Sunday, December 28, 2008

Baltic Dry Index Plunges 93% since June 08

So what is the BDI?

Baltic Dry Index

The Baltic Dry Index is a daily average of prices to ship raw materials. It represents the cost paid by an end user to have a shipping company transport raw materials across seas on the Baltic Exchange, the global marketplace for brokering shipping contracts.

This BDI is one of the purest leading indicators of economic activity. It measures the demand to move raw materials and precursors to production. Consumer spending and other economic indicators are backward looking, meaning they examine what has already occurred. The BDI offers a real time glimpse at global raw material and infrastructure demand. This could also be gleaned from looking at commodity prices, but there are substitution effects and futures contracts that make it difficult to interpret the impact of commodity price fluctuations.

Unlike stock and commodities markets, the Baltic Dry Index is totally devoid of speculative players. The trading is limited only to the member companies, and the only relevant parties securing contracts are those who have actual cargo to move and those who have the ships to move it.

Click tabs below for alternative BDI monthly/yearly perspectives:

Good 8 minute video on BDI Plunge:

So what does all this mean for you and your family?

Comments below extracted from this link

Raw materials are not being shipped. This means metal,lumber,grain etc....
Without the raw materials, factories will not be able to make finished goods.
This means no factory jobs and no goods for store shelves.
No goods mean nothing to transport.
Nothing to transport means no trucking/rail shipments
No shipments mean transport companies go bankrupt.
This means there may be no one to ship the vital supplies (food,medicine,gasoline)

Forget the stock market it's like a body that doesn't know its dead yet.....

Bottom Line:

Might be prudent to stock up that empty pantry - while you still can!


FOFOA said...


This is one of many possible ways that "deflation" could turn to hyperinflation very quickly. And this may be the most probable way. Shortages of necessities combined with monetary stimulus? Look out! When? I'm not sure, but this certainly is an ominous sounding snip from that link:

"You are correct on your post; things are on a true collapse. There is something else pretty major coming very soon that unfortunately I am not at liberty to discuss but it is all pointing to a major SHTF type event in late Feb 09 or early Mar 09. As soon as more people are in the loop I will be posting about it. I just happen to be lucky enough to have a friend the works in a position of trust that he is privy to this info. The only reason I even know is because we have been friends for 32 years and there is total trust... he knows I will keep my mouth shut until he says differently.

We are honestly about to experience things here in the U.S. none of us have ever had to experience before. I can not express how damn important it is RIGHT NOW, not next week or the week after but RIGHT NOW to go stock up on essentials and food/water. People need to start taking all these warnings seriously and
stop walking around like the living dead before they find themselves becoming the non-living variety."


Jayson said...

I agree about shortages leading to hyperinflation. The current credit crunch is very destructive to productive capacity. Farmers are forced to plant less and mines and factories shut-down to an extent much greater than the reduction in real demand. When the resulting shortages begin to appear in necessity items, hoarded cash will be deployed to chase it. At first it will appear like isolated cases, but the trend will accelerate.

Shannon said...

Thanks for your great blog! I have found just most information posted on here to be very helpful and insightful. I am heading out to the Commissary tonight to stock up on beans, rice, canned goods, and bottled H2O. Better to be safe than sorry!

Happy New Year!

Shannon (Josh's wife)

jerry said...

Chaos is coming!! There is no doubt about it. When the banks begin to shut down, there will be pandemonium everywhere. This video of the BDI is eye-opening. If nothing else happens except for bank "holidays", the public will freak!!! I do agree that it is time to prepare by stockpiling food, etc.

The Ponzi Scheme brought on by the US government has melted down the economy. Our GDP is $13 trillion, but our debt has crossed over that figure; therefore, we are operating as a bankrupt nation. Even the private debt is equal to our GDP.

It is better to be prepared, than to not be.

Randy said...

Agree w/you Fofoa. Please let me know if you hear anything more from that anon poster who seems to be in the know.

Jayson - thanks for taking the time to post up your relevant/astute thoughts.

Shannon, Much obilged. Glad the blog is serving a useful purpose - helping folks to understand world events - leading to better preparedness for their families.

Happy New Year to you also!


Couldn't agree w/you more.


Anonymous said...

This post falls right in line with the Dec 16th LEAP2020 article that speaks of the first quarter of 09 being the meltdown. They attach it to the 4 trillion meltdown in pension funds loss soon to be announced and the dramatic impact that will have causing mass panic and anger throughout the country.

Anonymous said...

Something WORTHY to consider...

When you view a 10 year chart of the Baltic Dry Index

You SEE that from the mid 80s to about 2002 shipping stays at a fairly steady rate EQUAL to what the Index has dropped to now at the LAST DAYS of 2008.

SO, where the rise in sales, consumption and shipping is during the bull-sht years from 2002 to 2005 and then a HUGE rise at the start of 2006 to the END of 2008.

Simply, it appears that when the B$ money (Ponzi) cash was flowing big time, so was shipping.

NOW that the game has reached it's limit of suckers and has been exposed, "we" are back to a more sensible rate of CONsumption.


I'm a hard core doomer, but the Baltic Index only shows a huge drop DOWN after a huge RISE up.

Kind of like sex or a drug buzz.

The 600+ Trillion in CDOs and other paper scams, as well as the Biggest banks exposure is what to watch.

Simply phony paper promises risking real goods, real jobs and real accounts --- dats da thing to worry about.


Anonymous said...

PS: Besides the massive financial fiasco coming due in 2009, the other thing to watch for (doubt if there will be much of a warning) will be the Known Unknown, that will be an Unknown Unknown to the clueless, sleepy masses.

Some sort of trigger event will be the phony cause of markets tanking and banks-a-closing.

When? Well Biden (and SNLive repeating it a half-dozen times), Powell and Brzezinski have ALL stated something funky was going to happen after the "inauguration" (Jan 20th).

There's a Friday the 13th in February.

As a full-time doomer, I consider any time after the ball falls at time's square, new years eve is when the clock starts for a countdown for bad times and a confused, frustrated, then soon to be angry public.


Chester said...

Shipping is extremely energy intensive. At 8:03 into the video, the BDI vs. Crude Oil shows a decently close tracking of the plunge in Crude Oil prices with the BDI price plunge.

I'd love to see a chart comparing the BDI vs. Crude AND total surface shipping volume as that would tell the tale more accurately.

Shipping volume would show a price peak at peak BDI prices as that would indicate the shipping industry running flat-out (demand based peaks).

And the Crude Oil vs. BDI would show how one of the major expenses of the shipping industry is affecting the shipping rates (energy based peaks).

I'm sure shipping demand is off. I'm not so sure it's panic time. Yet...

The combo chart could surprise us all though....

Anonymous said...

Nice video on the BDI there is a storng link netween shipping and the credit crisis in the following manner.

With the banks not issuing letters of credit to sellers and buyers there is no form of payment for goods to be moved.

Banks don't trust each other, issuing as LC is worthless in their eyes. They will not extend credit because they have no real way of knowing if the companies will be able to raise their own LC to pay for the goods they buy.

This is the unheralded part of the credit crisis. If no credit is extended then no goods are shipped.

Considering the banks are insolvent despite the $300Bn spent so far in propping up there balance sheets there is little to suggest that the BDI will change.

Unless of course that is all part of the plan, to reduce all goods and services and the companies that suppply them to a point where they are sold in a fire sale and the money masters take over those operations for pennies on the $

Just not sure how this one plays out butover and above stocking up now you might also want to learn how to grow your own food, your very survival and that of your families will depend on it.

Steven said...

Randy: Any updates yet?


Steven said...

Randy: Any updates yet?


The dry baltic index is a good measure of worldwide economic weakness.