Why You Should Care About the Baltic Dry Index

The Baltic Dry Index measures the cost of moving some raw materials, such as rocks and rice, across the ocean by ship.

Because raw materials are used at the beginning of a production cycle, indices related to moving them are seen as an important bellwether of future economic activity in the real economy. And that's why investors and economists should take care to watch what's happening, although they also need to be careful how they read it.

Changes in Shipping Rates Matter

"It's viewed as an indicator of commercial traffic," says Michael Darda, director of research and chief economist at MKM Partners in Greenwich, Conn. "Shipping rates are viewed as a measure of demand and they are looked at the same way other commodity prices are." ...