Success in the business world is most often achieved by those with a competitive edge.
That's why, here at Money Morning, helping readers find that edge for their investment toolkit is Job One. In the past week alone, we've introduced readers to two little-followed indicators that have big proven payoffs. The first was the Baltic Dry Index, a shipping index that provides a panoramic view of the global economy. And the second was the "Gold Spike Indicator," which helps gold investors time their purchases.
Shrewdly used, either (or both) of these indicators have the potential to provide investors with that sought-after competitive edge.
Take the Baltic Dry Index. As Money Morning Guest Columnist Jack Barnes explained, "the Baltic Dry Index has [historically] shown itself to be the EKG of future industrial demand. And, right now, the BDI is screaming "Danger, Will Robinson!" to any investor who will read it and heed it as a true leading indicator."
Then there's the "Gold Spike Indicator," which Money Morning commodities expert Peter Krauth shared with readers yesterday (Tuesday). Although this market-timing mechanism is elegantly simple, it's also shown itself to be a quite-powerful tool.
"[B]ank holding companies are required by law to make quarterly disclosures on their holdings – including commodities," Krauth said. "And my research shows that there's a certain 'window' during this disclosure period during which some of those commodities can make some pretty hefty price moves. Gold is one of the commodities that's worth watching."
These indicators are just two of hundreds out there that investors use to gain a competitive edge.
For those tracking economic growth, the latest on housing starts, the unemployment rate, and the consumer price index also are necessary to forecast the big picture. But reading numbers and reports is not enough.
Investors need to go behind the raw data to find the real story – a story Money Morning works to interpret: Where are these numbers headed? How will the markets react? What do investors do now?
That prompted last week's installment of our Money Morning "Question of the Week": How have you stocked your investment toolkit? How can investors on Main Street hope to trump the big players on Wall Street? What do you believe investors should rely on to get that competitive edge? Do you find some of the-most-talked-about "indicators" to be on-the-money? Or are they more smoke than promise?
Here is a collection of reader comments about which tools our readers have stocked up on to navigate the volatile market.
Watching & Waiting…& Hoarding
During this crisis, theone indicator I've been waiting for was capitulation. We never reallyhad it at the 2009 lows. I think people thought that although this was a deeprecession, at least it was over. We got used to having things going back to normalrelatively quickly.
Granted there was talk of a new normal, but at the time nobody really believed it. They looked at the V-rebound and thought that everything was okay. Now, people are starting to question where we really are. There'san unease that this may not be the end.
So, I'm still waiting for capitulation sometime in the future. Until then, I'm holding a lot of cash.
– Sam R
Focus on the Big Picture
Earnings can be manipulated very easily. I focus on main economic numbers, like unemployment and housing, which is terrible. Our current administration is also doing a very terrible job, and will likely make things even worse.
Faith in Silver
Another commodity to keep your eyes on, for "topping" actions, similar to that of oil in 2008, will be silver.
According to silver analyst Ted Butler, the Nestor of the silver industry, silver is on the verge of breaking out to the up side, in a move with suddenness and magnitude never seen before in financial history.
I have never heard Butler, who has followed and analyzed the silver industry for some 30-plus years now, speak in this way before about the imminence of such a break-out in the price of silver to the up side.
– Joachim T.
The following comments specifically refer to an economic indicator examined in last week's article by Money Morning Guest Columnist Jack Barnes: The Baltic Dry Index is Shouting "Danger, Will Robinson!" But Are Investors Listening?
I am somewhat astonished that I have not heretofore had the BDI in my gunsights. Thanks for the heads up!
Is there a place (free) where I can go to see the Baltic Index on a regular basis? It sounds like a very good index to watch.
– Tom A.
MM: For any readers who missed it, here's a link to the Baltic Dry Index:
It is important to note that the Harpex Index which tracks freight container shipments is still moving higher. As soon as China starts importing iron ore and coal again, the BDI should start moving up.
Don't forget that shipping day rates are also based upon total amount of tonnage afloat. North Korean and Chinese shipyards are churning out vessels. In China, vessel-building contracts that have been cancelled by the customer have been continued – the Chinese government/national banks become the new customer. This excess shipping capacity will depress prices for some time to come, even with an increase in raw material shipping.
– Richard B.
We should consider that China bought big quantities of iron ore and coal in the last 12 months, so China is no more, at the moment, a big actor on the market; and too many new ships have been delivered in the past months, unfortunately exactly when China was no more a big mover of the market. So we have to take a careful position. Perhaps this is only a temporary retreat, or perhaps it signals something much more serious.
The crazy position of the European Commission does not help the situation to improve, as the measures decided in Europe by the single countries, under German pressures, are clearly deflationary, and can bring the economic situation to a new recession or even a depression. In these days you have to improve the expenditure capabilities of consumers, and only when the economy is again on track can you look after state deficits and debts.
The BDI reflects all these uncertainties and sends us an alarm signal that should be seized not only by investors, but particularly by governments all over the world.
– Massimo D.
[Editor's Note: Thanks to all who responded to last week's "Question of the Week" feature regarding investment tools. Be sure to answer next week's question: Will BP's Makeover Restore the Oil Giant's Image??
Send your answers to firstname.lastname@example.org.!
Is there a topic you want to see covered as a Question of the Week feature? Then let us know by e-mailing Money Morning at email@example.com. Make sure to reference "question of the week suggestion" in the subject line. We reserve the right to edit responses for length, grammar and clarity.
Thanks to everyone who took the time to participate – via e-mail or by posting their comments directly on the Money Morning Web site.]
News and Related Story Links:
- Money Morning:
The Baltic Dry Index is Shouting "Danger, Will Robinson!" But Are Investors Listening?
- Money Morning:
When This Indicator Says to 'Buy Gold,' It's Never Wrong
- Money Morning:
Unemployment Report Shows Sluggish Recovery Will Take Years to Replace Jobs Lost in Great Recession
Bad January, Bad First Half: A Gloomy Omen For Stocks
- Money Morning:
A V-Shaped Recovery? Don't Bet On It
- Money Morning News Archive:
Question of the Week Feature