Regarding Cramer's Mad Money..
show tonight, and his monopolistic mergers segment and his number one pick regarding the railroads.
Yea, this would create stronger monopolistic pricing power creating a western RR and an eastern-part-of-the-country RR, but, both new systems would be more or less a heavily dual-duplicated line, including many major switching yards, etc. Maybe, then a new combined giant sells off some of those duplicated assets.
However, and I'm not sure why Cramer didn't do it different, a more likely scenario in this case (and actually better mergers) would be Burlington Northern going after Norfolk Southern and then Union Pacific going after CSX.
Why these combos instead? Because these two different mega-mergers would create two separate inter-continental Class I railroads. Combined with their different infrastructure including intermodal yards stretching from coast to coast, this is where you get true cost savings along with some growing monopolistic pricing power into certain markets.
How? Because a transcontinental railroad can offer much faster and more efficient transportation all the way across the United States to customers from either coast and/or the mid-west. Especially for intermodal containers from coastal ports as well as certain types of bulk commodities. And with two cross-country mega-carriers you still get the added benefit of creating an illusion of a competitive landscape with two major players (even though they do serve some different markets). This scenario also helps many other transportation companies that currently ship on their preferred/partnered different lines, companies like UPS, JB Hunt, Roadway, Schneider, many international shipping companies (Sea-Land, APL, etc), etc. Some of these existing partnerships wouldn't get near the benefit from a UP/BNSF merger like Cramer mentioned - so I'd say it's just not going to happen that way.
Plus, one interesting sidebar, do you know where much of this country's optical cable is laid, networks like Level Three's? In these companies right-of-way. Hmmmm.
I like UNP & CSX.
You want to really make things interesting and get trade going more seamlessly, what about the two Canadian Class I railroads, and Kansas City Southern (going to Mexico)?
GL & GT.
AI
