Maybe It Is Time to Put the BDI to Rest

When will people get it through their skulls that the BDI is NOT an good indicator of the global economy? This has been a great example of how an untruth can spread whereby people just rely on what some analyst said with blind faith. Markets and economics aren't physics. And analysts aren't rocket scientists. Half of what they say is complete garbage. Such as when they suggest that the BDI is a good indicator for the direction of the global economy. My old colleague and boss Charles de Trenck suggests: maybe it's time to put the BDI to rest.

Losing its religion: For how many years have we come in first thing in the morning and checked the BDI before gulping down our coffee. Although I care more about container volumes, between 2002 and 2007 I pretty much checked the BDI, the BCI, etc. religiously. I always remembered it was a crutch, but I did the comparative analysis because it often worked and ‘cause everyone expected me to… But we can now leave the BDI behind a little…One less bottle of snake oil.

No more BDI: I only check the BDI a couple of times a week now. And even then, I continue to ask people to stop treating it as they have. … CNBC was talking a lot about it last week…that it was falling off again. True, it fell as other commodities rose…Our point has been because of supply, the way the BDI worked under tight supply‐demand will change now.

Comments

[Baboon:]

'It's time to put BDI to rest'. Why?

Aug 28 07:47 AM

[Donald Ingram:]

Put the BDI to rest at your own peril. ALL indicators are good information sources. Sounds like you relied on the BDI for too much of your decision making. Use ALL indicators to form your own analysis, then after careful consideration, make your decision. Relying on just one indicator is a little like a one legged dog - it doesn't walk very far!

Aug 28 10:26 AM

[Old Trader:]

I have to agree with Donald Ingram's comment above. The BDI is not a "be all, end all" indicator, its just one more data point to throw into the mix when making investment decisions.

Just like the price of oil hinges on supply AND demand, so the BDI moves according to both the demand for shipping, AND the amount of new tonnage scheduled to hit the pipeline, minus scrappage.

Aug 28 07:33 PM