When will people realise that the Baltic Dry Index (BDI) is completely undependable as an indicator of the global economy?
The rise of the BDI-as-indicator meme has been a great example of how an untruth can spread rapidly based on blind faith in what a few analysts say.
The problem is, markets and economics aren’t physics. The ‘facts’ presented by analysts aren’t nearly as robust as the facts given by, say, an engineer. When it comes to suggesting that the BDI is a dependable indicator for the direction of the global economy, it’s not even opinion, it’s just plain wrong. You can find our reasons why here.
Nevertheless, to help put the nail in the coffin, Charles de Trenck of Transport Trackers politely suggests in a recent note that, yes, 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.
If you don’t quite follow his last sentence, follow the complete BDI take-down via the first link, above.
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