Money, food, and places to go

Well, 466lex sure knows how to sharpen a rhetorical point. In case you missed it in the dialogue on infrastructure expansion vs. share buybacks as a use for excess cash, here’s what he had to say:

“ I have believed for some time that the dramatic exercise of 'pricing power' across the industry for the past ten years is implicitly a “harvesting” strategy. Either “the traffic will bear it” or it will go away. In the east, the 'Intermodal Story' (especially for NS) is window-dressing to cover the reality of an ever-diminishing traditional railroad (low-value bulk commodity) franchise.                 

“The ability to earn cost-of-capital returns on an intermodal franchise with average haul of under 1,000 miles is yet to be demonstrated.  NS giving up on TripleCrown is the canary in the coal mine, and the absence of dramatic investment in the Crescent Corridor is additional confirmation.  In a bit of irony, CSX has been much less aggressive in promoting intermodal, and I have to believe this reflects a  realistic evaluation of potential returns on investment.

“Speaking of 'pricing power,' note NS' 'yield' on intermodal units in this time of supposed pressure on trucking costs:

    2012:  $667

    2013:  $667

    2014:  $666

“Yes, volume has grown, but we all know the ancient cliché ….

“Indeed, watch what management is doing.  And I believe that 35 years of deregulated intermodal service experience is finally convincing the eastern roads that intermodal's future has arrived, and it isn't pretty.”

Then from Oldmannd came this:

“NS management must believe that stock buy-backs are better for investors than investing the RR. Taking that just a bit farther leads me to think that they believe the future of the railroad looks not much different that what we see today. The status-quo is ‘good enough.’ In that light, the Bellevue expansion is all about efficiency - not growth. There is no real growth in car-load freight, so Bellevue works by improving the flow of existing traffic. It wasn't built to handle growth.

“Do railroad managers really believe railroads are ‘how tomorrow moves’?  Watch what they do, not what they say.  Buying back shares says ‘No’ ”

From two astute commentators to this blog come a damning conclusion I’ve been unwilling to make: Railroads, or at least the eastern and Canadian ones, don’t want to grow, other than to become fat. But consider two things. As one rail consultant points out in an email to me, everybody does share buybacks, analysts fawn on buybacks, and it’s what you have to do to appease shareholders.

The other thing nobody seems to be picking up on is what BNSF Railway is doing. Betting the farm, is what I call it, with a $6 billion capital budget this year that’s almost half again as big as Union Pacific’s. That comes atop $5.5 billion in 2014. What’s the message BNSF is sending? To me it’s the opposite of what 466lex and Oltmannd are saying of the eastern roads. BNSF is knocking down impediments to good service right and left. This is a railroad to watch going forward.

If I could change the subject, I enjoyed all the comments to my blogs on Amtrak food service and that of the Silver Star in particular. The Star, in an experiment, will lose its diner for about six months, putting riders at the mercy of the crap offered in the cafe lounge. I asked for ideas of what to bring aboard rather than buy in the lounge.

The best answer to me came from Bjorn88, who observed: “Years ago while travelling out to Seattle on the Empire Builder I recall seeing a group of young Germans seated nearby.  They were exploring America by train and had brought their own food with them consisting of sausage, cheese, black bread and some apples and with bottled water to drink.”

What a great practical idea, and one that my wife and I had while traveling on one of those diner-less overnight trains from Paris to Nice years ago. Except we skipped the water and brought aboard two bottles of wine. I’ll be on the Silver Star next week, and although it will still have its diner, will follow the example Bjorn88 related and let you know how a meal of bread, cheese, salami and red wine works out.

Finally, thanks to all of those who sent notes wishing me well with my new right knee. Today is Day 16. I was off the walker on Day 3 and drove a car to Safeway on Day 6 (a big no-no), so obviously things are going reasonably well. Larry the Knee Masher, my home physical therapist the past two weeks, says another six weeks will pass before I feel I’m on the other side of this experience.

My inactivity has led to me think where I want my wanderlust to take me this summer. Certainly to Vancouver and VIA Rail’s Canadian to Toronto. No matter how bad the trip, within a week I pine for another adventure. And the other place is La Posada, reborn from an abandoned Fred Harvey hotel in Winslow, Ariz., side by side the BNSF Transcon. Train watch by day, eat well and relax to the sounds of trains by evening.

Worth all those damn stretching and knee-bending exercises, don’t you agree?—Fred W. Frailey