Monthly Archives: May 2012

The world economy and the CRB index

The CRB index is the commodity price index which provides a very useful measure of the health of the world economy.

It currently is made up of 19 commodities and is quoted on a number of different exchanges. The index comprises petroleum based products which make up about 33% of the weighted index and a range of other diverse agricultural and resource commodities.

It is always useful to refer to the CRB index when trying to interpret the direction of the world economy. The monthly chart of the CRB index below shows the relationship between the index and the GFC during 2008 as well as the current trend.


Since early 2011 the CRB index has been in decline, reflecting a lowering demand for major commodities. I would expect that the economic problems in the EU will continue to depress demand for commodities with a continued fall in commodity prices. Falling… Continue reading

Consider the Baltic Dry Index

When considering indices which give have a high correlation with the health of the world economy it is worth looking at the Baltic Dry index or BDI. The BDI measures dry shipping freight costs, priced in dollars, as reported daily by brokers to London’s Baltic Exchange.

Prices for shipping coal, rice, wheat and other commodities are a proxy for the strength of world trade and, by extension, of activity in the global economy. A falling Baltic Dry index shows that ship owners are cutting prices in the face of falling demand.

In 2008 at the start of the GFC, the Baltic Dry index was an early warning sign of trouble ahead for the global economy. In January of this year the BDI fell to a 25-year-low giving cause for concern that history is about to repeat itself.

The figure below shows the BDI over the past 10 years with the… Continue reading

Equities or Fixed Interest

Investors have a dilemma in this current investing environment. We need to have an adequate return on our investments but we want reasonable assurance of safety of our capital. It becomes a question of what is a reasonable return and how do we ensure safety of capital.
While in the longer term investors looked at returns of around 12% which is the long term returns for the All Ords accumulation index, these are unlikely returns in the sort of investing environment that we could see over the next few years.  Perhaps a more realistic return is of the order of 6% to 8%.

There are many Australian stocks which are fully franked and offering at least 5% return, so some of these would seem to be a pretty safe bet. But how safe are stocks? In a falling market there is the potential for significant capital loss and there… Continue reading

Disclaimer

The Australian Independent Investor provides information and discussion 0f interest to Australian investors. The content may be useful to investors in their quest to achieve financial independence.

The material contained on this site is an interpretation based on publicly available information from sources that are believed to be reliable and is believed to be accurate at the time of writing.  However, the Australian independent Investor does not warrant its accuracy or reliability.

The information is made available without consideration of any reader’s specific investment objectives, personal financial situations or needs. Because of this, no reader should rely upon the information or commentary offered.   All views and information expressed are made available for the purposes of information and discussion only.

Before acting on any information contained herein readers should consider the appropriateness of the information, having regard to their particular objectives, financial situation and needs. Having made… Continue reading

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DISCLAIMER


The Independent Investor provides an educational website with information and comment of interest to Australian investors. All expressed views and information are made available for the purposes of information and discussion only. The material contained on this site is an interpretation based on publicly available information from sources that are believed to be reliable and believed to be accurate at the time of writing. However, the Australian Independent Investor does not warrant its accuracy or reliability. Before acting on any information on this site readers should consult a licensed professional.

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