Warren Buffett's favorite sector (besides insurance and banking) is rail. American railroads had a good run for the past couple of years but now the rolling slowdowns in other sectors are hitting the rails (ha ha, a pun). Big coal producers are cutting their production outlooks and won't need to order so many train shipments. It's too bad that rail industry managers can't retrench as quickly as their share prices have declined. Class I rail carriers are still hiring at a fast clip, and carriers of all sizes are still pulling idle cars out of yards for scheduling. Neither of those trends will be sustainable for much longer if big customers keep reducing demand.
The rail equipment sector also has its head in the sand with unrealistic expectations of rising demand for new railcars. Those planned orders will be canceled soon once railroads put cars back into storage as quickly as they pulled them out. Greenbrier (GBX), Trinity (TRN), and American Railcar Industries (ARII) are probably going to see a hard winter into 2012. I wouldn't ramp up hiring if I were them; they'll just have to lay those folks off all over again once this bow wave of slacking demand works its way through the railroads to their servicers.
Is there any good news? There is for me, since I've got cash I'm waiting to commit to buying railroad stocks that can stay healthy through the next phase of Great Depression 2.0.
Full disclosure: No positions in any railroad stocks or other companies named above at this time.
The rail equipment sector also has its head in the sand with unrealistic expectations of rising demand for new railcars. Those planned orders will be canceled soon once railroads put cars back into storage as quickly as they pulled them out. Greenbrier (GBX), Trinity (TRN), and American Railcar Industries (ARII) are probably going to see a hard winter into 2012. I wouldn't ramp up hiring if I were them; they'll just have to lay those folks off all over again once this bow wave of slacking demand works its way through the railroads to their servicers.
Is there any good news? There is for me, since I've got cash I'm waiting to commit to buying railroad stocks that can stay healthy through the next phase of Great Depression 2.0.
Full disclosure: No positions in any railroad stocks or other companies named above at this time.
