The Baltic Dry Index or BDI for short is an index that tracks the level of worldwide bulk shipping rates. As you can see it shows the bull market we've had in the world economy (especially the BRIC countries Brazil, Russia, India, China) we've had for years and shows it's recent collapse due to the financial crisis. It also correlates with the commodities price spike and commodities recent utter collapse (i.e. oil). The BDI is a great meter for showing the growth or decline of the world economy and proves that the decoupling theory, where world economies would become immune to the West, is not based in sound thinking. The old theory that if the US sneezes the world catches the flu is still intact.
First of all, the credit crisis, combined with deleveraging, combined with commodity price collapse, job losses, combined with rapidly slowing economies, and consumption decline signifies one thing, Deflation with a capital D. Deflation was at the heart of the Great Depression and is why Bernanke is intent on showering the world with dollars even if he risks rapid inflation in the future. Typically in deflation CASH or near cash equivalents is king because dollars become more valuable than the things they purchase and allows you to then step in with those dollars and buy things on the cheap (i.e. homes, cars, furniture, etc). I think it may have been Buffet or someone close that gave great advice last year saying don't lose your job and hang on to your cash.
chart giving a historical perspective
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