The Dow Jones Transports were a notable underperformer in Q3, -3.4% vs. +6.6% for the DJIA, and...

The Dow Jones Transports were a notable underperformer in Q3, -3.4% vs. +6.6% for the DJIA, and they trailed the broader market again today. Overseas Shipholding (OSG -6.4%) was a notable laggard within the group, and railroads remained weak: CSX -1.7%, KSU -1.5%. If economic data stays sluggish, it's just a question of when, not if, declining transports bleed into the broader market.
Comments (11)
  • J Mintzmyer
    , contributor
    Comments (8101) | Send Message
    Drybulk and containers were hammed as expected; however, we saw a tiny rally in September...
    28 Sep 2012, 05:17 PM Reply Like
  • Neil459
    , contributor
    Comments (2636) | Send Message
    I thought transports were a leading indicator. How does a leading indicator bleed into the broader market?


    The economy sucks and Obama's propaganda machine is not going to change the economy no matter how much ABC, CBS, AP, Reuters, and NBC want it to happen.
    28 Sep 2012, 05:20 PM Reply Like
  • Ted Bear
    , contributor
    Comments (700) | Send Message


    Transports carry the goods Americans consume. When there is a slowdown in transportation activity, such as the profit shortfall we saw from FDX, one can infer that the consumer is not buying as much crap as previously.


    To that extent, they are a concurrent indicator: People are reducing their economic activity. Now.


    If shippers are shipping less, then it could be presumed that manufacturers are making less. The sell off in transport companies could 'bleed' over into manufacturing companies, which might reduce profits (it hasn't thus far because companies simply lay off people and use more efficient machines) and therefor share prices might fall. Hence the expression, when the tranny shares show weakness, that could 'bleed' over into weakness in the broader market.


    As for the political comments, well, they are all a bunch of liars and crooks with only one thing in mind: self aggrandizement. The only role you and i have in the political play is to be the ticket buyer (taxpayer).


    At some point, such as we have seen in Greece and Spain, the ticket buyers refuse to subsidize the lifestyle of the players, and interesting things happen. Politicians, through spin and other nefarious means, attempt to delay that moment for as long as possible.


    But players can only play for so long.
    28 Sep 2012, 05:35 PM Reply Like
  • caupachow
    , contributor
    Comments (523) | Send Message
    Well stated!
    28 Sep 2012, 11:31 PM Reply Like
  • Neil459
    , contributor
    Comments (2636) | Send Message
    "To that extent, they are a concurrent indicator: People are reducing their economic activity. Now."


    Not so much. Transports carry the inventory that companies hope will sell in the future. Depending on the product it can be 30 to 90 days. For reference, ocean travel from China to Long Beach is 11 days. Around the holidays it can be as much as 120 days ahead of consumption. For pens made by a company like Sanford, they commit to their production in Japan 180 days ahead of delivery.


    The forecast can be wrong which does not happen so much now days.


    So yes people are reducing now, but retailers are forecasting that they will reduce even more this holiday season. That is why it is a leading indicator. Holiday shipments should have been committed by now.
    28 Sep 2012, 08:53 PM Reply Like
  • Dividends For The Long Haul
    , contributor
    Comments (195) | Send Message
    Transports and rails look like great opportunities.
    29 Sep 2012, 10:30 AM Reply Like
  • Neil459
    , contributor
    Comments (2636) | Send Message
    "Transports and rails look like great opportunities."


    As long as you assume that the bad economy is already factored in and that the economy will be better (thereby providing more profits) than the current forecast.


    The current process has the government printing enough money to keep the economy tolerable and thereby keeping the riots at bay, but not enough to provide any upside except for Wall Street. When they turn, it will be another blood bath.
    29 Sep 2012, 01:06 PM Reply Like
  • Tack
    , contributor
    Comments (16260) | Send Message


    You don't have "bloodbaths" when credit is constrained and overall liqudity is is oceanic. You have bloodbaths when everybdoy is fully invested and cheering for more, and every last ounce of cash and credit has been committed to stocks (like 2000) or real estate (like 2007).
    29 Sep 2012, 08:55 PM Reply Like
  • Neil459
    , contributor
    Comments (2636) | Send Message
    Tack the next bubble is credit. At some point, and it does not appear to be near, the government will start raising the interest rate. That will signal a long term bear market for stocks (at least it aways has in the past.)


    The simple fact is that if Obama is reelected the fat cats will be in heaven because this credit bubble will continue for another 4 years and stocks will continue to, on average, climb.


    If Romney is elected, then the free ride is over and the fat cats will be screwed. No more free money, No more ridiculous bail outs (vote payments). Not to say that there won't be government excess, because there always is, but at least we'll be back to normal levels of excess and waste.
    30 Sep 2012, 02:00 PM Reply Like
  • Tack
    , contributor
    Comments (16260) | Send Message


    You better check, again. Throughout the '90's and again from 2003-2007, interest rates rise consistently, along with major upward surges in markets.


    Regarding Obama vs. Romney, I tend to agree that an Obama election will signal continuance of Bernanke's low rates and lots of Government excess, but it may be offset by Obama's suicidal insistence on raising tax rates, which will kill markets and the economy, as sure as can be.


    If Romney is elected, and his monetary policies are at all reflected by Ryan, then, we'll have tight money, major recession, and falling markets, all while Republicans congratulate themselves on being puritanically prudent.


    Lastly, if credit is a bubble, and I agree it will be at some juncture, where does all that money go when people start leaving credit? especially, if we're seeing rising rates, I doubt that will be into coffee cans.
    30 Sep 2012, 02:15 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (3764) | Send Message
    bot some csx today at 20.70
    2 Oct 2012, 02:43 PM Reply Like
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