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Thursday, November 5, 2009

Baltic Dry Bulk Index

Ok, so what's the "Baltic Dry Bulk Index"?

There are two thoughts people usually have in regards to this index. Thoughts that you need to immediately dismiss.

1) This Index is not limited to the Baltic states. I could get into the etomology of how "Baltic" came to be in the title, but that's a lot of minutiae and unnecessary detail.

2) This Index does not show how much cargo is being shipped worldwide.

I find a lot of people looking at this index, and thinking:

"Gee! Shipping of cargo is back up to where it was in 2006!"

That's not the case. That is not to say however, that the Baltic Dry Index is giving a bad reading at the moment.

To put it as simply as possible, the Baltic Dry Index is an Index that best measures the demand for shipping (how many vessels can ship, as opposed to how many vessels are needed), adjusted for the fluctuations in the value of the U.S. Dollar; in raw materials.

No this is not a market you can trade or speculate in. It is a measurement of what is real, and the demand in U.S. Dollars, for real goods being shipped worldwide.

The following is a 5 year chart of the Baltic Dry Index:

(Can be Enlarged):

So yes, things are looking better. Demand is rising for vessels to ships available to ship dry cargo. It doesn't mean that there is an economic boon on the way. But the demand is there. I've been a follower of the Shipping sector for some time. I like the Oil shippers myself, but also dry bulk.

A lot of ships that have been built recently, and have been sitting idle throughout this crisis. So if we've risen back up to 2006 levels on the Index; this I see, as a good measurement.

When considering where we are at with the economy? Don't forget to check out this Index. Not only when times are bad. Many loved to look at the "Baltic Index" during the crisis moments of 2008. But continue to look at it. Look at the revenue's from the shippers like DRYS, FRO, and GMR. And remember that this index must be taken in context.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have over 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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