Maybe It Is Time to Put the BDI to Rest

by: Vincent Fernando, CFA

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.