The Baltic Dry Index tracks worldwide international shipping prices. At its peak in May, 2000, the index was over 11,700. Over the last month and a half it has plummeted from 1930 in mid-December to 662 as of Wednesday. This is a drop of 66%. The index now matches its multiyear low set in Dec 2008.
Granted, the index has seasonal swings that tend hit bottom around the beginning of February. And some new ships may have come online recently (though I credit this explanation less than I did a year or two ago).
I think this is another confirmation of what The Daily Capitalist has been saying for a while now. The economies of the world are pitching downward into recession, if they aren’t already there.
Speculators in oil may make gains if the situation in Iran heats up further. And I am not sure I would ever short food, as the demand for food does not seem like it could decline much but there can always be supply problems. I would think this is a harbinger for other commodities.
Caveat emptor.
Mr Harding, the index reached 651 today, a new four year low…
I too, thought this may be a harbinger of things to come, until this topic was discussed on Scott Grannis website…
http://mjperry.blogspot.com/2012/02/irrelevance-of-baltic-freight-index.html#links
i thought this index was better understood. to think that an index that gauges shipping and thus global trade, which i would agree is in the hurt locker (possibly dollar-strength driven?), would be referenced now down over 90% since the year 2000 … i mean come on.
shippers are notoriously bad allocaters of capital, alot like many oil men. this index, while at times relevant, is more a function of the micro within the shipping industry, most of the time.
however, i do think now is a good time to pay attention, i think Keith has a very good point right now. startling decline indeed.
i wouldn’t hang my hat on this one, last time this index bottomed marked a generational low in equities and credit.
It would be interesting to see data on what new ships have come online and when.
Your wish, is my command, Mr Weiner!
http://www.worldshipping.org/about-the-industry/containers/global-container-fleet
As I had argued the point before, that the replacement rate is within historical norms, however, what I gleamed from the information, from others, is that the ship’s capacity themselves rose dramatically…
I suspect that would be indicated by the increase in gross tonnage..
As, Mr Grannis stated, this is more likely the effects of surplus capacity, rather than declining commodities prices, which would state the obvious…
as the sugar high hits new highs and the consumption of accumulated wealth continues, we see higher stocks, good earnings and lower unemployment (at least how the gov’t measures it).
i do not think recession is imminent, i see the opposite in my studies. no one cares about savings rates, this is a consumption society until it all blows up. people are consuming. it’s sad and it will fail. in the meantime, it’s party-time.