Mattress Stuffing: What Does It Mean?

Yesterday I wrote about mutual funds - money market accounts, specifically, and how the banks and other financial entities appear to be looking at your money market funds while drool creeps from the corners of their mouths. It's money - and they want it. As much as they can lay hands on without further diluting the value of what there is by printing more.

There's good reason money is called the "root of all evil". People who don't have it will often do whatever it takes to get some. But it's an evil we all need. It is an absolute necessity for living like a human being. It buys stuff. It puts clothes on our backs, food in our bellies and a roof over our heads. It brings, or it at least appears to bring, power.

After all, if you have enough money, you can do just about anything you want because a) you're not beholden to anyone else; b) you can buy whatever or (in some cases, depending on the weakness of character of the other party) whoever; and c) if things don't go your way, you can retreat to some mountaintop - privately owned and well fortified, and do whatever you like there. Like sulk. Or build an army or something.

Because of the power of money, anyone with the lick of sense that God gave a chicken wants it.

So that's the money market thing. The safest of the safe might not be so safe after all because this house of cards we're living in is starting to shake. The bankers want your money to shore it up if the tiles start sliding off the roof and the foundation starts to crack.

So why else do I and others who pay at least passing attention to this stuff think the house is about to collapse? Because of what's happening with the Baltic Dry Index.

HUH? That's that you're thinking, right? I'm assuming that's what you're thinking because that's the reaction I had the first time I heard that term.

It is real. It has nothing to do with the northern part of Europe, and it has little to do with 'dry' - although it does, too.

It's shipping. Cargo and container shipping across the oceans, excluding oil tankers. Container and dry cargo shipping - concrete, lumber, steel, cars and so on - are an indicator of what's happening in the world economy.

If there's lots of cargo being shipped, that's good. That means people are making things and selling things and buying things because those cargo ships are full. If there is little cargo being shipped, that is bad. People aren't buying and making and selling.

Virtually all of the raw materials in the world get shipped by cargo carriers - dry bulk ships (hence the name 'dry' in Baltic Dry Index). Not everywhere in the world has all of the basic materials it needs to make things, so they ship it across the ocean from wherever they can buy it for the least amount of dinero.

China imports, the U.S. imports, Russia and virtually every other country on the planet imports - and most import both raw materials for manufacturing, and finished goods for sale.

So shipping is critical to a healthy economy. Without shipping in raw materials, China can't make the stuff they make. Without the shipping out, China would be overflowing with:

misseye.wordpress.com

Instead, they pack all that stuff into containers, put it onto ships, and share that junk with the rest of the world.

However, if the rest of the world isn't buying, if China makes a bunch of stuff but nobody wants it because they've just looked in their wallet and their money isn't t'home, the stores don't order. The manufacturers don't ship, and those big, hugely expensive-to-operate cargo ships sit idle. And that's the indicator that not all is right with the financial world.

Idle ships, ships just sitting around in ports, rusting and collecting barnacles on their hulls, means commerce ain't happening. Buying and selling, trade, isn't taking place, and that means that people are holding onto their money, or they don't have money to spend on SpongeBob dolls.

When money contracts, isn't readily available, people turn from luxuries, like SpongeBob dolls, to necessities, like food. Here's an article from the LA Times that shows that this year's big shopping day - Black Friday - indicates that things aren't so rosy on the Main Street home front, no matter what the talking heads are saying:

"“Retailers are standing on the edge of a cliff,” said Britt Beemer, a retail expert at America's Research Group who has tracked U.S. holiday sales nationally for more than three decades. “These two days are a reflection that consumers are extremely cautious and are focused on buying necessities."

About 60% of Thanksgiving shoppers bought door-buster deals and nothing else, and an additional 7% picked up only one or two other items aside from major promotions, Beemer said. That's a problem for stores, which draw customers in with bargains in the hopes that they will toss pricier products in their baskets."

http://www.latimes.com/business/la-fi-black-friday-shopping-20151126-story.html

What makes Black Friday so important is stated here, in this same article:

Retailers can haul in as much as 40% of their annual revenue during the holidays. This year, the retail industry's anxiety has ratcheted up after retailers, including Macy's and Nordstrom, reported disappointing third-quarter results. 

40%! That is a lot - a boatload, one might say. And it's all tied together through the Baltic Dry Index.

All U.S. retailers - from Ross Dress-For-Less to Wal-Mart to Target to Macy's to Nordstrom - rely heavily on China, Korea, Indonesia and other countries around the world to produce the goods they sell. If the U.S. retailers can't sell those goods, if they have stock piling up in their warehouses because people aren't buying, they aren't ordering more stuff from China and Korea and Indonesia. The ships that carry that stuff aren't moving - they're sitting idle.

And that is what the Baltic Dry Index is indicating right now - the article below is from November 20, but as of day-before-yesterday, the Index was down to 484, even lower than mentioned in this article titled "We Just Got Major Sign that World Trade is Crashing":

http://www.businessinsider.com/baltic-dry-index-hitting-record-lows-2015-11?r=UK&IR=T

From this article:

"The index has always been used as a bellwether indicator for global trade conditions and the state of the international economy, but it attracted special attention after it pointed to the coming financial crisis back in 2008."

And that's why, ladies and gents, I think this house of cards is starting to shake pretty heavily.

Go stuff your mattress. I've got to get back to stuffing mine.

Best~
Philippa

Follow me on Twitter: https://twitter.com/PhilippaStories