After a spectacular 17 day winning streak the Baltic Dry Index has run into a wall.  I mentioned last week how the big move in the Baltic Dry was likely a head fake.  This is a price index that has some pretty complex moving parts.  It’s not necessarily a great leading indicator of market activity.  Rather, the recent action in the BDI is likely more a function of the irrationality in the market.  Prices clearly overshot to the downside as the number of ships in port increased dramatically and the market came  to the conclusion that the world was ending.   The BDI fell 95% from its peak – a larger decline than just about any indicator anywhere covering anything.  To say that it was a minor overreaction is an understatement.  What we’re seeing now is nothing more than a bit of normalization in pricing rather than a sign of sharp economic recovery.  I wouldn’t read too much into it.

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