Read five different analyst reports and you'll come away with five different opinions on where the economy is. Some popular ones go from "major recovery on the way" to "we're sort of recovering" to "we're screwed."That's why one of the most popular investment strategies right now – both with professionals and amateurs – is confusion. Is big inflation on the way... or big deflation? Is the American consumer on death row? Is the dollar imploding?
Our advice: Form your opinions on these complex questions... but let the simplicity of the market judge how useful they are. Monitor "real world" market indicators like Intel, copper, and bonds to see if we're "recovering" or "screwed." Monitor the Baltic Dry Index, too...
The "BDI" is a widely followed gauge of the cost of shipping raw materials across the seas. If the economy is healthy, the BDI will trend higher. If the economy stinks, the BDI will trend lower. As you can see from today's chart, the BDI collapsed during last year's credit crisis... but has rallied hard since. As long as this rally holds above the 2,000 level, one has to trade from the "we're sort of recovering" camp. No confusion needed!
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