Washington 2017

Times are changing! Expect a pro-growth business policy agenda in Washington (with little to no Congressional gridlock). Competitive tax rates. Less restriction on energy reserves, shale, oil and natural. Approval of the Keystone XL oil pipeline. A cut in regulatory red tape and an end to the ‘war on coal.’ A reform of Obamacare and a review of trade agreements. The objective? Benefit Americans and bring back jobs. Most economists now expect higher GDP, inflation, interest rates, and tax and regulatory relief, along with a stronger dollar in 2017.

In this environment, transportation equipment leasing equipment provides both an opportunity to invest and a source of cash. While it is affected by demand and supply changes, transaction activity and trends in the overall economy, it acts as a hedge against inflation since shorter term leases have the ability to reset rates, and inflated asset values are a source of leverage. Both Air and Rail investments operate in transparent markets with predictable cash flows, downside risk protection, and relative liquidity.

The rails transport the bulk of major products for industrial and personal use. This year a bumper grain crop and record soybeans (shipments are up 6.5% this year), with autos maintaining lofty levels are offsetting other commodity groups (coal, intermodal, and petroleum) which remain challenged. Expect rail fundamentals to improve with growth in the industrial economy.

Air operates in a global network. It generates strong cash on cash returns. Inefficient older engine technology is being replaced with new engine options which produce a 20% fuel efficient operating cost per seat improvement. Warren Buffet bought the Burlington Northern in 2009. Now he is investing in airlines. His Berkshire Hathaway SEC filings show the company has taken a stake in three of the four major U.S. airline companies[3] and an undisclosed stake in Southwest. Avolon is completing the acquisition of CIT’s aviation portfolio for $11 Billion. Airlines are issuing secured debt[4].

Transportation equipment investment means the ability to earn attractive profits. Exogenous shocks do occur. The solution is to invest in real assets where equipment valuation, utilization, rent levels and fundamentals are understood. Where are the tools and processes for making these investment decisions? Where is a reliable source of strategic insight? Build your portfolio with a team of experienced transportation equipment managers who are brilliant on the basics. A team that has practical tools and experience. A firm with a history of excellence, expertise and ethics.

Call the air and rail transportation experts. Call RESIDCO!

[1]The ability to pass legislation, ratify treaties, have Cabinet members and Supreme Court Judges approved comes with party control of both Houses and Administration. Will Republicans stay united?

[2] Renegotiate NAFTA? According to the treaty, any of the three signatories can withdraw from the agreement six months after notifying the other two parties.

[3] Deutsche Bank believes the sector will benefit from lower regulation under President-elect Donald Trump. The airlines contribute $1.5 trillion to the U.S. economy, and provide 10 million jobs, November 15, 2016, Investopedia.

[4] American issues $1.21 billion in EETCs to finance acquisition of 298 new aircraft with a book value of $1.66 Billion.