Wednesday, January 30, 2013

Surprise Q4 GDP Drop Doesn't Surprise Transportation Watchers Like Me

The bloom started to come off the overstimulated U.S. economy in Q4.  I wasn't surprised because I expected this downturn for months and consider it overdue.  The Federal Reserve's quantitative easing can levitate phantom growth for quite some time.  People who are surprised have been following slanted mainstream media for too long.  They should have been reading my blog instead.

I won't rehash the snarky, negative things I said about the alleged recovery in 2011 and 2012.  I watched with dismay the news headlines from the email feeds I get on my favorite sectors, particularly transportation.  I first noticed the newbuild orders for supertankers and container ships from carriers that were raising their rates to catch the rebound in the transocean goods trade.  I then noticed the headlines screaming about record profits and rising carloads at Class I railroads.  Then I started seeing reports of major profit growth at the largest trucking companies.  All of this news played out like a pig moving its way through a python for about eighteen months, with nothing coming behind it.

The transportation sector is my bellwether for the larger U.S. economy.  This country has run persistently high trade deficits for decades.  Imported goods move through the shipping, rail, and truck segments in a predictable order.  A bow-wave of expansion and contraction in those segments IMHO presages turning points in the broader economy.  We shall see just how descriptive this theory proves to be as the federal spending sequester cuts into durable goods ordered by defense contractors and other large government agencies.