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Friday, December 13, 2013

Baltic Dry Index's positive prediction

Have a look at the following chart of the Baltic Dry Index.

I am particularly enthused about BDIY's recent uptick. BDIY was a very strong indicator of Global Trade and economic strength before it lost a bit of credibility in the post-Lehman crisis. The reason I am excited is this:

  1. Shipping industry went through one of the most intensive asset building phase between 2006-2010 with almost double the DWT built as was existing.
  2. This industry-specific weakness was coupled with economic weakness stemming from the global financial crisis.
  3. The Oil-accumulation during post-Lehman phase provided some respite but it tarnished the image of BDIY as predictor of economic performance.
I think the disturbances in BDIY are past us and its present uptick does bore well for us. This means it is time to dip your toes into shipping cos. In India I would go with Shipping Corp [which I have from the previous high :(], Great Eastern Shipping. These companies should benefit from the Iran-Iraq Oil deal.

We need to watch for any global weakness and potential head-and-shoulder formation as happened in 2010.