Article

2008-12-03 Home Front Economy

Archived material is restricted to Rantburg regulars and members. If you need access email fred.pruitt=at=gmail.com with your nick to be added to the members list. There is no charge to join Rantburg as a member.

Posted by Anonymoose 2008-12-03 00:00|| || Front Page|| [4 views ] Top

#1 I find this hard to believe for one simple reason ... the malls around here are still packed. I have noticed no significant decrease in the number of people shopping or the number of bags they are carrying. I am still seeing people loading cars in the parking lot.

Think about this for a second. Are you buying only 7% of the things you were buying? If people aren't buying cars, then they are having to keep the ones they have running longer. That should mean an increase in demand for repair parts. And regular wearout items like wiper blades and headlights which are imported still need to be shipped. People will still need tires, shoes, flashlights, etc.

Something's fishy with this story.

Posted by crosspatch 2008-12-03 01:20|| 2008-12-03 01:20|| Front Page Top

#2 As of this AM, MSM-NET > seems COMMERCIAL MORTAGES as held by HOTELS, MALLS, ETC. MAY BE NEXT ON THE FOR-BAILOUT LIST???

Posted by JosephMendiola 2008-12-03 02:03|| 2008-12-03 02:03|| Front Page Top

#3 Joe, EVERYTHING will eventually on the bailout list. Congress is doing a grand experiment by pouring money down a black hole and determine exactly how much is needed to satiate its appetite. Tune in for regular updates.

Posted by Alaska Paul in Nikolaevsk, AK 2008-12-03 04:22|| 2008-12-03 04:22|| Front Page Top

#4 crosspatch ,

It's not the amount shipped, it's the cost to ship.

Price is set at the margin so a 93% fall in price is NOT a 93% fall in trade.

Basically it means that there is a LOT more containerised supply than demand.

Posted by Bright Pebbles 2008-12-03 04:22|| 2008-12-03 04:22|| Front Page Top

#5 Agree with everything Bright Pebbles said except
that the Baltic Dry Index applies to dry bulk
shipping such as coal and ore, not containers.

For some background, there is this:
Forbes: Dry Bulk Shippers Foundering

Posted by Chuck 2008-12-03 04:46|| 2008-12-03 04:46|| Front Page Top

#6 I shall now sulk in the corner.

It's amazing that what you think ur typing and what ur actually typing can differ.

Posted by Bright Pebbles 2008-12-03 06:00|| 2008-12-03 06:00|| Front Page Top

#7 Looking at the shopping mallsright now is not a good measure of underlying economic status.

It neglects to take into account the lag time between economic causes and visible effects. Your retail shopping mall is full of people seeking bargains at a time that traditionally is a very high volume sales period. Those goods were manufactured and stocked months ago.

Today wholesalers have seen their orders fall dramatically and as a result are placing fewer orders with manufacturers, who in turn are buying a lot less of the bulk commodities that make up the main cargo for bulk shipping.

Posted by lotp 2008-12-03 06:15|| 2008-12-03 06:15|| Front Page Top

#8 Could this mean that we'll actually have to begin manufacturing our very own stuff?

Posted by Besoeker 2008-12-03 08:00|| 2008-12-03 08:00|| Front Page Top

#9 From a previous article:
Which is why global shipping has collapsed: it is the harbinger of the end of the era of trade, in which third-world labour costs kept first world inflation down and allowed interest rates to fall and stay low and debt to be increased to an historic degree.

That process of importing deflation (or, more precisely, disinflation) from developing nations -- especially China and India -- relied on trade: raw materials in; finished goods out.

The fall in freight rates for both dry bulk carriers and container ships is telling us that it's over.

In other words inflation is set to rise, so we are in for a period of "stagflation" (recession and inflation)
I'm still cogitating this hypothesis. Governments around the world are driving interest rates down to historic lows, so what's going on?

Posted by tipper 2008-12-03 08:33|| 2008-12-03 08:33|| Front Page Top

#10 People aren't buying new cars. That, after all, is why the Big Three have gone to Washington with their palms outstretched. At the shopping malls the prices were shockingly low even for the traditional day-after-Thanksgiving sales; In Buffalo, one of the most price-sensitive cities in the country, Lord & Taylor had rack after rack of current-season $100 items for $25.

Posted by trailing wife">trailing wife 2008-12-03 08:42|| 2008-12-03 08:42|| Front Page Top

#11 Is it price reduction or gouge reduction? 'If' they are still making a profit, has it been gouging all along? And 'if' profits are still being made, with the decline in ROI in other venues [as in I could make more money investing it over here rather than making a real reasonably priced item or service] does it reinforce basics in the economy at the expense of speculative markets?

Posted by Procopius2k 2008-12-03 08:50|| 2008-12-03 08:50|| Front Page Top

#12 It depends on the market.

(That's how you answer a question when you don't really know the answer)

(Pay attention, you may want to run for senate some day and this will be helpful)

Posted by bigjim-ky 2008-12-03 09:33|| 2008-12-03 09:33|| Front Page Top

#13 The shopping continues because of habit. People still spending what they should not. If they have cash, they ought to be conserving it. Do without the habit for once. The prices being offered now by retailers are likely below purchase cost. Many retailers have to sell at any price, because many are going to have to file for bankruptcy after the new year dawns. They are trying to keep the lights on and rent paid. But they are not gaining ground and turning a profit.
Yes, all transnational shipping is dropping. The use of electricity on the Chinese grid is down 40-60 %, depending on source information. This means a drastic contraction in smelting and manufacturing. Port loads at Port of LA are down 30% year/year and dropping. The operators of the TransCon rail shiping, BNSF and UP are laying off crews on that route which brings 90% of the containers east. Retail sales are bound to contract. People have enough "stuff" to get by for some time and will have to. Contraction is in the air.

Posted by Woozle Elmeter 2700 2008-12-03 11:22|| 2008-12-03 11:22|| Front Page Top

#14 Who* would have predicted that a credit boom would end in debt deflation?

* Except most people on the Internet it seems.

Posted by Bright Pebbles 2008-12-03 11:28|| 2008-12-03 11:28|| Front Page Top

#15 Could this mean that we'll actually have to begin manufacturing our very own stuff?

Nope. This doesn't change foreign labor being cheaper.

Posted by Mike N. 2008-12-03 12:30|| 2008-12-03 12:30|| Front Page Top

#16 Another way to look at this is that we have commodity deflation. Raw materials are becoming cheaper after spiking. Eventually, somebody is going to find the prices ammenable to making products again. This should fuel the eventual turnaround as long as credit markets are functional.

Look at gas prices. They've crashed. This will eventually free up some cash in the economy. It is like an across the board tax cut.

I agree some spending is out of habit but some is necessary too (food, diapers, etc.). This too forms the 'bottom' of the economic downturn.

Labor intensive manufacturing will continue to go offshore when there is demand for the products.

Posted by JAB 2008-12-03 15:12|| 2008-12-03 15:12|| Front Page Top

#17 #8, Could this mean that we'll actually have to begin manufacturing our very own stuff?

Seems like that would be a good idea. Jobs need to be created to give people purchasing ability. People also have to have purchasing power and create demand for there to be manufacturing. I don't mean to be pessimistic but things could get pretty rough before they get better.

Posted by JohnQC 2008-12-03 15:45|| 2008-12-03 15:45|| Front Page Top

#18 People aren't buying new cars.
Of course they aren't. The jobs that let them pay for the cars are gone.

Duh!

Posted by 3dc 2008-12-03 18:02|| 2008-12-03 18:02|| Front Page Top

#19 "This doesn't change foreign labor being cheaper."

The globalization and leveling of labor costs was already underway. This crisis may accelerate it, which would ultimately be a good thing.

Labor costs will eventually rise elsewhere as workers demand more, and workers in the U.S. will ultimately be obliged to demand less for their work, bringing the cost of employing them back to levels that have a more accurate historical context. This will make it more attractive to employ people here again.

This will NOT happen overnight, but it will happen.

Posted by no mo uro 2008-12-03 22:17|| 2008-12-03 22:17|| Front Page Top

#20 Couple of things about the BDI: First, it's quite dependent on shipping credit risk. From page two of the article:

While it is important to look at this recent tumble in the BDI's value as a possible harbinger of worsening global economic conditions, it is possible to speculate about the cause of this huge loss and therefore take some of the mystery and potential fear out of this gut wrenching economic development. One of the biggest factors that could be contributing to the BDI's recent massive downturn is the US turned International credit crisis. If a merchant who is selling and shipping $100 million dollars in goods can not obtain a guarantee from a bank that payment will be delivered upon completion of the sale, not many merchants would want to take the chance that their buyer would not be able to furnish the money to complete the transaction. In the past this was less of an issue even when banks couldn't entirely guarantee that the buyer could pay completely for the goods.

Banks used to be able to sell the cargo outright to pay the debt of a buyer in default. The situation has since changed. Because consumer and financial sector confidence has fallen in consumer goods being shipped from overseas and an economy that has driven down the demand for consumer goods, these same banks are reluctant to trust that they could sell the ships' cargo and recoup their potential loss due to a default of payment either by a raw goods buyer or another bank.

Second, it's not much lower today than it was in 2002.

Third, it appears to lag the S&P 500. Better to watch that:

BDI v. SP500 (log)

Posted by KBK 2008-12-03 23:29|| 2008-12-03 23:29|| Front Page Top

23:52 Jolutch Mussolini7800
23:51 JosephMendiola
23:44 Jolutch Mussolini7800
23:37 JohnQC
23:34 JosephMendiola
23:32 Jolutch Mussolini7800
23:29 KBK
23:21 JosephMendiola
23:12 OldSpook
23:12 JosephMendiola
23:09 USN,Ret.
23:08 OldSpook
23:01 USN,Ret.
22:55 Verlaine
22:52 JosephMendiola
22:47 DMFD
22:45 trailing wife
22:43 JosephMendiola
22:38 DMFD
22:32 trailing wife
22:29 JosephMendiola
22:17 no mo uro
22:15 JosephMendiola
22:07 JosephMendiola