong. And every time they ignore all the reasons the non-doomers point out they're wrong.

There is a big glut of shipping. Gluts cause massive price drops, and can bankrupt producers. Just like is happening with crude oil. And just like with crude oil, this phase will pass. (That's a primary function of markets -- they adjust). The question is how many years it will take.

[SumYunGai]

Yes, the industry is in turmoil pretty much across the board. There is a new thread on societal collapse early warning signs. This would fit right in.

Read back in the thread, which started all the way back in 2008, for all the past hysterics. This emphasis on BDI is a red herring.

It seems like you are having some trouble understanding that peak oil is a cumulative process. After the massive run up in oil prices from 2002-2008 that ultimately led to the financial crises and Great Recession, we never really recovered. The BDI collapsed in 2008. Since then, the banks have been keeping the shipping industry barely afloat. Now a bank has pulled the plug on the 7th largest shipper in the world. Down she goes. As the rest of the system keeps circling the drain.

[ennui2]

After the massive run up in oil prices from 2002-2008 that ultimately led to the financial crises and Great Recession

Here we go again with the sin of omission. Time to haul out the chart again.

[Newfie]

There are common factors and differences. BDI is more about raw materials and the slow down in manufacturing demand, the impact is limited.

If I understand this bankruptcy correctly its impact is very different, it's on the end product manufacturers and retailers. Apparently shippers don't really know who they are shipping with, they are just buying space across the ocean. And the JIT economy demands quick, cheap,and reliable delivery. Supposedly right now there are retailers who are counting on Christmas season product that will not arrive, and they don't know that yet.

It is a blow to the JIT scheme and erodes faith in the system. It is a ding in the global financial system that relies on quick turnover of cash and faith in international partners.

As a stand alone incident it's probably no big deal. If it's one of several hits, maybe it is significant.

[Cid_Yama]

What I said in January 2011.

Look at the 5 yr on the interactive. Last time the BDI was this low. Containers started stacking up on the docks as it was no longer profitable for the ships to run. Ships anchored up in ports worldwide.

Letters of credit dried up as no one wanted to back shipments that barely covered costs.

Although it's true that the BDI covers bulk cargoes, it is a leading indicator of the entire global shipping industry and the global economy as a whole.

An important thing to note. Many ships were scrapped after the bottom in 2008. Shipyards went out of business. New construction came to a halt. The reduction in available ships should have caused the index to rebound. The fact that it is now below 1500, reflects that there is a fall off in global demand even for the fewer ships that are left.

When letters of credit dry up, cargoes don't leave port.


What happened in 2007 and it's aftermath had nothing to do with petroleum.

What is Fraud?

Ok, it's time for a little truth telling. We all know what the scam was. Interest rates were at their lowest ever. There was no place else for interest rates to go but up. Thus, the creation of Adjustable Rate Mortgages. How much you pay goes up with interest rates. Sold to consumers as good deals as, if interest rates go down, so does the amount you pay. Nowhere down for interest rates to go, only up. Misrepresentation? You Bet'cha.

Now lets spend billions on television advertising to not only sell loans to people looking to buy a house(a very small percentage), but let's talk everyone into refinancing, taking out second mortgages, move that fixed mortgage into an adjustable rate one, money to spend on anything. Let's even make it sound Hip and call it ReFi.

Oh, let's not forget the credit cards, they can get in on the adjustable rate thing too. How many billions of 'preapproved' credit card applications were mailed out? Low starting rate, no interest for six months, ADJUSTABLE. Whenever, Wherever. Just read the fine print. Questionable business practice? You Bet'cha.

You've noticed I've not said the word FRAUD yet. Oh, but this is only the beginning.

Can't hold on to these loans, as soon as interest rates go up, they won't be able to pay. So, repackage them as financial instruments and sell them to pensions and hedge funds. Make a tidy profit and push these bad loans into someone else's lap. HIGH YIELD! Those Pension Funds were hurt bad last time around, barely standing on one leg. They need to recoup those losses. Suck(er) them in with promises of high return.

Now add in synergy. If now everyone can afford to buy a house, real estate values go through the roof. People are paying prices far far higher than before all this started. Inflated valuations means booked assets are inflated, meaning more money can be borrowed against those assets. And the Bubble grows.

FRAUD
Definition

Intentional misrepresentation or concealment of information in order to deceive or mislead. It is illegal.

fraud (frôd)
n.
A deception deliberately practiced in order to secure unfair or unlawful gain.


fraud

Intentionally deceiving another person and causing her to suffer a loss. Fraud includes lies and half-truths, such as selling a lemon and claiming "she runs like a dream."

And the collusion ran all the way to the top. I present to you "The Smoking Gun".


December 2006, the SEC removed the 'uptick rule' that prevented people from unrestrained shorting of the market as it goes down.(Unrestrained shorting acts like putting the accelerator to the floor while going downhill.) The only reason for doing this is to allow profiting on a crash. The rule was put it place in 1934 to prevent a 1929 type crash from happening again.

Chairman Christopher Cox
U.S. Securities and Exchange Commission
Washington, D.C.
December 4, 2006

The final item on our agenda today is elimination of the short sale price test - colloquially known as the "tick test."

Historically, the Commission and self-regulatory organizations have sought to balance the competing views of short selling -- whether it is primarily good or bad -- by permitting short sales in advancing markets, and preventing short sales at successively lower prices.

The Commission first imposed restrictions on the execution prices of short sales almost seventy years ago, when we adopted the "tick test" of Rule 10a-1 in 1938. The tick test permits short sales only at a price above the last sale price, or alternatively, at the last sale price -- if that is higher than the previous price.

The core provisions of Rule 10a-1 have remained virtually unchanged since the 1930s. But a great deal else has changed in the marketplace over that very long time. Over the years, decimalization and changes in trading strategies have undermined the effectiveness of the price test. And at the same time, increased transparency and better means of surveillance appear to have lessened the need for the price test.

We will today consider proposals to remove the tick test of Rule 10a-1, and to prohibit the SROs from maintaining their existing price tests or adopting any new ones. Along with the proposed repeal of the tick test, we will also consider a proposal to make conforming changes to the order-marking requirements of Regulation SHO.

link


The global financial system was fleeced, deliberately, intentionally with forethought.

[onlooker]

Very illuminating indeed Cid, sounds like the fat cats are ready to make a killing as all laws oops systems are in place. In the meantime, they keep robbing the masses. Don't know if you heard that the Great Depression was also induced by the fat cats and they subsequently made a killing. Yep, we have a profiteering system that is so corrupt it boggles the mind.

[ennui2]

Takes two to tango.

If rubes hadn't signed those liar loans, none of this would have been possible.

[onlooker]

So Ennui, would you rather we blame the hapless gullible victims than the ruthless perpetrators and scoundrels.?

[SumYunGai]

Takes two to tango.

If rubes hadn't signed those liar loans, none of this would have been possible.

So the cause of the Great Recession was...rubes?

[ennui2]

So Ennui, would you rather we blame the hapless gullible victims than the ruthless perpetrators and scoundrels.?

No, I'd rather we blame both.

Takes two to tango.
If rubes hadn't signed those liar loans, none of this would have been possible.

So the cause of the Great Recession was...rubes?

All bubbles are caused by irrational exuberance.

Being irrational isn't exactly a virtue.

[Cid_Yama]

Please. This was the largest, farthest reaching con ever conceived by man.

Only a fool blames stupid people for being stupid. Especially since they were socially engineered to be the marks they were. They were enticed over and over again. And too ignorant to comprehend. The educational system since 1980 was not an accident, it was intentional.

And since the subprime mortgages were bundled into derivatives and sold, The mortgages themselves had NO impact. Afterwards, the derivatives couldn't even be traced back to the original loans. It was the worthless derivatives, lacking a trail back to the original mortgages, that brought about the crisis.

The propaganda box in the living room of the average American fills their heads with nonsense.

Country music lyrics indoctrinate a vast group of Americans to despise education and elevate the 'Backroad Scholar', who is nothing more than an uneducated hick, indoctrinated to consider himself superior.

Country music is the worst offender as far as indoctrination is concerned. To consider politicians as their superiors, as truthful and trustworthy. To believe it is an honor to die in service to the military, which has been corporatist muscle in the world for a century and a half.

To shout down those who would say different. Or are different.

And we went after the wealth of other Western nations, dumping our worthless derivatives overseas, into the bank vaults of every major foreign bank. (Being wealthy is no proof against being conned. Everyone has blind spots to be exploited.)

It's hard to say if those individuals most responsible were called to task. There may have been assassinations we have not been privy to, the elite police their own.

Nothing changed, as they are already doing it again on a smaller scale, with subprime auto loans. (They lost control of it and took splash damage last time.)

P.S. Don't get me wrong, there is a lot of country music I like. And have liked for decades.

[ennui2]

Only a fool blames stupid people for being stupid.

BS. What is a popular phrase for doomers?

"Are we smarter than yeast?"

The implication that we, in our stupidity, will march over the overshoot cliff. Being stuipid is what's killing the planet, which you yourself think will be over in a matter of months with your methane bomb.

You're saying that behavior doesn't justify "blame"?

It does? Then why not the simple greed and gullibility of those who sign first and read the fine-print later?

[Cid_Yama]

Strawman much?

Overshoot is a natural ecological process. Same for any biological organism including us.
No blame to be had there. Has nothing to do with the global banking Ponzi.

For the under-educated poor, they and their world are engineered from above. The power of those at the top is much like weather to those at the bottom. It is what it is. They are exploited like any other resource.

[ennui2]

Strawman much?

Is there a reply here?

We've been down this road before. You come in here saying the world's gonna end in months and then when you calm down you fall back into sort of a Democracy Now style left-wing outrage. I'd say if you really believe what you say you believe then there are bigger fish to fry in the blame-game than the MSM. More of a day of reckoning for our long-term evolutionary success (i.e. being as dumb as yeast in the petri dish).