http://www.theglobeandmail.com/globe-investor/investment-ideas/baltic-dry-index-springs-a-leak/article2312239/

A quirky canary-in-the-coal-mine indicator for global economic activity is in freefall, but market experts can’t agree on whether it’s a sign of danger or an accident of recent history on the high seas.

The Baltic Dry Index – an index of global freight rates for shipping dry commodities such as iron ore, coal and grain – had fallen for 23 consecutive days as of last Friday, cutting its value in half in the space of a month. The last time the index was this low, the world was in the depths of a credit crisis and a major recession.

While the Baltic Dry Index is obscure to your average retail investor, keen market watchers have long considered it a valuable leading indicator for the world economy, indicating shifting tides in demand for key industrial commodities. And its plunge comes at a time when the prices for many key commodities remain buoyant – a disconnect that would traditionally suggest that commodities are poised for a fall.

But this time around, the Baltic Dry may not be signalling a slump in demand, as much as the growing supply of ships to carry them.

“A few years ago, there was a big shortage of these large ships, and the [Baltic Dry] Index soared,” said Ed Yardeni, president and chief investment strategist at U.S.-based Yardeni Research Inc. The response to the soaring freight prices was for shipping companies to order new vessels from shipbuilders – orders that were placed before the 2008-09 recession that hammered shipping rates. But because of the lengthy manufacturing cycle for large freighters, many of those ships are only now being delivered.

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http://www.theglobeandmail.com/globe-investor/markets/markets-blog/shrugs-over-collapse-of-baltic-dry-index/article2304180/

Shrugs over collapse of Baltic Dry Index
Bespoke Investment Group (via Abnormal Returns) points out that the Baltic Dry Index has collapsed in recent months. Since its near-term peak in mid-October, it has fallen 49 per cent and is down 43 per cent in the past month alone. What’s going on here?

The index measures changes in the price to ship various raw materials, and was once seen as a pretty good gauge of economic activity. That is, when the economy was good, the index rose. And when it collapsed, it was a sign of trouble. The problem is, its reliability has been called into question in recent years – such that its recent collapse has gone all-but-ignored.

The Baltic Dry Index surged to a record high in 2008, but the S&P 500 actually began to decline about six months before the BDI. In that way, the BDI was a lagging indicator of the stock market. It did, however, signal that the global economy was in deep trouble: It sank 94 per cent in 2008. The BDI also rebounded slightly before the stock market, rising nearly 250 per cent before stocks finally bottomed out on March 9, 2009.

Since then, though, the BDI has meandered at levels about 80 per cent below its pre-crisis peak, providing few glimpses into the state of the economy. One theory is that shipping prices are suffering not through a lack of trade, but through a glut of large ships. In other words, the Baltic Dry Index is flashing red – but no one really knows what that means, and fewer people seem to care.

Nope, no one cares about the normal indicators any more. The indicators may say one thing but then everyone comes out with "everything is fine" (these are not the Droids you are looking for)....this is because
1)everyone is covering their a$$es
2)everyone is trying to kick the can down the road just far enough to get THEIR money out
3)the government isn't ready for a collapse -yet -
4) MANIPULATION makes "normal", impossible
jmo

Dang Herbal, I do like your opinion.
Though you forgot, "look, there's, a shiny thing"

Sorry, didn't mean for it to go THAT far..... This is all my fault, damned flammables experiments....

Chart of the Day: The Baltic Dry Index
Sebastian Walsh
http://www.efinancialnews.com/story/2012-01-25/chart-of-day-baltic-dry-shipping-rates-fall?mod=mostemailed-IB
25 Jan 2012


Statistics from the Office of National Statistics this morning showed that the UK went into reverse in the last quarter of 2011, when the economy shrank by 0.2% – but as the Baltic Dry Index shows, the global economy is looking even more worrying.

Chart of the Day: Shipping rates fall off a cliff
The index – often used as a proxy for the health of the global economy as it reflects the prices charged for shipping commodities such as metals, coal or grain around the world – has fallen by 61% since October.

The index was at 842 at yesterday’s close – down from its 12-month high of 2173 last October.

Nick Bullman, managing partner at risk consultant Check Risks, said the index is a good way of looking at the risks to the global economy, “as it tends to be where they hit first”.

According to Bullman, its initial collapse in October was driven primarily by a fall-off in demand from China, where declining housing prices pushed purchasing managers to cut back on orders for the raw materials whose transport the Baltic Dry Index reflects.

He said: “This collapse looks similar to the falls we saw in the Baltic Dry ahead of the recessions of the late 1970s and early 1990s – but this drop is actually steeper.”

Bullman added that it was also a more direct indicator of global economic health than government-produced statistics. “Personally, I’m not interested in employment data and GDP figures because they’re manipulated,” he said.

“US employment is in high double digits at moment, not 9% - the way the US government collates the data means the long-term unemployed just fall out of the numbers.”

However, using the Baltic Dry as an indicator of global economic health is complicated by the fact that prices also fall when new ships come into service. Shipping firms have been expanding their fleet in response to rising Chinese demand for imported commodities in recent years.

But Bullman said that shipping companies have also been deliberately slowing down their journeys to save fuel, with trips from China to the US going now taking around 50% longer than they were early in 2011.

Instead, he said he was surprised by how long the Baltic Dry took to fall. The NewContex index – an indicator of prices for transporting products in container ships – started falling in April last year.

Bullman said: “When we saw that happening in April, we realised that risks had returned to pre-2008 levels. We thought the Baltic Dry would start falling too, but it was actually relatively resilient.”

“What this is signalling is that the world economy is slowing down much more quickly than people have been thinking.”

Value 784.00
Change -23.000 (-2.850%)

This is just in one day, can we just say free fall.

Too many ships? Wasn't it just a couple of years ago we saw all those cargo ship "graveyards" where they were parking ships off some island?

I tried to explain the "Baltic Dry Index" to some people and they just didn't get it!

They just don't understand how deep this goes and that it is effecting the whole world.
This could be the very reason why there are fewer items on the Wall Mart shelves.
I have noticed it and so have some other people.

I am beginning to think it is an insult for sheep to refer people to sheep. Dumb as dirt comes to mind!

I think people get involved with their own lives and as long as it doesn't affect them directly and drastically then they may moan and groan about it but that is about it.

Food is going up in price! --------- Oh no I guess that means less beer for me to drink!
Gas prices going up -----------------OH big deal, it is always going up but comes back down!
Paper goods are going up --------------So what! as long as I have toilet paper it doesn't affect me!
Every thing is going up even from China ------That is how it has always been, but as long as I get a raise to cover the increase in prices then it is nothing that isn't expected. Now you want to talk about expensive these tickets to the ball game are over 100 bucks for one seat. I had to get 4 of them and the cost of the concessions is just ridiculous. Now that is criminal!

People just don't seem to get it!

no Kevin, they don't get it! For the price of ball tickets here, I could probably get a years supply of food for two!
when gas goes up for us; since we have to travel off the mountain to get ANY where, it's a big issue! daughter had a part time job at Target and was going to have to give it up as it was cheaper for her to stay home.

Nobody really understands, since there is generally a stock at the store they go to and if that was out there is another store on the other corner (and so on)...they can'[t get it through their heads that when the trucks stop running, the stores will be empty in 3 days (tops). I've tried to talk to them and they honestly don't believe the trucks will stop running and IF they did, the government will find a way to get them in!