This index has been popping up in SpikeTrade discussions, and is a part of my daily homework. This is why I want to share with you this email from a friend, Yannis R, a trader in Paris:"I have read a lot of things about the Baltic Freight Index and I would like to put things in their right perspective. There is a widespread need to identify leading signals for economic recovery. The paradox is that people involved with the shipping industry try to find signs on what their industry will do by analyzing the economy. The rest try to see what the BDI does as a signal for economic recovery!!! This is very dangerous for outsiders as the mechanics of shipping are complicated. I am in the industry 20 years and claim to know 30% of it. So for the latest developments let me lay out the following:
1. During the downturn a lot of ships and especially the big ones (Capesizes) were laid up. These were around 400 ships. That's a lot and not counting the ships slow steaming as to win time.
2. These ships now are reactivating and see what is happening to BDI..!
3. On top we have the huge order book of new buildings. Even with the reported cancellations their size is 46% of existing tonnage due for delivery this year and next.
4. When demand returns to normal levels in the economies, shipping will still have to fight its own demons that were created during the greed years.
***** after receiving this email, I sent Yannis the following message ***************
************************** he responded: *****************************
Regarding DRYS I have to say I am biased so I might not be able to guide you accordingly.
Firstly I do not trust the guy who runs it.
During the drop he sold 10 ships from his private company to Drys .
Drys paid top money for them even though the market had dropped 50%.
I think the deal never went through goes of public outcry.
During the 90’s and the junk bond craziness he got 150 million from investors and bought bonds back at 30 cents..!!!
As I said the fundamentals of shipping for the next couple of years are not looking good because of the new buildings coming in and the low expectations for economic growth.
DRYS has a huge orderbook but I know they have cancelled a lot. But still they are hugely leveraged and the market will hardly justify repaying those loans.
For sure technical action can give us rebounds and may double or triple in price but I will not be part of it…!!!
The stock has been really volatile and after what has happened I think investor’s are loosing their faith.
When I saw this picture last week, my immediate response was that retailers are not going to have a good Christmas. This picture represents 12% of the world’s container ships that are sitting idle in the ocean off Singapore. The article said that the cost of transporting a 40 ft container of merchandise from China to the UK has fallen from £850 plus fuel charges last year to £180 this year.
This bearish scenario is confirmed by the decline of the Baltic dry index, described in several previous posts on this blog. The index peaked at 11,793 in May 2008, and bottomed at 663 in December 2008. The Baltic Dry Index is now at 2246. The green line represents the price movement of SPY. 
