That hard landing in China will have to wait another month.

Chinese PMI just came in at 50.5 vs. expectations of 49.6.

That’s still in improvement territory, and it also is an increase from last month’s 50.3. So good news all around.

And here’s the spike in the Aussie dollar via FinViz.

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Lately we’ve been getting a lot of concerned emails about this chart.

That chart is a 1-year look at the Baltic Dry Index, which measures the spot cost of shipping good by ship around the world.

As you can see, it’s plunged nearly 66% since its recent highs, and understandably, people are wondering whether this remarkable deflation means the global economy is falling straight off the cliff, or at a minimum indicative of a rapid hard landing in China.

To answer this question, let’s first put the latest move in the index in context.

Instantly you can see a couple things.

The first is that the current decline is nothing like the declines we saw the last time the global economy went into recession in 2008. You should also see, hopefully, that this index is VOLATILE.

It might be hard to figure out some of the moves due to the scale of the chart, but from May 21, 2010 to July 14, 2010 it fell from 4078 to 1708, a decline of 58%.

Conversely, from September 24, 2009 to November 16, 2009, the index jumped nearly 200%.

Again, these kinds of big swings are par for the course with the Baltic Dry.

But to really understand what’s going on, you need to understand that the Baltic Dry Index is not merely a reflection of shipping demand, but also ship supply.

Back in May 2009, former BI writer Vincent Fernando published a pretty fantastic Baltic Dry explainer of the index.

To start he noted:

Why do shipping rates seem to jump all over the place? Due to near term supply of ships versus demand for commodities. Its just a matter of bottleneck problems. If rates go up it can come from either of two things, not enough ships at the time or too much commodities demand at the time. In a situation where ship owners match demand, which over the long run they will, then rates won’t sky rocket and will just track their costs plus some margin for their effort.

He then offered up this very obvious example to explain the volatility…

Imagine you have 10 loads of iron ore and 9 ships, and that every load of iron ore must be sent no matter what while every ship must be filled no matter what. Imagine the bidding war between those 10 iron ore consumers fighting over just 9 ships. Shipping cost would skyrocket since they all need to ship regardless of cost. Now imagine if a week later two more ships enter the market. Now imagine the bidding process. Suddenly the tables have completely changed. You have 11 ships, that all need to be filled no matter what, and only 10 loads of ore. Shipping rates would plunge, despite a period of just a week passing by. This is, in a simplified nutshell why the BDI is so volatile.

And he concluded…

Now, add to this the fact that predicting ship supply and commodities demand has a pretty high margin of error, at the same time remembering how sensitive the BDI is to small mismatches due to the inelastic nature of its underlying supply and demand, and you quickly realize that predicting the BDI is a fool’s game and also that it is not a reliable forward indicator given that it is a spot rate index in a market where both sides are basically forced to close a deal due to high fixed costs. The BDI is measure of supply/demand mismatch at the moment, and can change drastically on a dime. It’s little else beyond this. It hit its peak not when the global economy was in its healthiest state, but in early 2008 when things were already starting to come apart, but Chinese commodities demand growth still had some steam and just kept outstripping stagnant vessel supply growth. For a moment. And then it all collapsed.

The bottom line is that because it has so many moving parts it’s just not that good of an economic indicator, though unfortunately a lot of stories have been written about how great it is, and how people should pay attention to it. Also, because it’s so volatile, you can tell a heck of a story using it.

So for all the people emailing us about the plunge, we’d just like to say: Chill.

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Everyone knew bonuses would be down.

But the big question going into today’s comp communication at Goldman was how much they would be down.

And as has been aptly pointed out, transparency around how comp is actually paid out is basically zero. 

Average pay per employee isn’t an indication of what an average employee gets paid (but it is a really fun number to kick around).

But now we have indications from Goldman employees that today was pretty bad (relatively speaking).

Numbers have been reported to be anywhere from flat to down 40%, with Fixed Income Currency and Commodities employees seeing bigger cuts than the Equities and Investment Banking divisions.

Things look particularly bad for the most junior members of banking teams, who in boom years could expect anywhere from 1 to 2 or even 2.5 times their base salary in bonus.

Now? Around 1/2 of base salary (or about 40k).

And there are reports of people taking it pretty emotionally, with John Carney’s sources saying employees are putting on a “strong face but there are a lot of clenched jaws” and one report of one employee crying after receiving her number.

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Jim O’Neill, the Chairman of Goldman Sachs Asset Management, is out with his latest note to clients.  As usual, O’Neill discusses the mountain of global economic data we got in the past week. 

Regarding the financial markets, he points out a potential break in the correlation between the dollar and euro, and he also discusses some new research findings regarding the correlation between the first five trading days of the year and S&P 500′s performance for the full year.

From his note:

So What About Markets?
There are two things which are potentially quite interesting about the markets, but we will need more evidence. In addition to the S&P 5-day rule (more below), there is some extremely tentative evidence that this weird risk on/risk off correlation between the Dollar and US economic news could be changing. The prevailing pattern since 2008 where the Dollar drops on better-than-expected US economic news and rises on disappointing news certainly didn’t pan out last week. If this is the start of the renewal of the more normal historic trend, this would be a fabulous development in my view, as it should make investment decisions more logical, if not easier.

As far as the 5-day rule I discussed as important for me at least, Monday’s close in New York will be the 5th day. After 4 days, the S&P closed up by 1.6 pct year-to-date, but given the fun and games since last Summer, this is easily reversible in a day.

I have found myself quite engrossed in analysis, discussion and debate about this somewhat odd rule in recent days, not least of which because Jose Ursua from the GS Economics, Commodities and Strategy (ECS) department devoted a daily commentary to the topic on Thursday, and subsequently explored it further at my prompting, as have a number of other poor souls including James Wrisdale, and another colleague from GSAM, Rob Hinch.

I first came across this notion from the Stock Market Almanac, and my 2012 edition has been more heavily turned over in the past couple of days than it normally would. It taught be two things many years ago. One, that there is remarkable pattern historically that many major stock markets show very strong performance from November through April, and quite often, quite weak performance from May through October (hence the “sell in May” oft discussed notion). Any investor that stuck to this calendar investing pattern would dramatically boost his returns. And two, when the S&P rises after the first 5 trading days of a new year, the market has a pretty good annual performance. In fact, the Almanac claims the success rate has been just under 87 pct since 1950. Jose studied a broader 5-day rule as well as the “January month” rule in his daily and showed that, for a number of markets, the January factors seemed to be quite powerful, albeit less than I had believed, and not enough to dismiss the superior importance of fundamental analysis.

While I certainly concur with the latter, in fact, the Almanac observation appears to be very strong on additional analysis; it is not useful when the 1st 5 days show a decline. Historically, this appears to offer no concrete signs for the year. In fact, those years are close to 50/50 as to whether the markets are up or down. (There have been 22 of them since 1950.) It is only really powerful when the S&P is up after the first 5 days. As I reported on January 3rd, 2011 was a real oddity, as it became just the 6th year out of 39 years when the rule didn’t work. What is especially interesting is that there have been no back-to-back years when the rule hasn’t worked. So if for some reason, the S&P is still in positive territory on Monday evening, I shall be most excited.

This 5-day rule and the January rule are arguably somewhat hocus-pocus and could prove to be spurious correlations.  A new AP report argues as much.  Regarding the January rule, BTIG’s Dan Greenhaus recently pointed out that the January effect isn’t exclusive to January and can be applied to almost any month.  Even O’Neill tells you his findings were “not enough to dismiss the superior importance of fundamental analysis.”

Perhaps these rules have little economic/fundamental basis.  But if enough people with enough money believe it’s true, then it could turn into a self-fulfilling prophecy.

SEE ALSO: Goldman’s Jim O’Neill Presents His 11 Predictions For 2012

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Here’s the weekly prediction from Raymond James’ Jeff Saut…

The call for this week: I think the SPX made its low last week at 1209.47. I also believe the Dollar Index made its high last week because I think Mr. Bernanke wants a lower U.S. dollar. If those thoughts prove correct, the CRB Commodity Index has likely made a double bottom in the charts and crude oil is headed higher. But remember, if Santa fails to call the bears will roam on Broad and Wall! Merry Christmas everyone . . .

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Famously bearish newsletter writer and investor Marc Faber was on Bloomberg TV this morning.

Mostly he thinks things are bad and are going to get worse, though he does see the euro surviving in a different form.

When asked whether he’d rather own dollars or euros he responded: “I have a very special stock tip for you. The symbol is g-o-l-d.”

You can watch the whole video here.

Below is a transcript provided to us by Bloomberg TV.

——

Faber on his latest report:

“It’s actually quite gloomy but if you’re very gloomy what do you invest in: Treasuries, Italian bonds or commodities or equities?  I happen to think U.S. equities are not terribly expensive, so relatively speaking to other assets, they may for a while actually do quite well.”

On the market now:

“Right now, the market is in neutral territory. It was very oversold on October 4^th when the S&P dropped to 1,074. Now around 1260, the upside in my opinion will be between 1,280 and 1,350 because there’s a lot of supply around that area. But if there is some good news coming out of Europe, and good news would simply mean postponing the problems for another few years with some kind of money printing operation, either by that ECB or IMF or EFSF, [that] lift stock prices higher.”"[Postponing problems] is not good news, but it is better news than if the whole eurozone falls apart. It gives some time to maybe find better solutions. I doubt they will be found, but with money printing you can hide a lot of things and you can postpone problems as we have seen in the U.S.”

On the outlook for the euro:

 ”I think the euro will survive, the question is in what form. It may survive without the weaker countries or it could survive theoretically just as a currency aside from local currencies. You would have in France and Italy and Spain and Greece, local currencies and…the dollar. So, I could travel anywhere in Europe and still pay in euros.”

 On whether he’d rather own euros or dollars:

“I have a very special stock tip for you. The symbol is g-o-l-d. That is what I prefer to hold. Both the euro and the dollar are long-term undesirable currencies, especially given zero interest rates in the U.S. Equities to some extent become like cash because they become a store of value compared to cash at a zero interest-rates. Paintings become a store of value, stamps become a store of value.”

On emerging markets:

“There is close correlation between all markets in the world. This year, the U.S. has grossly outperformed the emerging markets   In Asia, we’re down between 15% and 25% in markets. In Eastern Europe, even more. The U.S. this year is a wonderful market relative to the rest of the world. “

“I think this outperformance may go on for a while. Some emerging markets could rebound more strongly than the U.S. because they are more oversold. Like India, the currency is down 18% since July and the market is down 22%.  Currency adjusted, the market has been extremely weak and is oversold. It could rebound somewhat here, but forget about new highs. It’s not going to happen anytime soon.”

On China:

“The reason I’m not very keen on China at the present time [is because] we had a credit bubble, we still have artificially low interest rates and a huge fiscal deficit in orders words artificial stimulus. That’s coming to an end. Yes, the government can further stimulate and slash interest-rates again and reduce reserve requirements, but it will just postpone the problem and aggravate the problem in my opinion.”

 ”When you have an economy like China that becomes so big so quickly, you can have a more meaningful setback. If the U.S. economy grows at 3% or contracts that 3%, it has no impact on the price of copper to speak of….In the case of China, whether the economy grows at 10% or 5% as a huge impact on the demand for iron ore and copper and aluminum, steel and coal. The Chinese economy today has a much larger impact on the rest of the world than is generally perceived economically speaking.”

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All across the country tonight, Americans will be asking one important question: What’s for dinner?

For an increasing number, the answer will be on a restaurant menu rather than their kitchen, according to a report released this week by Bank of America Merrill Lynch.

Since mid-2009, consumers have been spending a bigger and bigger portion of their paychecks – now almost 4.5 percent – on dining out.

Spending on grocery items, on the other hand, still takes a bigger slice of those paychecks but has remained basically flat over the same period.

Eating out rather than dining in may seem like a perplexing choice for people still trying to recover from the Great Recession, but a closer look at the financial and time pressures families are experiencing helps explain the trend.

Shopping and preparing meals takes time – time that people simply don’t have these days.

 And if Americans do find a spare hour here or there, they’re likely to dedicate it to work so they can earn a little extra, writes Neil Dutta, an economist at Bank of America and co-author of the report.

On top of that, supermarket food prices are increasing at a staggering 6 percent a year, about 2.5 times as fast as the cost of restaurant meals, according to the report.

It is becoming cheaper (on a relative basis, the report notes) for consumers to eat out. “It’s all about substitution, as prices at grocery stores rise, consumers will respond by making choices,” says Dutta.

One of the biggest drivers behind the increased food costs is the rising price of commodities like wheat and corn. Grocery stores tend to pass these price hikes directly onto consumers. 

Restaurants too, have to deal with increasing commodity prices, but are better able to offset them by buying in bulk and cutting back in other areas – like wages. With youth unemployment hovering at 24 percent, it’s an unfortunate truth that restaurants are able to find younger workers who will do more for less.

To get a read on the relative value of eating out versus dining in, The Fiscal Times took a (virtual) trip to some large restaurant chains and compared the prices of meals there to the costs of preparing the same meals home. Admittedly, our methodology was highly unscientific. After all, we’re based in New York City and didn’t go hunting for the best deals we could find on groceries.

We also didn’t factor in whether one meal or another would be healthier, or friendlier to the environment. But that’s part of the point: Eating right and finding the extra savings that could be had by comparison shopping comes with a time trade-off that many families can’t afford to make these days.

The comparisons that follow at least offer some food for thought >

This post originally appeared at The Fiscal Times.

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A chart of NFLX and some thoughts.

There are good and valid reasons for this 75% drop in 4 months. The stock deserved to have gotten crushed. But this is more than just bad company news. There are a bunch of other “names” that have been slammed to the ground of late (FSLR/MCP etc). Those who listened to the TV hosts, stockbrokers and “smart guy” talk over drinks deserve everything they get. But I have to ask,

The answer is that Ben’s contribution to this stockholder debacle is not zero. All the Fed talkers have said again and again they want to force people to buy risk assets. They succeeded. And along the way those that listened to Ben got stepped on.

For sure this will happen again and again. When money has no intrinsic value due to ZIRP it will create froth in prices of stocks, commodities and bonds. I can’t think of a dumber policy than that. I hope that Bernanke followed his own advice and loaded up on NFLX.

Published at Bruce Krasting’s blog >

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European equities markets were lower Monday after a spokesman for the German government said a quick solution to the Eurozone debt crisis will not emerge from a meeting of European leaders scheduled for 23 October, after a plan for a solution was discussed over the weekend by G20 finance ministers and central bank leaders.

No details of the weekend discussions were released.

The FTSE 100 was down 0.54 percent to 5,436.7 in London, while the FTSE 250 dropped 0.85 percent to 10,250.4.

Oil explorer BP (LSE: BP) added 2.2 percent and lead gains on the 100 and in the energy sector after it said Texas-based Anadarko Petroleum (NYSE: APC), which owned a 25 percent stake in the Gulf of Mexico oil rig that exploded and spilled oil into the Gulf last year, will pay to settle all claims over the spill and will drop claims of gross negligence against BP.

BP was one of three energy sector constituents to place in the top five gainers on the 100, with engineer and consultancy to the energy industry AMEC (LSE: AMEC) up 1.74 percent while Essar Energy (LSE: ESSR) added 1.42 percent, but the worst performer in the oil sector was Heritage Oil (LSE: HOIL), with a decline of 4.11 percent.

Premier Foods (LSE: PFD) was the best performer on the 250, adding 6.33 percent in a mostly lower food and beverage sector.

Security specialist G4S (LSE: GFS) was the worst performer on the 100, dropping 22.1 percent after it said it will buy Danish facilities services company ISS, also announcing that it will pay for part of the deal with a £2 billion rights issue, while travel agent Thomas Cook Group (LSE: TCG) had the worst day on the 250 with a decline of 5.44 percent.

Most miners were lower, with the worst performance in the sector coming from Talvivaara Mining Company (LSE: TALV), which was down 4.76 percent, followed by a 4.74 percent decline for Allied Gold Mining (LSE: ALD), while Centamin Egypt (LSE: CEY) led five gainers in the sector as it added 3.67 percent.

Banks were mixed, with Standard Chartered (LSE: STAN) best as it added 0.74 percent, while Lloyds Banking Group (LSE: LLOY) dropped 2.5 percent for the worst performance in the sector.

The FTSE Eurofirst 300 was down 1.04 percent to 965.38 while the IBEX fell 1.24 percent to 8,864.3, the CAC-40 was 1.61 percent lower to 3,166.06 and the DAX dropped 1.81 percent to 5,859.43.

Markets in Asia and the Pacific region were mostly higher on fewer concerns about the Eurozone economy after a meeting of the G20 finance ministers in Paris over the weekend agreed to at least part of a plan to get a handle on the region’s debt crisis and ahead of a meeting of European leaders scheduled for 23 October to further consider the issue, before a German warning not to expect a quick end to the crisis.

The Nikkei 225 was up 1.5 percent to 8,879.6 in Tokyo, while the Topix index added 1.75 percent to 761.88 and the Mothers market gained 1.07 percent to 412.15.

Carmakers saw gains as Toyota Motor (TYO: 7203) added 2.9 percent and Honda Motor (TYO: 7267) was up 3.6 percent, while game maker Nintendo (TYO: 7974) gained 3.2 percent and consumer electronics manufacturer Sony (TYO: 6758) was 5 percent higher.

Camera and optics maker Olympus Corp (TYO: 7733), however, dropped 24 percent after a report commissioned by dismissed president Michael Woodford and conducted by PricewaterhouseCoopers said there could be legal and regulatory inquiries into payments made to advisers in 2008, and after Mr. Woodford said his dismissal came because he had questioned those payments.

Elsewhere in the region, the Shanghai Composite was up 0.37 percent to 2,440.4, the Straits Times Index added 1.27 percent to 2,778.97 in Singapore, Taiwan’s Taiex was 1.4 percent higher to 7,461.12, Australia’s markets were up as the Sydney Ordinaries gained 1.61 percent to 4,337.9 and the S&P/ASX200 was up 1.66 percent to 4,275.4, the Kospi was 1.62 percent higher to 1,865.18 and Hong Kong’s Hang Seng gained 2.01 percent to 18,874.

India’s Sensex dropped 0.34 percent to 17,075.1.

New York equities markets were lower in midday trade, with the Dow Jones Industrial Average down 1.41 percent to 11,479.8 at just past 12:30 p.m. local time, while the S&P 500 had dropped 1.31 percent to 1,208.51 and the Nasdaq Composite was 1.6 percent lower to 2,625.15.

Crude oil prices were lower on Germany’s warning to not expect a quick end of the European debt crisis, with November contracts for West Texas Intermediate crude down 49 cents to $86.31 per barrel on the New York Mercantile Exchange, while Brent crude was recently reported down $1.43 to $110.80 per barrel on the ICE Futures Europe exchange in London.

Metals prices were also lower in New York, with December gold down $14.10 to $1,668.90 per troy ounce at around 12:20 p.m. local time, while Silver was 51 cents lower to $31.66 per troy ounce and copper had dropped 3 cents to $3.38 per pound.

European equities markets were higher Friday, with gains coming on hopes for a solution to the region’s debt crisis as the G20 finance ministers meet in Paris to discuss the crisis and a rescue plan that could cause holders of Greek bonds to take bigger losses.

The gains came despite the third credit rating cut in three years for Spain from Standard and Poor’s.

The FTSE 100 was up 1.17 percent to 5,466.36 in London, while the FTSE 250 added 1.06 percent to 10,338.5 as miners and oil companies saw gains on higher commodities prices.

The biggest gainers on both the 100 and the 250, however, were by investment managers, as Man Group (LSE: EMG) added 5.07 percent to lead winners on the 100, while Jupiter Fund Management (LSE: JUP) gained 9.04 percent as the best performer on the 250.

Ferrexpo (LSE: FXPO) was up 7.28 percent to lead gains in the mining sector after UBS raised its recommendation on the iron-ore miner, while copper miner Antofagasta (LSE: ANTO) added 3.71 percent, while the five decliners in the sector were led by trader Glencore International (LSE: GLEN), which was down 3.03 percent and also led declines on the 100.

Hunting plc (LSE: HTG), which supplies the gas and oil industry, led gains in the energy sector as it added 5.41 percent Goldman Sachs imitated coverage with a “buy” recommendation, followed by a 4.71 percent gain for Tullow Oil (LSE: TLW), while the two decliners in the sector were led Salamander Energy (LSE: SMDR), which was 0.49 percent lower.

Most retailer were higher, but DIY retailer Home Retail Group (LSE: HOME) was the worst performer in the sector and on the 250 as it dropped 5.18 percent, while fellow DIY retailer Kingfisher (LSE: KGF) was down 1.07 percent.

The FTSE Eurofirst 300 was up 0.84 percent to 974.46 while the IBEX added 0.36 percent to 8,975.5, the Dax was 0.89 percent higher to 5,967.2 and the CAC-40 gained 0.97 percent to 3,217.89.

Markets in the Asia-Pacific region were mixed, with more down than up after Standard and Poor’s cut Spain’s credit rating from AA to AA-minus, and after Fitch Ratings cut ratings on European banks UBS (SIX: UBSN), Lloyds Banking Group (LSE: LLOY) and Royal Bank of Scotland Group (LSE: RBS).

The Nikkei 225 was down 0.85 percent to 8,747.96 in Tokyo, while the Topix index was 1.32 percent lower to 748.81 and the Mothers market dropped 1.05 percent to 407.77.

Optics and camera maker Olympus Corp (TYO: 7733) was down 18 percent after President Michael Woodford was voted out by the company’s board and replaced with Chairman Tsuyoshi Kikukawa, while camera and copier maker Canon (TYO: 7751) dropped 2.6 percent on the possibility that it could move production of inkjet printers after two plants in Thailand closed due to flooding.

The flooding in Thailand also played a part in declines for Honda Motor (TYO: 7267), which was down 2.4 percent after output at its Malaysia plant had to be reduced after the floods interrupted its supply of parts, while Nissan Motors (TYO: 7201), which earns 15 percent of its revenues in Europe, dropped 1.7 percent on concerns about the state of the Eurozone economy.

The Shanghai Composite was down 0.3 percent to 2,431.38, Australia’s markets declined as the Sydney Ordinaries dropped 0.86 percent to 4,269 and the S&P/ASX200 was 0.92 percent lower to 4,205.6, Taiwan’s Taiex fell 0.95 to 7,358.08 and the Hang Seng was 1.36 percent lower to 18,501.8 in Hong Hong.

Gainers in the region included the Straits Times Index, which added 0.37 percent to 2,744.17 in Singapore while South Korea’s Kospi was up 0.67 percent to 1,835.4 and the Sensex gained 1.18 percent to 17,082.17 in India.

New York equities markets were up in midday trade, with the Dow Jones Industrial Average adding 0.75 percent to 11,564.6 while at the same time the S&P 500 was up 0.89 percent to 1,214.42 and the Nasdaq Composite was 0.86 percent higher to 2,642.76.

Crude oil prices were higher at 12:30 p.m. in New York as investors worried less about the possibility of a recession after the Commerce Department said that US consumers spent more as retail sales were up by 1.1 percent in September, with West Texas Intermediate crude up $2.48 to $86.71 per barrel on the New York Mercantile Exchange, while at last report Brent crude was $3.29 higher to $114.40 per barrel on the ICE Futures Europe exchange in London.

Metals prices were also up at midday in New York as December gold added $6.30 to $1,674.80 per troy ounce, December silver was up 22 cents to $31.89 per troy ounce, December contracts for copper were 10 cents higher to $3.41 per pound and three-month contracts for copper gained $235 to $7,545 per tonne on the London Metal Exchange after going as high as $7,580.25 per tonne earlier.