An Investment Opportunity for Railroads?

With the current dismal economic conditions of today--freightcars parked at every available storage space, it would seem like an unlikely time to suggest railroad investment...but maybe not. When listening to various prognostications, there seems to be two separate schools of thought. Some analysts peer into their crystal ball and see business slowly working its way back to normal. The other camp thinks that the world has been fundamentally changed since the economic meltdown. In this view, consumer spending and business in general, will never be the same. This latter school bases its thinking on consumer behavior. Evidence shows that the average Joe's savings rate has increased at the expense of his spending rate. Will he return to his earlier habits?

Here's the test: If average Joe starts doing well financially will he think about all those forgone purchases (his pent-up demand, as economists call it) and start a trend (as we see so often at the end of business cycles) to spend America out of recession?

Personally, my money is on Joe spending again. Maybe he'll ramp up slowly to his old ways, but old habits, especially ones related to consumption, die hard. With that in mind, the overall investment environment in general, and the railroad environment, in particular, will improve slowly over the next few months. There will be ups and downs, but the overall trend will be up.

Freight Trains are Three or More Times More Fuel-Efficient than Trucks

Here are just a few thought-provoking energy-efficiency facts from the Association of American Railroads website:

1. A freight train can move a ton of freight an average of 436 miles on a single gallon of fuel. That’s close to four times as far as it could move by truck.

2. A train can take the load of 280 trucks off the road. That’s like removing 1,100 cars from the road.

3. Each ton-mile of freight moved by rail rather than highway reduces greenhouse gas emissions by two-thirds or more.

You can also visit the association's "Carbon Calculator" page to calculate exactly what a trainload of freight hauled by rail might save the environment. I calculated a 100 car train, moving fresh and frozen food across the U.S. (from Los Angeles to Charleston) and the tool calculated that "968 Tons of Carbon Dioxide were saved by moving this freight by rail instead of by truck." This savings would amount to 22,523 seedlings working 10 years to remove the same amount of waste.

View the Carbon Calculator at:
http://www.aar.org/Environment/EconomicCalculator.aspx