For those who invest in dry bulk shipping companies the Baltic Index is a good indicator of the present demand for dry bulk cargo.
The index has had a high of 1,484 points on 4 November, 2014 before coming down to its 52 weeks low of 509 points on 18 February, 2015. Since then it has recovered marginally to its current level.
Inadvertently, it shows that the global economy is still struggling. In the past, China's demand for commodities was what put the index in the highs of more than 10,000 points. Those days are gone, and the present situation looks bad.
Therefore, I would refrain from any investment into dry bulk shipping companies as global fundamentals are weak.
I would also avoid investing in mining companies as the demand for iron ore and other similar minerals are simply not there.
However, I will be on the look out for gold mining companies in Australia which are grossly undervalued and have a strong Balance Sheet. I would not however invest aggressively but accumulate slowly in manageable quantities. The reason?
AUD is at its lowest vs the USD in 5 years, due to the poor demand for commodities. Gold currently is less than USD1,200 per oz because of the strength of the USD. The greater the strength of the USD, the lower will be the price of gold. The only time when gold will shine is when there are great risks in the global economics and financial stress in major economies. As demand for gold rises, so too will be the demand for gold mining stocks and the AUD. You can potentially earn from the capital appreciation and FOREX.
That day is not too far off. China will continue to weaken as the past reductions in interest rates and capital ratio requirements for banks have failed to lift the economy from its present predicament. Asia itself, is swimming in a sea of liquidity with many countries seen lowering their interest rates to lift their respective economies which are clearly showing signs of a slowdown. Asia too is facing unprecedented high levels of debt due to the cheap money being made available since the last Global Financial Crisis and of course, property speculation.
Besides gold, you can also look at high dividend stocks or REITs which are financially strong and remain undervalued to this day. These will help you weather through the financial storm ahead.
These are just my opinions. It is advisable to do your own research before investing.
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