Monday, June 15, 2009

Trains from here to Albuquerque...

First the quote of the day: "The green shoots of an economic turnaround continue to appear, but the question is whether markets have priced in a bumper harvest,” said Tim Schroeders.

Railcars provide an interesting insight into the inner workings of the economy. Goods have to ship before they reach manufacturing facilities or retail sites. In the past, we've seen NY Airbrake's commercial railcar business has been a pretty good indicator of rail traffic patterns.

Consider the following chart from railfax report......

If those charts don't tell a story I don't know what chart can. All of the charts show that, yes, we've stopped falling off a cliff, but we're still tumbling down the side of the mountain.

While on the subject of railcars consider this article:

"The economic slump has idled about 70,000 Union Pacific railcars, now sidetracked wherever space can be found, said Zoe Richmond, a Union Pacific spokeswoman in Roseville, Calif. The railroad has also furloughed 5,000 of its 48,000 workers.

Back to back, Union Pacific's idled railcars would reach from Seattle to Albuquerque, N.M.

"We don't have 2,000 miles of track anywhere in our system to put them," Richmond said.

If you have a good 5 minutes I recommend reading the latest posting by Andy Xie. He offers a clear, concise set of opinions on a variety of subjects from Treasury yields, market action and green shoots.

This quote in particular speaks to the bullish bias of the stock market's many participants and the many "experts" you see on TV every day.

"While rational expectation is returning to part of the investment community, most investors are still trapped by institutional weakness, which makes them behave irrationally. The Greenspan era has nurtured a vast financial sector. All the people in this business need something to do. Since they invest other people's money, they are biased toward bullish sentiment. Otherwise, if they say it's all bad, their investors will take back the money, and they will lose their jobs. Governments know that, and create noise to give them excuses to be bullish.

This institutional weakness has been a catastrophe for people who trust investment professionals. In the past two decades, equity investors have done worse than those who held U.S. market bonds, and who lost big in Japan and emerging markets in general. It is astonishing that a value-destroying industry has lasted so long. The greater irony is that salaries in this industry have been two to three times above what's paid in other sector. The key to its survival is volatility. As markets collapse and surge, possibilities for getting rich quickly are created. Unfortunately, most people don't get out when markets are high, as they are now. They only take a ride."

My better half is in Switzerland for meetings (I think it may be a cover to get a closer look at Mark Cavendish or Fabian Cancellara in the Tour of Switzerland :) ) so postings may be light this week.

----------Sorry for the formatting errors -------- all of the photos and links confuse with google's format settings. It's too late for me to try fixing it :)

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