The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange, which traces its roots to the Virginia and Baltick coffeehouse in London's financial district in 1744.
Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets (supply and demand). The supply of ships (cargo transports) is much less elastic than the demand for them, so the index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, crude oil, metallic ores, and grains.
Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.
Now, let us look at the index chart below from InvestmentTools.com.
The index is free falling like a waterfall. It penetrates three major bottoms from 2008, 2005 and 2001 respectively. It is really ugly.
Below are charts of CRB index and Gold (GC) with the index.
BDI and CRB
BDI and GC
It looks like commodity prices still have rooms to go down. How about the global economy? Good Luck to us.
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