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Tuesday, May 12, 2009


rail car loadings

at the risk of succumbing to confirmation bias -- more on the fake recovery meme via big picture.

Rather than review the entire 24 pages about rail car loadings, these opening paragraphs amount to a real time glimpse of U.S. economic activity:

Bottom Line: Last week proved no different than the last 4: railroad carloads were down more than 20%. Week 17 saw a year-over-year volume shortfall of 21.6% - which is slightly worse than the 20.4% drop in Week 16.

• The weakness is broad based - whether it be industrial, bulk or consumer related - every segment has shown precipitous declines in each passing week. Worse, we are one-third of the way through the second quarter and volumes are well below even the substantial declines seen in the first quarter (recall that 1Q09 industry carloads were down more than 16% year-over-year).

The railroad carload data are telling a very different story about the economy than one might surmise by looking at the S&P 500. Our concern is that the carload data are ahead of the curve; the light at the end of the tunnel that seems to be boosting stock prices may just be an oncoming freight train.

• Volumes: All commodity types posted steep declines during Week 17. Specifically, we saw sharp drops in metallic ores and minerals (-52.6%), motor vehicles and equipment (-37.6%), non-metallic minerals (-26.4%) chemicals (-21.6%), coal (-18.0%) and intermodal (-17.0%). (source: Credit Suisse)

As you can see, the type of rail activity that should be accompanying any improvement in economic activity is nowhere to be found. In fact, Credit Suisse indicates economic growth is stuck in reverse. Back before the Great Crash and Great Depression, legend has it that Jesse Livermore and his forward–looking peers used rail car loadings to detect shifts in agricultural and industrial activity. Long before the Commerce and Labor Departments put out seasonally adjusted economic statistics, it was rail car loadings and even the Dow Transportation Average itself that were thought to be leading economic indicators. It’s easy to see why, since lower shipments to intermediate and end users would eventually lead to lower orders for the manufacturers. The Credit Suisse team says the data they track shows shipment trends are weakening, not strengthening.

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