The most obscure but perhaps the most important economic indicator we've got

Mutant — Fri, 31 Oct 2008 04:25:25 -0800

How best to take the pulse of the global economy? While market driven rates such as LIBOR or US Government T-Bills reveal the state of fixed income and Credit Default Swaps tell the observer much about possible default rates, many analysts prefer a more basal view. The Baltic Dry Index is one such indicator. For over 250 years member companies of the Baltic Exchange have tracked the cost of shipping goods across the globe. Everyday they produce The Baltic Dry Index, which is nothing more than "...a daily average of prices to ship raw materials". The performance of this index is unbiased as speculators do not participate in this market; hence we consider this an effective forward looking indicator of the expected state of the global economy, and presently the Baltic Dry Index is tanking. Looking for the bright side? The Baltic Dry Index tells us its now over 90% cheaper to ship goods and material across the globe than it was a year ago. At least until bankruptcies in the shipping sector reduce capacity to fit demand.

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