Can I get a S&P 1000 ?

[nero3]

Re: Can I get a S&P 1000 ?

Have railroad stocks ever done well in modern times? I had a buddy who was an officer at Norfolk Southern. I seem to remember saying about a steady 3% ROI was all he ever saw.

UNP 10 X in the seventies while the dow was flat.

It tends to do well in times of high inflation and stagflation. It did well under WW2, and did well in the seventies. It have also done well since 2003. It also tends to do well, after inflation peaks, as with the civil war in 1866, after the 1 year recession, and from 1982, as profit margin widen. The two railroads UNP and BNI, is also utility like, and does well if inflation is high, and the economy is bad. The railroads, with trucking costs very high, with fuel at these levels and further up, also provide a competitive advantage, that brings new business to the railroads, in a way not seen in the seventies. Compared to the early days, when railroads were heavy leveraged, they are now almost debt free, there are fewer competitors, in fact almost monopoly, and they have superb pricing power, unlike other companies that are much more likely to get squeezed by rising inflation.

[metalman]

Re: Can I get a S&P 1000 ?

I like it. Unlike gold, that went from around 200 at the top in 74, to around 850 in a very few days, I think the realistic top was more like 6-700 dollars, railroad at the time went from around 4-16, and...unlike gold, these shares benefited from the peak in inflation and went further up into the 1980-s. This non dependence on timing, makes it an excellent inflation hedge, even better than gold, in my opinion. It was not many things that went well during the 1970-s that also held up and set new records into the 1980-s, and also did superbly when interest rates was at 21 %. Let me also remind that the railroad boom, occurred after the civil war, and the departure from the gold standard., between 1866-1973, railroad was spectacular, even the yearly deflation rates was around 5 %.

thx. well argued. like your points below re competition with trucks. hmmm.

one thing might be 'different this time'... peak cheap oil makes all transport more expensive. see mega's post... Quick oil story

trucking profits get crushed. trains, too... but not as bad.

[nero3]

Re: Can I get a S&P 1000 ?

thx. well argued. like your points below re competition with trucks. hmmm.

one thing might be 'different this time'... peak cheap oil makes all transport more expensive. see mega's post... Quick oil story

trucking profits get crushed. trains, too... but not as bad.

Unless there is some change, that is new regulations designed to target the railroads, something I highly doubt, as that would not stimulate the railroads to expand, and therefore not reduce dependence on foreign oil, they are in my opinion in a situation where there is coming so much things that used to be run by trucks, that they will have to expand their tracks, simply to keep up with demand. The southern railroads will also benefit from the new panama channel, and also a likely increase in the trade with Cuba. Railroads is truly the backbone of America, without them, the cities would seize up totally. The last years, the upgrades have been making new tracks to keep up with demand, and also lower the tracks in tunnels, so the tunnels can have clearing to take the double stacked containers that comes straight off the ships onto the rails. Another big change is that there was a surge in passenger traffic up to 1950, when the automobile came and destroyed everything. Santa Fe used to be a passenger network, not a goods network. Burlington Nothern have always been an utility like goods network. The potential for the Santa Fe track to go back to passenger service in the future is huge. The railroads were able to set new profit records even as last as the last quarter of 2008. When thinking of the soft economy from the housing bubble peaked in 2005, that's simply amazing.

Right now a railroad ticket or booking a shipment don't cost much compared to someones salary. But in the future I think that will change. Owning railroad, is an exposure to that change that takes place as the US is reborn as an industrial and agricultural nation.

The graph of the US railroad companies, is like a mirror of gold, the sensex index or even more of USD/CHF since 2003, or even the price of coffee. It's a trend that's worth being exposed to.