- hope from the rails,
- defending the investment banks, and
- big upside in natural gas.
Rails Signal a Brighter Future
Posted at 12:44 p.m. EST, March 9, 2010 Rails can lie. These key members of the soaring and all-important Dow Jones Transportation Index can get ahead of themselves when hedge funds move them up, as was the case with CSX ( CSX) when a hedge fund took the stock up by buying on margin to get on the board. The whole way, by the way, the media lapped it up. But now there are only three of them -- Norfolk Southern ( NSC), CSX and Union Pacific ( UNP) -- and they are pretty unstoppable. If you think of what they carry, the whole thing feels counterintuitive. Coal is one of the biggest goods shipped and it's over-inventoried, so no reason to think that can be the driver. Lumber? Not doing well at all. Cars? Come on, they are still operating far below the old capacity. Fertilizer and grains? Both doing badly. Chemicals? Aha, that works, but they can't be the driver. I think the rails are trading on the future, and the future is getting better and better despite the worries about the federal stimulus going away, the Chinese bubble and higher taxes -- let's just call it the Pelosi factor. The rails are saying health care will lose, that the president is losing support -- a big win for him will produce an EPA that could work hard on coal plants to shut them -- and that the second half will be strong. Again, they could be lying. Now with only three of them, they could be attracting cohort money. But I follow them and they are reacting to prospects, not current booking, and institutions out there must think that the improvements are going to continue or they would be dumping these shares hand over fist. At the time of publication, Cramer had no positions in the stocks mentioned