CSX: THE ECONOMY IS IMPROVING
20 October 2011 by Cullen Roche
15 Comments
CSX’s CEO Michael Ward told CNBC Wednesday that the economy was not deteriorating and was in fact showing continued signs of life. This is consistent with recent rail traffic data which has shown steady year over year growth. Attached are some comments from the interview with full video attached below:
“We are a good barometer of the economy and we did see some uptick in September,”
“It’s a normal fall peak where retailers are stocking the stores for the Christmas time…We do expect continued growth, not robust but modest, in the coming quarters.”
“If you look at our 10 major markets, five grew, two were flat and three were down…Clearly the economy moderated some,”
Battle of the most dependable leading indicators…. Transports vs ECRI. ECRI – Recession Transports – Growth. Seems like no one wants to touch this one. Too hot to handle!
Great point. It’s been this way for a while now. Good reasoning on both sides and it all comes down to some little detail and then bam! the market moves big time up or down. Too much money in the game looking for yield. Flocking birds or lemmings. Hyper-reactive. Buy the dips or short the peaks and DO NOT HOLD.
It seems to me that ECRI has done an amazing job of forecasting a few months or quarters out. There is no question that the economy has slowed from earlier this year but just as Cullen says, grinding along near stall speed does not feel good to most people. The most recent export data would also confirm CSX’s view.
Cullen,
I assume you’ve seen this attack on you? http://market-ticker.org/akcs-www?post=196248
He tweeted it yesterday
Funny how a system as accurate as MMT can be so flawed. I have a theory about internet cranks: They act that way here because their wives don’t allow it at home.
Yes, I wrote a brief response here. Denninger quite literally has no idea what he’s talking about. http://pragcap.com/discussion-forum?mingleforumaction=viewtopic&t=191
I would be very careful reading his work. It’s highly misleading.
Despite the fact that you and other MMTers say that you know inflation is a problem, fact is that all your policy prescriptions nonetheless promote/lead to high (not hyper) inflation. MMT policy prescriptions (basically deficit spend into eternity until full employment is achieved, inflation could be a problem but won’t happen until there is full employment) are wrong and they haven’t worked and won’t work unless the overhang of crappy assets and high leverage is removed. So you can keep beating the drumroll of the US doing a lot more deficit spending…meanwhile inflation rises (goods and services a little, asset inflation a lot, wage inflation none!) anyway. Anyway, I am done making this point – I know you are blindly wedded to these policies and will promote this same nonsense every time (and selectively mine data to prove your points conveniently ignoring data points that don’t).
One way or the other, this debt financed over leveraged nonsense spending will come to an end precisely because after a while, that debt financing does not lead to productive uses but unproductive speculation. Hyman Minsky will be right (he was already partially right in 2008).
Isn’t rail traffic a coincident indicator?
I would think retail carriers like UPS/FedX are more coincidental. Rail seems fit more of a leading position.
Mercator,
It’s interesting as I actually think it fits between Leading and Coincident so a little further ahead of the UPS/FedEx but a little behind some of the other components of the LEI:
Average weekly hours, manufacturing 0.2737
2 Average weekly initial claims for unemployment insurance 0.0322
3 Manufacturers’ new orders, consumer goods and materials 0.0817
4 Index of supplier deliveries – vendor performance 0.0717
5 Manufacturers’ new orders, nondefense capital goods
I am not sure it tells you much about future production as much as what the coincident indicator will look like before its released.
If it was broken down into raw materials versus finished goods maybe we could draw some different conclusions.
Thanks for the feedback.
A biomedic company Amgen just laid off 600 more people yesterday. They have done this every October since 2006 prior to reporting earnings.
The CEO of Amgen made $21M last year. The stock has done nothing since 1998 the company in order to meet earnings estimates continues to run the company like a finance company. Cut, cut and cut to hit Bonus targets and Performance Unit targets for the top executives.
Last night befor I went to sleep I prayed for the 600 families who went home just in time for Thanksgiving and Christmas to let their family know they do not have a job.But the executives are hitting the numbers needed to receive the contracted pay performance.
Steve…created JOBS and should be rewarded. I’m not seeing that here.
I like the video you showed of David Gilmour..I like his comments regarding taking a salary and Executive expenses.
I’m happy CSX is hiring and things are moving along for them. Rail Roads provide excellent benefits and pensions for the employees. It’s good to see his optimism. I’m looking forward to the other side of the downturn and helping people get back to work.
I hope our policy makers find your cite Cullen…soon.
Remember, these guys are paid in stock of their company. Therefore they always have a vested interest in projecting the optimistic view.
UP seems to have a different take:
Union Pacific Corp. reported a 16% increase in third-quarter earnings Thursday that exceeded Wall Street forecasts, but volume growth slowed overall on a big dip in imported freight from Asia.
The Omaha, Neb.-based railroad said its international intermodal volume, meaning containerized goods shipped to West Coast ports on oceangoing freighters and then loaded onto trains, slumped 12% in the quarter.
Union Pacific chalked up the trend primarily to what is shaping up to be a weak peak shipping season this year, although it said the loss of an intermodal contract in the second quarter contributed slightly to the downturn.
“I have to admit that I’ve been disappointed” with the peak intermodal shipping season, Union Pacific Executive Vice President Jack Koraleski told analysts on a post-earnings conference call.
Peak shipping season is the time when U.S. retailers traditionally stock up for back-to-school and holiday shoppers, but it has been soft industrywide this year because of jitters over consumer sentiment and the economy.
“Retailers are very cautious about [consumer spending] going into the holiday season,” Chief Executive Jim Young said in an interview later Thursday. “With 9%-plus unemployment, you can see why.”
Still, Young said he doesn’t expect the U.S. economy to tip back into recession, describing it as more likely that “we’re just going to kind of limp along with some positive growth.” His comments echoed those from executives of fellow Class I railroad CSX Corp., who said earlier this week they don’t foresee a double-dip recession.
CEO’s are not punished for being too optimistic. They are however held to a high standard of perfection for pessimism. To have made it to CEO, they are survivors, so pessimism is a unattractive option.