seaworld

The Baltic Dry Index or BDI, is an index with twenty-two major dry bulk shipping and compiled as a daily in London. This index provides an assessment of the price of moving raw materials such as ore, grain, coal and cement by sea. This index contains no wet goods such as petroleum.

Since this index is not tradable contract which is not a direct speculative component. Although the contracts that contain a speculative component, the cost of influenceShipping. A component that has a speculative component to not less than 30% as of this writing (October 2007), is crude oil. Another reason is the U.S. Dollar. Since the index is measured in dollars, is the sharp decline of the dollar partly responsible for the recent near vertical rise in the index.

Why should an investor or trader care about how much it costs to dry goods by sea vessel?

Transport by sea can be a good barometer of the volume of worldTrade. This index is a good indicator of future economic growth and production as the raw materials are extradite its preliminary stages of production. Also, because the number of vessels available to relatively fixed, the price of shipping up or down based on supply and demand. If global growth slows, will decrease the cost of shipping raw materials. If the global growth accelerated, the cost of shipping raw materials is likely to increase.

Today is a big part of the demand for crude --Goods from China. The growth cycle in China affects the profits of many businesses around the world. After an index for a hint, if the trend of decreasing demand for fresh produce, or can give important clues to possible changes in general economic activity can.

A century ago, the Dow Theory has become increasingly popular, and it is still in use. However, it is much less effective in the new global environment. A part of the Dow Theory requires that a newhigh in the Dow Jones Industrial Average is to be confirmed by a new high average in the Dow Jones Transportation. A failure to confirm the two indices to new highs, at least within a reasonable time, usually would mean a possible turnaround, which will be confirmed by the price action itself. On the other hand, if the two indices confirm the new high, it is assumed that the trend be intact, and the prices can be expected to move higher. The same theory can be applied in the opposite direction, a confirmation orNon-confirmations of lows, so buy signals could be derived from an index to a new low, while not confirmed by others. The basis of this theory is that if goods are manufactured, or mined raw materials, it is important for companies that move goods between the district and also in increasing value. With an average measure of stock prices is not directly the costs of transporting these goods, how it actually works by measuring the cost of shipping, but if theTransport companies make more money, one might conclude that there is more transport activity, and hence economic activity in general.

Now that the economy has become global, with China and other emerging markets, an increasingly important factor in the global economy is a different kind of transportation index file. The Dow Jones Transportation Average is made up of shares of companies only on the components that transport raw materials and finished goods.For example, airline passengers and small packages are also included. While may indicate the current economic activity, there is little to future economic growth in the way of raw materials can be predicted. A large part of the activity is domestic, so you do not represent the global picture. While there are few companies are represented, which is the global supply of goods in general, it is very dilute, and not an accurate measure of the movement of raw materials. The measurement of the actual cost ofTransportation of raw materials, but as the value of the stock of transport companies, a direct reference to the development of economic activity. If a transport-not an average industrial average is at a new high or low, it might be a good idea to also check to see to confirm if the BDI makes a meaningful confirmation.

The BDI is not always a leading indicator. Sometimes it coincides, and sometimes it can lag. It has flaws, like any index. He may be shortTerm swings that can be affected more by the dollar and oil rotations. But with the BDI in a long-term framework for the development of the cost of shipping can give important clues to the development in the world, economic growth or contraction. It is an important part of the puzzle to determine longer-term trends in the global economy.

Click on the link in the resource box, many maps of the BDI-term, as it correlates with other indices.

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