Commendatori's Blog

Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you.

Baltic Dry Index Plunges 93% since June 08

Posted by commendatori on January 2, 2009

So what is the BDI?

The Baltic Dry Index is a daily average of prices to ship raw materials. It represents the cost paid by an end user to have a shipping company transport raw materials across seas on the Baltic Exchange, the global marketplace for brokering shipping contracts.

This BDI is one of the purest leading indicators of economic activity. It measures the demand to move raw materials and precursors to production. Consumer spending and other economic indicators are backward looking, meaning they examine what has already occurred. The BDI offers a real time glimpse at global raw material and infrastructure demand. This could also be gleaned from looking at commodity prices, but there are substitution effects and futures contracts that make it difficult to interpret the impact of commodity price fluctuations.

Unlike stock and commodities markets, the Baltic Dry Index is totally devoid of speculative players. The trading is limited only to the member companies, and the only relevant parties securing contracts are those who have actual cargo to move and those who have the ships to move it.


So what does all this mean for you and your family?

Raw materials are not being shipped. This means metal,lumber,grain etc….
Without the raw materials, factories will not be able to make finished goods.
This means no factory jobs and no goods for store shelves.
No goods mean nothing to transport.
Nothing to transport means no trucking/rail shipments
No shipments mean transport companies go bankrupt.
This means there may be no one to ship the vital supplies (food,medicine,gasoline)

Forget the stock market it’s like a body that doesn’t know its dead yet…..

Bottom Line:

Might be prudent to stock up that empty pantry – while you still can!


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