Baltic Dry Index Down 17 Days in a Row

The Baltic Dry Index has now declined for 17 straight days and hasn't had an up day since early July.  Since its peak in the Spring, the index is now down more than 30%.  Given that the index measures tanker shipping rates, falling prices are considered a sign of global economic weakness, while rising rates are considered signs of strength. 

In the present situation, however, the interpretation is a bit more tricky given the actions by the Chinese government to shut down factories ahead of the Olympics.  Some expect these rates, as well as the prices of other commodities, to pick up once the Olympics pass and factories begin to open back up.  While it sounds like a plausible explanation, is the market really that shortsighted that it hadn't already priced in a two-week event that has been on the radar for seven years now?

click to enlarge

Comments

[buyitcheaper:]

Seems you've just described the essence of event arbitrage. :-)

2008 Aug 05 08:40 PM

[ETF STER:]

"Given that the index measures tanker shipping rates,"

Do the words "Baltic DRY Index" mean anything to you?

Tankers are not dry freight!!!

2008 Aug 06 08:50 AM

[Tim Plaehn:]

Ditto! You guys are usually a little better than that.

2008 Aug 06 09:09 AM

[Kunst:]

"Apart from that, Mrs. Lincoln, how did you like the play?"

2008 Aug 07 01:32 AM