Western Railroad Discussion > 292 UP Engines Parked on AZ Siding Due To Freight Recession

picture: http://wolfstreet.com/wp-content/uploads/2016/05/US-railroads-Union-Pacific-engines-idled-2016-05-031.jpg
article: http://wolfstreet.com/2016/05/04/freight-rail-traffic-plunges-aar-april-report-photos-idled-engines-transportation-recession/



Edited 1 time(s). Last edit at 05/04/16 12:25 by teebone.

A lot fewer trains here on the Shasta Route now too.

Adam

Saw this and thought about the Classless one Railroads and their attitude that they didn't need the little customers anymore and treated them so badly, and now they will never get them back. Sorry only for the people getting laid off.......

Blame it on the Federal Reserve System and its manipulation of the interest rates.  Also blame it on the crony capitalists that quite literally buy politicians to write legislation.  On the same note, blame it on the extremely burdensome regulatory system in the USSA that punishes production and rewards incompetence.  Blame the crony politicians that bail out bad companies and tax to death the good companies.  Obama plays a huge role in keeping this system in tact.  He is the "executive" of this system which rewards incompetence.  So yes, its his fault.  I'm not saying that he is any better or worse than his predecessor, but yes, it IS his fault. 

In our industry, blame massive subsidies directed toward interstate trucking.  When two industries compete side by side in a market, one subsidized, one not, only one can survive.  The subsidized industry will always drive their unsubsidized competition out of business.  Basic economics.  Compound this with grossly incompetent management at the railroads and we begin to see a major crisis unfolding.  I almost see the railroads intentionally trying to waste money under the expection that they will recieve a bailout if their decisions run the company into the ground.

The worst part about the entire system is that it does not even remotely resemble a "free market."  In fact, its about as free as any socialist economy. (not at all)  Yet, whenever the economy succumbs to the evils of big government and crony capitalism that BOTH PARTIES inflicted, the politicians speak out against the evils of "free markets."  They cry that this is why the markets need regulation and this is why we need big government.  They fail to tell you that it was their big government policies that created and continue to create each and every economic crisis.  Every president, including bush and Obama has continued to make the problem worse and rest assured that Trump or Hillary (or anyone else elected) will continue to make the problem worse.

Negative interest rates are coming.  When the bubble bursts this time, negative interest rates are the only direction that the Fed can go to attempt to maintain the status quo.  Next comes currency controls and eventually we see the death and hyperinflation of the currency.  Companies such as railroads will continue to buyback overvalued shares, burning up their working capital to prop up share prices. They will desperately attempt to prop up their shares until all of their capital is gone and bankruptcy is the only option.  Has anyone read the financial statements for Union Pacific over the last two quarters?  Over 1 Billion in share repurchases.  Storm clouds are on the horizon.  Call me crazy but I could see outright nationalization of railroads taking place within a decade.  I hope I'm wrong, but it almost happened during the 60s-80s.  Either something major is going to have to change or this is the direction we are heading.

The Zerohedge blog, which reads Wolf Street, has picked up this story up and is currently highlighting it at the top of it home page.

Haunting Pictures Of A Transportation Recession As Freight Rail Traffic Plunges

3rd_Raton Wrote:
-------------------------------------------------------
> The Zerohedge blog, which reads Wolf Street, has
> picked up this story up and is currently
> highlighting it at the top of it home page.
>
> Haunting Pictures Of A Transportation Recession As
> Freight Rail Traffic Plunges

"No problem. Hockey stick recovery coming." -  HA!

HogheadMike, excellent points.

 



Edited 1 time(s). Last edit at 05/05/16 05:21 by doesyourdogbite.

Don't try going out there UP has security patrolling 24/7.

HogheadMike Wrote:
-------------------------------------------------------
> Blame it on the Federal Reserve System and its
> manipulation of the interest rates.  Also blame
> it on the crony capitalists that quite literally
> buy politicians to write legislation.  On the
> same note, blame it on the extremely burdensome
> regulatory system in the USSA that punishes
> production and rewards incompetence.  Blame the
> crony politicians that bail out bad companies and
> tax to death the good companies.  Obama plays a
> huge role in keeping this system in tact.  He is
> the "executive" of this system which rewards
> incompetence.  So yes, its his fault.  I'm not
> saying that he is any better or worse than his
> predecessor, but yes, it IS his fault. 
>
> In our industry, blame massive subsidies directed
> toward interstate trucking.  When two industries
> compete side by side in a market, one subsidized,
> one not, only one can survive.  The subsidized
> industry will always drive their unsubsidized
> competition out of business.  Basic economics. 
> Compound this with grossly incompetent management
> at the railroads and we begin to see a major
> crisis unfolding.  I almost see the railroads
> intentionally trying to waste money under the
> expection that they will recieve a bailout if
> their decisions run the company into the ground.
>
> The worst part about the entire system is that it
> does not even remotely resemble a "free market." 
> In fact, its about as free as any socialist
> economy. (not at all)  Yet, whenever the economy
> succumbs to the evils of big government and crony
> capitalism that BOTH PARTIES inflicted, the
> politicians speak out against the evils of "free
> markets."  They cry that this is why the markets
> need regulation and this is why we need big
> government.  They fail to tell you that it was
> their big government policies that created and
> continue to create each and every economic
> crisis.  Every president, including bush and
> Obama has continued to make the problem worse and
> rest assured that Trump or Hillary (or anyone else
> elected) will continue to make the problem worse.
>
> Negative interest rates are coming.  When the
> bubble bursts this time, negative interest rates
> are the only direction that the Fed can go to
> attempt to maintain the status quo.  Next comes
> currency controls and eventually we see the death
> and hyperinflation of the currency.  Companies
> such as railroads will continue to buyback
> overvalued shares, burning up their working
> capital to prop up share prices. They will
> desperately attempt to prop up their shares until
> all of their capital is gone and bankruptcy is the
> only option.  Has anyone read the financial
> statements for Union Pacific over the last two
> quarters?  Over 1 Billion in share repurchases. 
> Storm clouds are on the horizon.  Call me crazy
> but I could see outright nationalization of
> railroads taking place within a decade.  I hope
> I'm wrong, but it almost happened during the
> 60s-80s.  Either something major is going to have
> to change or this is the direction we are heading.

You know what, you can't please all of the people all of the time - the reason being that we all have different needs. I quite like low interest rates because it means i'm paying my mortgage off fast and not lining the coffers of those banker types. In this world there are the haves and the have-nots and the have-nots are working hard to become the have-too's, in short it's a filthy-great competition and frankly, not everyone can be at the top of the leader board.
The western world has had it pretty good for a long time, often at the expense of the rest of the world. Low interest rates are here to stay because 1. the rest of the world is catching up (we now have a lot of competition) and 2. we live on a planet with a finite size (we have fewer people/nations that we can wantonly exploit for huge profit).
The major change we have coming is that as the world becomes more developed the birth rate is falling and therefore the potential for constant growth is going to fall. Business and all of us will have to get used to this as long as we live by the current capitalist model. So if you want to get ahead financially, you'll have to work very hard to get a high paying job or work longer before you retire. No such thing as a free lunch!

exhausED, you are wrong and obviously didn't pay attention in economics class. I'll keep it simple. Low interest rates are exactly what the big banks want and you are hurt by it in ways that you are failing to see. Instead of financing a loan for 100,000 on your house, you are financing it for 250k or more at a "low" interest rate and driving yourself into perpetual debt. You still pay more interest because the price is higher. That new truck you want? 40-50k instead of 20k. You pay far more interest when you take out these loans.

Secondly, you don't make any money on your savings because of "low" interest rates. You might have been able to save and pay for that truck in CASH, not paying ANY interest at all. The banks don't want that. Instead, savings don't make a return so Americans must go into debt to buy anything at all. You never own anything and you'll be making minimum payments FOREVER, but by God you love that 2.9% APR. You're one of those useful idiots that just never grasped money or economics. It's OK, most people don't. Just keep playing on your phone and eating that big Mac and waving the American flag. Nothing to see here, move along.

Posted from Android

To further HogHeadMike's point.
You get a mortage of $210,000 at 7.5% Total payout is $528.606.17
You get a mortage of $375,000 at 3%. Total payout is $569,165.45

Same house. Just inflated prices due to low intrest rates.

Union Pacific is playing a very smart game.  Business is down. Coal, some chemicals, some grain shipments are off. Park un-needed engines, lay off crews, don't fill HQ jobs, and wait out the cycle. Borrow money at cheap rates, and buy back stock. The cost of the dividend is high, the cost of borrowing money to reduce the stock count is low, and tax deductible to boot.  No different than  using a 2.5% home equity loan to pay off  18% credit card debt or student loans, and using the savings for investment.

UP didn't create the low interest environment, but it understands that an opportunity has been presented.

HogheadMike Wrote:
-------------------------------------------------------
> exhausED, you are wrong and obviously didn't pay
> attention in economics class. I'll keep it
> simple. Low interest rates are exactly what the
> big banks want and you are hurt by it in ways that
> you are failing to see. Instead of financing a
> loan for 100,000 on your house, you are financing
> it for 250k or more at a "low" interest rate and
> driving yourself into perpetual debt. You still
> pay more interest because the price is higher.
> That new truck you want? 40-50k instead of 20k.
> You pay far more interest when you take out these
> loans.
>
> Secondly, you don't make any money on your savings
> because of "low" interest rates. You might have
> been able to save and pay for that truck in CASH,
> not paying ANY interest at all. The banks don't
> want that. Instead, savings don't make a return so
> Americans must go into debt to buy anything at
> all. You never own anything and you'll be making
> minimum payments FOREVER, but by God you love that
> 2.9% APR. You're one of those useful idiots that
> just never grasped money or economics. It's OK,
> most people don't. Just keep playing on your
> phone and eating that big Mac and waving the
> American flag. Nothing to see here, move along.
>
> Posted from Android

Wow, you must be a very bright guy to spout all this BS and then tell someone with a PhD that they're an idiot. I'm guessing that unlike me, you did pay attention in economics class and that you're now a very high earning financial services employee...very magnanimous of you to let us all have the benefit of your amazing insights for free. 
You have no knowledge of where i live or the economics in my area, but i can tell you that house prices are not crazy where i live and that the price of most goods and services have fallen in recent years, along with those falling interest rates, so i'm really happy because my mortgage will be gone in about 3 years time, way ahead of schedule.
So thanks for your genius level insight but i'll stick to my schedule. Oh, by the way, you're right, i didn't pay attention in economics class, but that's because i wasn't stupid enough to take economics, instead i took real subjects that got me a real job that has some meaning and is paying my mortgage off really nicely, thanks for asking.

Interest on my savings? Because the size of most mortgages is a lot higher than the average savings pot then higher interest rates often don't do you any favours. Take a look at your own argument, the interest on a small amount of savings is small compared to the interest you have to pay on a mortgage, so don't bother trying to save, just pay your mortgage off instead. QED....that's latin by the way, for 'i love big-macs'....

As for your personal circumstances, you're probably either a disgruntled retiree whose savings are not growing and you don't care about saving on your mortgage because you don't have one or, alternatively, you're just a bit of a farqueet who's angry because you're going nowhere. I'd probably bet on the second of those options...but because i'm an idiot i might be wrong.



Edited 4 time(s). Last edit at 05/05/16 13:45 by exhaustED.

Populist Bullcrap. Bits and pieces are accurate but that has been going on for years. We are not going to see negative interest rates
in this country. The sharp downturn in commodities is reflected by stored locomotives near Mescal, AZ. Coal will linger on.
Obama is not to blame. Factors long before Obama are to blame but I don't want to get into politics!
Mega Capitalism is not doing this country any good.

Lackawanna484 Wrote:
-------------------------------------------------------
> Union Pacific is playing a very smart game. 
> Business is down. Coal, some chemicals, some grain
> shipments are off. Park un-needed engines, lay off
> crews, don't fill HQ jobs, and wait out the cycle.
> Borrow money at cheap rates, and buy back stock.
> The cost of the dividend is high, the cost of
> borrowing money to reduce the stock count is low,
> and tax deductible to boot.  No different than 
> using a 2.5% home equity loan to pay off  18%
> credit card debt or student loans, and using the
> savings for investment.
>
> UP didn't create the low interest environment, but
> it understands that an opportunity has been
> presented.

The keyword is game. Here's a link to a thread discussing carload % comparison between BNSF and UP posted by rob_l few days ago:

http://www.trainorders.com/discussion/read.php?1,4022461

Based on the info posted there, it seems BNSF might have more problems than UP in the near future in terms of carload revenue. However, BNSF don't have to cater to the whims of Wall St., so all they have to do is operate profitably until the next cycle and generate cash for Berkshire Hathaway. No need to play games with stock prices (buybacks, insider selling), interest rates (timing debt managment), and so forth. 

Had Jim Young been the CEO right now, I wouldn't be worried about UP senior management - perhaps the "balanced portfolio" of carload % was a result of his and his sucessor's (Koraleski) focus. I don't have the same confidence with the Fritz regime. Would his team be able to manage his railroad properly once the "bust" cycle is over and focus on growing the business instead of playing games?

ValvePilot Wrote:
-------------------------------------------------------
> Populist Bullcrap. Bits and pieces are accurate
> but that has been going on for years. We are not
> going to see negative interest rates
> in this country. The sharp downturn in commodities
> is reflected by stored locomotives near Mescal,
> AZ. Coal will linger on.
> Obama is not to blame. Factors long before Obama
> are to blame but I don't want to get into
> politics!
> Mega Capitalism is not doing this country any
> good.

I think that maybe the capitalism system we've adopted and lived with might not be the best model to live by as we progress through this century. The world is changing rapidly in terms of population etc etc and so maybe there needs to be a different way to run things, a way where maybe you're 'worth' to society is less defined by how much financial profit you can generate but how you live your life in terms of environmental and social responsibility....crikey, that all sound s a bit liberal!! I'll shut up now.

exhaustED Wrote:
-------------------------------------------------------
> HogheadMike Wrote:
> --------------------------------------------------
> -----
> > exhausED, you are wrong and obviously didn't
> pay
> > attention in economics class. I'll keep it
> > simple. Low interest rates are exactly what the
> > big banks want and you are hurt by it in ways
> that
> > you are failing to see. Instead of financing a
> > loan for 100,000 on your house, you are
> financing
> > it for 250k or more at a "low" interest rate
> and
> > driving yourself into perpetual debt. You still
> > pay more interest because the price is higher.
> > That new truck you want? 40-50k instead of 20k.
> > You pay far more interest when you take out
> these
> > loans.
> >
> > Secondly, you don't make any money on your
> savings
> > because of "low" interest rates. You might have
> > been able to save and pay for that truck in
> CASH,
> > not paying ANY interest at all. The banks don't
> > want that. Instead, savings don't make a return
> so
> > Americans must go into debt to buy anything at
> > all. You never own anything and you'll be
> making
> > minimum payments FOREVER, but by God you love
> that
> > 2.9% APR. You're one of those useful idiots
> that
> > just never grasped money or economics. It's OK,
> > most people don't. Just keep playing on your
> > phone and eating that big Mac and waving the
> > American flag. Nothing to see here, move along.
> >
> > Posted from Android
>
> Wow, you must be a very bright guy to spout all
> this BS and then tell someone with a PhD that
> they're an idiot. I'm guessing that unlike me, you
> did pay attention in economics class and that
> you're now a very high earning financial services
> employee...very magnanimous of you to let us all
> have the benefit of your amazing insights for
> free. 
> You have no knowledge of where i live or the
> economics in my area, but i can tell you that
> house prices are not crazy where i live and that
> the price of most goods and services have fallen
> in recent years, along with those falling interest
> rates, so i'm really happy because my mortgage
> will be gone in about 3 years time, way ahead of
> schedule.
> So thanks for your genius level insight but i'll
> stick to my schedule. Oh, by the way, you're
> right, i didn't pay attention in economics class,
> but that's because i wasn't stupid enough to take
> economics, instead i took real subjects that got
> me a real job that has some meaning and is paying
> my mortgage off really nicely, thanks for asking.
>
> Interest on my savings? Because the size of most
> mortgages is a lot higher than the average savings
> pot then higher interest rates often don't do you
> any favours. Take a look at your own argument, the
> interest on a small amount of savings is small
> compared to the interest you have to pay on a
> mortgage, so don't bother trying to save, just pay
> your mortgage off instead. QED....that's latin by
> the way, for 'i love big-macs'....
>
> As for your personal circumstances, you're
> probably either a disgruntled retiree whose
> savings are not growing and you don't care about
> saving on your mortgage because you don't have one
> or, alternatively, you're just a bit of a farqueet
> who's angry because you're going nowhere. I'd
> probably bet on the second of those options...but
> because i'm an idiot i might be wrong.

exhaused Ed. So you couldn't break hogheadmike's arguement so you throw out a PHD pedigree. Your pedigree means nothing, hogheadmike hit the nail on the head.

CS

If you're looking for evidence of crony capitalism, you don't have to look far. Millions of dollars flowing to candidates at all levels. Fed governors and presidential advisers going directly to cushy Wall Street jobs.


Union Pacific is playing the cards it's been dealt.

Posted from Android

mococomike Wrote:
-------------------------------------------------------
> Don't try going out there UP has security
> patrolling 24/7.

One of the pictures shows a blue porta-potty at the end of a dirt road. 

I passed by there in April on the Sunset and was amazed. The siding is the remnant of the south track that was abandoned several years ago when UP straightened that track to avoid having to rebuild an overpass over a widened I-10. The west connection has been abandoned and the east connection links to the current main. The location is between Vail and Benson.

CaliforniaSteam Wrote:

>
> exhaused Ed. So you couldn't break hogheadmike's
> arguement so you throw out a PHD pedigree. Your
> pedigree means nothing, hogheadmike hit the nail
> on the head.
>
> CS

That's just your opinion sonny Jim, and it doesn't mean a lot to me as you're showing your pedigree by being unable to spell multiple words in a two-sentence post. Hogheadmike didn't have an argument, he had an ill-informed rant and threw insults and less than half-baked nonsense at someone who dared not to agree with him. 

I wonder if some of the 292 stored engines will be fodder for a future UP rebuild program?

There was a report of UP staff visiting the NS's rebuild programs.  It would be good to keep shop crews in place, rebuilding power for another ten years use.