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The Association of American Railroads has begun publishing “Rail Time Indicators,” their monthly look at Rail Transport related data.

Here’s an excerpt from their most recent report:

• Carloads originated on U.S. railroads in June 2009 were down 19.5% (252,078 carloads) from June 2008 to 1,037,928 carloads. June 2009 was the eighth straight double-digit monthly carload decline, but it was a smaller decline than the previous two months. Average weekly carloads in June 2009 (259,482) were 10,311 carloads higher than in May 2009.

• U.S. intermodal traffic (which is not included in carloads) was down 18.2% (168,031 trailers and containers) in June 2009 to 755,000 units. (See table next page.)

• For the second quarter of 2009, U.S. rail carloadings were down 22.2% (945,652 carloads); second quarter intermodal traffic was down 18.3% 538,345 trailers and containers).

• For the first six months of 2009, U.S. rail carloadings were down 19.3% (1,573,998 carloads); intermodal traffic in the first half of 2009 was down 17.0% (950,147 trailers and containers).

And of course, a chart — 2007, 08 and 09 — note the seasonality around June each year:

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From their report:

“AAR combines rail traffic data with more than 15 key economic indicators (such as consumer confidence, housing starts, and industrial production) in a non-technical snapshot of the U.S. economy. By assembling this information in a single place, and presenting rail traffic in the context of the broader economy, Rail Time Indicators provides a convenient, clear look at the key trends that can reveal where the economy — and, therefore, rail traffic — are going.”

Weekly AAR data detail rail carloadings for 19 major commodity categories, as well as intermodal
trailers and containers, for the previous week for a group of railroads that collectively account for the vast majority of total U.S. and Canadian rail traffic.

Freight railroading is a “derived demand” industry — demand for rail service occurs as a result of
demand elsewhere in the economy for the products that railroads haul.  Thus, freight rail traffic is a useful economic indicator, both for the overall economy and for specific sub-sectors.

Interesting to see something that’s not pure spin from a trade group . .  .

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Source:
Rail Time Indicators
A Review of Key Economic Trends Shaping the Demand for Rail Transportation
Association of American Railroads July 21, 2009

http://www.aar.org/Home/AAR2/NewsAndEvents/RailTimeIndicators.aspx

Rail Time Indicators July 2009

http://www.aar.org/Home/AAR2/NewsAndEvents/~/media/AAR/RailTimeIndicators/Rail%20Time%20Indicators%20July%202009.ashx

Barron’s Alan Abelson discusses the lack of media skepticism when reporting most economic data these days. (Memo to media: A little skepticism, please.)

As an example, he channels Mark Hanson, who makes one of our favorite arguments about housing seasonality.

Excerpt:

“Take the big play given to the 3.6% rise in sales of existing homes last month, which helped power a nearly 200-point rally in the Dow that lifted that venerable index over 9000 for the first time since January. Adding to the excited stock market response was the refrain in virtually every story, whether recounted in print or on the Internet and the tube, that this was the third month in a row of higher sales, signaling that the long-awaited but frustratingly elusive bottom in housing had been reached. Really?

As Mark Hanson of the eponymous real-estate advisory points out, it’s a seasonal phenomenon that until recent years has happened every year.

Indeed, the wonder of it is that, with prices soft and mortgage rates down, sentiment better and supply restrained by foreclosure moratoriums, sales weren’t higher than a year ago. Some of those benign factors are changing, and not for the better: Rates are creeping up, moratoriums are ending and foreclosures are on the rise.

Prices, moreover, are also rising, Mark points out, “but only at the low end, as investors and first-time home owners slug it out for $150,000 foreclosure sales.”

Prices at the middle and high end are a whole different and not very happy story. And Mark notes ominously, “rising foreclosures as the market enters the slow season is a negative housing leading indicator that wasn’t in place in July 2008, but was in place in July 2007,” when the roof started to fall in.

Although it may sometimes seem as if we do, it isn’t that we believe every hopeful bit of news should be dumped on. But an account tempered by a little perspective might give investors and everyone else a truer picture of the way things are rather than the way we wish they were.”

My analysis shows Existing Home Sales were flat for other reasons, but I will save those until Monday . . .

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Source:
It Could Be Worse
Memo to media: A little skepticism, please.
ALAN ABELSON
Barron’s July 27, 2009

http://online.barrons.com/article/SB124847529046580215.html

I have some interesting items to discuss over the coming days — a good conference should generate ideas and feedback and stimulate the mind — and the Agora conference did just that.

I will get to those existing home sales data — no, they were not good month over month, and they were not up 3%. We’ll look at Investor overconfidence; I will also discuss the long lag between reality and its manifestation in the markets, the disconnect and variant perspective. Lastly, the debate between CNBC pundits Dennis Kneale and Charlie Gasparino versus the blogging wolrd will get some pixels.

I am back at my desk today for the next 2 weeks, then its on to Maine (for fishing) and Vail (yet another conference).

Oh, and this next weekend, I expect there will be some Bailout Nation buzz . . .

Video-o-rama: Dow back above 9,000

The Dow Jones Industrial Index on Thursday breached 9,000 for the first time since January and the Nasdaq Composite Index notched up a 12^th consecutive advancing day (the first time sine 1992) as favorable reactions to earnings and economics reports propelled stocks and other risky assets higher. Meanwhile, the usual debate on the outlook for the economy and shenanigans of financial institutions again dominated the video channels over the past few days.

Fed Chairman Ben Bernanke’s bi-annual testimony on Capitol Hill (and an expected grilling by Alan Grayson) and other highlights of the week’s trials and tribulations were captured on video and are included in this video-o-rama compilation. Strutting their stuff were a star-studded cast including the likes of Martin Feldstein, Stephen Roach, Bill King, Nouriel Roubini, Sheila Bair, Mario Gabelli and George Friedman.

The compilation starts off with an interview with Harvard’s Martin Feldstein about his “double-dip” economic outlook, and concludes with a Charlie Rose conversation about the 40^th anniversary of the moon landing.

Bloomberg: Harvard’s Feldstein sees risk of “double-dip” recession in US

“Martin Feldstein, an economics professor at Harvard University, talks with Bloomberg’s Betty Liu about the outlook for the US economy. Feldstein, speaking in New York, also discusses Federal Reserve monetary policy, the performance and future of Chairman Ben Bernanke.”

Click here for the full article.

Source: Bloomberg, July 21, 2009.

CNBC: Pascal Lamy – global trade to post “huge drop”

“The worst may not yet be over for the global economic crisis as world trade could continue to contract by another 10% in volume terms this year, Pascal Lamy, director general of the World Trade Organisation, told CNBC.”

Source: CNBC, July 22, 2009.

CNBC: Stephen Roach – the financial crisis isn’t over

“The CIT Group woes show that the financial crisis is not over and more writeoffs are on the way, Stephen Roach, chairman at Morgan Stanley Asia, told CNBC Thursday.”

Source: CNBC, July 16, 2009.

Bloomberg: Bill King on Unemployment Claims

“Interview and discussion with Bill King of The King Report. He talks about the growing unemployment number.”

Source: Bloomberg, (via YouTube) July 23, 2009.

Yahoo Finance, Tech Ticker: How a “very pessimistic” Ron Paul would fix the economy

“Congressman Ron Paul is ‘very pessimistic’ about the state of the economy, largely because – from his view – the Obama Administration ‘continues to do the things that created the problem in the first place’.

“Long a proponent of small government and a staunch opponent of the Federal Reserve system, Paul’s main point is that increased spending and higher deficits are not the solution to our problems, but their cause.

“‘You can take care of people, but never with a deficit, never by expanding the spending,’ the Texas Republican says in this exclusive video interview, taped in the Capitol Hill Rotunda in Washington D.C. ‘The more we do to interfere with the correction – the longer it lasts.’

“Had he been elected, Paul said he would be doing ‘a lot less’ than President Obama and blames Keynesian economics – which advocates increased government borrowing and spending during times of duress – for our nation’s current ills.”

Click here for the full article.

Source: Yahoo Finance, Tech Ticker, July 16, 2009.

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Ever wonder what goes no at Disney’s Star Wars weekends?

Wonder no more . . .

Hat tip boingboing

This is an interesting mix of analyses, with several economists drawing opposite conclusions from the data:

“Fewer American households appear to be falling behind on their debt payments, according to a new study, but some economists question whether the data reflect a meaningful easing of consumer-credit problems . . .

The analysis of “early-stage” delinquencies can be key to spotting changing trends. When such data show a slowing, it could indicate that total delinquencies will come down in the next six to 12 months. But the data don’t mean the broader credit problems plaguing banks and other lenders will be eliminated anytime soon.

In fact, the total number of seriously delinquent borrowers and those in default will keep rising for some time, as borrowers who are 30, 60 and 90 days delinquent move to the next phase of delinquency. Overall, household liabilities in delinquency and default rose to $1.15 trillion in June, 10% of total liabilities, according to Mr. Zandi’s analysis of the Equifax data. The delinquency and default rate in June was up from 8.96% in March and 8.01% in December.”

Delinquencies are still going up? This isn’t even a case of less bad = good.

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Source:
Consumer-Debt Picture Shows One Sign of Improvement
RUTH SIMON and CONSTANCE MITCHELL FORD
WSJ, JULY 25, 2009

http://online.wsj.com/article/SB124848104178780505.html

A lot of bullish commentators are talking about a recovery being in the works, and they may very well be right. But it is not going to look like any recovery worthy of the name. This week we look at what I will call The Statistical Recovery. But first we take a look at what China is doing, as we continue our look at the rest of the world and ponder whether it is time to brace ourselves for an extended bout with the Muddle Through Economy*. (And yes, there is an asterisk.)

Quickly, and importantly, tonight we are releasing the first in a new series of quarterly Conversations entitled Geopolitical Conversations with John Mauldin and George Friedman. We believe that these new Conversations will help you better understand not only the global political landscape but also how it affects the financial umbrella that we are under. In this first Conversation, we talk about the “exogenous” risks to the markets (those from outside the markets themselves) posed by the geopolitical world.

George and I are going to make it a regular quarterly gig. We will offer this service, which will be priced separately, at some point in the near future. Now, here is the important part: all current subscribers and anyone who subscribes now will receive these Geopolitical Conversations free, as a thank you. (Current members can log in now.) If you have not yet subscribed, you can do so and receive a discount, by clicking the link and typing in the code JM49 to subscribe for $149. This is a large discount from our regular price of $199; plus, we are including the bonus Geopolitical Conversations that are worth $59.

Further, we will post a separate interview next week that I have obtained permission to use from my friends at Casey Research, and which I personally found very valuable. When we launched Conversations, we promised eight interviews a year. We are now at six, and next week I will record the seventh with housing experts John Burns of John Burns Real Estate Consulting and Rick Sharga of Realty Trac, the two leading experts on housing in the country. There is SO much uninformed, simplistic misinformation in the media about housing that I thought subscribers might like to know what the real situation is.

When you subscribe, all of the past Conversations are there for you to review. I am going to make sure subscribers get way more than their money’s worth. You don’t want to wait another day to subscribe. And now, let’s jump into this week’s letter.

Can China Lead the Global Recovery?

China is growing by about 8% a year, which is amazing on the surface of it, as their exports are down about 20% (more in some sectors). How can that be? I continually read about how China is going to lead the world out of its global funk. And 8% growth in GDP does seem pretty strong. But we need to look a little deeper.

If I told you that the next US stimulus package would be $4.5 trillion dollars, mostly given to banks that would be forced to loan out the money quickly, do you think that might jump spending and GDP in the short term? Would you start looking for a few bubbles to be created? What about the dollar?

That is the equivalent of what China is now doing. The volume of credit that is flowing into China is
equivalent to one-third of their GDP. Banks that already have large problem-loan portfolios are now lending even more, in a very short time frame. China has severe capacity-utilization problems, as trade has sharply fallen; and the US consumer is unlikely to return to anywhere near the level of consumption that was the case in 2006.

The Chinese stock market is up 85% this year, and commodity and real estate prices are rising. And no wonder: the money supply shot up 28.5% in June alone. That money is looking for a home. My friend Vitaliy Katsenelson has written a very perceptive essay for Foreign Policy magazine, talking about the nature of the current growth in China.

“But don’t confuse fast growth with sustainable growth. Much of China’s growth over the past decade has come from lending to the United States. The country suffers from real overcapacity. And now growth comes from borrowing — and hundreds of billion-dollar decisions made on the fly don’t inspire a lot of confidence. For example, a nearly completed, 13-story building in Shanghai collapsed in June due to the poor quality of its construction.

“This growth will result in a huge pile of bad debt — as forced lending is bad lending. The list of negative consequences is very long, but the bottom line is simple: There is no miracle in the Chinese miracle growth, and China will pay a price. The only question is when and how much.”

I am going to quote at some length from Simon Hunt’s latest note. He travels very frequently to China and is one of the world’s true experts on the copper market. If you want to know something about copper, ask Simon. Copper, we are told, is the metal with a PhD in economics. If copper prices are rising, then the economy is booming. And historically, that has more or less been the case. But there may be reason to believe that PhD may be no more useful this time around than a regular Ivy League degree.

“The world community has come to see that China is its savior. Growth picked up sharply in the second quarter, but it is based on fixed asset investment and renewed speculative activity in the real estate sector. It is not what the actual GDP or IP [Industrial Production] numbers will show that matters, but the quality of that growth. Money is cheap with loans and credit freely available, so much so that China risks developing new bubbles in the stock and commodity markets and real estate. Speculation is based on the simple premise that prices must rise. Foreigners as well as domestic participants are feeding this frenzy, especially in metal markets.

“The frenzied loan and credit growth is unlikely to be cut back until the fourth quarter at the earliest. It
is not this year or next which worries us, but post 2010. What will China do when the world economy gets hit with its next big leg down?

“There is no better example of this speculative activity than what is being seen in the copper market. It is easy for global merchants, hedge funds etc to ship cathode into China and warehouse it outside the reporting system, so fuelling investors’ sentiments that copper demand in China is soaring and at the same time draining copper from the rest of the market.

“It is not so much industry which is doing this buying in China, but individuals, financial institutions and even small companies divorced from the copper industry who are buying and holding the metal because copper is a store of value and prices will go up is the common response. We updated our numbers for the first half of this year.

They are truly staggering. Over 1 million tonnes of cathode is sitting in China mostly outside the reporting system as a punt on rising prices.” (Emphasis mine)

If it is happening in copper it is likely to be happening in other commodity markets as well. If you are trading the metals, you should be aware that a quick drop could happen if demand falls off due to there being a glut of supply coming back onto the market.

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Good times . . .

The six bank subsidiaries of Security Bank Corporation, Macon, Georgia, were closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.

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Source:
Bank Fail
State Bank and Trust Company, Pinehurst, Georgia, Assumes All of the Deposits of the Six Bank Subsidiaries of Security Bank Corporation, Macon, Georgia

http://www.fdic.gov/news/news/press/2009/pr09130.html

Friday linkage — something for everyone, bull and bear alike:

• The Charade Of Quarterly “Earnings Surprises” (Business Insider)

• What Can China Get For Its $2 Trillion? (Real Time Economics)

• Simon Johnson says “Fix the economy? Curb corporate America (Salon)

• America’s Disappearing Millionaires (Newsweek

• Turf War Over Financial Oversight Plays Out at Hearing (NYT)

• Dropping the shopping (The Economist)

• Have to Admit It’s Getting Better: As the Beatles sang back in the Psychedelic ‘Sixties, “Can’t get no worse.” (Barron’s)

• Stars align for easing of U.S. credit crunch (Reuters)

• Geithner Calls for Finanical Rules Revamp to Be Passed This Year (WSJ)

• Nice while it lasted: Sentiment has now risen back to dangerous levels (MarketWatch)

• Rating Agencies Downgraded (The Economist) see also: Berkshire Hathaway reduces stake in Moody’s (Reuters)

• Executives Receive One-Third of All Pay in the U.S. (Alternet)

• “Does Securitization Affect Loan Modifications?” (Naked Capitalism)

• Gasparino Responds to Crossing Wall Street (Crossing Wall Street)

Anything else clickworthy?

It is really fascinating to see how much people underestimate the political staying power of technocrats such as FDIC Chairman Sheila Bair and SEC Chairman Mary Schapiro. I get the distinct feeling that some senior members of the media, analysts and the banking community, still don’t see the ladies as serious players. If you bother to look at the Players’ Roster of American politics, it is clear that the ladies are very much in the ascendancy in Washington, both in government and in the lobbyist community.

Consider the movement in terms of legislation on regulatory reform. The ebb and flow of the debate is headed very much in the direction of collective, shared authority for determining when a TBTF bank or, more specifically, a non-bank company such as AIG needs restructuring. This goes directly contrary to the Geithner proposal to give this function to the Fed. Bair’s comments here about why giving the sole authority to the Fed or any single agency is a bad approach are instructive:

“The macro-prudential oversight of system-wide risks requires the integration of insights from a number of different regulatory perspectives — banks, securities firms, holding companies, and perhaps others. Only through these differing perspectives can there be a holistic view of developing risks to our system. As a result, for this latter role, the FDIC supports the creation of a Council to oversee systemic risk issues, develop needed prudential policies and mitigate developing systemic risks. In addition, for systemic entities not already subject to a federal prudential supervisor, this Council should be empowered to require that they submit to such oversight, presumably as a financial holding company under the Federal Reserve — without subjecting them to the activities restrictions applicable to these companies.”

Click here to read the entire Bair comment to the HFSC.

By making such decisions collective, inter-agency processes, the tendency at the Fed for cults of personality a la the “Greenspan doctrine” to guide decision making will be largely eliminated. Since each agency in the proposed council will have to document its decision process and maintain a public record of same, the Fed’s cultural tendency to bury such decisions and the people responsible will be at least partly thwarted.
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