Looking for a Bubble?

If you’re looking for an investment bubble, you might want to consider shipping stocks. The Holy Grail of the shipping industry is something called the Baltic Dry Index. Although most people have never heard of it, the index, which measures the cost of shipping goods by sea, is probably one of the world’s most-watched economic barometers.

Thanks to the China’s insatiable demand for iron, the index has had an amazing rise since 9/11. The index rose from 900 in 2001 to over 6,200 last December. As you might expect, the shipping initial public offerings are coming fast and furious. There were three more in June alone. Earlier this year, a company went public with just two employees. As bubbles inflate, the quality of new offerings often tends to go down. The breaking point may be soon. The Baltic Dry Index has plunged over 60% lately. It’s now around 2,400.

The reason for the fall may be signs of a slowdown in China. The lower shipping costs are felt all over the world, and the late IPOs may be left holding the bag.

Posted by on July 15th, 2005 at 9:29 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.