Thursday, July 26, 2012


Over the last couple of years I've shared with you some odd indicators that folks like me track to get a handle on where the economy is going.  I've posted links to US auto searches in google, railroad traffic figures, and even thrown out the old Coppock Turn Indicator.  Some of these items are worthy to keep around and some....not so much.

I saw a post from a Bloomberg contributor the other day and wanted to share his chart with you because it took me back to my old high-yield trading days when you could actually get a decent yield on bonds and people actually demanded appropriate interest payments for the risk they were taking by lending to companies.

One industry that I owned a ton of bonds in the portfolio I traded was in the waste industry.  Waste companies often have assets (leases or ownership of land) and some trucks and machinery.  This was just the type of asset intensive company we liked.  In my research of these waste companies like Allied Waste and Waste Management I discovered that these firms also are almost 100% correlated to the economy.  In other words, if the economy is expanding, waste companies are growing.  If the trash companies are suffering, it is probably due to a recession and slowdown.

I have placed a link here for Michael McDonough's twitter page.  It appears that Michael is now working in Hong Kong, but had posted this chart regarding US GDP and carloads of waste here in the US.  The relationship is striking and it seems that it hasn't weakened since I was researching these companies way back in the early 2000's.

The takeaway here is simply that US carloads of trash have been falling and are still falling and if we have less trash it seems a sound argument to suggest we are making and consuming less stuff.  This is not an indicator that shows that our nation is recovering and ready to move forward, it suggests just the opposite that production is falling and we are probably still heading toward a recession.

Finally, if you wanted to drink from the fire hydrant of economic information I've included another link to the Bloomberg Brief dated 7/25/12 which is SO full of information about the global economy.  There is a section on page 10 about the Fed and if they are out of bullets which is interesting, unfortunately they don't give any conclusive answers, simply relaying what both sides of the issue think.  Enjoy.

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at