Baltic Dry Index Almost Back to Record Highs

The Baltic Dry Index is up 82% since bottoming in late January, which might be a sign that the global economic environment is not faring as poorly as many think. The index was cut in half from its October peak to its January bottom, but it quickly reversed and is now approaching record highs again.

The Baltic Dry Index measures changes in the cost to transport raw materials by sea, and as noted on Investopedia, it

...can give investors insight into global supply and demand trends...

This change is often considered a leading indicator of future economic growth (if the index is rising) or contraction (index is falling) because the goods shipped are raw, pre-production material, which is typically an area with very low levels of speculation.

Below we have plotted the Baltic Dry Index along with a chart of the S&P 500 since the last bull market began in October of 2002.

click to enlarge

Comments

[JREwing:]

The Baltic dry is really impressive. Last week there were two days, when it jumped 3%.

2008 May 11 01:20 PM

[R. Richard ...:]

For a broader, in-depth look at ocean transit:

shipping.capitallink.c.../

2008 May 11 02:14 PM

[R. Richard ...:]

sorry got cut off : shipping.capitallink.c.../

2008 May 11 02:15 PM

[sliman:]

DRYS is still dirt cheap.

2008 May 11 02:47 PM

[Anton Johnson:]

Is there an ETF or Mutual fund that tracks the Baltic Dry Index, and if not what stocks have a high correlation to it?

2008 May 11 06:47 PM

[Fritz Kadid...:]

Geez, the chart makes it look like a lagging indicator to the S&P. What good is that?
-Fritz

2008 May 11 09:56 PM

[Krakatoa:]

Agree with Fritz.

2008 May 12 02:57 AM

[JREwing:]

No, guys. The chart shows, that all this time financials were in a bubble. It burst in October and now this chart makes sense again.

2008 May 12 03:11 AM

[R. Richard ...:]

In the previous link to shipping.capitallink, there should be the prefix:

http://

2008 May 12 07:42 AM

[Ker:]

Could this mean that the explosion on the commodities has began? People buying raw materials because we are running out of oil ? Anticipating the skyrocketing prices in the resources? This would begin the sell off in stock market

2008 May 12 08:52 AM

[ETF STER:]

Could it be that maybe we are entering into a period of dare I say it,..
STAGFLATION!!!

2008 May 12 09:21 AM

[Fritz Kadid...:]

JREwing are you saying the S&P was in a bubble for 36 months?
If so, I disagree.

2008 May 12 10:24 PM

[JREwing:]

Were you in a different solar system during the last 10 months or so?

Obviously financials were in a bubble, because they gave loans and mortgages to people, who couldn't afford them. (May be I am a bit old fashioned, but when people need to get a mortgage on their house to repair the roof of that very house, they cannot afford the house and on top of that the whole thing goes down with out a down payment.

That's what I call a bubble and that's what led to the credit crisis.

2008 May 13 07:31 AM

[JREwing:]

And of course financials were dominant in the S&P.

2008 May 13 08:12 AM