US economy on the right track

The CEO of a railroad giant projects sufficient growth, and it's all private sector driven.

By Jim Cramer May 28, 2013 9:03AM

thestreet logoArrow Up (© Stockbyte/SuperStock)If you ask me, we could do worse than 2% to 2.5% growth. That's the level of activity that Union Pacific (UNP) CEO Jack Koraleski thinks we can do in this country, and I believe that will result in a steady turn over time. Nothing rapid, but no slippage either. That pretty much jibes with the solid durable-goods numbers we just got Friday.

 

Why do I believe Koraleski has a bead on things? Because he's just about the biggest shipper of building materials, coal, oil, grain, chemicals and autos -- and that's pretty much everything that gives you a feel for what a nation can grow.

 

I was incredibly encouraged after speaking with Koraleski, because he is at the heart of the changing face of American industry due to the energy boom. Given the tight environmental noose on many pipeline developments, Union Pacific has stepped up by building new track everywhere and linking the wellhead to the refineries. That's a ton of jobs. I know from Frank Semple -- CEO of Markwest (MWE), a master limited partnership company -- that plenty of pipeline is still being laid, 18 projects worth multibillions just by Markwest alone. But the railcar imperative grows by the find -- and the runs from Texas (Eagle Ford) to Los Angeles, and from the Bakken to Louisiana, are really Union Pacific-dominated.

 

There's also a feverish building of chemical plants in the Southeast to take advantage of all of the natural gas and natural gas liquids being found, turning the materials into plastic and those oily materials. All are going Union Pacific's way.

 

Just the sheer volume of oil shipped is pretty amazing. Union Pacific moved more oil this quarter than it did all of 2011, and it is just beginning to ramp. If the Keystone pipeline doesn't get built, by the way, that oil will come via Union Pacific. If it does get built, this company will ship the pipe.

Autos isn't really an American story, unfortunately. The North American Free Trade Agreement (NAFTA) has given Mexico such an edge that I expect far fewer jobs to be generated from autos than what would otherwise have occurred at this stage of the cycle. However, Union Pacific is the shipper that controls Mexico -- through partnerships with Kansas City Southern (KSU) -- and that business is growing very quickly.

 

The housing business is percolating just fine, and lumber shipments keep increasing.

 

Only agriculture and coal are weak, and both might be hitting some sort of cyclical trough. It is true that plantings are not showing a robust ag year, and the downturn in ethanol is a headwind.

 

But coal inventories have been worked down big, and they are now in short supply. In fact, I think coal will turn up big if the weather gets warm and air conditioning starts running hard amid a bottom in natural gas. At these prices, those utilities that can shift are shifting. Don't forget that Union Pacific ships cleaner coal, the kind that newer coal plants can handle without running afoul of the Environmental Protection Agency.

 

All in all, if you sit down with Union Pacific, you get very encouraged that the U.S. is moving again. You know that things are on the right track, so to speak. You know that the energy boom is the single most important spur to growth this country has had in years and years, and that it remains an intense focus for growth.

 

Just so we're clear, though, this is all private sector. Nothing is being helped by Washington. Yet there's no doubt that if the government had supported this industry the way it supported solar, millions of jobs could be created in a relatively short period of time, perhaps as few as five years.

 

Doesn't matter. It's fossil fuel. Not going to happen.

 

jim cramer

 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and had no positions in the stocks mentioned.

 

 

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147Comments
May 28, 2013 9:58AM
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Thanks for the "heads up", Jimmy; hope that this isn't the kiss of death like all your stock recommendations are.
May 28, 2013 9:35AM
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Yeah, we could do worse than 2% growth, for sure.  But coming out of a deep recession, we should be seeing 2-3 times that, if we're in a real, sustainable recovery.  But we're not.

2.5% growth on $16 trillion in GDP comes out to $400 billion per year in growth, or about 33 billion in growth per month.  Bernanke is pumping in $85 billion per month to get $33 billion in growth - uh oh...

May 28, 2013 10:35AM
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The problem with the internet age is too many opinions. The best thing and investor can do for himself is not read the comment sections of online articles.
May 28, 2013 9:51AM
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You must be KIDDING. We are fully reliant on those stimulus infusions, not on actual movement that can defined as "economy". Another UP day for the Dow, another dilution of our currency, another fake day of misleading data, ZERO job recovery. We're dead. If you can PROVE that the stimulus helps us go ahead and SPECIFICALLY say so. Will it save retail on it's last breath indebted billions to banks? Will it fund innovation that creates jobs or more electronics and apps? Will it hire trainers that put the masses back to work? It won't do ANY of that. It will make false markets even more fat, but it won't be used for anything beyond that. THAT'S CRAP, not prosperity.
May 28, 2013 10:40AM
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red banner day!  glad i bought all those stocks (via mutual funds) when evertyhing was on sale the past few years!
May 28, 2013 12:42PM
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I am so tired of these articles that pull blinders over people telling them everything is just fine!  Nothing is real, including the markets.
May 28, 2013 10:50AM
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OK, let's stop printing all that currency and see what happens? I here a sucking sound.
May 28, 2013 9:39AM
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there is a section of track along interstate 10, thru san bernadino county, that USED to have stashed literally miles of train engines.  (good weather storage any time of year).  this was a very obvious site during the recession.  today that parking lot is empty so i assume those engines went into service elsewhere? 
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Cramer the economy is going down hill faster and faster all the time.

 

Just what is happening on main street that would tell you otherwise???

 

Did we create 10,000,000 jobs over night with $140,000 a year salaries???

 

Average wages are increasing merely because we include the top 10 percent wage earners.

 

Take all the data and scrub out the top 10 percent wage earners and you have a true picture of the US economy. Cars sales down 30 percent wages down 10 percent this year alone. Half of all families on food stamps. Housing sales down 50 percent. People forced out of their homes only to wind up in rental houses for more than their mortgages were. How long is that going to last Cramer???

 

Pretty much you can not have an economic recovery when the elite 10 percent of the country are stealing the rest of the country's wages and benefits.

 

Sure everything is great for the top 10 percenters and that is why FEMA is preparing riot camps to house those of the lower class once they are starving and rioting on the streets as our economy falls apart.

 

 

 

 

May 28, 2013 9:29AM
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Certainly homes prices not back to anything near similar bubbles...

But over exuberance by Buyers, Realtor hype...And Banking fanagling....At it again.

May 28, 2013 1:48PM
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Let the big boys eat it this time. From 1775 to 1914, the year the fed was created America had a real growth rate (GDP) of 4.05%, annual inflation was .19%. From 1914 to 1971 the year America went off the gold standard, the real GDP grew at 3.71%, inflation averaged 2.54%. From 1971 to 2012 the real GDP was 2.78% and annual inflation ran 4.32%. From 2006 the year all this printed money started the real GDP has run .8%. Until the fed gets the real inflation down to between a deflationary 1% and 0 inflation and keeps it there our economy is going no where. All printed money has done is inflate asset prices and let the elite and the government borrow cheap money. This stock market is a bubble, so again let the big boys eat it this time.
May 28, 2013 12:57PM
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As long as the electricity to the printing press isn't sequestered.......
May 28, 2013 11:20AM
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Yeah, right, until the dollar value base catches up with the paper being printed and inflation sets in prices go through the roof. Cramer as well as the other progressives blow smoke every time they talk. This economy is about 6 months from tanking. This whole economy is being propped up by promises and free paper.

who is kidding who

May 28, 2013 9:10AM
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I would look for 125-150 upside DOW today, maybe even more or intraday bumps?

World looks somewhat settling..

And problems are not as bad as some would have you think?

Quit or don't worry about scumbags and manipulators...

Make some profit while you can.

May 28, 2013 12:16PM
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 I was wondering how is USA going to get out of this debt. And by researching I noticed something that a lot of people didn't see that there's a way out of this mess. Now, I know what some of you are thinking, but listen to me out. United States is dependent around 65% give or take on foreign oil and experts that I been reading. that they are claiming that the USA will be 0% dependent on foreign oil by the year 2020. So every year USA is declining, because of solar,wind better fuel mileage on cars,electric cars and other things better insulation for our homes,windows and door improved better etc. So as long as USA don't go to war by 2020, we as a nation will be exporting our oil to the allies. If you did the math,we spend Billions even Trillions or dollar on foreign oil and this will reverse and now we will bring in Billions of dollars from selling our oil. Now a lot of people don't know this but believe me I know this personally from someone who in the field and knows that America has at least 200 to 300 years of oil reserved. And I know the question next, because I also asked why ain't we using our oil now. And the answer was United States will use as much oil from other countries until there running low as the United States is adjusting to the new way of energy. So the other countries could depend on us for our oil in the future. Think about it ?No more billions leaving this country on foreign oil and in return, by waiting for the right time we be receiving billions of dollars every year after 2020 from selling our oil instead of spending that much money. because we be on alternative energy. That why the Fed's and World banking knows this, and that why they printing all that money because we're good for it down the road.. it's a waiting game. It like a squirrel saving is nuts and eating everyone else nuts. But we have to bite the bullet until then because we got caught with our greediness. Inspiration! for our kids for the future of America.
May 28, 2013 12:47PM
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Sounds like Union-Pacific's lawyers were working overtime lobbying against the pipeline.
May 28, 2013 12:03PM
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Rumor has it that an UFO landed in Harlem and took Barry S. away for his extreme

wisdom and class.

May 28, 2013 12:03PM
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Just another warning, at 1155 hrs manipulators started accelerating sell orders...We are up still about 148 points or so but,  just a heads up....Remember, things down here can change in a NY minute; we've seen it a million times.
May 28, 2013 1:52PM
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last week his prediction was MAYHEM IN THE MARKET , if you say enough , you're gonna be right SOMETIMES , THE GUY'S A JERK
May 28, 2013 3:10PM
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I'll still stick with my 125 upside, I'm not scared....At least over a hundred.

Scumbags falling over themselves..

And they will be back tomorrow trying to suck more profits...

More after the close in about an hour..

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