Rail Freight Shipments Are Collapsing – Dave Kranzler

[Goldhedge]

Rail Freight Shipments Are Collapsing – Dave Kranzler

TND Guest Contributor: Dave Kranzler

The pundits can disingenuously blame the crashing Baltric Dry Index on container ship overcapacity and find some dopes to believe that fairy tale, but there’s only one explanation for collapsing rail freight shipment volume in the United States: the consumer has finally suffocated from too much debt and declining real income.

We believe rail data may be signaling a warning for the broader economy,” the recent note from Bank of America says. “Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009. – Bank of America brain trust

Eric Dubin of The News Doctors brought this article to my attention: Rail Traffic Is Saying Something Worrying About the U.S. Economy

I’d like to point out that the price of oil is collapsing. It will soon be in the $20’s. Several Wall Street fraud shops have decided that oil is headed to $20. I made that call 6 months ago. Oil is the economy’s canary in the coal mine that the Fed can not remove before it dies. Rail freight traffic is the canary’s twin brother.

I hope everyone is braced for impact because the system is in for a much bigger shock than occurred in 2008/2009…and the Fed is out of bullets – just ask former Fed President Richard Fisher…

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About Dave Kranzler:

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics. Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.

http://thenewsdoctors.com/rail-freight-shipments-are-collapsing-dave-kranzler/

 

[Ahillock]

Another data point along with BDI. Things are starting to show.

 

[michael59]

Yep, I've already tightened my belt a notch or two this year, only have a few more notches to go before I get the belt I wore in my thirties out as a replacement.

 

[Ahillock]

BDI at an all time low.

Rail freight shipments at a level not seen since 2009.

How many more shoes need to drop?

 

[Krag]

Worldwide recession.

This Reuters report tries desperately to show that the decline in the various U.S. stock markets is somehow a mistake. It keeps referring to the good news about U.S. jobs.

The good news on U.S. jobs is based on statistical smoke and mirrors by the government. David Stockman explained this at length over the weekend. The total number of new jobs was 11,000, not close to 300,000.



Here's a newsflash that CNBC didn't mention. According to the BLS, the US economy generated a miniscule 11,000 jobs in the month of December.
Yet notwithstanding the fact that almost nobody works outdoors any more, the BLS fiction writers added 281,000 to their headline number to cover the "seasonal adjustment." This is done on the apparent truism that December is generally colder than November and that workers get holiday vacations.

Of course, this December was much warmer, not colder, than average. And that's not the only deviation from normal seasonal trends.

The Christmas selling season this year, for example, was absolutely not comparable to the ghosts of Christmas past. Bricks and mortar retail is in turmoil and in secular decline due to Amazon and its e-commerce ilk, and this trend is accelerating by the year.

So too, energy and export based sectors have been thrown for a loop in the last few months by a surging dollar and collapsing commodity prices. Likewise, construction activity has been so weak in this cycle---and for the good reason that both commercial and residential stock is vastly overbuilt owing to two decades of cheap credit----that its not remotely comparable to historic patterns.

Never mind. The BLS always adds the same big dollop of jobs to the December establishment survey come hell or high water. In fact, the seasonal adjustment has averaged 320,000 for the last 12 years!

With this is mind, read this.



The benchmark S&P 500 U.S. stock index on Friday notched its worst five-day start to a year on record as fear of a slowdown in China offset a surprisingly strong payrolls report in the United States.
Brent and U.S. crude futures prices extended their weekly slide to more than 10 percent, pressured by unrelenting oversupply and a bleak demand outlook.

Stocks had opened higher on Wall Street after data showed the economy created many more jobs than expected in December and previous months were revised higher.

But the S&P 500 hit its session high within five minutes of the open and closed near its session low, down more than 1 percent on the day and 6 percent for the week.

It was the largest weekly drop in more than four years and the largest 5-day slide to start a year on record.

"The market's reaction (to the jobs report) is something between curious and concerning," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.

"People are skittish in holding positions. If you are long stocks, you think you might be saved by this jobs report. If they don't go up, you are in trouble."

U.S. jobs are irrelevant in a worldwide decline in stocks. The U.S. stock markets were dropping along with the rest of the world. This should be obvious. But happy-face bulls refuse to see it.



Investors fear that China, the second-largest economy in the world, is growing more slowly than expected and could further weigh on commodity prices and global economic growth.
They have good reason to fear this. The rational response is to sell shares.



Europe initially followed suit, but the pan-European FTSEurofirst 300 index closed down 1.5 percent and lost 6.7 percent this week.
MSCI's broadest gauge of stocks globally was down 0.8 percent on the day and fell more than 6 percent this week, also the largest such drop in more than four years.

"What's going to come out of China is a short-term concern for the market, so maybe the ... decline we've seen is not quite enough," said Andrew Slimmon, a Chicago-based portfolio manager at Morgan Stanley Investment Management, which manages more than $400 billion in assets.

He said concerns are only near-term and the beginning of earnings season will "remind investors that the U.S. micro story hasn't changed."

Short-term concern? Where is the evidence? This is whistling past the graveyard.



Traders are indeed more concerned near-term, with the spot price of the CBOE volatility index higher than futures three months down the line. The VIX "fear index" closed Friday at its highest since late September.
Then the article cites one opposing opinion.



"The start of the year is very poor, so that's got investors on the defensive," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
"In the face of weakening global growth," he said, "it's difficult to find reasons to commit money at this point even if one is bullish."

Treasury rates were down. Prices were up. This is what I have been predicting. The FED did not "raise rates."



The benchmark U.S. Treasury yield hit the lowest since late October, reversing an initial rise after the strong jobs data that also showed hourly earnings were unchanged versus expectations of a 0.2 percent increase. Continued safety bids also kept yields from climbing.
In short, there is nothing surprising here.

 

[Ahillock]

After reading krag's post, I felt the need to post this as the viewpoint MSM feeds to the sheep:

 

[Ebie]

Can hardly get a parking space at Costco.
Are they only buying food?

 

[Ahillock]

So you guys are telling me we can't ship off all the decent paying USA jobs to China, India and other places and still expect the middle class to survive and keep buying crap?