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Five Things You Need to Know: What is the Baltic Dry Index?, $30 Million Per Hour, IEA Proposes Sphinx-like Energy Riddle, Couldn't We Just Pay Someone for a Higher Ranking?, Five Stock Indices We Wish We Knew


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. What is the Baltic Dry Index?

What is this thing called the Baltic Dry Index, and why do you need to know about it?

  • The Baltic Dry Index is a number issued daily by the Baltic Exchange, a London-based organization whose members arrange for ocean transport of industrial bulk commodities from producers to end users.
  • Every day they survey brokers around the world to find out how much it costs to book cargoes of raw materials on a variety of shipping routes.
  • The answers are then reformulated as the Baltic Dry Index.
  • Now, why is the Baltic Dry Index considered important? Well, first off, it's not a speculative index. In other words, no one is out there bidding up the Baltic Dry Index because they believe shipping costs will change in the future.
  • Instead, it tracks the actual cost of shipping raw materials by sea based on real cargo bookings and is therefore considered a pretty good indicator of global trade volumes.
  • For those without access to Bloomberg, the Web site Investment has updated Baltic Dry Index data available.
  • Note the chart shows a recent breakout. Put that in some context with today's Number Two.

2. $30 Million Per Hour

China's foreign currency reserves have topped $1 trillion, setting a new record for the world's largest currency reserves.

  • China first became the country with the largest foreign currency reserves at the end of February when it overtook Japan.
  • Japan had reserves of $881.3 billion at the end of September.
  • Ba Shusong, an expert for the State Council, China's cabinet, said he expected the reserves to grow to $1.5 trillion in only two years while the International Monetary Fund predicted they would hit $2 trillion by 2010, according to
  • China's currency reserves increase by nearly $30 million per hour.
  • The increase is fueled primarily by China's large trade surplus, which tripled last year to $102 billion, and surging foreign investment.
  • It is believed that as much as 70% of China's reserves consist of U.S. dollars.
  • Meanwhile, Chinese economists and policymakers are calling for diversification of the country's forex reserves.
  • Zhao Xijun, a finance professor with Beijing's People's University, said that China can use its reserves to import 'high-tech products and strategic natural resources," AFX News reported.
  • China should also invest its massive holdings in the stocks of foreign companies, and inject capital into China's under-funded social welfare system, Zhao was quoted by the People's Daily as saying.

3. IEA Proposes Sphinx-like Energy Riddle

The International Energy Agency has warned that the world faces the twin threat of not having enough energy and damaging the environment by using too much energy, the Financial Times reported.

  • In its annual World Energy Outlook, the IEA said that despite the recent rise in the oil price and the jump in investment, the world's energy industry is not building enough new oil and gas capacity to ensure future supplies.
  • Adjusted for inflation, the oil industry's investment increased by just 5% between 2000 and 2005, the IEA said.
  • The IEA also warned, however, that the world's high level of oil and natural gas consumption poses significant environmental threats.
  • Without laws to curb energy use and global warming, energy- related carbon-dioxide emissions in 2030 will surge 14 billion metric tons from 2004 levels, or 55 percent, to 40 billion tons, the IEA said.
  • The sphinx-like riddle posed by the IEA is how to boost investment in oil and natural gas production to match future consumption, while reducing future consumption of oil and natural gas fuels in favor of cleaner nuclear and biofuels.
  • Ok, to be clear, the IEA says oil and natural gas production is underfunded. But increased oil and natural gas production and consumption will likely result in an environmental catastrophe.
  • So, we need to increase oil and natural gas production investments in order to be able to produce a possible environmental catastrophe?
  • No. We want to avoid an environmental catastrophe.
  • But don't we need to invest in oil and natural gas production to ensure adequate supplies?
  • Yes, definitely, the IEA says, or oil prices could reach $97.30 a barrel by 2030.
  • But if we continue to consume oil and natural gas at our current rate, then won't we face a global environmental catastrophe, according to the IEA?
  • Yes. "The energy future we are facing today ... is doomed to failure," Claude Mandil, executive director of the IEA said.
  • But, if we... never mind.

4. Couldn't We Just Pay Someone for a Higher Ranking?

The US has suffered a worsening in its perceived levels of corruption following a series of business scandals and increasing worries over political party funding an anti-corruption watchdog said, according to the Financial Times.

  • In an international ranking of countries released ahead of Tuesday's mid-term congressional elections, the US fell to 20th place from 17th last year.
  • Its score fell from 7.6 to 7.3, with 10 representing "least corrupt" and 0 "rampant corruption."
  • Transparency International's annual Corruption Perceptions Index ranks 163 countries based on opinion polls and expert assessments.
  • Finland, Iceland and New Zealand are the world's least corrupt countries, while Haiti, Burma, and Iraq are most corrupt, according to the index.
  • This year's index score for Iraq of 1.9 is based only on surveys made after the invasion.
  • "The systems for upholding integrity in Iraq, the rule of law and courts, are not functioning, or have been destroyed," said David Nussbaum, Transparency International chief executive.
  • The index revealed a link between corruption and poverty, Transparency International said, with all low-income countries scoring below 5.0.

5. Five Stock Indices We Wish We Knew

This morning Minyanville Professor Bennet Sedacca asked on the Buzz & Banter if we could name the top five performing stock indices so far this year. We couldn't.

1. Shenzen SE B Share Index: +80.39%

2. Shangai SE B Share Index: +78.29%

3. Botswana Stock Market: +77.65%

4. Ho Chi Minh Stock Index: +69.12%

5. Poland WSE Midwig Index: +66.18%

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No positions in stocks mentioned.

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