
Baltic Dry Index Falls Below 500 for First Time - protomyth
https://gcaptain.com/baltic-dry-falls-below-500-for-first-time-ever/
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chollida1
I wouldn't worry too much about this. The Baltic Dry Index hasn't really been
a usable indicator for many years now.

Originally it was a brilliant insight. Most numbers can be fudged, but it was
super expensive to have ships sitting around empty so the index was hard to
game.

What made it even more useful was that it is one of the very few leading
indicators of the global macro economy. Most indicators that work are lagging,
which means they tell you that something has already happened.

Since hte index measures both demand for shipping and supply it can be pushed
down by either. The general consensus is that the current lows is actually due
to over supply by the shipping giants like maersk.

More reading:

[http://www.economist.com/blogs/economist-
explains/2015/03/ec...](http://www.economist.com/blogs/economist-
explains/2015/03/economist-explains-7)

[http://www.forbes.com/sites/timworstall/2015/02/05/why-
you-s...](http://www.forbes.com/sites/timworstall/2015/02/05/why-you-shouldnt-
worry-about-the-baltic-dry-index-hitting-a-29-year-low/)

~~~
rrggrr
That is not the consensus. The consensus is a massive decline in commodity
prices (oil, metals, etc) and a decline in demand for exportable finished
goods is crushing global trade. Indicators are everywhere:

Rail Traffic Data: [https://www.aar.org/Pages/Freight-Rail-Traffic-
Data.aspx](https://www.aar.org/Pages/Freight-Rail-Traffic-Data.aspx)

US Capacity Utilization:
[https://research.stlouisfed.org/fred2/series/TCU/](https://research.stlouisfed.org/fred2/series/TCU/)

US Exports:
[https://research.stlouisfed.org/fred2/series/IQ](https://research.stlouisfed.org/fred2/series/IQ)

US Industrial Production: [http://www.tradingeconomics.com/united-
states/industrial-pro...](http://www.tradingeconomics.com/united-
states/industrial-production)

WPI, PPI, CPI and oil prices have all fallen significantly.

I don't want to get political but a deflationary spiral is something
governments globally should be working to correct, yet priorities seem to be
elsewhere.

~~~
chollida1
> That is not the consensus.

That's fair as far as I guess there is no consensus. You posted alot of links
that don't really point to any definitive conclusion.

Look at your data. It doesn't correlate with the Index in any way. The Index
had a very pronounce peak in 2008.

This link >
[https://research.stlouisfed.org/fred2/series/TCU/](https://research.stlouisfed.org/fred2/series/TCU/)

was on a huge downward trend staring in 2007

I agree there is alot of room for interpretation, but I'm very happy to stand
behind and put my money behind my assertion that the Baltic Index isn't a
useful indicator anymore.

But I do appreciate the opposing view point!

~~~
rrggrr
The BDI's indication is supported by the decline in rail traffic, the decline
in imports/exports in/out of China, and corresponding declines for the BRIC
nations. Its supported by the recent (and growing) closures of mines and mills
globally. From Janet Yellen, Michael Pettis, Zhou Xiaochaun... all acknowledge
this decline. You're in a very, very small minority.

~~~
toomuchtodo
What's your take on the Fed raising rates next month? I've seen a lot of
consensus that rates _are_ going up next month, but I don't see how they can
with various economic indicators showing that the global economy isn't on
solid footing.

Perhaps we'll be stuck with ZIRP for a bit longer :/

~~~
marcusgarvey
I'm starting to wonder if "a bit longer" means "forever." There seems to be a
real lack of global growth engines.

~~~
toomuchtodo
If you want to chat over coffee about it, I have a long thesis that agrees
with this. Global growth is, for lack of a better way to put it, over.

Central planning interest rates will probably never be over 3-4% again (and
that's a bullish outlook).

~~~
rrggrr
Totally agree for four reasons:

1\. Wealth demography. Wealth is held by older people seeking safety not
growth/risk.

2\. Capital stagnation. Capital is being stockpiled by central banks and large
corporations. The former seeks to rectify structural problems in spending and
banking sectors. The latter seeks to avoid tax liability.

3\. Small businesses abandoned. Developed nations, the US in particular, have
focused resources on the largest institutions and institutions serving the
poorest. By comparison small businesses are ignored creating more risk for
large institutions, and incrasing the ranks of the poor.

4\. Global instability. Declines are almost always preceded by alarming world
events causing capital flights that expose imbalances in economies. Yes, the
solution is to not have imbalances, but aside from that utopian ideal,
restoration of a stable world order opens the door to economic risk taking and
then prosperity.

~~~
toomuchtodo
We're in violent agreement!

------
Zigurd
Two things to know about this:

BDI goes up when bulk shipping capacity is tight. That's interesting, but the
reason BDI was an obscure index until the 2008 crisis is that it isn't a good
indicator of the health of the world economy.

Except for that one time: The BDI crashed super-hard because nobody could get
a letter of credit. It was the canary in the coal mine for the subsequent
general seizing-up of credit due to the derivatives-driven crash.

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tosseraccount
Commodities are cyclical. There's been a long boom. The party is over for oil
and metals. The inefficient will fold up; the strong or smart will hunker down
and wait for the inevitable upturn.

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keithpeter
From the 'how it works' section of the Wikipedia page...

 _" Every working day, a panel of international shipbrokers submits their view
of current freight cost on various routes to the Baltic Exchange. The routes
are meant to be representative, i.e. large enough in volume to matter for the
overall market."_

So three [chaps|chapesses] in London think of a number presumably based on
some kind of average volume figure and price.

I'll have to find a list of obscure indices and do some visualisations. Might
make Maths lessons a bit more interesting...

~~~
roymurdock
The big-mac index [1] is another unorthodox one that has gained a lot of
attention for actually being a very rigorously updated price-level guide
between different nations.

[1] [http://www.economist.com/content/big-mac-
index](http://www.economist.com/content/big-mac-index)

~~~
keithpeter
Now _that_ will get them talking. We could do a 'teenager price index' as well
and compare it to the retail price index (UK).

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marcusgarvey
This may be relevant: The Great Fall Of China Started At Least 4 Years Ago
[http://www.theautomaticearth.com/2015/11/the-great-fall-
of-c...](http://www.theautomaticearth.com/2015/11/the-great-fall-of-china-
started-at-least-4-years-ago/)

------
c-slice
I'd predict that we're going to see a depressed Baltic Dry for the foreseeable
future, and it will likely never reach the 2007/8 era highs again. As we
continue to see slowing global demand for coal/oil and growing demand for
renewable energy, bulk shipping volumes will continue to stay low.

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ilaksh
Seems like we should expect the real economy to slow in many (but not all)
ways as sustainability becomes a more primary goal for many individuals and
companies. I believe this may be a big part of the global recession.

Mining and shipping large quantities of coal and iron large distances is just
an inherently unsustainable practice.

Economic indicators as well as other fundamental aspects of the economic era
may need to be replaced with more up-to-date concepts.

------
todorstoyanov
Low oil prices, no need of new eficient ships.

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blobbers
I get that this is an interesting datapoint in the global economy, but how is
this at all related to Hackernews?

~~~
rrggrr
Most HN partipants rely on brick and mortar businesses, directly or
indirectly, as first or second order revenue sources. The Baltic Dry Index is
telling us that an unprecedented slowdown in global trade is occuring, the
impact of which will be felt by tech firms building and selling logistics
solutions, payment platforms, inventory systems, accounting applications,
financial modeling software and so much more. The VC community is paying close
attention to the global economy, which will impact their willingness to
invest. I enjoy reading about undocumented Python regular expression libraries
as much as the next guy, but a deflationary spiral spinning unabated is going
to impact all our lives far more and very soon.

~~~
jacquesm
It's not unprecedented, the previous time this happened a global crisis was
about to get underway. This is what makes (or rather, maybe made) this
particular index so interesting, the fact that it doesn't lag but gave a
warning ahead of time. Of course once that happens everybody will adjust their
models so this won't repeat. But the previous recorded drop in this particular
shipping index was a harbinger of some pretty bad news.

~~~
toomuchtodo
What was the lag time between the last time happened and financial crisis
began?

~~~
jacquesm
95% drop or so between May and Dec 2008.

~~~
toomuchtodo
Thank you!

