Given the global economic slowdown, lower commodity prices, and cool-down in former red-hot grow markets such as China; the accompanying table presents statistics and an overview of a global transport short ETF strategy for passenger airlines, auto makers, maritime, and trucking companies.
While I am still bullish on the prospects for railroads as a long investment idea and a hedge to these short transport ETF ideas, they will also suffer to some degree depending on the length and depth of the slowdown. However, the railroad industry is more fuel efficient than trucking, is not plagued by overcapacity, and also enjoys pricing power as there is a limited amount of railroad track and little ability to add new tracks in the U.S.
In contrast, the passenger airline industry is plagued by too many airlines and too little demand as it continues to struggle despite the recent relief from high oil prices. Ironically, Southwest Airlines (LUV) reported its first loss in 17 years last week as it hedged for much higher oil prices, and is now number two in terms of market cap behind Singapore Airlines (SINGF).
As General Motors (GM) and Chrysler continue to discuss a merger of weakness, the auto industry is also struggling to make money and 24 of the 39 stocks in the index have lost over half of their value in the past year. A major exception is Volkswagen (VLKAY) which posted major gains, moving it ahead of Toyota Motor (TM) for the top market cap spot.
Along with plunging commodity prices, a measure of the cost to move that same stuff around the seas, the Baltic Dry Index , has posted declines of 52% (2-week), 70.4% (1-month), and 86.6% (1-year) as it hovers at multi-year lows. The ETFI Global Maritime Index is structured to track the 40 lowest rated companies, and includes less than half (19) duplicate companies as the recently launched Claymore/Delta Global Shipping (Long) ETF (SEA).
$70.63 (10/18/08)
