March trucking index- not the bottom, yet.

[GMAN]

I thought that you were talking about gross rates. I just thought it would be good to clarify what the truck is making for those who are not familiar with this industry and how rates are calculated. It sounds like you are doing pretty well with the rates you are getting, Lowrange, even after your carrier gets their cut. There are some running out here not doing nearly as well.

[lowrange]

I thought that you were talking about gross rates. I just thought it would be good to clarify what the truck is making for those who are not familiar with this industry and how rates are calculated. It sounds like you are doing pretty well with the rates you are getting, Lowrange, even after your carrier gets their cut. There are some running out here not doing nearly as well.

It's a good deal. Honestly, I'm doing well to get 1500 miles a week, but at least those are decent paying miles. I'm always heavy, and the product moves. Tankwashes generally take a day, particularly when you have to deadhead there before you deadhead to a pickup- that's not paid. You know all this, I just don't want to over-inflate or mislead anyone.

[poster]

I was wondering what the proof is for the belief that rates will go up when capacity of trucks goes down? How do we know that the amount of freight won't go down in the same proportion that the truck capacity does; like as freight volumes go down it knocks out trucks? Like the whole country is traveling in a handbasket and what is this hope of better trucking times based on?

[lowrange]

I was wondering what the proof is for the belief that rates will go up when capacity of trucks goes down? How do we know that the amount of freight won't go down in the same proportion that the truck capacity does; like as freight volumes go down it knocks out trucks? Like the whole country is traveling in a handbasket and what is this hope of better trucking times based on?

Good point. That's why we talk about upward and downward "price pressure." We know for sure that reduced capacity will result in upward price pressure. As you've indicated, other things like reduced economic activity could push prices down at the same time that reduced capacity is pushing up. Then, the way prices go depends on what is pushing the hardest, and there can be other factors.

One thing is certain, reduced capacity means upward price pressure.

[GMAN]

I was wondering what the proof is for the belief that rates will go up when capacity of trucks goes down?

History is the proof that rates will go up when capacity goes down. Everything runs in cycles. Economies go up and down. Depressions and recessions come at regular intervals as does inflation and prosperity. Supply and demand will dictate current pricing. I have seen some of this today. I was offered loads today at rates that I haven't seen in several months. It could be the tide is turning, the holiday coming up or more capacity leaving the market or simply being in the right place at the right time. More capacity means that there is more competition. When freight is sparse and capacity is high the result is that competition will drive prices down until one of two things happen. Either freight and shipments will increase to a level which capacity cannot handle it or enough capacity will be taken out of the market to push prices up. Capacity has been taken out due to so many taking freight at too cheap rates to be profitable.

How do we know that the amount of freight won't go down in the same proportion that the truck capacity does; like as freight volumes go down it knocks out trucks? Like the whole country is traveling in a handbasket and what is this hope of better trucking times based on?

The proportion of decrease in freight will not likely match the decrease in truck capacity although there will be some parody. On the other hand, it is entirely possible and probable that there will continue to be a decline in capacity. Those who are attempting to operate at or below operating costs will not survive. At some point capacity will decrease below demand. Again, history shows us that this is true. What is not known is the time factor. When external forces interfere with the natural order of economics then the time line can and will change. For instance, the government has interfered with the natural cycle of the world economy by taking over a big portion of the financial markets and is currently planning on taking over two of the largest auto manufacturers in the world. Market forces are not allowed to work. This will skew the way the market works and will ultimately result in these companies failing if they continue on the current path.

If you want to know whether the economy will improve then all you need do is look at our history. And based on history the next likely major even we should see is inflation. With all this debt the government is accumulating they will need to print more money. With the last spending spree they call the stimulus bill our taxes are expected to take 60% of our earnings. The people cannot pay much more in taxes. The only way the government can sustain this fallacy is to print more paper money. Since there is nothing to back up the money inflation will raise it's ugly head. I know this will happen because it has happened before.

[poster]

I'm wondering if there's a theory re spending basically all the savings and investments that one has based on inflation, because your money will buy more now than it will after inflation. Like now is the time to set yourself up for whatever you can.

[GMAN]

If there is a theory such as you mentioned it is flawed. If you spend all of your money and liquidate your investments then you won't have anything in reserve. Your investments are likely to increase in value along with any inflation. There are some investments that benefit from inflation.

[poster]

Regarding the "historical model" answers, what would be needed is a model that included a percent mix of countries that printed the amount of money we are, ones that have gone socialistic at the rate we are and ones that retained the amount of capitalism that we are. A serious study and analysis would be able to more closely predict the future of business.

[sidman82]

Produce season. Get it while you can.

[GMAN]

Regarding the "historical model" answers, what would be needed is a model that included a percent mix of countries that printed the amount of money we are, ones that have gone socialistic at the rate we are and ones that retained the amount of capitalism that we are. A serious study and analysis would be able to more closely predict the future of business.

If you want to compare some statistics from other countries then you can go back to the Great Depression which started in 1929. Hitler rose to power during this time. He blamed the Jews for the bad economy, took their businesses and murdered millions of Jews and others from the time he took power in the late 1930's until his death in the mid 1940's. He pushed a socialist agenda. Inflation ran rampant as he printed more money to fund his power and war effort. Italy did something similar with the rise of Mussolini during this same time period. It took a wheel barrel of Lira (Italian money) to buy a loaf of bread. Russia, China and other countries had similar experiences during the last century. The government will print more money and raise taxes to pay for the massive debt they are accumulating. When more money is printed then inflation runs out of control.

[lowrange]

I'm wondering if there's a theory re spending basically all the savings and investments that one has based on inflation, because your money will buy more now than it will after inflation. Like now is the time to set yourself up for whatever you can.

People do this all the time, buying gold is the main hedge against inflation. I guess it depends on how much cash you are sitting on.

I caught a glimpse of CNN and they had a panel of guests including David Gergin and I don't remember who else. I was interested to hear they are saying what I've been saying for awhile. We have to get used to new economic realities, the debt of the federal government now almost ensures that the America of the future won't be like the America of the past. They were saying we're accustomed to 3% GDP growth, but something like 1% will probably be the case for the unforeseeable future.

Bottom line, the average American will be poorer and we'll have to adjust out lifestyles to reflect that.

The good news is that much of what we live for in this country has been vanity. $35,000 SUVs that get 19 mpg really never made sense, IMO. Everybody had to have that look, though. We've been a rich country and we've been able to spend a fortune on the way we look. Much of it was just vanity. We can still have things like faith, family, food, housing, peace, conversations, goals and dreams. The other stuff though, a lot of people just won't be able make that showing. I think trucking will be worse than it was in the past but compared to how others are doing, trucking might look better than ever. The worst stress will come upon those who refuse to change and refuse to accept the new realities.

[Oso]

The good news is that much of what we live for in this country has been vanity. $35,000 SUVs that get 19 mpg really never made sense, IMO. Everybody had to have that look, though. We've been a rich country and we've been able to spend a fortune on the way we look. Much of it was just vanity. We can still have things like faith, family, food, housing, peace, conversations, goals and dreams. .....The worst stress will come upon those who refuse to change and refuse to accept the new realities.

IMHO the biggest problem is the suburbs, which are designed for single families who can afford cars. Back in the day my grandfather took the streetcar to work - which was a few kilometers away. It's pretty hard to adjust your lifestyle when there are no more streetcars and your office/plant/store is now 35-50 kilometers away.

Anyway, I was speaking to a broker this week who said that rates in Ontario are in the $1.50 cdn range - and that it costs $1.60 to run a truck. Is that about right?

[allan5oh]

You're absolutely right lowrange, too much completely discretionary spending. The majority of the job losses up to this point have been linked to discretionary spending, either directly or indirectly. Unfortunately many of these jobs are auto industry related. Just goes to show that the average American does NOT need a new car every 3 years!

If instead the average American reigned in their discretionary spending, and instead used it to pay off debt, expand their business, or invest, the economy would be much more stable. Sure some manufacturing jobs would be lost, but much better jobs would replace it like science and technology.

[heavyhaulerss]

I.M.O. this recovery as far as trucking goes will be a lot better than all other recoveries before it. the reason.. for the last 12 - 15 years any one could get financed for a truck. you may had to go a different route , like refinance your home, or take out a loan on your home via home equity, but the point is credit was available to anyone. not so anymore. with so many repo's & the credit crunch, buying a truck may be like trying to buy a new home now & may be that way for years. so when rates & freight pick back up, you just may not have every "Joe " able to go back out & get a truck.

[lowrange]

IMHO the biggest problem is the suburbs, which are designed for single families who can afford cars. Back in the day my grandfather took the streetcar to work - which was a few kilometers away. It's pretty hard to adjust your lifestyle when there are no more streetcars and your office/plant/store is now 35-50 kilometers away.

Anyway, I was speaking to a broker this week who said that rates in Ontario are in the $1.50 cdn range - and that it costs $1.60 to run a truck. Is that about right?

Yeah, that's a good point about how the country is structured. You hear about experiments to build communities that foster more efficient and healthy lifestyles, but I think they are few and far between. Things easier to convert to include having grandma move in, staying home and going to a community college, and like Allan says, cutting out all the discretionary spending.

Let's see, that $1.60 CDN is about $1.44 USD, I believe. Probably somebody else could answer this better, somebody who has their own authority and pays cargo insurance, has their own trailer, knows Canadian taxes and expenses... Then, there is the issue of backhauls- is that a headhaul rate or a backhaul rate...

Myself, I'm still running on decent margins down here in the US. It's not the big money guys used to make in my sector, but I don't have to wonder if I am burning up my energy and my truck for nothing. I don't take my well for granted, however. It could dry up just like anything else.