
The Surprising Relevance of the Baltic Dry Index - kawera
http://www.newyorker.com/business/currency/the-surprising-relevance-of-the-baltic-dry-index?&currentPage=all
======
Animats
But compare the Port of Los Angeles container movement statistics, which are
published monthly.[1] Those are actual counts. They're going up, not dropping.
The cost of transport is dropping because China's subsidized shipbuilders
built far more ships than are needed.

(The discouraging thing to see there is that about half the containers coming
in from Asia to the US go back empty.)

[1]
[https://www.portoflosangeles.org/maritime/stats.asp](https://www.portoflosangeles.org/maritime/stats.asp)

~~~
unabridged
>(The discouraging thing to see there is that about half the containers coming
in from Asia to the US go back empty.)

Depends on how you look at it. The US is only sending pieces of paper (or
electrons that represent pieces of paper) and getting back containers full of
goods.

~~~
asmithmd1
I wish I could read an economic analysis of a container of iPhones landing at
the port of Los Angeles. This is recorded as trade imbalance but somehow I
feel Apple and US customers are getting the full benefit of low cost Chinese
labor.

~~~
criley2
>I wish I could read an economic analysis of a container of iPhones landing at
the port of Los Angeles. This is recorded as trade imbalance but somehow I
feel Apple and US customers are getting the full benefit of low cost Chinese
labor.

It doesn't seem like Chinese labor plays that big of a role regardless, seeing
as labor costs on a $800 device are around $2.

Apple and their shareholders certainly benefit from selling $800 devices at
70% profit margins, but I would not go so far as to say that consumers also
get the benefit, seeing as they are paying 70% markups.

~~~
Scoundreller
> seeing as labor costs on a $800 device are around $2.

Well, the Foxconn (or whomever) assembly labor costs may be $2, but in some
way, shape or form, all $800 is a labor cost to somebody, somewhere.

~~~
garrettgrimsley
Only if you subscribe to the labor theory of value.

~~~
Scoundreller
What other theory is there? That 4 $100 bills get burned in the production of
every iPhone?

~~~
garrettgrimsley
Subjective theory of value.

------
Zigurd
In the 2008 crisis, the Baltic Dry Index was a publicly visible indicator of a
semi-hidden crisis: Letters of credit stopped abruptly, therefore so did bulk
shipping. Watching BDI as some kind of general purpose crystal ball will
surely be uninformative.

------
rconti
This seems unlikely. I ordered a new Volkswagen back in July of last year, and
was tracking ship traffic. By following the logistics company they use, you
could see new batches of VWs departing Emden Germany for ports in Canada and
the US (Halifax, Dover, Jacksonville, Houston, Port Hueneme via the Panama
Canal) almost constantly. I'd say a new ship left every 5-7 days, which meant
that at any given point in time, it was almost certain that a ship from Europe
was in the Atlantic on its way to North America _carrying VWs_. I'm sure VWs
represent a very small percentage of the trade from Europe to North America.

------
biztos
Could it have predicted the Brexit vote?

Fewer dry goods shipped == less money for people shipping them == unhappy
working people in England == these vote Leave.

(Ridiculous oversimplification, but the article is suggesting this kind of
prediction could be meaningful.)

~~~
Florin_Andrei
I think it's difficult to come up with hard numbers, but these things are all
indicative of very broad, high level trends. Countries are turning inwards,
global cohesion is weakening.

You have a loud demagogue in the US arguing for building walls around the
country. You have the UK voting for a divorce from the EU; and you have right-
wing extremists in the EU applauding that decision (Marine Le Pen, etc). You
have a totalitarian figure like Putin dominating the East for a long time. And
fundamental indicators like the BDI seem to show a decrease in global
exchange.

If not the whole world, then at least the West broadly speaking (North
America, EU and Russia) is like that person who is gradually slipping into a
nasty depression without noticing it, slowly becoming introverted and fearful.

A sign of health in this situation would not be further isolation and saber
rattling, but a turn outwards, and increased cooperation, and a frank
discussion about what's really going on. This holds true for persons as well
as for countries.

------
jyriand
So as I understand it has nothing to do with Baltic region?

~~~
auntienomen
It's published by the Baltic Exchange, which is a futures exchange located in
London. No idea what the history of the name is, I'm afraid.

~~~
michaelf77
The history of the name is in the Article... Known then as the Virginia and
Baltick, to reflect the most valuable trade concessions—tobacco from Virginia;
fur and tallow from the Baltics

------
xivzgrev
to me it would far more insightfil to note a drop, then postulate as to why.
The current situation is "welp its flat" \- duh, thats been the news all 2016.
Markets are nervous and everyine is waiting for a swing one way or the other
and obviously a positive signak woild have to be much larger as people are
risk averse.

------
rogerallen
Only in the New Yorker would you find a discussion about an economic index
without any visual aid for context...

~~~
lmm
The numbers are in the text. That's a lot more concrete than most
"infographics" you see on the web.

~~~
rogerallen
I would not ask for an "infographic". I'm sure they could channel Tufte very
well.

A small, simple line graph of 10-20 years of this index would allow me to see
in an instant how relevant it might be.

It struck me as a very odd editorial choice to leave this obvious graph out.

------
vegabook
baltic dry has never been anything but an "oh wow" index for
marketers/salespeople to get said reaction from clients and hopefully get them
to transact. It has that beautiful combination of seemingly being a leading
indicator, and being left-field enough to make the originator seem clever.

It has a very low correlation to any actual markets. People on trading floors
have been pushing this baltic dry pitch for at least 10 years. It's very old
news for anybody in markets and is more of an eye-roller than anything else.
That the New Yorker has now latched on shows that they hope to get a bit of
oh-wow out of it too. Snake oil.

Baltic Dry is fun to watch, but there is too much micro going on in it for it
to have any macro significance that is not coincidental.

