02/01/2023
We are about to enter February - the historically slowest month of the year for trucking, so I think now is a good time to make a semi-professional forecast for the next quarter or two.
I know most of us here are truckers, but have to start with sea freight - the big daddy of logistics. Here are a few indexes showing that containers and bulk shipments are back to pre-covid levels.
https://en.macromicro.me/charts/44756/drewry-world-container-index
https://tradingeconomics.com/commodity/baltic
https://www.statista.com/statistics/1309698/monthly-china-shanghai-container-freight-rate-index/
This means one thing - it can't get worse than this, unless we have another worldwide event like a major war (Taiwan or escalation in Ukraine?), pandemic, 2008-sized stock market crash or aliens landing in Central Park. The question is - how long will it stay slow?
Let's move to big retail in the US. Walmart, Target, Costco, Kroger - all their stock prices are above pre-pandemic levels, but that's normal, the inflation plays a big role in the current price. What's more important is that all those retailers scored record profits (despite the inflation) and are sitting on a lots of cash! They all got burned by the "logistics bottleneck" at the port of Los Angeles, the high rail and truck costs and the overstocking of products after that. But considering their profits - I think they made too big of a deal out of it and seem to have handled the "bottleneck" quite well.
Maybe some of you noticed I left out one of the biggest retailers out there - Amazon. They are the only ones who's stock is not above pre-covid levels. One of the main reasons is that their stock rose, because of the lockdown and a lot of US consumers who ordered stuff to be delivered to them now prefer to shop at the traditional brick & mortar stores. Another reason is that Amazon is not 100% retailer like the rest, but more of a tech company - they make most of their profits from AWS (google it), not retail sales. But they are still an outlier and it needs to be noted.
Now let's mention macroeconomics. J. Powell (head of FED) will keep raising the base interest rate. The next hike is coming this afternoon to 4.5%-4.75%. This means higher loan costs, higher mortgages, higher credit card APR... - all bad for businesses, but necessary to lower the inflation. According to the textbook definition your base interest rate needs to be as high or higher than the inflation rate (6.5% for December) in order to reign in the inflation. But the FED doesn't care about logic, because it can print as much money as it wants (it already did during the 2020 market crash, the horrible PPP handout to huge corps, the Reverse repo program and other scams benefiting banks and hedge funds) and has a ton of "instruments" to suck those money out of the market.
Still, the unemployment remains low and both the US and EU GDPs grew more than expected in Q3 and Q4 of 2022 - a great sign, after the negative growth in Q1 and Q2.
On the other hand bunch of CEOs of banks, Elon Musk, Jeff Bezos and other ultrarich as****es are warning us of recession. But those bastards don't care about you and me - they care about their stocks and wouldn't give you a free stock tip out of the goodness of their heart. I suspect they are trying to bring their stocks lower, so they can purchase them back from the market cheaper now (stock buyback) an sell them higher later. But this is a pure speculation, don't pay attention to it.
And finally we come to trucking. To summarize - I still think that things will start to get better by the end of March / beginning of April, but most of my buddies are thinking end of Q2. And we all have different definitions for "better".
In this article https://www.wsj.com/articles/truckers-expect-an-inventory-driven-rebound-later-this-year-11675199615?mod=hp_minor_pos13 (use the 12ft ladder to bypass subscription) the president of Knight-Swift gives us insight from his customers. I can't write as well as a WSJ journalist, so I'll just leave a few quotes that leave me optimistic about the freight market:
Carrier executives say they are hearing from their shipping customers that they expect to return to a more normal ordering cycle this year and start moving bigger volumes closer to the fall shopping season following volatile retail spending and distribution in 2022 that left them overstocked.
“The general consensus, almost unanimous, from customers that have given us feedback about their inventories has been that by the time they get through the spring, things are caught up,” David Jackson, president and chief executive of trucking giant Knight-Swift Transportation Holdings Inc., said on an investor conference call Jan. 26...
Shelley Simpson, president of Lowell, Ark.-based J.B. Hunt, said its retail customers have told the carrier that a pullback in orders is “largely an inventory correction” driven by the shift in consumer buying patterns rather than broader weakness in the economy.
She said on a Jan. 18 earnings conference call that the company “has good signals” from shipping customers that they plan to pick up their ordering in the second quarter.
That's it! I'm hopeful that by the end of Q1/Q2 the market will pick up again. Feel free to add something to my analysis or to disagree. I know there is way bigger fish lurking on this sub than me - please let us know what you think!
Also - I'm a carrier, not a financial analyst. If I was one - I'd be sniffing co***ne in some Wall Street hedge fund, not sipping coffee in my trucking office near O'Hare.
Don't take my word on anything and do your own research!!!
Freight executives say their customers have told them they plan bigger orders closer to the fall shopping season.
