Brian Kelly's  Instablog

On CNBC Friday afternoon, I spoke about our bearish stance on the Dow Jones Transports and we are not alone, even Warren Buffet, in a Good Morning America interview, indicated he is concerned about the decline in freight traffic. The following is an excerpt from our research report on the US Transportation sector. We shall present our analysis in three parts; today Warren Buffet’s favorite indicator railcar loadings, tomorrow the truck tonnage index, and on Wednesday diesel demand and inventories.

Each week we receive the railcar loading report from Railfax. This report consolidates all railcar loads in North America. From this report we can determine whether or not shipments are increasing on a weekly basis.

These charts show the 13 week average year over year percentage change in railcar loadings. Not only do we look at total railcar loadings but we also examine intermodal traffic to determine the impact on the trucking industry. The charts clearly illustrate that shipments are down significantly on a yearly basis.

Drilling down into the weekly data we find that loadings are headed lower once again.

The charts above are the 4-week moving average of actual loaded units on all railroads. The pickup in shipments in the first quarter is evident, but so is the recent decline. The decline in both total rail traffic and intermodal traffic over the last 4 weeks correlated directly with the decline in distillate demand.

Disclosure: We are short IYT