This Economic Indicator Has Never Been More Bearish

A key measure of global trade just hit an all-time low…

The Baltic Dry Index (BDI) measures the price of shipping materials such as iron, coal, and grains. It accounts for 23 different shipping routes and four ship sizes. It’s one of the most closely watched indicators for the global economy…

On Friday, the BDI closed at 498. It was the first time the index has closed below 500 in its twenty-year history.

The BDI hit an all-time record high in May 2008. It’s been falling ever since. The index is now down 96% from that point. It’s plummeted an incredible 59% since August alone.

Two things determine shipping rates: the number of ships and demand for shipping...

Shipping rates soared from 2002 to 2008. The BDI rose more than 12-fold during this period.

Shipping companies thought the boom times would last, so they built more ships…

Then shipping rates collapsed in 2008. The industry built too many new ships, and global trade slowed dramatically. (As Casey readers know, oil tankers are the one exception to the bloodbath in shipping. The oil shipping business is booming right now.)

On Friday, Forbes reported that the global shipping industry still has 30% more capacity than it needs.

• The global economy is slowing...

Shipping giant A.P. Møller-Mærsk A/S (AMKAF) recently reported a 15% drop in sales during the third quarter. It was the fourth quarter in a row that sales dropped from the previous year.

Mærsk is the world’s largest shipping company. It moves about 15% of all manufactured goods shipped worldwide. If Mærsk is struggling, it’s because global trade is slowing.

Last month, the company also announced plans to lay off 4,000 workers. This will cut the company’s global workforce by 17%.

Mærsk’s CEO, Nils Smedegaard Andersen, said he’s cutting jobs because the global economy is slowing faster than people think.

We believe that global growth is slowing down...Trade is currently significantly weaker than it normally would be under the growth forecasts we see.

Last month, the International Monetary Fund cut its global GDP forecast from 3.3% to 3.1%. The organization also lowered its growth forecast for 2016 from 3.8% to 3.6%. According to Andersen, these new projections are still too optimistic.

• Meanwhile, the price of copper hit a new six-year low on Friday...

Copper has been falling all year. Now it’s plummeting. Copper is down 14% in the past month alone. It’s now down 56% from its 2011 all-time high.

Plunging copper prices are another sign of a slowing global economy…

Copper is used to make smartphones, televisions, laptops, and other electronics. It’s used in plumbing and roofing parts. Copper is also waterproof, so it’s used in shipbuilding. When the price of copper drops, it means a wide range of companies are making fewer products.

• Global machinery maker Caterpillar (CAT) just had its worst monthly sales decline in five years...

In October, Caterpillar’s global machine sales fell 16% from the year before. It was the company’s biggest sales decline since February 2010. Caterpillar’s machine sales have now declined 35 months in a row.

The chart below shows how Caterpillar is experiencing its longest streak of declining monthly sales since the Great Recession.

Caterpillar is the world’s largest publicly traded equipment and machinery manufacturer. Its customers are the companies that build houses, office buildings, bridges, and the rest of the “real” economy. This is why many investors consider Caterpillar a “canary in the coalmine” for the global economy.

It’s unlikely Caterpillar’s sales drought will end anytime soon...

Management expects annual revenues to drop 5% in 2016. If that happens, it will mark the fourth year in a row the company’s annual sales have dropped. That’s never happened in Caterpillar’s 90-year history.

• Like Caterpillar, Europe’s weak economic data is pointing to a slowing global economy...

Europe is experiencing its weakest economic recovery in decades. During the second quarter, Europe’s economy grew half as fast as the U.S. economy. And at 10%, Europe’s unemployment rate is double the U.S. unemployment rate.

On Friday, European Central Bank (ECB) president Mario Draghi described the current recovery as “the weakest euro area rebound since 1998”...

The ECB has tried (and failed) to jumpstart Europe’s economy by cutting interest rates to zero.

In March, the ECB went one step further and launched its first quantitative easing (QE) program. QE is when a central bank creates money from nothing and pumps it into the financial system. It’s basically another word for money printing.

Every month, the ECB’s QE program pumps €60 billion ($65 billion) into the Eurozone’s financial system. It’s scheduled to run “at least until September 2016.” At that point, the program will have pumped at least €1.14 trillion into Europe’s financial system.

• Yet the ECB probably won’t stop at €1.14 trillion...

On Friday, Draghi said that the ECB will do whatever it thinks is necessary to boost economic growth “as quickly as possible.” He added that the ECB “will act by using all the instruments available within our mandate.”

Draghi already hinted the ECB might increase its QE program last month. His statements on Friday went much further. He’s essentially saying, “Get ready for more money printing.”

• Investors are betting on more European QE...

Last week, the euro fell to a seven-month low against the U.S. dollar.

The euro has now lost 20% against the U.S. dollar over the past two years. That’s a huge move for a major currency.

When a central bank pumps money into a financial system, it increases the money supply. In short, QE increases the number of euros chasing the same number of goods and services, which weakens the euro.

• In 2012, Draghi said the ECB would do “whatever it takes” to save the euro…

But more money printing won’t help Europe’s economy. That’s because the European Union has a serious design flaw.

Doug Casey explains:

The problem with every currency in the world today is that they're not backed by a commodity (like gold) but only by the ability of government to steal from people. But the euro doesn't even have that going for it. The European Union doesn’t have the power to tax. Right now, the Eurocrats in Brussels really only have the power to regulate. I've long said that, while the U.S. dollar is an 'IOU nothing,' the euro is a 'who owes you nothing.'

Chart of the Day

Silver is in its longest bear market on record...

Today’s chart compares silver’s current bear market with previous silver bear markets. The price of silver hit an all-time high in April 2011. It’s been in a downtrend ever since.

Silver’s current bear market has run 55 months so far. That makes it the longest silver bear market in five decades. The price of silver is now down 70% from its 2011 high. That’s the second-biggest price drop of any bear market since 1968.

Like other commodities, the price of silver is highly cyclical. It goes through big booms and busts.

Even though silver is in a brutal bear market right now, it will eventually turn around…

And the turnaround could be explosive. Silver surged 441% during its 2008-2011 bull market.

Louis James, editor of International Speculator, is very bullish on silver right now. He thinks a silver supply crunch could end this bear market.

According to Louis and his team, global silver output is set to decline in 2015. That hasn’t happened in 12 years. Louis and his team say this could lead to “a major supply crunch as soon as next year.”

The International Speculator team says the combination of shrinking supply and healthy demand is creating what “looks like the setup for a perfect silver storm.”

Just last week, Louis told his readers about his “go-to” silver company. The company is making profits even at today’s ultra-low silver prices. And its stock is trading at a discount…

You can learn about Louis’ favorite silver company by taking International Speculator for a risk-free trial. Click here to learn more.

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