Timing-wise, the rail group took its biggest bath in the three weeks between March 20 and April 3 when seven out of 13 issues began the slide from their peaks. Outside that three-week period, the first to peak were PWX and RailTex (Nasdaq: RTEX) on 1/30; the last was KSU in the week ending 7/17, just when the current sell-off was beginning. Perhaps some of the technicians out there can tell us more about lead and lag between transportation issues and the market in general.

If Wall Street defines a bear market as stocks off 20% from their highs, then the rails certainly qualify. Take WCLX: the high was $30.50 back on 3/20. Lop 20% off that and you get $24.40, yet it closed the quarter at $14, some $57% off the high. While KSU is off 32%, CNI, NSC, BNI and FLA have yet to reach the 20% marker. However, the action later this week may portend these last two still have new lows to hit. Stay tuned.

Word comes from Norfolk that Don Nelson, senior vice president for Shared Asset ("new Conrail") operations says, "We must be colorblind and will function with complete neutrality. There will be a scorecard kept on impartial handling and train performance, and we will be accountable." Nelson said late trains will take a back seat to trains that run as advertised. He noted that plans call for running several additional daily trains over existing routes in northern New Jersey and that he does not foresee problems in boosting train departures above the 57 to 59 operations in the region currently.

By way of review, the merger/division plan assigns operation of Croxton, Portside, and E-Rail to NS, while CSX Transportation (NYSE: CSX) will operate the intermodal facilities at South Kearny, North Bergen and an APL Ltd. facility that NSC will be allowed to serve as well. The ExpressRail facility at the New York-New Jersey port will be open to both railroads and operated as part of the SAA.

The New York Stock Exchange website (www.nyse.com) provides some fascinating reading on the early days of that august organization, and the railroads were big players. From the chronology page we learn that the first railroad stock, Mohawk & Hudson, began trading in 1830 and railroad securities came to dominate trading for the remainder of the century.

"Watered stock" (shares issued by a company without authorization) became an issue in 1869. The Exchange that year required all shares of listed companies be registered at a bank or other appropriate agency. Only Erie Railroad refused to comply; its shares were delisted from trading until it did. And in 1873 Jay Cooke & Company, a prestigious Philadelphia banking firm, failed due to over speculation in railroad stocks. The NYSE was closed for ten days "as a severe financial panic [gripped] the nation." Shades of the present Long Term Capital bail-out!

Quick Takes: Monday carbuilder Greenbrier (NYSE: GBX) made the WSJ "big movers" list, up 1 11/16 at 15 1/16. Said The Motley Fool (www.fool.com), "GBX will report fiscal Q4 EPS between $0.44 and $0.46, beating the $0.30 that the company said the Street had been expecting"...Union Pacific (NYSE: UNP) has loaded its 75,000th coal train in Wyoming's southern Powder River Basin (PRB). The railroad began PRB service in 1984 and averages more than two dozen loaded coal trains a day.

Continuing the thread on the lack if understanding between shortlines and junior class 1 railroad managers, a shortline operator writes, "One reason for the disconnect is there is little or no training at class 1s about short lines, and when there is, it is optional. Too often we have to deal with market managers who are clueless about *any* railroad economics and who are shocked, shocked! at what drives shortline revenue requirements.

"Shortlines take one of the highest costs--terminal operations--off the class 1s' hands, and have to pay the class 1 for car costs to boot. Even when you have to take some folks through the costs, item by item, it's to help them understand why shortlines have to spend upwards of $5,000 per mile per year to maintain track at 10 mph, assuming it's already current on maintenance."

This is, unfortunately a shoe that fits in too many places. However, the new Industry Agreement (WIR 9/25/98) provides a tremendous means to the end of better understanding of shortline economics among all the class 1 players who interact with the smaller properties. Last week I e-mailed the shortlines on this list looking for ideas on how they will implement the agreement and the response was encouraging.

Both GNWR and RailAmerica (Nasdaq: RAIL) came back with some great ideas, as did many privately-held lines. What is more, early indications from NSC, UNP, and BNI are that newly-identified areas for collaboration will bear fruit for all players. Industry observer Frank Wilner reports on the class 1 viewpoint in October Railway Age; I will report on the shortline take in the same place in the November issue.

--Roy Blanchard