Trading Tips

Take Advantage of Today’s Bizarre Economic Conditions

July 30, 2019 Trading Tips
Trading Tips
Take Advantage of Today’s Bizarre Economic Conditions
Show Notes

Lately, most pieces of macroeconomic data seem to fall into a “good news/bad news” category.

For example, unemployment is near a 60 year low. That’s good news. But as unemployment has gotten low, new job growth has slowed. That’s bad news, as a slowdown that goes too far could tip over into higher unemployment and a slowing economy.

Housing data has looked pretty good, but also shows signs of a slowdown. So do many pieces of industrial production data.

One corporate CEO, while on an earnings season conference call, even went as far as to say it was one of the most unusual periods in all his time in business. That CEO is the head of CSX (CSX), one of America’s publicly-traded railroad companies.

Railroads have been tied to America’s economy for over 150 years. Today, railroads are less about passenger travel and more about shipping goods across the country. Railroads measure their growth by the number of railcars being shipped. A good year for corn may mean more railcar demand in Nebraska. A poor year may mean less.

When the overall numbers are rising, the economy is likely booming. When the numbers are falling, it may be contracting. Right now, the numbers suggest a contraction. Yet the economy is growing. Some of the explanation is that much of the economy is growing in a digital sense—we have more goods and services traded online than those that require shipment by railcar.

Yet some goods will always need to be shipped, and railroads provide the most efficient way to do so. As part of an oligopoly with heavy government regulations to ensure profitability, the railroads are a sound buy whenever they’re trading out of favor.

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