Shares of United Parcel Service (NYSE: UPS) fell after the world's largest shipper reduced its first quarter earnings forecast, citing a downturn in the U.S. economy and lower shipping volumes.

The warning, which came two months after the company told investors that it might miss its earnings guidance, isn't a huge shock and likely will be one of many to come during the current earnings season. After the close yesterday, UPS lowered its first quarter outlook to 86 cents to 87 cents from 94 cents to 98 cents, according to The Associated Press. Analysts were expecting earnings of 93 cents.

Pundits such as BB&T analyst John Barnes aren't finding fault with UPS.

"I don't think they misread anything. The market just got a lot weaker and oil prices shot up more aggressively than they thought,'' he told Bloomberg TV, adding that package shippers are "going to have to provide guidance with the assumption that oil prices are going to stay this high for the foreseeable future.''

Given that UPS is down about 3%, you have to wonder whether investors will be so forgiving to other companies.

The report of February rail freight movements was released Thursday March 6, by The Association of American Railroads. Again this month the report reveals some mentionable trends. The report on the AAR website indicates a gain in rail freight volume of 2.8 percent, for the first nine weeks of 2008. An estimated 296.1 billion ton-miles total volume was reported for the period.

There are declines showing in inter-modal traffic. Trailer and container loading is down 3.4 percent for the first two months of 2008. This means that a higher volume of freight is moving by rail, yet less of it is getting to the rails via truck. I could speculate that railroads shall continue to become increasingly more cost effective for volume shipment of freight. Watch for new possibilities with direct-from-rail distribution centers. Watch for rapid growth and development in the RFID sector.

The choppy/consolidating (or perhaps worse) market conditions sometimes give the impression that growth plays do not exist, but that is not the case, and one growth company worth an evaluation is OceanFreight.

OceanFreight Inc. (Nasdaq: OCNF) specializes in dry bulk carrier lease charters. Third parties use OceanFreight's dry bulk vessels to carry iron ore, coal, grain, and etc.

OCNF operates a 10-vessel fleet, primarily dry bulk containers, but the company also owns oil tankers. Overall capacity is about 1 million deadweight tons.

Further, the secular, global trend of increased international trade between the Americas and Asia hemispheres bodes well for OCNF. Moreover, OCNF is one of those "off the radar" companies worthy of investor consideration: light institutional coverage gives individual investors a chance to establish a position in a promising company, before the major buy-side institutions drive up OCNF's price. The Reuters FY 2008/FY 2009 EPS consensus estimates for OCNF are $2.78/$2.63

A quick look at freight traffic via railroads indicates no surprising changes in our economic landscape. However, the numbers do reaffirm some interesting trends. Total rail freight volume for the fourth week of January 2008 was estimated at 32.4 billion ton-miles, a decrease of 1.2% from one year ago. Some of the decline is attributed to severe weather conditions early in the month, especially in the eastern states.

What bears special concern in the Association of American Railroads rail freight traffic report are the few categories of freight that are showing significant reductions in rail freight loading volume when compared to 2007. Coal coke, which is used mainly as an industrial fuel showed a major decline in loading volume of 36.8%. This could be due in part to a shifting away from hydrocarbon fuels. Lumber and wood products loadings declined by a significant 22.35%, which does not bode well for the construction and furnishing trades. Primary forest product loadings dropped by 19.9% which further indicates a slow start to the coming building season.

I read a quote in an article recently which stated, "What Wall Street is about is smart guys thinking about ways to make money from dumb ones." That quote is attributed to one John E. Fitzgibbon, the publisher of an online newsletter, in an article from Eric Dash via The New York Times. While Mr. Fitzgibbon's remark might validate special investing skill on the part of some smart and timely investors, I take exception to the notion that all those investors who lost money in the markets over the past year are the dumb ones.

The question now is, where is the smart money headed?

Very interesting piece from the Financial Times today regarding dry shipping rates in the Far East -- the article's premise is based on an interview with Nobu Su, chief executive of family-owned Taiwan Maritime Transport (TMT), one of the largest dry bulk shippers globally. Salient quote from the interview: when asked about day rates, or the rates shippers charge clients to charter out their ships, rising 300% this year, CEO Su called the rates "insane."

Su's main concern was that with inflated day rates, customers using dry shippers, mainly mining companies, would be forced to pass on the costs to their customers -- ultimately, you and me.

"We believe it's unsustainable and shipping people forget about their own business, which is providing shipping services," Su said of the market conditions, where owners of the largest ships, can command about $180,000 a day in charter rates. "TMT has been in the shipping business for 50 years. We continue to do the basic business."

Investors have certainly profited from this trend. If you had owned DryShips (NASDAQ: DRYS) this year, you would have 400% more than what you started with at the beginning of 2007. According to Reuters, the company's fleet consists of five Capesize drybulk carriers, 29 Panamax drybulk carriers, and one Handymax drybulk carrier.

Judging by the most recently available statistics from the American Association of Railroads, the trade and productivity numbers currently coming out of Washington appear to be a bunch of bunk. Will someone please tell Ben Bernanke that cold hard facts will supplant pipe dreams any day?

Rail freight numbers for the week ended June 9 continue to trend downward and are consistent with trending for the year so far. By now, industrial surpluses and inventories should have been reduced to the point that manufacturing would be demanding an increased influx of raw materials, but such is not the case. Plainly put, consumer demand and domestic manufacturing are down, and it shows plainly in reduced freight numbers. The breakdown for the week ending June 9 is as follows:

• Intermodal freight (truck trailers or shipping containers): Down 3.2 percent from last year.
• Carload freight (not including intermodal): Down 5.6 percent.
• 4.0 percent fewer carloads originated from the West and 7.8 percent fewer originated from the East.
• Total cumulative rail freight volume for the first 23 weeks of 2007 was an estimated 754.9 billion ton-miles, down 3.1 percent from last year.

Canadian and Mexican railroad reports show similar trending, though not as significantly as the American declines. The single remarkable exception is the Mexican railroad, Kansas City Southern de Mexico (KCSM), which has reported intermodal volume of 4,878 trailers or containers, up 18.4 percent from the 23rd week of 2006. That significant increase, my friends, is reflective of manufactured goods they're shipping up to us.

Bear these numbers in mind the next time you get your statistical hogwash from Washington. They can tell you that more people are working and they can tell you that companies are manufacturing more stuff, but the true facts come out when the train cars get loaded (or don't).

China Venture News reports that China's state-owned shipping firm, COSCO, is initiating an IPO of 1.78 billion shares which is scheduled for the Shanghai Stock Exchange on June 26. The report states that sales of shares online began June 18, 2007. The report further states that price per share should be starting between "7.60 yuan and 8.48 yuan per share." According to the report, "Analysts expect the price to go to 15 yuan a share early in trading."

Cosco plans on using the money raised for renwewing and/or increasing its shipping fleet and has also earmarked the funds for expanding port facilities. Cosco is currently China's single largest state owned shipping operation.

Officials at the Platinum Shield Association, whose members own and operate United Parcel Service (NYSE: UPS) franchises under the Mail Boxes Etc. banner, said that UPS puts higher shipping costs on its franchisees because UPS manipulates the dimensional weight system used to calculate package size and weight for shipping.

Joel Wightman, a franchisee in New York quoted a recent memo the UPS Store Area Franchise Developer sent to UPS franchises, which said that UPS is altering their shipping weights of packages.

Mr. Wightman warned shippers by saying, " "If you as a franchisee are being hit with substantial UPS billing adjustments for restated dimensions of your store's shipments, and you are convinced that your original dimensions are accurate ... Look carefully at your bill to see if UPS changes the dimensions of these boxes and increases the billed amount based upon their laser scanning based audit."

Mr. Wightman added that his organization, the Platinum Shield Association wants Federal and state government agencies to intervene to make sure shipping consumers are being charged a fair and accurate price.

The Platinum Shield Organization filed its lawsuit against UPS in 2003 and plans to attend the UPS shareholder meeting in Wilmington, Delaware on May 10th.

Stay tuned.

In the latest sign of the slowing economy, FedEx Corp. (NYSE:FDX) today reported a decline in fiscal third quarter profit and gave disappointing guidance.

Profit was $420 million, or $1.35 per share, compared with $428 million, or $1.38 per share, a year earlier. Revenue rose 7 percent or $8.59 billion. The company was expected to earn $1.33 on sales of $8.77 billion, according to Thomson Financial.

Though firms often blame the macro environment for their troubles, FedEx has a good excuse. The company said that the economy grew at a slower rate than it expected during the third quarter though it expected a more sustainable growth rate going forward.

Investors, though, weren't so understanding.

Shares of FedEx traded down after the company shaved 5 cents off its forecast for the current quarter. FedEx did reiterate its long-term goal of growing earnings per share by 10 to 15 percent per year though it company said it may not be able to hit that target for fiscal 2008 because of slower economic growth and planned investments in the business, according to Reuters.

Wall Street didn't punish the stock as much as one might expect. Shares were only off about 2 percent in the latest trading, indicating that investors are still bullish on FedEx's prospects. Its shares have declined 4 percent over the past year compared with an 11 percent decline for United Parcel Service Inc. (NYSE:UPS).

A brief look at railroad freight traffic numbers offers some tell-tale signs as to where our economy is heading. I like to review railroad loading statistics because they can give you a crystal-ball edge in guessing where the big money is leaning in the volatile economic food chain. Basically, right now the numbers are firm year over year, but the freight demographics are what I find interesting.

According to the Association of American Railroads: Total rail freight volume is up 8.9% as compared to 2006, but while container volume is up about 14%, trailer volume is down 6.2%. That indicates that for the year so far, the railroads are probably moving more imported product than domestic product.

While total carload freight (not including inter-modal) was down nearly 1% this week as compared to the same week last year, total ton-miles increased 0.3%, indicating that less freight is moving but it is traveling more miles. That is clearly due to the decreasing inventories of manufactured product, which should bode well for manufacturers in the second and third quarters. That's assuming that consumer spending maintains current levels.

Nonmetallic mineral shipments have increased nearly 20% by volume over last year. This shows strength in base chemicals, base raw materials, glass, concrete, asphalt, industrial construction, and infrastructural improvements. Metallic ore shipments are down over 50%; I believe that shows weakness most especially in steel, tin, aluminum, and copper. Lumber and wood product shipments declined nearly 25% -- no reprieve for the home building market there! Petroleum product shipments are up 9.2% year over year, and coal shipments have increased 3.1%. Here's a tip, it looks like road building and resurfacing will be a big gainer this summer!

Okay, so my title is a bit misleading. No, I don't mean a bigger trade deficit is a good thing. What I'm getting at here is that bigger thinking could help lead us down a better road. Beginning with the introduction of transistors in 1947 and then progressing from transistors to integrated circuits and on through to today's computer chips, the trend in electronics manufacturing has been to make things smaller and smaller. While this shrinking of electronics has been an overall good thing, the concept has crept into nearly every class of consumer merchandise. This has made the manufacturing, shipping and importation of foreign manufactured items that much more lucrative.

In the 1970's we were faced with much screaming and yelling about how crude oil was going to run out in 20 years. There was a world wide mad dash to do something to prevent that from happening. The mantra for auto makers became "if it's not a compact car it'll be a subcompact car." People didn't like those cars much but they were sold to us as fun and practical. At .95 cents a gallon for gas, people were eager to use less oil in order to help save the world. Chromium steel was replaced with ugly black and gray plastic. Roofs were lowered to eliminate glass. Tires had their sidewall area reduced and tire widths began to narrow. Japan began to salivate as the proposition of exporting cars to America became lighter, leaner and cheaper. .

(photo courtesy of: www.njscuba.net/ )