You hear a lot about the Dow these days. It’s the only barometer of economic health that most people know. But it’s really not a terribly great economic indicator — not only is it gamed by all sorts of interests, but it isn’t really a leading indicator. As a public service, I’m telling you about an economic index that probably will tell you what’s going to happen. It’s called the Baltic Dry Index, and isn’t much followed by mainstream financial analysts because it’s about the very “dry” subject of raw materials shipping.
Very simply, this index tracks how much ship owners can expect to command for their global shipping services for all kinds of raw commodities such as iron, copper, grains, and everything that goes into manufacturing the goods we eat and use. When the index is high, that means there are a lot of materials to be shipped – high demand for the shipping services. When the index is low, that means that there probably isn’t that much raw material floating around out there on the high seas — low demand for shipping.
What you see on the BDI today is probably not being felt in real life today, but may be felt weeks or months from now. The BDI was as high as 11,000 over the summer. Today, it stands at 666, its lowest-ever reading. If the number reaches (a theoretical) zero, that would likely mean a complete drying-up of global trade – and probably of manufacturing as well. Which would mean more job losses, and possibly more shortages of manufactured goods. Why is this happening? Economic slowdown is one, but it also has to do with the global credit crunch, which hampers the flow of the shipping trade (there is a market for some of this stuff, but credit-based transactions cannot be completed). (Here is a link to a daily report about the BDI. You can bookmark it and watch it fluctuate.)
Okay, I admit this post was mainly an excuse for me to tell folks about the BDI. But it occurs to me that maybe someone should develop an “SMI” – Syracuse Misery Index (and perhaps an opposite SJI, Syracuse Joy Index). What factors would you include? Obviously, rain, snow and temperature levels; how many points SU football/basketball gave up during its last game; job losses; but that can’t be all there is, so what else would you suggest?