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Facts Still Do Not Justify Warren Buffett Fiction; Carloads Down 13.7% YoY, 18.2% Compared To 2007
The latest AAR data is out and it is far from justifying Buffett's optimism in railroad traffic. Carloads this week were down 13.7% over one year, and 18.2% lower compared to 2007. In the ever important western section (so conveniently served by Burlington Northern) the decline is even more pronounced at 14.3% YoY. Year to Date total carloads are down an expected 18%. Maybe Warren's thinking is comparable to Steve Liesman's: from here things can only get better. Of course, unless they don't.
The full weekly report from AAR, which provides the cutest attempt at optimistic spin in its subtitle.
AAR Reports Rail Traffic Remains Down
Increases Seen in Four of 19 Commodity Groups
WASHINGTON, D.C., Nov. 5, 2009 — The
Association of American Railroads today said that freight rail traffic
remains down for the week ended Oct. 31, 2009. U.S. railroads reported
originating 275,439 carloads for the week, down 13.7 percent compared
with the same week in 2008 and down 18.2 percent from 2007. In order to
offer a complete picture of the progress in rail traffic, AAR will be
reporting 2009 weekly rail traffic with year over comparisons for both
2008 and 2007 going forward.
In the West, carloads were down 14.3 percent compared with the same week last year, and 18.3 percent compared with 2007. In the East, carloads were down 12.9 percent compared with 2008, and 18.0 percent compared with the same week in 2007.
Intermodal traffic totaled 203,860 trailers and containers, down 11.1 percent from a year ago and 15.5 percent
from 2007. Compared with the same week in 2008, container volume fell
5.4 percent and trailer volume dropped 32.3 percent. Compared with the
same week in 2007, container volume fell 8.9 percent and trailer volume
dropped 38.6 percent.
While 15 of the 19 carload freight commodity groups were down
compared with the same week last year, increases were seen in grain
mill products (9.9 percent), chemicals (3.6 percent), and waste and
scrap metal (.7 percent and nonmetallic minerals (.3 percent). Declines
in commodity groups ranged from 2.2 percent for the all other carloads
category to 55.6 percent for metallic ores.
Total volume on U.S. railroads for the week ending Oct. 31, 2009
was estimated at 31 billion ton-miles, down 12.7 percent compared with
the same week last year and 13.2 percent from 2007.
For the first 43 weeks of 2009, U.S. railroads reported
cumulative volume of 11,482,619 carloads, down 17.9 percent from 2008
and 18.3 percent from 2007; 8,173,640 trailers or containers, down 16.2
percent from 2008 and 18.6 percent from 2007, and total volume of an
estimated 1.23 trillion ton-miles, down 17 percent from 2008 and 17.1
percent from 2007.
Canadian railroads reported volume of 71,023 cars for the week,
down 8.7 percent from last year, and 42,869 trailers or containers,
down 12.2 percent from 2008. For the first 43 weeks of 2009, Canadian
railroads reported cumulative volume of 2,656,713 carloads, down 21.1
percent from last year, and 1,763,759 trailers or containers, down 15.8
percent.
Mexican railroads reported originated volume of 12,952 cars,
down 17.2 percent from the same week last year, and 7,087 trailers or
containers, down .5 percent. Cumulative volume on Mexican railroads for
the first 43 weeks of 2009 was reported as 494,437 carloads, down 11.9
percent from last year; and 231,525 trailers or containers, down 17.2
percent.
Combined North American rail volume for the first 43 weeks of
2009 on 13 reporting U.S., Canadian and Mexican railroads totaled
14,633,769 carloads, down 18.3 percent from last year, and 10,168,924
trailers and containers, down 16.2 percent from last year.
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Warren Buffet intends to be the sole carrier of western coal to the east coast beginning in 2012.
I think it's a bet on road transport becoming more expensive. What can replace rail? It's going to be boats and rail from here on.
Exactly, given the last 2 year's accelerating oil import decline, with year over year oil imports down 9.6% into America, this could turn out to be a very smart move by Buffett. He invested in a business that will certainly survive, and thrive, in an Oil starved America
Buffet = rail traffic as China exports = BDI
From Denninger's Forum Posted From Another Forum & Quite Interesting:
Geez, I think that's like almost what they said when Becky was oohing Warren on the phone all morning yesterday...NOT. However, good points and definitely worth considering. I guess that means we should all go all in on something...I'm heading for one of those hot robo plays.
You are dead on LoneStar, Buffett must expect the dollar to get cut in half over succeeding years, hopefullu 4 or more so few notice, which will make US coal, wheat, corn quite competitive to foreign buyers, what better way to move it to coast than BNI. This is a statement of belief that a weak dollar is the only way America can remain solvent, and BNI is a great way to play that. Be sure to bone up on Jim Rickards work in that regard..dh
Oil supply shock. Large gov't contracts. War materiel transport. Get out of us $. Hedge imminent inflation. Make fast purchase to dump currency ahead of instant devaluation?
All great reasons. Buying at premium means he has come to some knowledge that make sudden haste very necessary.
Otherwise buy on weakness, or another crash, or 6 months ago.
Buying at a perceived peak on strength? Came into some inside knowledge that makes it an offer to good to refuse.
In addition, consider that the Weimar Republic in 1924 valued the new Mark based on land holdings (and gold), as did all of the former Soviet states when communism collapsed. If the currency goes to essentially zero, and they have to come up with a new currency, ole Warren will be at the head of the line exchanging old scrip for new, based on all of this fabulous new real estate.
Tyler Buffet bought to get "out of cash"...he knows the big reverse repo that will stick the tax payer with crap and then default on it when the crash comes...stealing from the people 101...the best thing the fed has been able to do since 1913...hang on folks it is going to get bumpy
RR are the poor mans mode of transport. Buffet wants to cover all his angle. He's just positioning himself to profit from Americans that it be inflation or deflation.
Burlington Northern has no passenger rail
He wants the assets (trading at a discount even here) before the coming currency devaluation. Cash is not king when purchasing power is getting eroded.
buffet's known for buying co's (under the cover of folksy 'wisdom') then jacking up prices drastically.
all those rails are just so many squid tentacles over which he'll charge whatever toll he chooses.
and over those tentacles he'll be leasing fiber optic and power distribution easements.
and yeah, cash is trash.
i wouldn't bet against him.
I get the investment on the timeframe he operates on. The course of policy action is in part aimed at devaluing the currency. The thoughts and hopes being this forcing a balancing in global trade. Which means the US manufactures more and becomes more reliant on domestic energy supply. Agricultural exports pick up. This would cause more use of rail. Put that into a view that 20 years from now corporations will still exist and the US economy will be functioning in some way (the US won't look like it did in the 18th century and if it does so what if you made a bad investment). With the dollar falling in the L-T, assets especially what is essentially a utility will become more valuable.
Now the timing (price paid) and financing of the deal and its impact on BRK in the near-term may be a totally different story. I won't even attempt to take a look into BRK's balance sheet.
Sounds to me like he's betting on peak oil. I'm no fan of Buffet but I know he doesn't throw money away.
Rails are a peak oil play. In 10 years Buffet's ostensibly pricey purchase will look quite savvy.
As someone said elsewhere about Government Sachs, don't bet against Buffet. He may know something the unwashed don't, that is where Sitmulus 2.0 is likely to go. Don't be surprised to see a big public committment to railroad infrastructure, freight and hi-speed passenger. It makes practical sense for flexible energy modes, including electrical from any generation source, but don't discount Buffet's elite connectivity to the levers of power. After all that's what capitalism is all about right?
They bailed his @ss out on the American Express getting TARP funds. People in this country need to wake up. Berkshire and Goldman are two of the biggest stewards of the wealthy's wealth. Who buys off Congress? The wealthy. Who does Congress protect? The wealthy.
Look at it this way - at least the iron in the railroad cars will be worth more than the dollars he paid for them (sometime in the near future).
Why does Warren Buffet invest massive billions in rail? The pundits are at a loss. Well, here is the answer obvious to the student of history. Warren Buffet has been acting as an agent of the US government for decades. There can be only one reason for this massive investment: PREPARATION FOR WAR. But not a word from the press nor any media outlet. Like sheeple. these wall street gangsters and obama have stlolen 25 trillion. Now they will send the american sheeple to war.
Why does Warren Buffet invest massive billions in rail? The pundits are at a loss. Well, here is the answer obvious to the student of history. Warren Buffet has been acting as an agent of the US government for decades. There can be only one reason for this massive investment: PREPARATION FOR WAR. But not a word from the press nor any media outlet. Like sheeple. these wall street gangsters and obama have stlolen 25 trillion. Now they will send the american sheeple to war.
Economy walked off the cliff and the car loads down only almost 20%?
Give me a break.
There is an Obama connection to this that we do not know. Buffet is a dirty player and he has bit the apple. In time he will be remembered as a nobody.
Buffet is thinking 10 years down the line. The fact that business is so bad for the railroads right now is exactly why he's buying it. Car loadings are Buffet's favorite economic indicator, so I'm sure he's acquainted with the numbers. He's betting that a decade from now, the fundamentals will be better and his price will look cheap.
Coal is rumored to be the biggest beneficiary of the new cap and trade system.
I know that sounds crazy, since coal is not the normal alternative energy we think of that should be promoted. Unfortunately the coal companies were the strongest lobby, natural gas was slow to engage the for hire representatives but are now trying to show up late and impact the legislation.
Why hasn't anyone mentioned which industries benefit the most from cap & trade.
This is a bet on cap and trade. Perhaps it would include government subsidy benefits for new energy efficient GE locomotives that use coal with very little pollution emissions (little cost for new capital and very cheap travel costs) So far, I think the war footing argument related to potential spikes in oil costs along with peak oil are the strongest arguments. I don't think deflation/inflation are as relevant but the strategic land argument and involvement in power generation and optic cables along rail lines makes sense. If you wanted to buy land (one of the best long term investments), this is a great play on strategic land that is not dependent on the weather (agricultural land). What do you think on the cap & trade angle, I would like to get others thoughts on this?
More derivatives. More Goldman Sachs:
http://rightsoup.com/goldman-sachs-drools-over-cap-and-trade/
Maybe he just wanted his NetJets pilots to become train engineers...
This deal is not about Buffet's view on the railway business, at least for the medium term. This is about his legacy many years from now, when he departs.
He likes these kinds of "iron" businesses and there are very few opportunities to own them. By then he will look like a departing superstar.
Cap and Trade won't hurt!
Old men prefer quick thrills. That's my thought on timing...
-4yeah4
If Panama canal shuts down, Buffet will be become the first trillionaere.
When it comes to Buffet, you have to think long-term not short-term gain. And this is a no-brainer: Kunstler has been talking over at Clusterfuck about the sad state of the rails during our Hummergasm, and how the foot will be on the other shoe after peak oil hits. All the other stuff is just frosting on the cake.
Railroads are lot like land....
There isn't but so much of it....
The only time a smart individual would buy a RR
is when the economy is obviously down....
One would be a fool to buy a RR when the economy is strong....
Buffett wins again....
Those that buy when the econ is strong have
efficiency in mind....ie innovation....
Diesel trains are going to be around....
The shut-down of the Panama canal would confirm my thesis that this is a bet on militarism and war. Only full spectrum militarism could justify buffets wager. Nothing else. If the economy grows at 5 % the next 10 years, his bet is still a loss. Preparation for war is the ONLY explanation. WW3 is near. General Suvonov, the premier USSr analysts, notes that Stalin mobilized nearly 1 million cargo loads in 1940 to prepare for his invasion and annihilation of europe. So we still have time to prepare for the onslaught.
The current numbers totally justify why this was a really intelligent purchase. Economists expect U.S. freight tonnage to rise 26% by 2020. Truck demand will increase more than rail, but intermodal is expected to see the largest growth of any surface transport segment.
Warren Buffet bought it because he KNOWS
Warren Buffet bought it because he KNOWS the gvt. is going to do something hugely beneficial for the company. What is that? We do not know yet. But we will know soon enough.
Check this article out that sums up Buffetts purchase.
http://www.marketoracle.co.uk/Article14793.html
Diversification and risk aversion is what it looks like. The above article paints even more worrisome picture. If things are so bad why did buffett buy railroad. Looks like somebody knows things are going to get nasty.
Check this article out that sums up Buffetts purchase.
http://www.marketoracle.co.uk/Article14793.html
Diversification and risk aversion is what it looks like. The above article paints even more worrisome picture. If things are so bad why did buffett buy railroad. Looks like somebody knows things are going to get nasty.
When old men party, it's for the quick thrill. After all, how long could his time horizon possibly be?
-u4yeah