Keep An Eye On Baltic Dry Index, Not Your 401(k)

I suggest you watch an index that will tell you when the world economies are starting to perk up and when trade conditions are really starting to ease. It’s called the Baltic Dry Index.

Essentially the Baltic Dry tracks the average daily price for shipping dry bulk like coal, iron ore, wheat and soybeans. There are three things that make it such a good leading indicator.

One, the index looks at raw materials, so it captures activity at the very beginning of the production process.

Two, it looks at ocean shipping, so it reveals what’s happening to international trade - the critical driver of global growth.

And, three, the shipping business depends heavily on credit, so the Baltic Dry indicates whether credit is tight or loose.

~Economist Susan Lee on NPR’s Marketplace, “Keep An Eye on Baltic Dry, Not 401(k)”

MP: The Baltic Dry Index has increased 8 days in a row, to a 5-month high of 2298 yesterday, see chart above.

Subscribe by RSS Subscribe by Email

Comment by Andre Marcano

2009-03-12 06:45:59

it seems you are missing to look at it as real shipping person. At least 1/3 of world the dry fleet is laid up. almost half of the world container fleet is either laid up of working bellow opex (container carriers semi-finished/finished goods). For what the dry market is concerned the laid up vessels create some sort of a false of demand since they are out of use, another third of the fleet is stuck in Port congestions and threfore not many ships left creating regional demands. for example a Atlantic - Far east route is almost twice the money for other routes. Needless to say major public companies going belly up due to speculation in FFA markets, Convenants requirements, lack of business. I could spend hours talking about it, but please do everyone a favor - in special those losing their shirts in the 401K funds - a bit of double checking never killed anyone. thanks

Reply to this comment