 |
|
|
|
|
 |
|
« Bull and bear markets | Main | The Geithner Plan could work »
Baltic Dry Index and Gold
Is the global economic recession starting to bottom out? One indication that activity is slowly picking up is the Baltic Dry Index. In a recent interview with Kai Ryssdal on Marketplace, economist Susan Lee explained why she follows the Baltic Dry:
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.
The price of gold has also been strong with the global economic crisis. But now gold is off it peak. Thanks to the website investmenttools.com, here is a chart of the Baltic Dry Index and the price of gold.
It's still too early to say, of course, and the BDI has taken a slight turn down. But these are two indices worth following, and it's intriguing that the message in the chart seems to be the same message in the U.S. stock market: There is a slight improvement, but it's fragile.
Latest posts
The Geithner Plan could workBaltic Dry Index and Gold
Bull and bear markets
A smarter way to set CEO pay
Millennium Bank a Ponzi scheme
Fiscal stimulus managers?
Low-income student loan debts
What inflation?
The new face of poverty
The Geithner plan
Topics
Latest comments from recent posts
Baltic Dry Index and Gold (1)Rich Masters wrote: "Activity is slowly picking up..." In the Baltic Dry Index?... [read]
The new face of poverty (2)
Mac Wildstar wrote: First of all, nice article Mr. Farrell. Second of all, may I... [read]
The Geithner plan (2)
Missi Randa wrote: Obama and Geithner Knew and Bonuses Flew. There are many rea... [read]
Rent-to-price ratio (2)
mschris wrote: As a first time home buyer, what criteria should I use in or... [read]
A Short Sale Warning (9)
CORINNA ANDRADE wrote: I LIVE IN CALIFORNIA,HAVE MY ONLY ONE HOME(I LIVE IN)IN SHOR... [read]
Archives
| S | M | T | W | T | F | S |
|---|---|---|---|---|---|---|
| 1 | 2 | 3 | 4 | |||
| 5 | 6 | 7 | 8 | 9 | 10 | 11 |
| 12 | 13 | 14 | 15 | 16 | 17 | 18 |
| 19 | 20 | 21 | 22 | 23 | 24 | 25 |
| 26 | 27 | 28 | 29 | 30 |
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
Appearances and Worthwhile Events
Policy and a Pint: Health Care HandcuffsMore From
Chris Farrell
Marketplace Money's Money Clip Video
How Alan Helped Ben (BusinessWeek.com)
Other Blogs
Andrew TobiasAngry Bear
Becker-Posner Blog
Brad DeLong
Cafe Hayek
Calculated Risk
Econbrowser
Economics Unbound
Economists View
Financial Rounds
Finance Roundtable
Greg Mankiw's Blog
Hot Property
Marginal Revolution
New Economist
TaxProf Blog
The Big Picture
Vox Baby
Books by
Chris Farrell
Right on the Money!: Taking Control of Your Personal Finances
Deflation: What Happens When Prices Fall
Recommended Books
Against the Gods: The Remarkable Story of Riskby Peter L. Bernstein
A Random Walk Down Wall Street
by Burton Malkiel
The Little Book of Common Sense Investing
by John Bogle
Common Stocks and Uncommon Profits
by Phillip Fisher
The Intelligent Investor
by Benjamin Graham
More Than You Know: Finding Financial Wisdom in Unconventional Places
by Michael Mauboussin
Smart and Simple Financial Strategies for Busy People
by Jane Bryant Quinn
Stocks for the Long Run
by Jeremy Siegel
The Random Walk Guide to Investing: Ten Rules for Financial Success
by Burton Malkiel
The Only Investment Guide You'll Ever Need
by Andrew Tobias
Unconventional Success: A Fundamental Approach to Personal Investment
by David F. Swensen
Comments (1)
April 2, 2009 2:08 PM
"Activity is slowly picking up..." In the Baltic Dry Index? The Baltic Dry Index has been down each and every day during the recent "rally" on Wall Street. The Baltic Dry can be used as an indicator of growth looking out about a year into the future (and if you look at the Baltic Dry the future doesn't look very bright) for the raw materials of production in the pipeline.
To give you some idea of how bad the Baltic Dry Index really is, consider the fact you might need an index of around 3,500 to 4,000 as a "break even" point. Many Ro-Ro (Roll On - Roll Off ships used for vehicle shipments) shipping lines are cutting their capacity for good; they do not think the economy will ever improve to 2007 levels.
Susan Lee, however, is totally correct in using the Baltic Dry as an important economic indicator; it tends to be removed from government manipulation and influence. The television talking heads will tell you that the markets are a "forward indicator," but if that's true, our "future" based on 2007 prices should have been terrific -- of course, that wasn't true.
One final note on using the Baltic Dry Index... Some small increases can be caused by seasonal factors, bunker (oil) prices, and currency drift. The Baltic Dry Index is telling us that the current stock market rally is based on thin air...