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