What is the Baltic Dry Index?
The Baltic Dry Index is the daily average of prices to ship raw bulk materials. It is issued daily by the London based Baltic Exchange. The Baltic Exchange acts as the global marketplace for buying and selling shipping contracts. The Baltic Index does not allow speculation like other exchanges such as the New York Stock Exchange, the Chicago Board of Trade, and the CME group.
The BDI and The Recession
The Baltic Dry Index is considered to be a leading indicator, because it tracks the volume of raw materials and where they are going. It is even believed to be the indicator Mark Haines used to predict the stock market bottom in March of 2009. Also called the Haines Bottom, March 10th, 2009 was the day that Mark Haines said the rally would stick. In fact, it turned out to be the beginning of the continuing rally.
Analyzing the Baltic Dry Index
Looking at the chart you will notice that around July of 2008, the volume of dry bulk ships dropped dramatically. In January of 2009, right before the stock market began its rally, the volume increased as well.
The Baltic Dry Index is an unconventional indicator that charts production by following the flow of raw material shipments.