Every once in a while the Baltic Dry Index is brought to the forefront for discussion. This is one of those times and I guess for good reason since it has dropped 53% this month alone. Are you kiddin' me? Wow! This shipping index deserves another look to be sure.
I personally haven't used the $BDI for the purposes of trying to gain any timing advice regarding the broader stock markets in the past 5 years at least. I'll explain why a bit later on. The theory is that since it's a kind of transportation index it gives an indication of the health of the global economy. So in that respect it's different from the Transportation Index ($TRAN) or statistics on rail traffic which are both based on the US economy alone. By far, the $TRAN and rail traffic studies offer much better guidance on the timing aspects for the North American markets. Further, the $BDI is a measure of the prices charged for carrying ship cargo that, well... that is not liquid. In other words, basically it's a measure of prices charged for the shipping of dry goods such as coal, wheat, lumber, goats, automobiles, steel, goats, textiles, electronic goods, goats, furniture, etc. Did I mention goats? But it doesn't include oil. And neither does the CPI data and we know how accurate that ridiculous measure is. But for the purposes of measuring the health of the global interactive economy, the $BDI does offer a general clue. Currently, the Baltic Dry Index is off its all time high of May, 2008. Down by 93.8% to be more precise.
|The ghost fleet. Empty dry-cargo ships with nothing to do.|
In any event, the correlation between the $BDI and the global equities markets should actually be recognized as as being rather flimsy because there are just too many other factors that affect shipping rates. Those factors include the all-import