John D. Boyd | Sep 16, 2009 5:28PM GMT
Railroad freight volumes are probably the single most important indicator of the economy’s health to billionaire investor Warren Buffett.
The investor known as the “oracle of Omaha” for the Nebraska city where he lives and his long record of business success told CNBC television network in an interview aired Tuesday/Wednesday that if he could only get access to one economic indicator he would want to see rail freightcar loadings.
Buffett’s Berskhire Hathaway investment firm owns Geico and other insurance operations among a range of companies or ownership stakes it holds from furniture to candies and fast foods.
It is also the largest single owner of stock in BNSF Railway and holds shares of other Class I U.S. carriers Norfolk Southern Railway and Union Pacific Railroad.
But asked what he considers the most important indicators of how well the whole economy is performing, Buffett said he tracks railcar loadings along with other types of data.
“I look at our businesses every day,” he said. “But I . . . look at everything. . . I look at car loadings. I look at the (Federal Reserve’s) balance sheet” of how much money it is lending to the financial system.
The interviewer tried to narrow him down. “Let's pretend you're on a desert island for a month,” she said. “There's only one set of numbers you can get. What would it be?”
“I would probably look at perhaps freightcar loadings,” Buffett said. He then added truck tonnages and said “but I’d want to look at a lot of figures” rather than rely on a few.
Rail traffic has long been watched by economists, including some at the Fed and notably former Fed Chairman Alan Greenspan, for the weekly snapshot they provide about industrial shipments of finished goods for consumers as well as factory inputs that point to demand for future production. Since they are released days after their reporting period, rail volumes offer an up-to-date view of current activity.
Many other data series are reported monthly. And the lags in reporting many monthly indicators mean they are looking backward to where the economy had been rather than saying much about the present pace.
The Journal of Commerce publishes separate weekly reports on rail traffic. Those are bulk carloadings and intermodal unit hauls by major U.S. carriers from the Association of American Railroads, and North American short line traffic from the RMI RailConnect index that compiles figures from more than 60 percent of small carriers.
See “Traffic Slips at Large Railroads”
See “Short Line Volume Ebbs”
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