An Ordinary Recession This is Not

ATeam

Senior Member
Retired Expediter
Recessions are part of the business cycle. They are the flip side of expansions. While difficult to go through, recessions have the benefit of wringing excess speculation, debt and obsolete products and practices out of the economy and setting the stage for new growth.

Recessions vary in frequency, depth and duration. For the most part, people get through them well enough. But this recession is different. Consider the following:

From its record high in October, 2007, the Dow has fallen 47%, "making this the worst bear market since the Dow fell 49% in 1937-38." (Wall Street Journal)

The spread between investment-grade corporate bond yields and Treasury bond yields is the highest since 1932. (Wall Street Journal) (This is a market indicator of corporate creditworthiness. The lower the spread the more credit worthy corporations are perceived to be.)

Sales of cars and light trucks last month were the worst since February, 1983. (Bloomberg)

New home sales in October were the worst in 17 years. (Bloomberg)

When November figures are released, they are expected to show the housing downturn is entering its fourth year. (Bloomberg)

The unemployment rate is at a 14 year high. (Business Week)

Global trade will decline in 2009, the first drop since 1982. (Economist)

The U.S. government has intervened in financial markets more than anytime since the 1930's (Fannie Mae, Freddie Mac, AIG nationalized; Federal Reserve balance sheet used to prop up Wall Street firms; $700 billion bailout; government protection extended to money market funds; etc.)

I could go on as most economic indicators are down. What is remarkable is the depth, breadth and magnitude of the decline. Things are happening today that we have not seen in our lifetime.

Nor have have the economic experts that are being looked to for wisdom and advice. Their college educations and decades of experience creates a belief system and way of seeing things that they have relied upon for years. With the astounding changes we are seeing in government, the markets and the economic indicators today, I am left wondering how meaningful the sage advice from these experts is today?

I'm not dismissing them out of hand and still listen to their words. But I am also preparing more and more to be surprised. Few people saw coming what is now here. I don't know what surprises may lie ahead (that's why they call them surprises) but expect more to occur.

In our one-truck owner-operator business, this motivates us to batten down the hatches and prepare to ride out a storm. I am confident we will make it through. I just don't know what kind of a world we will be sailing in when the skies clear.

If anyone does know, I am all ears. What do you think the expedite freight marketplace will look like one year and two years from now?
 
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ericmoss37

Seasoned Expediter
Great post Phil, good points. I think we are going to see half the expediting trucks on the road by this time next year. The load offers will increase and come more often when a good amount of owners call it quits. Those who are not diversified in trucking will not make it. What I mean by that is my FedEx Ground residential deliveries are really picking up and the Month of December will be great sales wise. Enough to carry a few poor expediting months. I also have reduced most my teams to solo's to keep them above the poverty level. Meaning $500 to $600 a week since they take the gross of the 40%. When it picks up and team runs become more available I will put teams back in all trucks. I think the Panther fleet has to get down to the 600 mark before things get busy. They are averaging 500 loads a day nation wide. Right now they are at 1100 between Cargo,Straight and Semi. That count needs to be cut in half.

Eric
 

OntarioVanMan

Retired Expediter
Owner/Operator
Great post Phil, good points. I think we are going to see half the expediting trucks on the road by this time next year. The load offers will increase and come more often when a good amount of owners call it quits. Those who are not diversified in trucking will not make it. What I mean by that is my FedEx Ground residential deliveries are really picking up and the Month of December will be great sales wise. Enough to carry a few poor expediting months. I also have reduced most my teams to solo's to keep them above the poverty level. Meaning $500 to $600 a week since they take the gross of the 40%. When it picks up and team runs become more available I will put teams back in all trucks. I think the Panther fleet has to get down to the 600 mark before things get busy.

They are averaging 500 loads a day nation wide. Right now they are at 1100 between Cargo,Straight and Semi. That count needs to be cut in half.

Eric

In theory if 10% of the fleet is OOS for any reason the numbers suggest that you will get a load every other day....not so bad..
 

ericmoss37

Seasoned Expediter
In theory if 10% of the fleet is OOS for any reason the numbers suggest that you will get a load every other day....not so bad..

What happens if that load every two days is a mini or a 200 mile run and you have a team that shares .63 cents a mile. It's not going to cut it. 200 mile runs are ok for teams if they do two a day and sit a short time after the loads. They really need at least one 1,000 mile load a week if not two. 200 for a solo every two days is also not enough. It's like $350 a week and that stinks.
 

RLENT

Veteran Expediter
With the astounding changes we are seeing in government, the markets and the economic indicators today, I am left wondering how meaningful the sage advice from these experts is today?
Don't remember the exact institution (Lehman mebbe ?) but the day before they failed Jim Cramer (CNBC MadMoney ?) was poo-poo'ing any talk of impending failure and encouraging people to hold .......

Not that I am encouraging it in any way whatsoever because I'm not, but if there were any justice in this world at all, he would have been dragged kicking and screaming from his studio ...... and publicly lynched in the street outside.

Instead, he still has a tv show ...... apparently the network is so shameless that they are willing to employ him ..... tells ya something about them .......

There ya go - that's an example of "sage advice" - from someone who was a "successful financial expert" ......

........ and these guys are the morons that get tapped to be in charge of our nation's finances .......
 
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ATeam

Senior Member
Retired Expediter
CNBC.com has a slideshow that provides historical perspective on U.S. government bailout activity.

CNBC reports, "Thus far, only one item surpasses the $700 billion allocated to the government's main rescue fund, what's known as the Treasury Dept.'s TARP program. Other expenses and/or commitments, from Federal Reserve lending and guarantees to FDIC insurance fund losses to complex financial market mechanism, put the total cost at some $3.8 trillion (as of Oct. 23)."

In today's dollars (inflation adjusted) the costs are:

Hoover Dam: $782 million

Panama Canal: $7.9 billion

Gulf War I: $98 billion

Marshall Plan: $115.3 billion

Louisiana Purchase: $217 billion

Race to the Moon: $237 billion

Savings and Loan Crisis: $256 billion

Korean War: $454 billion

The New Deal: $500 billion

Gulf War II/War on Terror: $597 billion

Vietnam War: $698 billion

All NASA spending from
its first day (50 years): $851.2 billion

World War II: $3.6 trillion

I find some basis for hope in these numbers. None of the above events brought the U.S. to its knees. Periods of national economic health and prosperity followed every one.

Nevetheless, the amount of public money being spent and/or put at risk to prop up the global financial system is staggering. When that much money is being moved around, it is hard to predict what will come of it all. For good or ill, we are charging headlong into uncharted territory.

Again the question, what do you think the expedite freight marketplace will look like one year and two years from now?
 
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OntarioVanMan

Retired Expediter
Owner/Operator
What happens if that load every two days is a mini or a 200 mile run and you have a team that shares .63 cents a mile. It's not going to cut it. 200 mile runs are ok for teams if they do two a day and sit a short time after the loads. They really need at least one 1,000 mile load a week if not two. 200 for a solo every two days is also not enough. It's like $350 a week and that stinks.

I was looking more over the monthly average then weekly...like one week 700 miles next maybe 1300 and then 600 and maybe 1800...That should give ya about 1,000-1100 a week....considering its SLOW...thats not bad....Better for those that have their finances in order...Remember these numbers are just a stab and not fixed...very fluid to say...

Back to topic....I think as far as auto freight is concerned..it will be very tight...In a way it's good that all sectors have collapsed at the same time...rather then spread out the pain....Now the rebuilding process can go forward...on all levels..
 
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springrivergroup

Seasoned Expediter
"Nov. 24 (Bloomberg) -- The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago."

And who will pay for it?
 

ClassicOne

Expert Expediter
Interesting list Phil, most of the items were either related to destruction, reconstruction or expansion. What is the next driver of our economy? New land for our farmers to expand to, infrastructure, auto, aerospace, tech? What ever the next big thing is, there will be a need to transport goods. The question is will our tax system change. If it does, and the reasons for JIT disappear, expedite as we know it will diminish. Expedite will truly become emergency freight, not normal business. JMHO
 

layoutshooter

Veteran Expediter
Retired Expediter
While some things are worse than in the past few down turns, one big one is not. Unemployment is STILL not as bad as it was in the '70's, even here in Michigan. In fact, Ford is putting on a SECOND shift at the F150 plant to meet the HIGHER demand for pick-up trucks. It will start the first of the year. GM has ALREADY put SECOND shifts on and is working OVERTIME at several plants that make SUV's to meet the increase in demand. Chrysler engine plant is working 24/7 and OVERTIME making engines for SUV's and pick-up's. I am SO glad I live where I can get new other than the daily bunk passed out by the SO-CALLED news media. I get it straight from the horses mouth, the guys on the line who are working the shifts. Drill more oil to insure that the fuel prices stay where they are and things will boom. Of course, they are now talking about a $.50 to $.75 per gallon INCREASE in fuel tax. That will most surely help this "NEW BORN" recovery. Yea right. Keep the taxes low, cut out the 100 Million in UN-FUNDED mandates from CONGRESS on the auto industry and see what happens. That most likely will not happen. The NEW BREED in Washinton WANTS this to get worse and will do whatever they can to insure that it does. Watch for stealth taxes. They may not raise the income tax till the Bush cuts expire to make themselfs look good but the fuel taxes, new energy taxes, taxes on big cars and SUV's etc. You can bet that taxes and "fees" will go up as high as they can get them up to insure that this thing deepens rather than allow the recovery that now shows signs of starting to grow. Layoutshooter
 
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OntarioVanMan

Retired Expediter
Owner/Operator
Still waiting lines at the Cracker Barrel for breakfast, waiting lines at the Outback for supper...how bad can it be?
 

PJay59

Veteran Expediter
You know this is a good post, maybe I just watch to much news about Doom and Gloom for people have been talking this economy down for years, well they sure got their wish. But feels good reading this post , and I think some positive news would be just a real shot in the arm, it works for me anyways. Happy Turkey day to you all.
 

OntarioVanMan

Retired Expediter
Owner/Operator
Seems like there is ALWAYS 30% that don't get the message OVM.

To which part Col?...

Anyone notice all the building going on? A lot of commercial sites...A lot of cash being spent by the motel chains changing their signage and upgrading the rooms...Theres still a lot of good going on out there...something the press omits..
 

layoutshooter

Veteran Expediter
Retired Expediter
We had trouble getting tickets for the Red Wings. They are hard to get. Last month showed a slight up-tick in housing prices in the Detroit area suggesting that things MAY have bottomed out around here, housing wise. Keep in mind that our nationwide un-employment rate is about 6%. That is about where the European socialist states are at a norm. I think that it will start to fall soon if Obama does nothing with taxes or increased spending. Does not look like that will happen. Lots of talk out of that guy on MORE socialist spending. He is now looking at new stimulis package to increase production in China. Cut business taxes, the U.S. has the one of the highest business tax rates in the world, and watch the hiring start. Japan has high business and they have been in a funk for a long time. TAXES KILL BUSINESS!!! Want to see what an Obama style tax package will do for the nation? Look a Michigan. Our un-employment rate is 3-4% higher than the rest of the country. It will continue until we CUT our taxes. That goober governer cut the taxes on film making here and there are 7 new flims being made here starting next year. WHY? The nations LOWEST tax on that industry. Too bad she did not learn from that and cut ALL business taxes. Those films are pumping about 15 million into the Michigan economy. Layoutshooter
 

BillChaffey

Veteran Expediter
Owner/Operator
US Navy
Chrysler may be building more engines in Michigan, but it doesn't change the fact they have closed at least one plant in St Louis and are preparing to close another, and have moved the construction of the "Town & Country" to Canada.
 

pelicn

Veteran Expediter
Still waiting lines at the Cracker Barrel for breakfast, waiting lines at the Outback for supper...how bad can it be?

OVM, you make an interesting observation. My father in law feels that there are few "truly poor people" in America today. Many people claim to be "poor" while driving their cars, or talking on their cells phones, or watching cable TV, etc.
Maybe poor in comparison to the neighbors, but not poor in comparison to past generations.
 

layoutshooter

Veteran Expediter
Retired Expediter
Things ALWAYS change in business. There is nothing new under the sun. Plants open and close. production shifts. Some lines do better, some not as good. The only new thing is the massive government regulations on the auto industry. Over 100 million dollars of new regs to counteract "Global Warming", whatever that is. Last winter was one of the colder in years and this one is shaping up to be a VERY cold one. A lot of the plants that they are closing are old or taxes are too high in that area. The move to Canada is directly related to the Canadians DROP in the business tax rate. Low taxes are the key. Lower them and production will go up. Raise them and it will go down. Government CANNOT create wealth or REAL jobs. Only private industry can do that. Layoutshooter
 

OntarioVanMan

Retired Expediter
Owner/Operator
exactly..define poor....Because you can't buy your kid that X-Box for Christmas...You can't go to Denny's every Sunday now...can't have the guys over for Football Sunday as often..have to cut your cell minutes...oh how deprived we are...
 

OntarioVanMan

Retired Expediter
Owner/Operator
Things ALWAYS change in business. There is nothing new under the sun. Plants open and close. production shifts. Some lines do better, some not as good. The only new thing is the massive government regulations on the auto industry. Over 100 million dollars of new regs to counteract "Global Warming", whatever that is. Last winter was one of the colder in years and this one is shaping up to be a VERY cold one. A lot of the plants that they are closing are old or taxes are too high in that area. The move to Canada is directly related to the Canadians DROP in the business tax rate. Low taxes are the key. Lower them and production will go up. Raise them and it will go down. Government CANNOT create wealth or REAL jobs. Only private industry can do that. Layoutshooter

That too they are dealing with a level headed union in the CAW as opposed to the UAW...Is it an accident that most of the popular models are built in Canada?
 
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