Tuesday, April 12, 2011

Rail Making Waves On Land

Rail's resurgence is evidence for some recovery given rail traffic's usefulness as a leading indicator.  Railcar owners are putting more idle cars into service from their unused fleets in anticipation of more orders.  RailAmerica thinks it can get more mileage out of short-haul rail lines in Alabama, although the interfaces with CSX now make RailAmerica more dependent on a much larger carrier.  Even rail container traffic in Russia is seeing good times.  Rail looks a lot more attractive than its main competitor - trucking - with diesel costs rising across the U.S.  What could go wrong with this rosy rail picture? 

Macroeconomic black swans could derail this surge, at least in the U.S.  IMF predictions of minimally stable growth are probably too optimistic in the midst of a double-dip in housing.  Massive spending cuts needed to bring the U.S. federal deficit down have yet to be made.  Rail's surging volume may be a mere echo of the asset inflation pumping the stock market. 

Full disclosure:  No positions in any rail stocks at this time.