Baltic Dry Index continues to decline under economic stagnation

Market forces September 23

The Baltic Dry Index peaked in June as optimism began to surpass reality and inventories were allowed to grow. But since then the only market to grow has been the stock market. World growth has stagnated again but inflation has stemmed the declines in real estate and stock prices. Inflation is already at hand yet is being interpreted incorrectly as demand for commodities.

http://www.bloomberg.com/apps/cbuilder?ticker1=BDIY%3AIND

Light crude oil and industrial copper trade now in a narrow range responding to stagflation (stagnation with inflation) but gold’s advances are affected by inflation and are unaffected by the economic stagnation.

http://www.tfc-charts.w2d.com/chart/HG_/99


The FED has been buying US Treasuries to depress the interest expense and compensate for the decline in foreign purchases. When the FED does that the treasury must print the money and that will eventually drastically weaken the dollar and become highly inflationary. The Financial Forecast Center predicts inflation has already started and will hit 3% this year.

http://www.forecasts.org/inflation.htm



Market Outlook

Worldwide credit remains tight due to de-leveraging of banks. Free world consumer demand continues to decline. The Federal Open Market Committee's (FOMC) decision on interest rates is due out today. Markets will be looking for inevitable evidence that the Fed is about to wind down on its unconventional financial stimulus measures given the recent optimism of Bernanke. If they continue to let the bubble expand it could destabilize the dollar.

Asian markets were down last night; China down -1.9%, Hong Kong up 0.5%, Japan markets closed, and India down -1%. Indian inflation has returned

European markets are up from 0.2% to 0.3% this morning about half way through their day.

US market futures are flat at 7:00 AM EST before the opening awaiting Federal Reserve decision.

We are very cautious now in anticipation of a sudden correction at any time. The percentage of bullish investment advisors now rivals that seen at the 2007 market peak.