Signs of Weakness

One simple gauge I watch to judge the direction of the world economy is the iron ore price.  Every evening, I check the Asian and Australian market opens to see how iron and other basic commodities are doing. The decline in iron ore this year has been shocking, especially considering that this most basic of materials is so highly dependent on economic growth. The chart below of spot iron ore prices tells the story, down by a third this year alone.

Iron Ore Price -- Chart Source: Bloomberg View Chart » View in New Window »

Some optimistic analysts attribute the price decline to "step function" increases in supply over the past few quarters, and say that prices could reverse on "mean reversion." But that thesis seems to be wishful thinking rather than hard-headed analysis. A great portion of the world's iron ore goes to China, either for internal consumption to fuel their massive building boom, or for re-export as steel and steel-based products....471 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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