I keep getting emails asking why I've been so optimistic for Q4 and for Q1 2015. In its most simple form, the chart below cannot give anyone a reason to be anything but:

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The chart tracks total N. American rail traffic on a weekly basis since 2009. The green arrows (click image to enlarge) indicate the historic rail traffic pattern from each year's high point (typically week 40-45 depending on when holiday's fall) and the beginning of the following year. You'll notice the same trend each year….except for 2014-15. Rather than the normal steep decline from the highs into the new year, we are currently seeing basically a flatline. This is a trend I've commented on recently but at that time also said we had to wait this out to see if it was just a weekly oddity or a trend.

It is now a trend…

Skeptics will instantly claim this strength is due to the increase in oil shipments from shale production, not overall US economic activity. While to be sure that has increased, cheap natural gas has caused coal shipments to collapse negating any gains from oil.

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The major switch from natural gas to coal began in 2011. Since that time “chemical and petroleum” shipments have risen ~15K carloads a week (note: this is “chemicals and petroleum so not all of the rise is oil) while coals shipments are down ~20k week so even considering the oil factor, rail shipments in total are still at a small deficit due to changing US energy dynamics.