re:marks
BY GEnE MarkS
My heroes: Cole Hamels
and the Baltic Dry index
Back in late 2008, the Phillies were in the World Series. And it was right around that time that the economy
was imploding. Banks were failing. The stock
market was in a free fall.
I remember one particular game after the
Dow dropped something like 8,000 points
in a day, I was sitting in Citizens Bank Park
and thinking to myself, ‘How could all these
fans be so happy when we’re all so poor?’
Is it possible that these millions of Phillies
fans (and the four fans following the Tampa
Bay Rays at the time) knew something that I
didn’t know?
Were they familiar with the Baltic Dry Index? They must’ve been.
Because at the time, a few smart bloggers were saying that the Baltic Dry Index
was bottoming out. And that, even though
the economy seemed terrible and we were
certainly in a recession, things were going
to be looking up over the next six-to-nine
months. There was going to be a light at the
end of the tunnel. We were not headed into
a severe depression. Oh, that must be why
the Phillies fans were so happy in light of the
events of the day.
That, and pitcher Cole Hamels.
supply and demand. What the economists
and bloggers were telling me at that time was
that shipping was holding steady — in fact, it
was picking up just a little in the Baltic Sea.
The world was not imploding. Except for the
Rays, that is.
Smart advisors I know, like CPAs, follow
certain key metrics like that Baltic Dry Index.
Sure, it’s important to watch the numbers internally. Like gross profit and inventory turnover and quick/current ratios. But our job is
more than that. We’ve hopefully figured out
how the bills will be paid over the next 60-90
of embarrassing). Like Expedia. You can see
how active the site has been over the past few
months and years. When Expedia is active,
it’s because more people are booking travel.
It’s all graphed out.
And what do you see? When Expedia’s
traffic is rising, it’s an indication of a rising
economy. And when it’s falling, the opposite is going on. Some bloggers and economists say that tracking Expedia is a good way
to track where the economy is going. And I
guess that makes sense. I’m a prime example.
When things are going good, I’m taking the
Want another index? How
about the Men’s Underwear
Index? Oh yes, it exists.
WHAT IS IT?
The Baltic Dry Index is a freight index. It measures the cost of freight through the Baltic
Sea. Who knew? I honestly can’t even find the
Baltic Sea on a map. And yet (so I’m told) it’s
one of the world’s largest shipping channels,
connecting Asia with Europe or something
like that.
Whatever.
But the index is important. Because as
freight costs go up, so does the index. And
if freight costs are going up, that means that
there’s more shipping demand. True, I re-
ceived a C+ in freshman economics, but I
know enough to understand the basics of
days. The real challenge, the one that’s met
by the people who truly succeed, is figuring
out how the bills will be paid over the next
12-18 months.
gene Marks, Cpa, is the owner of the Marks
group, which sells customer relationship,
service, and financial management tools to
small and midsized businesses.
WHY EXPEDIA?
Because if you go to Alexa.com, you can track
the activities of any Web site in the world,
including Expedia. (It’s a travel Web site, in
case you’ve been living near the Baltic Sea
for the past 10 years.)
On Alexa.com, a free service, you can see
how many visits any site receives (including
your own, by the way). You can see how that
site is ranked among all others in the world
(please don’t type in my Web site, it’s kind
family to Disney. And when things are slow?
Yeah, you guessed it: the Jersey Shore.
THE HOMETOWN FED
AND SOME ARCANE INDEXES
I couldn’t be writing about economic metrics
without giving a shout out to my hometown
boys: the Philly Fed. Yo, Fed ... what up with
you? The Philly Fed has the mother of all
metrics. The Aruoba-Diebold-Scotti Business
Conditions Index. That’s right, fans — these
guys made up the infield of the Philadelphia
Athletics back in the Connie Mack days.
Just kidding; they’re just another group of
economist dudes. But their index is worthy
of the Hall of Fame. The Philly Fed says that
their index “is designed to track real business
conditions at high frequency. Its underlying
(seasonally adjusted) economic indicators
(weekly initial jobless claims; monthly payroll
employment, industrial production, personal
income less transfer payments, manufactur-
ing and trade sales; and quarterly real GDP)
blend high- and low-frequency information
and stock and flow data.” Basically, it’s an in-
dex of indexes. And, like the others, it tracks
the economy pretty closely.
