Strong railroad profits show US economy growing


finance.yahoo.com/news/strong-railroad-p...ow-us-211046937.html


OMAHA, Neb. (AP) -- Strong earnings reports from two of the nation's biggest freight railroads show that the U.S. economy is continuing its long, slow recovery.

Union Pacific Corp. said Thursday its first-quarter net income jumped 35 percent as the railroad hauled more cars and crude oil. CSX said earlier this week that its net income jumped 14 percent. Both railroads were hauling more containers of consumer goods and both were able to increase rates enough to offset a decline in coal shipments after a mild winter.

"The economy is stable and slowly growing," said Jack Koraleski, Union Pacific's president and CEO. "We're seeing some generally positive trends."

Many people will be encouraged by the reports because the major freight railroads are considered indicators of the nation's economic health. The amount of cars, chemicals, crops, lumber and containers of imported goods that railroads carry across the country offer insight into those industries.

"The railroad is a good leading indicator of how the economy will do," said Sung Won Sohn, an economics professor at California State University.

Both Union Pacific and CSX reported a drop in coal shipments. Winter weather was mild and prices for natural gas, an alternative for power generation, are around 10-year lows. UP's energy shipments declined 8 percent, and CSX reported a 14 percent drop in its coal shipments.

But shipments of more economically sensitive items like cars, lumber, industrial products and crude oil all increased in the quarter. That led officials at both Union Pacific and CSX to express confidence that their companies could offset the decline in coal shipments this year with growth in other areas of their business.

The 15 percent jump in automotive shipments that Union Pacific reported was particularly encouraging. That figure reflects the 13 percent increase in sales of cars and trucks in the first quarter. Analysts are predicting sales of 14.5 million or more this year, which would be the industry's best performance since 2007.

Sohn said the railroads' strong performance, combined with data on trucking and port traffic, all suggest the economy is doing just fine.

"They all indicate that the economy is moving in the right direction," Sohn said.

That's the trend railroad officials have been seeing although Koraleski said he worries that sustained high gasoline prices could slow the economic recovery. The national average for a gallon of regular gasoline is $3.89, up 62 cents since Jan. 1.

The U.S. government issues its initial estimate of first-quarter gross domestic product a week from Friday. Economists estimate the economy grew around 2.5 percent in the first three months of the year.

Omaha-based Union Pacific said Thursday that it generated $863 million in net income, or $1.79 per share, in the quarter that ended March 31. That's up from $639 million, or $1.29 per share, a year earlier.

UP, which is the nation's largest railroad, said it increased prices on many shipments and collected more fuel surcharge fees during the quarter to boost its revenue 14 percent to $5.11 billion.

CSX said price increases helped it increase profits 14 percent to $449 million, or 43 cents per share, in the first quarter. That's up from $395 million, or 35 cents per share, a year ago.

Both railroads exceeded what Wall Street had been expecting.

Deutsche Bank analyst Justin Yagerman gives both UP and CSX a buy rating partly because he believes they'll be able to continue increasing prices and improving their operations.

Union Pacific has 32,400 miles of track crossing 23 states from the Midwest to the West and Gulf Coasts.

CSX is based in Jacksonville, Fla., and has about 21,000 miles of track in 23 eastern states and two Canadian provinces.

Earl at first glance this looks like unambiguous good news - a rarity for the U.S. economy (lol). It IS bullish for an economy to see increased rail traffic (or trucking), since it SUGGESTS increased economic activity. However, look CLOSER and suddenly questions emerge.

Recall what I ALWAYS say about the game the propaganda machine plays: ONLY give you a glimpse of the short term. So first of all we are missing CONTEXT.

Railway earnings are "growing"? Great! But are they "growing" after a plunge off a cliff - like the U.S. housing sector? And is the "growth" just some tiny dead-cat bounce (like the housing sector)? The fact that they are HIDING the context leads me to believe my suspicions are correct.

Note that we are at the end of the THIRD YEAR of the supposed recovery. Where were the big earnings BEFORE this? There is no indication of ANY good times before this. So on the one hand we're supposed to get excited that the rail companies are now doing well. What about the first 2 1/2 years of the "recovery"???

And speaking of being at the end of the third year of a "recovery", note the jibberish about rail-traffic being "a leading indicator". This isn't 2009 - when the propaganda machine was trying to convince the sheep that a recovery was about to BEGIN. It's 2012, with a recovery that is supposedly three years old. So to talk about "leading indicators" LATE in a cylce like this is idiotic.

More likely is that instead of this being a "leading indicator" it is a LAST GASP. Note that earnings reports are AFTER THE FACT, meaning this growth in rail traffic is now several months old.

File this report away in your memory Earl (and others). Let's see if NEXT quarter things look as rosy for the rail companies. My GUESS is that we'll hear from the propaganda machine that earnings will be "surprisingly weak"...

Maybe things are actually improving. Then what happens to the price of gold?

Seb,

I'll bite on this one-

Exclusive "Bloom" Report

Economy Improving Leads to SPIKE in Gold Jewelry Sales and Gold Dental Demand

Have a great week end,
Earl

Seb1 wrote:
Maybe things are actually improving. Then what happens to the price of gold?


Seb, now I'm wondering if you're paying attention. What did I just say in my latest article?

"If the U.S. economy was NOT already dead than its 0% interest rates would cause the economy to explode into asset-bubbles..."

Surely I don't have to explain that "exploding into asset bubbles" is bullish for gold (and silver)?

All roads lead to higher gold and silver prices.

OK I get it. With regards to the price of gold it doesn't matter then whether the economy improves or dies. The price of gold will go up regardless? Hmmmmm.

Seb1,

Case 1: Economy dies, gold goes up because value of dollar is falling. IOW, the value of gold isn't necessarily increasing (though it probably will as demand goes up for a limited supply), just it takes more dollars to buy the same product (of anything)

Case 2: Economy improves, gold goes up because more people have more dollars that are valued at a lower rate (thanks to dollar printing). People will spend dollars as investment. There are only limited consumables to invest in.

Yes, well we'll see. So far it hasn't happened. Speaking of the last 8 months anyway. It all sounds very plausible but I have serious doubts.

Seb1 wrote:
OK I get it. With regards to the price of gold it doesn't matter then whether the economy improves or dies. The price of gold will go up regardless? Hmmmmm.

Seb, I can SMELL your skepticism all the way through cyberspace.



Surely you've heard the phrase "backed into a corner" as well as the phrase "cornered rats". These expressions refer to scenarios where (generally nefarious) individuals have maneuvered THEMSELVES into a "corner" - where ANYTHING they do will lead to the OPPOSITE result they desire.

How do phrases become CLICHES in our societies? By reflecting COMMON SCENARIOS. So why is it "common" for RATS to corner themselves? Regular readers should ALL be able to answer this one.

GREED is short-sighted. Rats thus ALWAYS end up eventually cornering themselves. Thus rather than being so SKEPTICAL of my proposition that "all roads lead to higher gold and silver prices", the RATIONAL person would say to themselves "this is EXACTLY what I expected": the RATS have cornered themselves AGAIN.

Lastly, recall that the ENTIRE exercise in manipulation is designed to DELAY the prices of gold and silver rising to their fair market value. It was never (and could never) be possible to PERMANENTLY prevent these markets from adjusting. So once AGAIN, the rational person would respond to the phrase "all roads lead to higher gold and silver prices" by thinking to themselves that this is EXACTLY what they expected.

IF the banksters could PERMANENTLY squash these markets then the price of gold would be UNDER $300/oz and the price of silver would be UNDER $4/oz - and NONE OF US would ever consider buying these HORRIBLY DEPRESSED metals...

rroush wrote:
Seb1,

Case 1: Economy dies, gold goes up because value of dollar is falling. IOW, the value of gold isn't necessarily increasing (though it probably will as demand goes up for a limited supply), just it takes more dollars to buy the same product (of anything)

Case 2: Economy improves, gold goes up because more people have more dollars that are valued at a lower rate (thanks to dollar printing). People will spend dollars as investment. There are only limited consumables to invest in.

Rroush let me be more emphatic about your Case 1.

If our economies have ANY kind of significant downturn then EVERYONE IS GREECE. The debt-dominoes default one by one, and the brain-dead bond-holders FINALLY emerge from their comas and (attempt) to flee to the sanctuary of precious metals.

Readers must recall that there are TWO simultaneous dynamics with EVERY "recession" scenario:

1) Revenues COLLAPSE.

2) Our governments deficits SKYROCKET, meaning that the money-printing would increase AGAIN exponentially from already exponential levels.

As things stand, our lying/thieving governments are BARELY able to ward-off hyperinflation. Imagine if EVERY nation was simultaneously engaging in "QE to the max"...???