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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Amid the Financial Turmoil One Economic Indicator is Soaring

The financial world is coming unglued again. Greece has pushed the E.U. to the brink. Global stock markets are tumbling.

And yet, at the same time at least one economic indicator is soaring. The Baltic Dry Index.

Today, the BDI jumped nearly 9%. The largest daily jump in at least the last six months.

Baltic Dry Index

In fact, the index is up 40% since the end of April. A jump that has roughly coincided with the recent decline in global stock markets.

The BDI tracks global shipping rates. A rising index generally means more trade, as goods are sailed around the world.

So what's going on? Are nations buying and selling more, even as the economy tailspins?

Digging a little deeper, the recent rise in the BDI is attributable mostly to a jump in rates for one particular ship type. Capesize.

Capesize vessels are amongst the largest in the world. Typically with capacity over 150,000 long tons of deadweight. (Back in the day, such ships were too large to sail through the Panama Canal. Therefore, they had to transit the Cape of Good Hope or Cape Horn. Thus the name.)

Interestingly, capesize vessels are the "weapon of choice" when it comes to transporting metal ores. This category also includes oil tankers.

Could the jump in Capesize rates be signaling more metals and oil floating globally? And if so, is this due to buyers hungry for product, or sellers desperate to unload?

By. Dave Forest of Notela Resources




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Leave a comment
  • Anonymous on May 26 2010 said:
    How about a bit more digging... Historically, does the BDI correlate as a lagging or leading indicator?
  • Anonymous on May 26 2010 said:
    The index is called Baltic Dry Index and not Tanker rates. So why mention of tankers? The assumptions laid out are not logical.
  • Anonymous on May 26 2010 said:
    i would think this is IRON ore, I'm long for 3 months.
  • Anonymous on June 02 2010 said:
    Remember everyone, The Fed pulled most of the M3/ Money supply out of the system this year, that they put in in '08 & '09.(There is still some of that money left in the system, but not much.This year, for anyone in business, is much worse than last year.People aren't spending, because they have no money to spend.I hope all of you have gotten your mortgage mods done, as this economy is not going to get better for some time.If there is a War w/Iran, or Korea, all bets are off.Last year, at the Port of L.A., there were miles & miles of cars parked there,with no where to go.Banks aren't lending a lot of money on car loans, so the cars coming in, just sit there, rusting in the Salt Air.There should be some very good deals on oil & iron ore coming soon.Those tankers can't sit offshore, looking for buyers, forever.Stay as liquid as possible.RegardsBon

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