Tuesday, June 14, 2005

Baltic Baby!

Not the property in the game Monopoly, but the Dry Index, yes the Baltic Dry Index.

The Who? The What? The Where? No, it is not a guide book of the Baltic region. The Baltic Dry Index (BDI) is a good leading indicator for economic growth and production. What it tracks is the cost associated with shipping bulk commodities.

It deals with the precursors to production: bulk carriers carrying building materials, cement, grain, coal, and iron. To my knowledge, there are no options, futures or other forms of derivatives associated with shipping freight, so there is no speculation in the market. People tend not to book freighters unless they have cargo to move, although I am sure there is an arbitrage opportunity in here somewhere.

For some more information on the BDI, take a look at Slate (the article is old, but it explains the basics. Yesterday's WSJ had a small blurb on it and so did a recent Economist. If you want to get a little deeper in the BDI, take a look over here for some TA (that is technical analysis, not tits and ass you pervert!) of the index.

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