An Overlooked Index

demand for goodsMarkets traded mixed on Wednesday and once again ended with the miraculous end of day rally to push the Dow slightly into the green once again. However, the past few days have shown us that definite uncertainty remains with investors as volume remains extremely light, and selling is becoming more and more prevalent. Unfortunately, I still believe manipulation exists with such low volume levels, which continues to make it an unnerving market for me to invest in at the moment.

I wanted to discuss an interesting benchmark that I track that many overlook. In fact, CNBC actually talked a bit about it today in a good article, however, you had to dig a bit to find it. Click here to read more about it.

The Baltic Dry Index (BDI) is an index measuring shipping activity along 20 of the world's biggest routes. As a result, many economists use the index to measure overall demand of goods. I really like this indicator, because I believe it is a good measure of consumer progression (which is the biggest contributor to GDP growth). Also, conveniently, it has an almost flawless record of predicting recessions.

Earn Real Money For Beating The S&P


Despite all of the big gains we've seen on Wall Street the past few months, the BDI has been consistently declining since June, which as a whole, has been about a 43% decline. The indicator has found to have a large influence on China's economy, which since August, The Shanghai Composite is down 16%. The large decline in the BDI is believed to be largely due to lower demand of metals, which in turn could be a very strong indicator for a near deflation, which I have feared. Believers in this demand measure fear that more economic problems are headed for the US and the global economy and recommend investors to take higher cash positions.

This is just one more indicator that has been thrown to the side as we have seen nothing but green in the markets. As unpopular as the index has been, like I said, its track record is impeccable in predicting recessions and usually is directly related to consumer demand. One more caution for those believing we are out of the woods. Happy Trading

Posted in Labels: , , |

4 comments:

  1. Anonymous Says:

    I'd be interested to know your thoughts on this:

    http://seekingalpha.com/article/157487-rethinking-the-baltic-dry-index

  2. Finance Fanatic Says:

    Anon,
    the BDI tends to be a leading indicator so to evaluate its peaks compared to the peaks in the market is not signifcant. Also, the writer (who I feel isn't familiar with the index) is mostly speaking of this past year's comparison, which in all reality, is a skewed perspective, considering the market has not followed any fundamental indexes as of late.

    You will see that China stocks follow the index much more closely, consider there huge reliance on exports. However, regardless of the point the writer was trying to make, the index is a great measure of consumer demand.

  3. PENNY STOCK INVESTMENTS Says:

    The marine index is a great measuement of world economic strength or weakness.

  4. Xj Cheng Says:

    Therefore,the replica watches business flourishes.Humans who cannot allow or do not wish to replica watches uk absorb baby money on a watch can now buy a dozen replica watches.If one happens aloft a amount that is too acceptable to be true,blow assured that you are getting offered Hublot Replica Watches.In all honesty,if a being is walking down the artery with 18-carat artist Hublot Watches or Hublot Replica Watches,who can acquaint louis vuitton replica the difference? Hardly anyone!Designers'replica handbags are exists in food and boutiques and they are aswell accessible on internet.Abounding online shops advertise designers replica handbags.If one baddest bigger boutique or online boutique to buy designers replica handbags again it will be reasonable for gucci replica her.Designers'replica handbags accept mirror angel of the original.Apple a lot of accepted handbag's designers like Gucci,Chanel,Louis Vuitton,Anya Hindmarch and abounding added replica are be present in the appearance stores.It is accessible online also.These replica handbags are fabricated from top superior of hublot replica covering and no PVC is acclimated to adapt it.What craftsmen are do that they alone archetype the appearance and admeasurement and blush of designers'handbags and fabricated it from best materials.Humans are now acceptable smarter and they adopt affairs the Burberry replica handbags instead of rolex replica the aboriginal Burberry rolex replica.