TRANSPORTS CONFIRM THE ECONOMY IS WEAK
Nothing has been more confounding during this equity rally than the weakness in the underlying fundamentals of the transports. Without fail, the data from the transports has been an excellent leading indicator in past recessions. Warren Buffett has even admitted that the rail data is his single favorite indicator to watch. But as equity market have ripped higher, the rails and other transports have lagged.
Of course, as time has passed we have witnessed the enormous influence of government stimulus on the economy and the incredible impact of money printing on asset prices. As we begin to see signs that government stimulus is failing to generate jobs and a sustainable recovery, the transports continue to forecast a very weak recovery. Have the transports been right this whole time or is the Fed’s liquidity induced rally a more accurate reflection of the economy?
Late last week, Union Pacific CEO Jim Young said the economy had stabilized, but was not recovering just yet:
“So, it looks like the economy has bottomed out, but unfortunately we’re not seeing an upturn yet.
The weekly rails data we report has shown certain signs of stability and even a slight uptick of late, but whether this warrants the extreme recovery optimism we hear about on a daily basis is highly suspect:
Of course, the weakness in the transports isn’t just in the rails. The Air Transports reported a 13% year over year decline in cargo just last week and the latest truck tonnage data shows that the recovery in trucking is also very weak:
In terms of market implications, Richard Russell is now growing very concerned about the action in the Transports:
“From a Dow Theory standpoint, the Transports are now worth watching. They’re sort of sinking out of sight on higher volume. And look at MACD which has now turned bearish. Transports could be a problem. And note today’s plunge of over 100 points.”
From a trading perspective, we saw heavy put action in the Transports late last month as they were beginning to top out. Since then, traders have become very concerned about a potential double top leading to further weakness in the transports sector.
The fundamentals seems to rhyme with the technicals. Some traders couldn’t ask for a better set-up….
OBAMA IS MAKING IT ***WORSE***
BASICALLY, THE NEXT JIMMY CARTER
The next Jimmy Carter??? We shoulld be so lucky !!
Thanks, TPC. Have been wondering when the market is going to start worrying over a ‘Dow Theory Sell Signal’. The Transports peaked back Sept., never making newer highs like some of the other indices.
This consumer confidence number can’t be good for the .DJT either. I think it’s a good one to keep watching here.
I thought it was odd that the guy in Barron’s Trader colummn this week was trying to make FDX and UPS seem like good buys with mid 20 multiples. Made a pretty weak case.
Many in the mainstream seem to be saying that the storm is past and it will be nothing but blue skies from now on. Thanks for the confirmation they are wrong. This is no normal economic storm — it is instead a hurricane — and the relative calm of the past months has been due to us being in its eye. Look around because we are completely surrounded by economic storm clouds on every side. Unless you believe that the hurricane is going to magically completely dissipate with the eye stalled over us (possible but highly unlikely), you need to be prepared for when the other edge of the eye reaches us and the rest of the storm passes over. Because it is fast approaching and anyone not prepared will be in a world of hurt when it does.
The Balkan Dry Index tracks the costs to ship dry goods worldwide. Its a great indicator for worldwide commerce. While its off its lows, its still sitting near 10 year lows. Here’s a chart:
a href=http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm
I think you mean Baltic Dry Index?
To start with BDI is not near its 10 year low and I don’t think you should compare it with what it showed in 2007 and 2008, not for now anyway. The cost of carrying dry bulk commodities is also depended on the number of ships available on the market. In 2009 many new ships have been delivered and since demand is lower than supply this will lower the cost of carrying dry bulk commodities and the BDI.
Statistics lie and liars use statistics!
As i have said on previous posts the SP500 is on a pe of 20, this is way too high at this stage of a recovery, but markets can remain irrational longer than one can remain solvent (or as long as the stimulus lasts), the transport index fell again today, the main bear in the room is the price of oil, if it goes above 100 dollars for any length of time we may have a double-dip recession time will tell
My first day on this site…very informative…just one comment.
‘MAINSTREAM MEDIA’. Just what or whom does that refer to now?
Does anyone reading this read anything besides WSJ, Barrons or IBD for their news?
I know of no one who gets their news from NEW YORK TIMES, THE WASHINGTON POST, L.A. TIMES, CNN, MSNBC, ABC, CBS or NBC. The crawl and commentary on MSNBC and BLOOMBERG can be informative but if they have news it isn’t mainstream. It’s financial or biased to their agenda.
Last week a T.V. personality on CNN had to give what he said was an apology, on air, for a statement he made as news… Charley Gibson didn’t know about ACORN-and on and on and on!
Anyway..lets call it the way you see it… THE WEENY MEDIA.
The UNP railyard in Spring,Tx still looks weak—hardly any movement.
Another “Bellweather” US Steel say demand remains weak going forward.
Another “Bellweather” China Steel producers–demand remains weak.
I mispoke in the last post:
China steel production has recovered to 2008 avg levels.
But China Steel production has declined the last 2 months
For final demand use Container Index which keeps hitting new lows. Of course it could be alot of new container ships too. But looking at Port of Los Angeles monthly in-bound and out-bound container volume reports pretty much confirms shipping is down on weak final demand. Another good confirmation of low final demand in shipping would be intermodal freight car loadings – way way down compared to last year.
When Obama’s term (hopefully not terms) has ended, I suspect history will indicate that he was the worst American President ever. I am near 50, and Jimmy Carter has always ranked at the top for me as the worst President – both domestic and international policies. His international policies enabled much of the problems that plague the world today with the radical Muslim nations. Well, George Jr. made it to my second worst behind the peanut man, but Obama, he just scares the hell out of me on what the landscape of America may look like when he is finished with the aid of his radical left Comgress. Vote both parties out of Washington, America needs a reboot!