Transportation Infrastructure Demands Smart Investment Management

Transportation equipment investment serves as an engine for economic development and job creation.  It enables people and goods to access markets and services more efficiently and ‘induces’ demand growth.  Available, reliable, and competitively priced alternatives allow business and consumers to shift their focus to business development and new consumption.  Infrastructure investment works in a similar manner. It can be private (e.g. Rail right of way) or public (Government spending supported with user fees, e.g. Highway, Air and Water ports, Inland and Coastal Waterways).  This investment directly impacts the economy by enabling efficient movement of goods on highways, railways, and through air and maritime ports.  Significant spending is planned.  Properly managed, it can work to create jobs and demand for the movement of raw material.  Such investment can maintain or expand existing capacity or develop completely new solutions.  Changes in global economies are shifting economic conditions and impacting demand.  An infrastructure spending package and a successful China trade agreement will act to continue U.S. economic growth.

Precision Scheduled Railroading (‘PSR’) and ‘congestion pricing’ are working to further facilitate traffic.  Major North American railroads are at various stages of implementing the PSR operating philosophy which is designed to improve rail efficiency by doing more with fewer resources.  This solution suggests flat demand for new rail equipment.  Overall U.S. rail traffic has softened on a year to date basis (down 1.8%: carloads down 2.8%, intermodal down .8%), but the AAR has reported rail traffic ‘significantly’ improved in April over March.  Will it continue? Improving traffic would be consistent with early 2019 FTR freight-rail traffic growth projections, including new car deliveries jumping to 60,000 cars.  Advance estimates of first quarter U.S. GDP growth have been reported to have increased at an annual rate of 3.2%, much stronger than anticipated.  

Official statistics have at times been misleading or politically motivated.  Economics and finance can be subjective as the Fed has demonstrated by leaving interest rates alone.  But hard asset investors understand what the Fed is doing.  By maintaining liquidity the Fed is driving asset investors to acquire assets with the specific purpose of maintaining and pushing pricing up.  

History demonstrates public policy makers have consistently struggled to efficiently deliver long term economic and social benefits.  Investment solutions may come and go but ‘Government funded’ infrastructure investment is best if privately managed.  A disciplined approach based on robust research and implementation is the most reliable path.  Profitable economic growth, improved transport efficiency, and jobs are created by private investors.  The current low interest rate, low inflation, and growth environment, if maintained, will act to continue to drive investment in transportation assets and infrastructure improvement.  Where are the ‘right’ deals? Commercial Air and Rail equipment.  For smart investment management call RESIDCO.