Hi Mc, sorry if I upset you,
my posts were never meant to be personal. Believe me, as a rule I really like what you post. It was not directed only at you, there are a lot of people who “like” the BDI, both here and elsewhere. Because it moves so violently, I suppose. There’s one more thing with the BDI I forgot to mention: It is priced on the margin. Just like housing and gold. Makes a big impact on volatility, of course.
What everybody wants are indices that can tell where we are, and where we are heading. My point is that BDI is a poor one. Many believe that it is a leading indicator, since it in a way measures commodities that will be made into goods perhaps a year later. But it gets distorted every time a ship is scrapped or commissioned.
I’m not Jata1, so I don’t have access to what %age of the BDI is Dry Bulk – or other numbers. But everyone living in the industrial world can only go into a hardware store or supermarket and be convinced that world trade is functioning. No empty shelves. World trade has not cratered with the BDI. Of course trade volume is down: Parts of Europe is on the brink, unemployment on the rise, riots in MENA. Rising food and energy costs calls for less discretionary spending. Aging population in the richer parts of the world. But it is not bringing any understanding of the situation if we point to an index that is down 98 (?) percent.
That is to say, the BDI has been volatile exactly BECAUSE markets have been volatile and unstable, …
Perhaps it can be used as a volatility-indicator, but then I suppose you’d have to do some math on it. I’ve never seen it as such. BDI is mostly used as a scarecrow, I’ve done it myself.
It cannot be manipulated, any more than reports of gas prices around the USSA
That is of course true. My favourite indicator would be unemployment, but those numbers are easily manipulated. Youth unemployment in Spain is >50 %. That is both a lagging and a leading indicator – of some eerie sort.
As opposed to the BS BLS NFP Report. Noting that the World Markets treat IT
like your proverbial 'Canary in the Coal Mine' and I don't think I've seen much from you, Norseman, on that?
Does the World Markets treat it like the Canary in the Coal Mine? I’ve never seen it. Some authors treat it like the proverbial, but that is something completely different. If the financial authors had the ability to get rich on the markets, they wouldn't have had to write those pesky articles. "Those who can, do. Those who can't, teach"
Perhaps we can agree that: “The problem with the BDI is that it is little understood”
Thanks for great charts Ralfy.
From the linked ZH-article:
While the 25 year low in Baltic Dry is explained away by the simple over-supply of ships (as if that is a good thing) with little thought as to the near-record high inventories of Iron Ore and so on around the world, the reality as shown above is a world in which trade volumes are down dramatically.
Note that the author does not even try to explain why the BDI is important/measures anything useful for the public. He instead attack those who are critical to the index' useability. He then goes on to say something about abundant iron ore inventories. If the case for low trade volumes has to do with surplus iron ore inventories, why not make an iron ore-index? Very weak argumentation.
Sometimes I wonder whether the world is being run by smart people who are putting us on ... or by imbeciles who really mean it. – Mark Twain