Three Hidden Market Signals-wsj 4/23 : 시장의 방향이 되는 3가지 투자지표

[처용]

By SIMON CONSTABLE And ROBERT E. WRIGHT

Anyone with an investment portfolio felt pain when the Great Credit Crunch hurled stock markets into turmoil in 2008 and early 2009. Investors large and small watched while their wealth shrank by the day, and sometimes even by the hour.

Our new book, "The Wall Street Journal Guide to the 50 Economic Indicators That Really Matter," is meant to help you not let that happen again. It is about helping you protect your money. The best way to do that, we think, is to watch trends in economic data. Not just a few key metrics followed by everyone, such as the consumer-price index or the gross domestic product. Instead, we picked a whole slew of them, many of them unfamiliar to casual investors.

Using a range of economic indicators can help you see the turns in the economy before they happen. In a sense, you will be able to see the future and use that knowledge to invest—or pull back—when most people are either too frightened to buy or too sanguine to sell.

To whet your appetite we have condensed a sample of three of our fantastic 50:

Baltic Dry Index

The funny thing about the Baltic Dry Index, or BDI, is that it involves lots of water. Specifically, it is a measure of the cost of moving raw materials across the world's oceans. The "dry" refers to the state of the things shipped: iron ore, coal and grains, typically.

The "Baltic" part of the moniker refers to the London-based Baltic Exchange, which calculates and publishes the BDI weekdays. It isn't limited to cargoes shipped across the Baltic Sea, however. The exchange tracks the cost of moving freight along key shipping lanes around the globe. The index reflects the cost to rent a ship today in the so-called spot market, rather than a price to rent one at some point in the future.

These so-called dry-bulk ships are like "massive ocean-going dump trucks," says Urs Dur, senior equity analyst for marine shipping and logistics at Lazard Capital Markets in New York. How massive? The largest of these vessels is so big, it can't sail through either the Panama or Suez canals. Instead, they must travel around South Africa's Cape of Good Hope or South America's Cape Horn.

The simplest way to think about the BDI is that it goes up and down according to the demand for the vessels. As demand increases, the price to charter a ship rises. That is because the number of ships available is typically fixed. So when the global economy hums and the need for raw materials increases, the price to rent a ship rises.

We track the BDI because it gives an insight into the state of trade in the most basic industrial materials. Notably, iron ore and coal together make steel—an essential input for construction and a key to the manufacture of automobiles as well as many other consumer durables.

Lately that means watching China. Mr. Dur says he watches Chinese iron-ore inventories and the overall health of that economy. In particular, when iron ore inventories are low but the Chinese economy is still healthy, increased imports of more ore might be in the cards.

• Investment Strategy. Mr. Dur says investors can profit from changes in the BDI by finding publicly traded shipping companies whose revenues increase as the BDI rises, and whose earnings fall as the BDI sinks.

Finding such a company is difficult because some shippers lock in the rate at which they rent out their vessels for years at a time. The result: Their revenue gyrates less than does the BDI.

One company that fits the bill is Baltic Trading Ltd. Mr. Dur says the firm's stated goal is to rent out ships at spot market rates, rather than locking in prices with multiyear contracts.

The firm intends to pay out most of what it earns in dividends to shareholders, Mr. Dur says. Other companies with some spot-market exposure include Eagle Bulk Shipping Inc. and Navios Maritime Holdings Inc., he says.

Some analysts also use changes in the BDI to predict future commodity-price movements. For example, a slump in the BDI might suggest a falloff in metals prices in the near future. But that can be risky, Mr. Dur cautions. He says BDI changes sometimes have little to do with changes in underlying demand. For instance, a spike in prices might simply indicate the limited availability of ships in the area needed. At any given moment, the supply and demand for ships is local. If an available ship is halfway around the world from where it is needed that can cause a price spike in charter rates, but it will be only temporary.

Another wrinkle to watch for: a drop in the BDI caused by newly manufactured vessels hitting the water. They will likely weigh down on charter rates for all ships, regardless of underlying demand for the cargoes.

Crack Spread

We know what you're thinking. But this indicator has more to do with gasoline than anything else.

"The crack spread is an indicator of refinery profitability," says Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington—specifically, the profitability of refining crude oil into gasoline and heating oil.

When the crack spread is wide, it is more profitable to refine. When the spread is narrow, it is less profitable. If it were ever to go negative and stay that way, then refining would actually be a loss-making proposition and we would likely have no gasoline to fill our car's tank.

It is called a crack spread because crude oil is said to be cracked, or broken, into other stuff, such as gasoline, diesel fuel, heating oil and lots of other petrochemicals. The truth is that there are many different crack spreads, but the one investors most care about is the one between crude oil and gasoline.

The crack spread widens and narrows because the price of gasoline and crude oil don't move in synch. Why? "Because the things that influence the crude-oil market and the gasoline market are different," Mr. Sieminski says. "If a refinery shuts down because of a fire or explosion, then heating-oil or gasoline prices would likely react. but not those of crude oil."

Likewise, announcements from the Organization of the Petroleum Exporting Countries likely would affect the price of crude oil but probably wouldn't have an immediate impact on gasoline, he says.

• Investment Strategy. The first important thing to note is that crack spreads are seasonal: More gasoline needs to be produced during the spring and summer and more heating oil in the fall and winter. Moreover, during the annual production facility maintenance period—traditionally late winter—crack spreads rise as fewer refiners are making gasoline. That means the few that are making fuel can charge more. Many observers believe that total U.S. oil-refinery capacity is below that required during peak periods of demand.

With all this in mind, investors can use the crack spread to help predict future supply-and-demand conditions for fossil fuels. When the crack spread is low, refiners aren't making much profit. Refiners are therefore not likely to increase production anytime soon, so look for a decrease in demand for crude and a decrease in gasoline/heating oil inventories.

When the crack spread is high, by contrast, refiners try to make while the making is good, so demand for crude will rise, as will supplies of gasoline and heating oil. Mr. Sieminski says investors can profit from wider crack spreads by looking at those energy companies with a strong refining business.

In particular, he highlights Valero Energy Corp. When crack spreads are wide, Valero will benefit from the improved profitability. When the crack spreads are narrow, the firm likely will see its profits diminish, he says.

Note also that the crack spread provides information about only one side of each market, the demand for crude and the supply of its distillates. Use other indicators, such as the Baltic Dirty Tanker Index, which measures the price of renting a oil tanker, to discern the future supply of crude and demand for its distillates, and you will be prepared to profit in those markets and also to better understand the economy's position in the business cycle.

Misery Index

When the economic gods are smiling, we see our paychecks get fatter and the goods we buy get cheaper. (Don't laugh. It has been known to happen.) But sometimes we get the opposite. We see our paychecks disappear (lose our jobs) and the cost of everything we need to buy skyrockets (inflation).

That is economic misery.

Like so many brilliant ideas, the Misery Index, or MI, is simple. It just adds the unemployment rate together with the inflation rate. The higher the figure, the more misery society has to deal with.

"The Misery Index captures the pain throughout the economy," says Peter Rodriguez, professor of economics at the University of Virginia's Darden Business School. "It's most acute among the lowest rungs on the economic ladder." It makes sense that the MI was developed in the 1970s, when, for the first time since the 1860s, the government's tight hold on inflation came unstuck. During that same dreadful decade came levels of unemployment unseen since the Great Depression.

Under the economic theories prevailing in the 1970s, high inflation and high unemployment were incompatible; the former would automatically create jobs and the latter would naturally keep prices down. However, the theories were wrong.

"This phenomenon of high unemployment and rising inflation was a new thing altogether," Mr. Rodriguez says.

• Investment Strategy. Because of the way economic pain is felt, we can use the Misery Index as a crude metric to help read the electoral tea leaves. Or more simply put, when the Misery Index is high and rising, then you can expect the general populace to be hopping mad. And sometimes they hop madly to the polling place, where they take out their frustrations on incumbents, as when they ousted Jimmy Carter.

When President Carter took office, the Misery Index was a fairly elevated 12.7. It jumped to the record high (of any presidency) of about 22 in June 1980.

Those presidents who somehow managed to see the Misery Index drop or stay relatively flat tended to make it through two terms—George W. Bush and Bill Clinton are two examples.

The Misery Index also tells us how well the Federal Reserve is doing. Mr. Rodriguezpoints out that the Fed, unlike other central banks, has a double mandate of low inflation and low unemployment. So the higher the Misery Index, the worse the job the Fed is doing.

What investors can do with the MI is a tricky question. They might use the MI to predict gridlock in Washington, which might be bullish for stocks. Or they might use it to help read the interest-rate tea leaves. The Fed is pretty independent from the political process, but it isn't completely immune as it enjoys no constitutional protection.

—Adapted from "THE WALL STREET JOURNAL GUIDE TO THE 50 ECONOMIC INDICATORS THAT REALLY MATTER," by Simon Constable and Robert E. Wright. Copyright 2011 by Dow Jones & Co. Published by Harper Paperbacks, an imprint of HarperCollins Publishers.