Tuesday, January 12, 2016

Quite the correlation; North Carolina Railroad relatively suddenly investing in a megasite as their cash flow falls precipitously

"Sorry Warren Buffett: Things Just Went From Bad To Worse For U.S. Railroads

...Carloads have declined more than 5% in each of the past 11 weeks on a year-over-year basis.

While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1% decline, has not occurred since 2009.

...going back nearly 30 years, similar periods of weakness have occurred in only five other instances since 1985: (1) the majority of 1988, (2) the first half of 1991, (3) several weeks in early 1996, (4) late 2000 and early 2001, and (5) late 2008 and the majority of 2009. 

...The current period starting in October and continuing through the present has been accompanied by weak ISM results, with the purchasing managers index recently falling to 48.2 in December from 48.6 in November (a reading below 50 suggests contraction), and our proprietary BofAML Truck Shipper Indicator recently falling to its lowest level since 2012.

Here is a rather troubling finding from BofA: the manufacturing recession has spilled over from purely the industrial sector and into "other, more consumer-oriented segments." In other words, the service recession is imminent.

...in 4Q15, volume is at its lowest level since 2010."

Industrial weakness correlated 
with shipping 86% of the time
= GDP decline = layoffs = less need for a new car plant
= North Carolina Railroad executives 
trying to save their own asses with a Hail Mary

Can't say I blame them, 
but if Greensboro's City Council decides to pay for the water and sewer
instead of the state without a deal, doom on them.