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North American Rail Traffic Up For 2010


Parsad
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There was an article at The Motley Fool just a few weeks ago which cited a rail report and concluded that rail traffic might be on track to fall by 25% this year.

 

http://www.fool.com/investing/general/2010/06/17/buffetts-favorite-indicator-points-down.aspx

 

The indicator in question is freight car loadings, which reflect the amount of goods transported over the railway system. According to David Rosenberg, chief economist at asset manager Gluskin Sheff, the latest data for the week of June 5 shows a rate of decline over the past 13 weeks that would work out to 25% on an annual basis. This is particularly troubling, since, as Rosenberg notes, " This metric is closely linked to the only [two] areas of the economy that have been major contributors to the recovery: Exports and inventories."

 

However, this article from the same report has a more favorable view:

 

http://mjperry.blogspot.com/2010/06/rail-traffic-continues-to-improve.html

 

The weekly report on rail traffic shows promising signs of continued improvements in rail freight activity, with intermodal traffic far above last year's level by 21.2%, and almost back to the same level of traffic for Week 24 of 2008 (lower by only 0.20%).  Container volume is up both from the same week in 2008 (by 8.8%) and the same week in 2009 (by 23.2%).  Trailer volume is also above last year's level, but down by 33% from 2008.

 

I am sure that Buffett follows these numbers and those from his other businesses closely, and can use that to gauge the strength of the economy and where it is in the recovery process.  About 9 months before economists said we were in recession, Buffett did, probably based on the same kind of numbers.  Now, he is saying that we are certainly in recovery, though other analysts aren't saying that yet.  Hey maybe the old guy knows something?

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Strictly speaking, paying down debt doesn't increase book value... it uses an asset (cash) to eliminate a liability (debt) which is neutral to book value.  Paying down the debt would allow Berkshire to decrease its debt ratio and maybe regain its AAA credit status.

 

I am sure that Berkshire will do fine but not fantastic long-term with BNI.  More importantly I think the increase in rail volume is a positive indicator for economic recovery.

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