The markets are filled with acronyms that are often impossible to remember the underlying words for, but if you say them knowingly and confidently, with gravity, most folks will also pretend they know what the acronym stands for and you never really have to know what it means.
It’s like the emperor’s new clothes: no one wants to admit they can’t see what everyone else is talking about.
In his blog on the Daily Telegraph site, mega-bear Ambrose Evans-Pritchard is humble enough to admit he had never heard before of the CIOPCI. He doesn’t even mention it in an acronymic form, reveling instead in its full mouth of wordiness: Capesize Iron Ore Port Congestion Index. In fact, it may not exist as an acronym at all. I can’t find any reference on that world wide web thing for it as an acronym, so perhaps no one has ever done so before. (I just did a quick google search.) Maybe I, here, have created it as an acronym. Which would be a career highlight, I must say.
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The reason Evans-Pritchard was talking about the Capesize Iron Ore Port Congestion Index is that it can be used as a surrogate for world commodity demand. The index measures how many capesize ships (giant bulk commodity carriers) are waiting to get loaded in the world’s ports. When there are a lot lined up to get filled, it’s a sign of booming world industrial demand. When there are few, it’s taken as a sign of weak world demand.
Ambrose Evans-Pritchard (I love saying his name. Sounds like that of a man who would be rather fussy about how you made his tea) is a mega bear, seeing dire economic conditions coming in what he assumes will be a depression. So he’s quick to jump on stats that show that the glimmers of hope in the economy and the equity market rally since the spring are false hopes and merely going to lead to more despair a few months from now. (If you want to drag yourself down a bit, go to his blog at: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/ )
The reason he brought up the Capesize Iron Ore Port Congestion Index is that it has turned downwards, after rising sharply in the past few months. That sort of a turndown in demand for shipping was also seen last year, before the commodity market slump. So this drop in the CIOPCI is an “A-HA!” moment for Evans-Pritchard.
But he’s not alone. There’s been a lot of chatter in the markets this week about the BDI (Baltic Dry Index) turning downwards and the tremors of worry this is sending through some parts of the market.
In this week’s paper – the July 9 issue – I wrote a story summing up the views of some of the commodity bulls. For next week’s paper I’m going to look at bears like Evans-Pritchard and explain why they think commodities are going the opposite way.
