Uncommon Inflation Measures for Analyzing Attitude towards Risk

1 maj

In this analysis we breakdown certain inflation measures that can aid us in capitalizing on longer term trends in various asset classes. The Baltic Dry Index or BDI gives us a real world view of shipping costs. The Index is a measure of the cost to move commodities by the Sea. Therefore, It's a leading indicator for the demand of commodities around the world. The Baltic Dry Index dates back to the mid eighteenth century as the majority of sea trade was done between London and surrounding Baltic states. Each day the price is updated just prior to New York stock exchange open by the 26 largest shipping companies in the world. The Baltic dry index is a pure piece of data because there is no government or central bank manipulation behind it. The BDI can be quite volatile and this is due to the fact that there are a finite number of available transport ships at any given time. If suddenly commodities come into high demand globally .. this means there will be less ships.. and this results in higher prices to ship goods. This signals us that Inflation may be increasing and therefore higher interest rates may result as the economy heats up. A Falling Baltic Dry Index indicates to us a slowdown of demand for commodities and also of the broader world economy.

Next, we observe the GCC or an Exchange Traded Fund that is based upon the Continuous Commodity Index. The Fund intends to provide broad-based exposure to four commodity sectors : Energy, Agriculture, Precious metals, and Industrial Metals. The Baltic Dry Index generally leads commodity prices(and the commodity index) which was a concept we identified in our analysis.

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2 maj

Uwaga

Understand the Baltic Dry Index and the Continuous Commodity Index for gauging demand for commodities. Higher demand leads to Higher prices. Higher prices suggests Inflation and Higher inflation means higher Interest rates potential. This can lead to long term trends in currencies such as the safe haven USD or commodity currencies such as the AUD,NZD or CAD.

6 maj

Uwaga

What can we look at for observing increases in Inflation? The Baltic Dry Index and the Commodity Index ( the ETF) ticker symbol GCC.

8 maj

Uwaga

Inflation is important because it can impact interest rates. What Indicators can we observe to increasing or decreasing of inflation?