just in in-tray, discussing some other amazing indications
On Wed, Apr 2, 2008 at 4:35 AM, Mac wrote:
This chart looks horrible.
This is the trailing 12 month auto and light truck sales in the US over the past 15 years.
I would have to think that layoffs will continue to come thick and fast in auto sensitive areas.
On another point, can anyone explain why transports are doing so well aside from everyone chasing Warren's purchases?
We are just heading into a recession with the Transports within 10% of their all time highs.
Interesting data over the past decade.
Avg. Price / Cash Flow = 6 times. Currently 8.1 times.
Avg. Price / EBITDA = 4.75 times. Currently 6.15 times.
FWIW, I note that the low in Price/EBITDA was in March 2000 at 2.16 times, and then the bear market was just beginning.
So it seems to me that transport margins are just now beginning to shrink, yet multiples are 3 times higher than they were going in to the last recession. Why the love affair with Transportation stocks? I know the "smart money" is in love with the railroads as perceived monopolies and railroads more efficient transportation vs. trucking at current prices, but it that conception solid?
After all, the railroads are now being sued by ADM for exactly that, monopolistic practices:
"Archer Daniels Midland is suing the five big U.S. railroads, accusing them of violating antitrust laws to fix their fuel surcharges.
Decatur, Ill.-based ADM said it has paid more than $250 million in fuel surcharges since 2003. The lawsuit doesn't say the surcharges are illegal, but accuses the railroads of illegally acting in concert to set them."
And it appears that fixed costs are getting ready to go up substantially for the transport of chemicals:
"The Federal Railroad Administration has proposed what it calls "sweeping" and "revolutionary" changes in standards for the construction of the railroad tank cars that carry the most dangerous chemicals through American communities. The new rules would strengthen the tankers to prevent penetration and ruptures at speeds up to 30 mph and slow some freights hauling dangerous cargo until the older tankers are replaced. Railroads and chemical companies would have to replace half the 15,300 tank cars used to transport chlorine and anhydrous ammonia with stronger models within five years of the rules' enactment. The entire fleet would be replaced within eight years."
And there doesn't seem to be any real growth:
BNSF Railway Co., the nation's top hauler of container rail freight, is parking miles of railcars in Montana and elsewhere because there isn't enough freight to keep them rolling. Texas-based BNSF Railway, a division of Burlington Northern Santa Fe Corp., has parked upward of 1,000 cars in Montana alone, spokesman Gus Melonas said. More are parked in other parts of the company's 32,000-mile system, which operates in 28 states and two Canadian provinces. The cars standing between Helena and Great Falls constitute 5 percent of the BNSF fleet, Melonas said. He declined to say what percentage of the fleet is parked elsewhere, citing confidentiality issues. Seasonal car storage is common, he said, but the number of cars now idle is exceptional. For the first two months of 2008, the volume of intermodal rail freight in the United States was down 3.4 percent compared to the same period last year, according to the Association of American Railroads, an industry group based in Washington, D.C.
Excluding intermodal traffic, rail freight rose 1.7 percent for the first two months of 2008 compared to the same period a year earlier. Coal was out in front last month with 576,012 carloads, or an increase of 5.7 percent.
In Long Beach, Calif., home of the nation's busiest port complex with Los Angeles, the movement of goods has been somewhat stagnant. About 7.3 million containers passed through the Port of Long Beach in 2007, the same as in 2006, port spokesman John Pope said. "That was a big decline from the growth we'd seen in the past decade or so," Pope said. "Typically, there had been double-digit growth from year to year." In January, Long Beach posted a decrease of about 12 percent in overall volume compared to January 2007. The situation was less extreme last month, with a 2 percent drop in overall volume compared to a year earlier.
one who does not use capital letters responded:
given that the transportation sector is very economically sensitive, its strength is indeed surprising. besides, trucking companies are really smarting from rising fuel prices, and i suspect the same holds true for airlines. what needs to be figured out here is how fundamentals will develop in the future. a big US consumer retrenchment will surely cut into the revenues of all transportation firms.
the main caveat would normally be that when a market sector acts contrary to one's perception of the fundamental backdrop, there is a likelihood that the perception is at fault.
however, this is simply not true in this market, which seems to be largely populated by greater fools.
to wit, the near demise of ABK, MBI, BSC and similar troubled financial firms took a very long time to be recognized by the market. the market action vs. their fundamentals was incongruent for many months, until they suddenly got cut down in the space of a few weeks. given that fundamentals for many transportation firms continue to worsen, a similar 'late recognition' effect may come into play at some stage. currently the market seems to focus exclusively on the 'second half recovery' concept. if that recovery doesn't materialize then we might see a sudden revaluation of the sector.
|
