The Baltic Dry Index (the spot index for dry bulk shipping) became famous during the commodities super-spike pre-financial crisis. It was suddenly bandied about by economists and strategists as a leading indicator for the economy ‘because it was related to commodities demand’.
We have spoken at length in the past how this was and is complete hogwash, how just by the BDI’s very nature of construction it couldn’t be a reliable indicator for the economy. We also explained why it was ridiculous for Raymond James to think it could even be an indicator for oil.
At this stage we’ve basically learned to just bite our tongue every time we see it mentioned as a reliable indicator for the world. You really have to know what’s going on behind it.
Well, you don’t need to take it from us anymore. Here — An economist put in his place, by a shipping markets specialist from M2M Management, for mentioning that he used the BDI as an indicator. Hopefully this video helps kill off the BDI-as-indicator meme because it’s been really hard to do.
Starting at 4:20:
Economist: “As an economist [sic] we often looked at the Baltic Freight to predict world trade, if you see it going up it means more trade with China and so on…”
Tim Coffin from M2M: “I doubt that the Baltic Dry Index has ever been a good leading indicator because there are too many inputs into the BDI itself…”
See his full explanation in the video below.
(Tip via our friends at Transport Trackers)
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