Al’s Corner – March 2023
Trucking Rates, Inflation, Recession Thoughts
Good day everyone, it is time for the March 2023 edition of Al’s Corner.
First up is the St. Louis Blues March 15th Hockey Night. The game time is late starting at 830 pm. For $85 you get a ticket to the game, and from 530-730 a Happy Hour at Wheelhouse that includes an open bar, and food. Good times! The game tickets are still available, and the $50 deal is still available for Happy Hour only before.
International Night was a tremendous success. This time it was held at the Cedars just south of downtown. I enjoyed the complete setup with vendor booths, an open bar and a venue. The Master of Ceremony was Brad Reinhardt who was assisted by his fabulous daughter Alana Reinhardt for the eighty that attended. Excellent job! Several awards were presented, and the food was INCREDIBLY good. It is always about the food for me!!!
A couple of Shoutouts to my longtime friends from the STL Transportation Club who are monthly readers of this note. Anna Hickman with MC Freight and Todd TeBrink is a longtime sales rep for Alliance Shippers. These two are so much fun, great people, and are real pros in our business (love them). Hope you both have a huge year. I try to promote anyone who reads my monthly blast!
Monthly Topic—after writing this note for 14 years I must admit I am a little surprised by the oddities of the world we live in when looking at this economy. The same holds true for the transportation industry. In many ways, this particular note I am writing could be the most insightful I have ever written (then again maybe not!).
The reason is that I am having trouble understanding what is going on, overall. I do understand how we got to this point with the pandemic and the financial support so many people and companies received. This was going to cause a problem eventually. It had to. Kind of reminded me of the mortgage problems back 15 years ago. Back then I was told by a small mortgage lender that all he needed to do each month was write 4-5 loans and he would make $300,000 per year (seemed like a lot of profit, and he did close). That was surprising but then I spoke with several other people back then, that were doing Interest only loans, and were ultimately in trouble when the housing market fell dramatically. They were upside-down in-house value. One lady bought a $450,000 dollar house and did the interest-only thing, in spite of her being a receptionist, and her total income with her husband being around $100,000 per year. That did not work out well for them. I was of the opinion then that if you took a circle being the starting point for a loan it had little or no money in the origin. So, everyone was making money off no money. I know there was more to it, that was my limited thoughts then, and still now. I recently watched the movie Trading Places again with Eddie Murphy, it was so funny. This snippet has nothing to do with the housing thing above. In the beginning, Murphy was asked if knew what the Duke’s business was like, and he said “you guys are like a bunch of bookies!!!”
Fast forward to 2023. In the last 2 years, people and businesses received free money and support. Some of it was necessary as many businesses and individuals were struggling. Some of the free money should have never happened, mistakes were made in honor of trying to keep things going. Businesses that had lost customers because they could not have in-person attendance like restaurants, eliminated the need for servers. Takeout orders helped, but only so much. So, they increased prices tremendously in the name of increased costs, and labor, which I believed. Building supplies boomed as many people started working from home and did home remodeling projects. The demand was so high that lumber and such soured in price. This raised the price in the housing market. We also had an issue with our ports being backed up, which caused the rates to rise too. Because of the free money given out many companies started having trouble finding enough workers and were forced to raise the wages that were paid. Things went up again.
Ok, enough of that, what are my points? As I said in my last article, most companies and businesses want to have their sale prices stay high, but want their suppliers’ prices to go down. I would like to be younger and better looking too in a perfect world. You can’t have it both ways in business for very long. When will their customers say I need a reduction? Soon I would think. When will consumers say enough also? Already?
Transportation trends and prices, though limited in scope, usually provide an advanced look into where the economy is going. Transportation prices have gone down as shipping volume has gone down. With that said, everything should be getting cheaper, EVERYTHING. Example–A couple of fast-food fish sandwiches, a French fry, and a drink cost $13. Another FF place served 2 small chicken sandwiches, 2 fries, and 2 iced teas for $17. Iced tea at a chain pasta restaurant charges $4 each. I bet these prices were half that of 4 years ago. Did it go up that much? Is it gauging now? This reminds me of a salesperson who was making $100,000 per year but had their sales and profits drop in half. Nobody ever wants their compensation to go down. Large companies that are taking advantage of this should be showing huge quarterly profits. Lumber is the lowest it has been in a long while too. The high-interest rates will cause hardships period and will slow housing development because of high mortgages, not sure how that will work out though. Kind of sad, now that building products are cheaper, thus a house would cost less to build, but the high-Interest Rates will kill that advantage.
Anyway, I hope you enjoyed this note and my suggestion would be to wait a few months before you buy a lot of stuff. The prices should, I hope, start filtering down to the consumer soon. But with trucking companies leaving or closing their doors at the rate of at least 1% per month, because of low rates now, high fuel costs, and high investments in equipment last year, transportation rates, I believe, will start to rise by the end of the year. We will see. Have a great month, AL