Baltic Freight, Shipping Credit and China: Part 1

By: Gordon Long | Mon, Apr 14, 2014
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Valtic Freight Shipping Credit & China
with Bert Dohmen & Gordon T Long
23 Minutes, 37 Slides

Bert Dohmen who recently authored "The Coming China Crisis" is now warning about Chinese shipping credit and what he sees in oversea freight rates. He believes there was a major dividing line that was crossed in June 2013 when overnight lending rates abruptly tripled. Though government actions quieted things down on the surface (at least temporarily), below the surface an avalanche of credit issues has ensued.


China

The Coming China Crisis

Bert predicted much of what is currently occurring in his book and describes it as China hitting the "Great Wall of Communism". As an export led economy being capital investment driven it is now time for innovative entrepreneurs to take over, but they can't. 41% of Chinese GDP is primarily foreign capital investment which has slowed and new investment from investment savings is not occurring. "It has gone as far as it can go!" according to Bert Dohmen.

The basic reason is mal-investment due to corruption and the unregulated and massive shadow banking system which has taken hold of the Chinese economy. With $21T of loans outstanding the unregulated shadow banking system has funded half of these loans and is now facing escalating levels of default.

Most troubling is the level of corruption and the control that the government owned "SOB" exercise. Only recently has the scale of the corruption began to be made visible outside of China.

Chinese Leader: Billions siezed


Baltic Freight Rate & Shipping Credit

Chinese government economic numbers are manipulated and therefore shipping levels and their rates are the actual measure of the real global trade which investors need to study.

The Chinese private sector is in recession and has been for some time which can be seen in the 40% decline in one month in the Baltic Freight rates. It was made clear last month when 300 tons of Soybeans could not get a shipping letter of credit. Additionally, financial leverage being employed regarding the use of imported commodities as loan collateral became public.

Baltic Dry Index

The shipping credit 'canary' is very reminiscent of exactly what preceded the 2007 global financial collapse.


US Economic "Demand Engine" is Stalled

China's export lead and investment driven economy has been powered by the US consumer. However US and European retail sales and real disposable income is sending an unambiguous message that slowing growth and even contraction lay ahead. US Money velocity has been steadily falling as US businesses continue to resist investment. This does not bode well for for an already tenuous problem in China.

Velocities of M3 and M2 Chart

Bert sees turbulent times directly ahead as the realities of slowing global trade come home to roost in China.


Macro Analytics Video: Baltic Freight, Shipping Credit & China - Part 1 w/Bert Dohmen

 


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Gordon Long

Author: Gordon Long

Gordon T. Long
Publisher - LONGWave

Gordon T. Long

Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public.

Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL - Canada); Vice President Engineering & Officer, Motorola (Codex - USA).

After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech start-up and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager.

In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition.

Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. GordonTLong.com is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Co-operative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

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