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Railroad Rebirth?

According to The Wall Street Journal there is a rebirth of railroad building taking place across the country. Since 2000, railroads have spent $10 Billion to expand tracks, improve infrastructure, from buying locomotives to building freight yards.

Much of this movement may well be driven by Asia, where many of our consumer goods are now produced. The surge in railroad use coincides with a major surge in the importing of consumer goods from Asia in 2003. The railroad is a major mover of product in Asia.

According to Kenneth Kamar, an economist who follows the railroad industry for the Consulting firm Global Insight, railroad stocks have for the most part escaped the beating that other stocks have taken. None other than Warren Buffet is buying up shares of Burlington Northern Santa Fe Railroad, one of the two largest handlers of frieght in the United States. He owns at least 18% of the company now. Investor money followed the railroads investing in themselves and the aforementioned upgrades. Union Pacific the other largest freight handler reported an earnings increase in the fourth quarter of 2007.

But, in Connecticut, the rail system has been systematically dismantled since the seventies. Since the eighties, rail as a mover of goods and raw materials through the state has virtually disappeared. Rail sidings which used to be integral to a quality industrial building are barely a consideration these days. The moves in rail improvements that are happening in the south and midwest isn't happening here in Connecticut. The proposed commuter rail line between New Haven and Springfield aside. We are not seeing any major improvements to rail lines for the movement of consumer goods or raw materials. These are two more indicators that the manufacturing businesses that moved out of state in the eighties and nineties aren't planning to charge back any time soon. though manufacturers in other parts of the country claim that the rail improvements aren't meant for raw materials. They are meant for consumer goods and increased freight fees are driving up the cost of manufacturing rather than reducing it, even though it costs about a third in fuel to move product by rail versus long haul trucking. Since Connecticut still sees most of its goods moving by truck, we are not likely to see our markets, New Haven, Hartford, Tolland or Litchfield Counties emerge as major distribution hubs for New England.

March 10, 2008

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