Morning Report Tuesday 10 February 2015
What does the “Baltic Dry Index” reaching all-time lows mean for stocks?
The Baltic Dry Index, is generally viewed by investors as an indicator of global industrial activity, it measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea. Last night, it reached an all-time low, note the Index only dates back to 1985. This negativity is an indicator of both the slowdown in China and the lack of pick up by the rest of the world’s economies.
• The Baltic Dry Index basically measures the cost of shipping resources around the world.
There is no real fresh news here, we all know world economies are slowing down resulting in interest rates at their lowest levels in history. What I am looking for is any leading indicators that may help identify the trends of the future. When I trawl through mounds of economic data and stock prices I am looking triggers that can get us ahead of the curve. Unfortunately when I compare the Baltic Dry Index with Australia’s 3 major Iron Ore players all I can clearly see is an extremely strong correlation as opposed to any leading indicator – see chart 1.
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