Friday, July 09, 2010

Warren Buffett's Favorite Economic Indicator: Rail

In this CNBC interview, Warren Buffett was asked to identify the single most important economic statistic he would choose if he was stranded on a desert island for a month and could only get one set of economic numbers. Buffett reported that his favorite “desert island indicator” would be freight car loadings. 

The likely reason that Buffett is so fond of rail traffic as his “desert island indicator” is that it measures the amount of raw materials, inputs, and supplies moving around the country every week, and this should accurately predict the future direction of the overall economy. After all, the inputs transported by rail eventually get processed into inventory, final output, and goods for sale.

In that case, Buffett must be pretty pleased with yesterday's American Railroad Association’s (AAR’s) weekly report, which shows that rail traffic in the United States is booming.

Read more here at The Enterprise Blog.

9 Comments:

At 7/09/2010 10:23 AM, Anonymous Anonymous said...

He should be smiling: Berkshire Hathaway bought out BNSF, the second largest railroad in the country.

 
At 7/09/2010 10:33 AM, Anonymous gettingrational said...

The rail figures are even more impressive when one considers how much of the U.S. economy is "knowledge" based. Knowledge based industry is nano sized small if it is in a material form at all. I hope our trading "partners" will be paying for knowledge products in the same large proportions as material products -- then job growth will materialize.

 
At 7/09/2010 12:48 PM, Blogger Benjamin said...

I do wonder if the rail stats are more of a coincident than leading figure, or maybe even a lagging figure.
The last few weeks suggest the recovery is petering out.

The nation's property markets are still in a depression, and sustained property deflation promises to bankrupt our financial system.

The Fed needs to think massive stimulus.

 
At 7/09/2010 1:29 PM, Blogger Marko said...

Did the rail numbers predict this recession, or reflect it?

If it did, I wish I had known that and saved some money instead of staying in the market too long and trying to convince everyone that things were not that bad based on the numbers I was seeing.

I hope it is not the same now - the numbers are actually quite good but the market could be about to crash. I hope not, because I am doing the same thing!

 
At 7/09/2010 5:18 PM, Blogger David said...

Intermodal rail includes a significant mix of imports...containers coming off ship and going more than 700-1000 miles or so usually go from ship to train.

 
At 7/09/2010 10:30 PM, Blogger VangelV said...

The rail figures are even more impressive when one considers how much of the U.S. economy is "knowledge" based. Knowledge based industry is nano sized small if it is in a material form at all. I hope our trading "partners" will be paying for knowledge products in the same large proportions as material products -- then job growth will materialize.

The latest information shows a large number of patents from Chinese and Indian companies which are in direct competition with American companies. And while most of the profit is still at the design and marketing end, which is where American companies do well, many of the jobs are still in the lower margin activities. While not as profitable, those activities act to employ many people, who are improving their standard of living and acquiring more marketable skills even as Americans seem to be going the other way.

 
At 7/10/2010 10:52 PM, Blogger Tim Winfrey said...

Well Said!!!! @gettingrational

 
At 7/12/2010 12:36 AM, Anonymous Anonymous said...

At one place in the book The Snowball , Only Warren Buffet could have the guts to tell his biographer – wherever my version and someone else’s version differ, use that one which is less flattering. If this is not transparency, what is?

 
At 7/12/2010 3:48 PM, Anonymous Anonymous said...

When it comes to Buffett's I prefer Howard to Warren.

 

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