King of the Road... Almost

Imagine walking over to the side of a road and lying down
in a puddle of dirty rainwater. Not only is it winter and
the water is close to freezing, but there’s a strong gale
blowing, and with 50 mph gusts of wind and horizontal rain
squalls that sting the skin, you’d probably be quite cold.

That’s the situation your Baltimore-based editor found
himself in last week, except we weren’t at the side of a
road. We were perched on the end of a container car,
speeding across the great Canadian Prairies.

As we reported two weeks ago in the Rude Awakening, your
Baltimore-base editor ventured up to Canada for the sole
purpose of hopping a freight train, hobo-style and riding
across the Rocky Mountains. It’s our second attempt at the
feat. The first attempt, three years ago, ended very
abruptly when a couple of Canadian Mounties plucked us from
the train and threatened to toss us in jail. Our second
attempt did not fare much better…

Despite the fact that our sleeping bags were now thoroughly
soaked with water, and we were freezing, we were on our
way. In the world of the tramp, things were going pretty
well you might say.

We’d arrived in Canada earlier that day, Regina’s
international airport being the port of entry. The pretty
immigration officer was immediately suspicious of our story
and asked us to wait in the detention area while she
attended to the rest of the passengers from our plane.

We told her we were in Canada as tourists and that we
planned to rent a car and drive through the Rockies. But
Regina is just a dusty series of strip clubs, saloons and
casinos on a pancake, and it’s still 12 hours from the
mountains, so the story didn’t wash and she knew it. No
matter, we stuck to our guns and after a thorough
interrogation and two hours of paperwork, she sent us on
our way.

We made our way to the Greyhound station, or as we’ve been
calling it, "the town’s armpit," and boarded a bus to the
"catch-out point."  The catch-out point was a small town on
Canadian National’s (CN) mainline, 50 miles north of
Regina, where the trains stop to change crew. There’s no
security and no fences, so it’s the perfect location to
jump the train.

Getting off the bus, we stopped in the gas station for a
final meal and to load up with water, and then we sauntered
off into the blustery, rainy night, heading towards the

A train was already there, waiting for us. It looked
majestic, the large, double-stacked container boxes
silhouetted against the Prairie sky at night. We had to
hurry; this train was a hotshot.

There’s a safe place for the hobo on nearly every train. On
the porch of a grain hopper, inside an open boxcar, or even
between the trailer tires of a piggyback (a truck trailer
on a flatcar)…these are all quality rides with protection
from the elements and plenty of room for stretching out and
sleeping. But the fastest ride for a hobo is the container
train, or as it’s called in the industry, the intermodal
train. With their cargoes of expensive consumer
merchandise, container trains have priority over all other
freight trains, and they don’t hang around in the yard for

We jumped on the first suitable ride we could find. The
best spot is behind the container in the little dugout of
leftover space. It’s really just a metal box, usually about
eight feet wide, four foot long and four foot deep. If it
weren’t for the inch of water sitting in the bottom, this
would have been a perfect ride. We took it anyway.

Not more than five minutes later, with a long blast on the
horn, the train pulled out. We curled up and fell asleep
hoping the damp sleeping bag would somehow warm us up…It
never did.

The next day, we woke up early and set the sleeping bags
out to dry in the breeze. The floor was almost dry now and
the sun was rising fast. For the first time in 14 hours, we
were warm again. Now it was time to relax and enjoy the

Disaster struck sometime around midday, as we peered out at
the wheat fields. An eastbound train had pulled into a
siding to let us pass, and the engineer had climbed down
from his locomotive to watch, probably looking for any
trouble with the equipment.

We didn’t have time to duck and he spotted us. He scowled
and immediately reached for his radio. We were busted. An
hour later, at a grade crossing, the train stopped and a
policeman stuck his head over the wall. "Okay guys, this
ride’s over. Get your stuff and jump off."

The welcoming committee was there in force. Two Mountie
police cars and an SUV for the railroad cop. It wasn’t a
big deal. We were courteous and cooperative, so after
checking for outstanding warrants, they wrote us up a
ticket for petty trespassing and drove us to the bus

"Your names are in the computer now. If we catch you again
on CN property, you’ll be going to jail. Have a good day."

Our mission had failed. No mountains, no tunnels, no pine
trees…just a bad case of foot rot and a ticket for $278.

We’d come back and try again next week…

A quick note from Eric Fry: The Canadian rail system is not
only a 14,000-mile long playground for Mr. Dyson and other
hobo-wannabes, it is also an increasingly vital conduit for
transporting natural resources coast-to-coast.

The map below depicts Canadian Pacific Railway’s (NYSE CP)
enviable rail franchise, a franchise that has been
profiting very nicely from the worldwide boom in demand for
coal, grain and other natural resources. As such, CP
represents a "backdoor play" on a continuing bull market in
commodities, particularly the sorts of commodities it moves
to ports in Vancouver, en route to China.

Coal, for example, has become an increasingly important –
and profitable – cargo for Canadian Pacific. The company
reported a tripling of net income during the first three
months of 2005, thanks in part to a sharp jump in transport
rates for coal.

"Revenue growth was strong across our entire bulk commodity
sector in the first quarter of 2005, compared with first-
quarter 2004," the company reports, "led by coal and grain,
which increased 44 per cent and 23 percent
respectively…We expect [overall] revenue to grow 12
percent to 14 percent in 2005."

The stock’s strong performance over the past couple of
years may already have priced in much of the company’s
anticipated earning’s growth over the near-term. But
eventually, forward-looking investors might want to hop
aboard CP, as an investor, that is.

(Tomorrow, your New York editor will be checking in with
Canadian Pacific, while attending the Merrill Lynch Global
Transportation Conference in Manhattan. Update to follow)

Did You Notice…?
By Tom Dyson

In 1993, four people died and hundreds were injured after
eating E. coli-infected hamburgers at Jack in the Box
restaurants. So why did the price of bacon soar for several
months following the news? Read on…

Traveling by alternative methods, you inevitably meet
interesting people…with interesting jobs. We’ve met them
all –drivers of giant dump-trucks from the Athabasca oil
sands, gold and diamond miners from the Yukon, bus drivers,
prison guards, helicopter pilots, bio-technologists…

Today we met a hog futures trader. He’s not a market maker
or a scalper but a straight up speculator, and he’s been
doing it for 35 years. We asked him how he beats the

1. Never forget your wingman

"A long time ago," he says, "I realized it was very
difficult to beat the market using naked positions…i.e.
going long and hoping the market goes up. So we only trade
spreads. My trades always have a long and a short side to
them…hence the idea of a ‘wingman,’ a hedged position
that protects the main investment position."

2. Know your market

"Every time I trade something other than hogs, I get
killed. I just can’t make any money in other markets. I
once tried trading cattle futures, which you’d think would
be similar to hogs, but they’re not. The market moves in a
totally different way. I have an edge in the hog market,
and I expect to make money when I trade them."

3. Have a plan that works and work your plan

"At all times, I know what the other traders are doing and
I get there first. I look at the trade flows, I talk to
people on the floor and I know how the seasonal
fluctuations work. This is my edge."

"In my 35 years, I’ve seen it all, so nothing scares me.
While less experienced guys may be panicked out of a
position on some unexpected news, I’d be more likely to
double up."

4. Discipline

"I only trade in relatively small quantities…trades that
I can stomach if the market moves against me fast. People
often ask, if I’m so good, why I don’t increase my
positions. But if you do that, you’re guaranteed to take a
big hit when your position is largest. I’d get wiped out in
a flash."

So why did the price of bacon soar in 1993 following the E.
coli hamburger scandal?

In order to regain the public’s confidence, the whole
burger industry started burning their burgers – cooking
them at much higher temperatures. They all did it,
McDonalds, Wendys, BK etc. But it ruined the quality of
their product. So what did they do? They started adding
bacon to everything to hide the taste of the burnt meat.

Demand for pork bellies soared and the first pork belly
traders to figure this out made a killing.

And the Markets…



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