Hard versus soft versus no landing; A debate about precision railroading; Why I'm still wary of Chinese stocks; My favorite travel hack so you're never forced to gate check your bag; Visiting my daughter in Minnesota

As regular readers know, my e-mails often have a theme... such as an overview of economic indicators (yesterday), where activist investors are stirring up trouble (Wednesday), or a first look/deep dive into a stock – like Air Products and Chemicals (APD) on Monday and Boeing (BA) on Tuesday.

But sometimes (like today), there are a handful of interesting, unrelated things I like to share with readers...

1) Following up on my bullish take yesterday on the hard versus soft versus no landing for the U.S. economy, I agree with this post on X from Ben Carlson – the author of the popular financial blog, A Wealth of Common Sense:

As I said yesterday, I still remain constructive on stocks.

2) In response to the Wall Street Journal article I commented on in Wednesday's e-mail, Can a 'Precision Scheduling' Expert Fix Berkshire Hathaway's Railroad?, one of my readers, David F., sent me a sharp critique of precision scheduled railroading ("PSR").

I shared David's criticisms with a friend that knows PSR better than anyone else I know, who was kind enough to reply to them. So below, I'll share David's comments and my friend's responses to them:

David writes: "Your enthusiasm for PSR is seriously misguided. It has led to widespread disinvestment and downsizing of the Class I U.S. rail carriers, which, long-term, makes them less modally competitive with trucks."

My friend's reply: "When assets are mismanaged, they are far less productive and therefore are in great excess."

David: "Their freight volume peaked in 2006 and has been falling ever since. The reason is that PSR emphasizes curtailing operating costs, not growing business."

My friend: "It emphasizes increasing asset and labor productivity and increasing service levels, and it achieves these objectives. The objective is to grow intrinsic value per share, not maximize the amount of freight carried while destroying shareholder value."

David: "As costs are slashed, service reliability suffers because the carriers become less capable to perform well."

My friend: "Wrong. It's not about slashing costs but rather enhancing productivity and then shedding people and assets that have nothing to do. Service and reliability materially increase. It's in the numbers. It's well understood."

David: "A focus on fewer, longer trains is an example. Yes, this can cut costs, but batching the freight flows inherently slows them down and makes customer service less nimble and responsive."

My friend: "False. It enhances network fluidity, decongests the network, and increases nimbleness."

David: "Wall Street evaluates PSR by its myopic focus on the operating ratio, There is no interest in a corresponding metric to measure customer service or reliability."

My friend: "Customer service means delivering what you say you will deliver. It's tracked carefully."

David: "As these things get shoved aside in pursuit of lower costs, customers find rail service more and more of an oxymoron and move their business to other modes."

My friend: "The pursuit is of efficiency and creating value. The modal shift is driven by many variables including trucking rates. Rails have actually slightly increased their market share."

David: "BNSF [Railway] was the only one not to fall into this trap. They could focus on business growth and customer service without concern of the operating ratio quarter by quarter because they are privately owned. I challenge you and your staff to probe in depth to the BNSF performance record. It won't look as good in many metrics as those carriers who only worry about cost reduction, but I'd bet based on customer satisfaction and volume growth you'll find a different picture."

My friend: "When implemented well, PSR leads to fast, reliable, reasonably priced performance and railcar availability, which leads to increased customer satisfaction."

David: "BNSF alone has had the courage to just say no. You'll find that their customer service is better, dwell times are less, train movement is more fluid, and their business volume is growing (usually), but at least more stable."

My friend: "This is false."

David: "The public benefits from compelling environmental, economic, and energy advantages by having as much surface freight move by rail as possible. PSR reduces costs but is inherently self-limiting as there is only so much freight that railroads can unload on other modes and still be viable enterprises."

My friend: "PSR-focused railroads aren't interested in taking on more volume by adding unattractive business. They instead seek to increase the appeal of their service offering."

David: "BNSF deserves praise for NOT getting sucked into this nefarious scheme rather than the condemnation you and so many others in the investment community espouse."

Thank you both for the enlightening debate! As always, I welcome feedback on topics I write about – just send me an e-mail by clicking here.

3) To stimulate China's moribund economy, the government announced various stimulus measures (the WSJ has more on this here: Behind Xi Jinping's Pivot on Broad China Stimulus) that trigged a sharp pop in the local stock market.

This attracted plenty of foreign investors, as this WSJ other article from earlier this week noted: Don't Chase China's FOMO Rally. Excerpt:

China is such a hot theme that U.S. individual investors paid more attention to it than a U.S. market also ripping to record highs. According to ETF.com, four of the 10 exchange-traded funds with the largest inflows last week were China funds, creating a rare period when foreign stock ETFs handily topped inflows into domestic stock ETFs.

But I think the article is right that investors should continue to avoid this market:

The exact size of the stimulus remains hard for investors to pin down, though, which is why markets have fallen back lately. Investors might indeed be getting ahead of themselves. Such big changes to the budget will need the approval of the National People's Congress, China's legislature. Its standing committee will only meet later this month, which is when specific numbers will be announced.

Even then, the package might still underwhelm investors. The process of easing the fiscal burden of local governments to stimulate demand could take a long time to work out. Meanwhile, providing big, direct stimulus to boost consumption seems unlikely as Beijing has long preferred supply-side measures. And housing inventories might take years to digest, even if the plan for local governments to buy some of those unsold apartments works out. And there is also the not-insignificant question of what can replace the housing market as the growth engine of the economy.

As I said back in my March 6 e-mail:

Capitalism in China is the Wild West – I would compare it with the U.S. 150 years ago. I know plenty of people who've been defrauded – and have no recourse. Analysts and researchers who discover fraud have been imprisoned.

And, most relevant for my readers, the percentage of Chinese stocks listed on U.S. exchanges that turn out to be frauds is alarmingly high...

So, those thinking of investing in China need to be very careful – or simply do what I've done and put it in the "too hard" bin. In other words, I stay away.

4) This WSJ article from earlier this week, The Two Words That Strike Fear in Fliers: Gate-Check, reminds me of my favorite travel hack that ensures that I never have to check my carry-on bag...

I have a Matein rolling bag that (this is the key!) has straps so I can sling it over my shoulder as a backpack when I'm boarding the plane.

Here's a picture of the two versions of the bag (the one on the left is about 10% larger than the one on the right – both are currently $69.99 on Amazon) that my wife Susan and I used for our trip to Minneapolis yesterday morning:

5) Susan and I are in Minnesota to visit our youngest daughter Katharine, who's a senior at Carleton College, for family weekend. We surprised her by bringing our dog, Phoebe the Wonder Pup (I posted photos and a video on my Facebook page here).

We accompanied Katharine to vote and then walked around campus, where the foliage was magnificent and Phoebe was a hit! Here are some pictures:

Best regards,

Whitney