Tag: freight
Coronavirus and the Trade War: A Perfect Storm Argument for SMB Supply Chain Diversification
The coronavirus outbreak has the whole global community concerned and hoping for the swift containment of this humanitarian crisis. In addition to the terrible human cost, the virus is also sending ripples throughout the global supply chain. The two recent crises in global trade – the outbreak and the US-China trade war – show how […]
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RFID: The Key to Improving Visibility
Technology is fast evolving and so is its adoption by vast industries like supply chain where it is been used more creatively and expansively. RFID (Radio Frequency Identification) is one such innovation which is widely used in Supply Chain and Logistics as it’s efficient and saves time. What’s RFID? RFID is a tool to read & understand digital data encrypted in RFID tags through a reader via radio waves. To understand it, we can take the example of a bar code or magnetic strip of a bank’s ATM card where data is captured by the device and stored in the […]
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Project cargo complexities simplified
The most important job of a freight forwarding company is to deliver the consignment on the agreed date. If the consignment is not delivered on time, it’s a loss to the receiving party. Well, some cargos’ are special and require an eye for detail and prior planning to implement the whole operation. Such special deliveries are known as ‘Project Cargo’. What’s Project Cargo? Huge equipment, high-value machinery, tanks, pumps, windmills, etc.is large and sometimes require disassembling before shipping and reassembling for delivering. It’s a special and complex freight and need to have proper planning as it may require multi-mode, changing […]
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Another Tough Report from A Carrier – Schneider Has Tough Q32019
- EPS missed by .02 on Non GAAP and by .11 on a GAAP basis
- Revenue was down 7.7% YoY and missed expectations by $40mm
- Volumes and price were "compressed" and while they stated there was a "moderate" uplift in the seasonal volume the tone of the message was it was virtually meaningless. We have learned this from other carriers: There has been no meaningful "surge" period.
- We knew there were shutdown costs due to the closing of the First to Final Mile business (Which opened to a lot of fanfare about 2 years ago) but I found it surprising they had to impair the value of trucks they are selling. This tells me they are shrinking the fleet and are actually taking losses on the equipment to dispose of them.
- While their truckload numbers are tough to decipher due to impacts of the FTFM closure and the impairment of tractors, both intermodal and logistics (think brokerage) suffered as well. Intermodal was down 2% due to volumes and Logistics was down 13% (Blamed on a major customer insourcing).
- They lowered their guidance from what was $1.30 per share to $1.38 and it is now $1.24 to $1.30. Again, this appears to be due to the tractor impairment charge. Interestingly they lowered their CAPEX for the year which again, indicates to me they are shrinking the asset base.
The perverse incentives produced by institutional division
A Transit Employer’s Duty to Bargain Over Automation: Introduction
When a transit authority considers automation, a duty to bargain with labor over the decision to automate and a duty to bargain over the effects of the decision may arise. The source of the duty may be one of three types of labor laws that govern the transit employment relationship: the National Labor Relations Act (NLRA), the Railway Labor Act (RLA) or state-specific public sector collective bargaining statutes. This post will discuss the duty to bargain generally. Next week's post will review subjects over which an employer may be required to bargain and steps an employer can take now to better position itself to automate.
How Can The Market Be at An All Time High and There Be A Freight Recession – Part II
So, how can the stock market be hitting an all time high? I believe it is due to 3 reasons (Warning, I know a lot more about freight than I do about investing but here goes):
- The alternative investment (10yr as a proxy)
- % of the economy which has nothing to do with goods
- The Fed.
This chart compares the Dow Jones Transportation Index to the DJ30 and the S&P500. This is a one year return graph and ends on June 21. As of June 21, the DJ30 is up 6.66%, the SPX is up 7.1% and yet the DJT is DOWN 3.91% Bottom line is investors are shunning transports yet still embracing the overall economy. Why?
The Alternative Investment:
Investors are going to invest. That is what they do and they have two macro alternatives. First, they can invest in the "risk" markets (i.e., stocks) or they can invest in what is generally considered the "risk free" or "near risk free" investment. I will use the 10yr as a proxy for this second grouping. What we have seen recently is not only a 10 year treasury at multi year lows but we are also hearing the Fed discussing lowering the rates even further. This will drive investment dollars away from the "risk free" and into the markets.
It is no coincidence towards the end of last year when the Fed was not only raising rates but also calling for 3 rate hikes in 2019 the stock market tanked. Investors were deciding to move away from risk assets as the risk free was looking pretty good. Not so much any more as the 10yr is now bouncing around the 2% level.
The graph to the left is the graph of the 10 year treasury rates as of Friday, June 21. This movement of rates down has caused money to flow back into the risk asset markets and specifically look at the major move down since mid May. This is when the Fed made it pretty clear the only action they likely will take is a move down in rates.
% of The Economy Which Does Not Have Anything to Do with Shippable Goods:
This one is a bit nuanced. Let's just look at 30 years ago and think about what it meant for the economy to be growing at 3%. It was intuitive that the growth had to have much to do with autos, real hard electronics, housing etc. etc. These are all very "hard" goods which drove the economy.
Today, when we the economy grows at 3% more of it has to do with finance, services and the infamous FANG stocks (Facebook, Amazon, Netflix and Google - Alphabet). Only one of these, Amazon, ships anything. The rest make their money in the "virtual" world. Very important to the economy but not so important to trucking. The graph below illustrates this:
Non Shipment Economy |
- Economy is slowing
- Investors have to invest in the market to get any kind of return due to the "risk free" paying so low.
- Investors are shunning the transports
- This drives the market to records
- Less and less of the GDP has to do with "shippable goods"
How Can The Market be at All time High and There Be a “Freight Recession”? – PART I
There will be two parts to this posting. The first will be to show the macroeconomic data I look at which tells me the freight market is slowing. The second part will be to show how the stock market could hit an all time high while the freight market slows.
There are 3 real reasons why the market (i.e., the SP500 and the Dow) is disconnected from what we, the "transporters of freight" see in the market:
- The alternative investment (i.e., 10yr).
- The % of the economy which has nothing to do with "goods".
- The Fed
Inventory to Sales Ratio - St. Louis Fed |
MFG PMI - Tradingeconomics.com |
While employment is incredibly robust and generally "all is good" there are some signs of cracks:
3 Month Net Change in Employment - BLS |
Is “Freight-Tech” the future or Has Uber and Lyft Killed the Dream?
Or, as the title stated, has Uber and Lyft killed the dream? More on that later but first, let's remind ourselves "how business works".
An entrepreneur comes up with a great idea and tries to get it to scale with a series of private fundings. Venture capitalists get in early, generally get seats on the board and hope for an eventual big pay day when the company is either sold or goes public. The company is built to scale (meaning it is generating cash - hopefully - or has a path to be cash flow positive. Then, the early owners need to take money out of the company for a variety of reasons by going public or selling. Here are the reasons they may want to extract money:
- Family wealth planning - they generally have a lot of their wealth in the company and they need some back.
- Pay Employees - Many early stage company employees are paid with options and they eventually want and need that money. This is a warning to many employees who get in too late in the game. If your options are valued right before the IPO then a lot of the time you are under water when it goes public (as are many Uber and Lyft employees).
- All the juice is squeezed and the VC people want out. - Venture capitalists do not hold companies and eventually they want their money back. Once they believe they have "squeezed all the juice out of they idea they will want to exit.
- Uber has lost over $3Bl in the last three years. And that is if you count a gain on divestiture and "other investments". If you look at just operations, in the last three years Uber has lost almost $10bl.
- They continually discuss incentives paid to the drivers and to the customers. They are paying on both sides of the transaction.
- There is very little path to profitability. They "sold" the IPO to the retail investor at exactly the right time (for them.
- Too much money chasing too few ideas... the "new" ideas are starting to be "me too's" (How many apps can have a competitive algorithm just to find an available truck)?
- The FT VC population will want to sell.
- The Asset guys will find out they are getting killed by the "trucks and clicks" model of J.B. Hunt and this will drive them to pay exorbitant prices to get the tech quick to catch up.
- JBHunt, by innovating early and fast will win this game big just like they did with intermodal.