Interesting that a lot of used trucks are going oversees thereby slowing the amount available to put back into service.
Link: http://www.landlinemag.com/Archives/...r_daylight.htm
Article:
Quote:
Looking for daylight
The economic storm of 2008 leaves truckers wondering when it is going to end
By Jami Jones
senior editor
Many feel as though the economic storm of 2008 has left them dripping wet and hoping that someday soon the sun will surely break through the clouds.
What started with financial forecasters calling for rough economic conditions through only the first part of 2008 turned into a torrential downpour that still hadn’t let up heading into the end of the year.
Banks closed up shop. The “Big Three” automakers cut their work force and cut it again and again. Wall Street’s fickle bunch couldn’t seem to decide day to day which way the market would go, but opted for down more than up. Even OPEC was whining because fuel and oil prices were, in terms of recent history, unexpected record lows.
We’ll remember 2008 as a year where buzzwords like bailout, short sells, record lows, housing crunch, and credit meltdown invaded our language.
Many of us who didn’t know a bull from a bear found ourselves watching the daily data paint a grim picture of the financial crisis that started on Wall Street and entangled the rest of the economy.
On Main Street, fears are similar to that of the recession of the early 1980s, when the jobless rate hit 10.8 percent. It’s been speculated that unemployment could hit 8.5 percent before things start getting better.
As with any storm that won’t let up, most people are looking for signs that the clouds are going to break and there will be better times ahead, and soon.
Banks will loan again
Trucking has always been a barometer of the overall health of the economy. When consumers start buying less and the economy starts slowing down, trucking takes the hit first.
The upside is that when the economy starts to rebound and climb out of the depths, truckers lead the way.
The start of the upswing may not be that far off into the future either, according to Steve Freidell, senior vice president of DeWaay Financial Network.
“We already started to see some positive change occurring out there with the ... bailout program the Fed got passed through Congress,” Freidell said.
Banks started getting some of the bailout cash in early November. That was expected to give the economy a boost in a couple of different ways, he said.
First, while even asking for a loan through a chunk of 2008 was a joke in and of itself, that was likely to change because of the bailout money.
Banks make money a couple of different ways, by either investing in securities or loaning money. With the markets down and securities at a 50-year low, the one surefire way for banks to turn some profit is to start loaning money again.
So the days of holding onto money and not loaning it to anyone are numbered.
How loose credit will become remains to be seen. The “loose and wild” lending habits of banks in early the early 2000s have been blamed for the crash in the home and lending markets.
Freidell said hopefully banks will learn from those mistakes and avoid making them again. Nonetheless, as credit loosens up qualified lenders will be able to get their hands on loans again – sooner rather than later.
A stock market rebound will follow because businesses will be able to get loans for expansion and productivity.
The November general election is also certain to have an impact on the economy.
“Elections create a euphoric attitude. Regardless of who you voted for, you have to (acknowledge) that Obama has captured the country’s attention,” Freidell said. “There’s a perception, be it right or wrong, that he will be able to turn things around quickly.”
Psychology plays a huge roll in economic conditions. To oversimplify, if people think it’s good, they’ll spend. If they think it’s bad, they’ll hold on to their money.
“It’s just the psychology alone that, many times, will (boost economic growth), regardless of what actions the president might take,” Freidell said.
A sharp rebound in stocks could happen in the first quarter, maybe even sooner, because of that optimistic psychology. If that does happen, the optimism will build on itself and things will improve in our economic situation.
Psychology alone won’t bring the economy around. While the markets could experience a boost in the next few months, in order for full-blown economic growth to take a strong foothold, consumers will have to be willing to spend. Until that happens, economic news will continue to report on a down economy through the end of 2008 and into early 2009.
Wall Street will see times of volatility with the markets up and down at least through the first three quarters of 2009, according to Freidell.
Economically it will take a while for the U.S. to be out of the woods completely.
When might retirement funds dependent on the market recover?
Freidell said it could be three years, admitting he may be optimistic in his prediction.
While the recovery is ongoing, Freidell said that the injection of money into the banking system and business will more than likely drive the value of the dollar down.
With the dollar weaker than foreign currency, it makes U.S. goods cheaper. This could actually make the economy grow. There isn’t the incentive to import goods from other countries.
That helps U.S. manufacturing businesses grow because not only are their products being bought in the U.S., but they are also more attractive for export.
That will lead to more U.S. businesses beefing up their operations and even bringing production back to the states. Add that to President-elect Obama’s plan to give a tax benefit to companies that bring jobs back and domestic manufacturing could more than likely see a lot of growth in the future.
That seems all well and good, but what does that mean – specifically – for truckers. It will be growth led by truckers.
Truckers will lead
It is a virtual impossibility for the economy to recover without trucks.
With a shift from importing everything we seem to need, to manufacturing it again, that will mean freight, and a lot more of it, for truckers.
“When you import a car, you pick it up at the dock and deliver it to the dealership,” said Donald Broughton, a long-time trucking analyst with Avondale Partners.
“When you’re making those goods domestically, that’s a lot more ton miles.”
In other words, it’s going to take a heck of a lot more than just one truck ride from the port to the dealership for a car to hit the showroom floor.
Expanding on his car example, Broughton anecdotally pointed out that trucks will have to haul the ore to the steel plant, the steel to the parts plants, the parts to the manufacturing facilities. Finally, in the end, the cars to the dealerships. And that’s just scratching the surface.
In addition to building goods for U.S. consumers to buy rather than ship them in, the weak dollar means more U.S. manufactured goods will be exported. So exporting freight lanes to the ports and train yards are certain to get a lot busier through the course of this economic recovery.
Freight, and a lot of it, is coming. And truckers who have found shelter in the economic storm of 2008 are in prime position to reap some huge rewards. A lot of those will be owner-operators, too.
Owner-operators: no strangers to the rain
Through a big chunk of 2008, more trucks were shut down because of companies closing than at any other time in history, according to Broughton. Although it was about the same number of companies that failed in the downturn of 2000 to 2001, the size of the companies failing in 2008 was much larger.
“The bulk of the market remains owner-operators and small companies, and it’s clear that the small guys will be the most impacted,” said Jon Starks, transportation analyst for FTR Associates. “The larger fleets continue to show strong asset sheets, although it may cost them more to get less.”
Starks stressed the resilience of owner-operators. “The owner-operator, in theory, has been in demise for the past 20 years or so,” Starks said, “but they’re still kicking.”
And they will continue to. “All of the large fleets have been downsizing … and these owner-operators will be that swing capacity when freight comes back,” he said.
As the fleets have downsized, there really wasn’t much of a market for used equipment, so a lot of it went overseas. There isn’t a glut on the used truck market the way there was in the early 2000s.
The return of freight
Fact: the freight will come back. The math is pretty simple from there. With fewer trucks hauling more freight, shippers will be competing for truckers to haul their freight by paying better rates – really good rates if capacity is very tight.
Owner-operators will be the most nimble in the recovering market. It’s easier for a one-man, one-truck operation to maneuver into new or expanding freight lanes and pick up new business.
With a potential shortage of used trucks on the horizon and the downsizing in manufacturing many of the heavy-duty truck manufacturers have gone through, it’s not likely fleets will be able to buy trucks and trailers to accommodate the inevitable deluge of freight.
That will put owner-operators who took care of business during the downturn of ’08 in the enviable position of being able not only to pick and choose from high-paying freight if they continue under their own authority, but also to pick and choose a company to lease on with. In either case, rates will be good.
When will those rates hit? Obviously, it remains to be seen.
The moves being made by the federal government will put the floor in, but those things take time.
Estimates vary on the recovery of freight volume, with some estimates saying truckers may have to wait until 2010 for healthy freight levels return.
Broughton and Freidell think some economic health should return sometime in the second quarter of 2009. That could very well mark the start of a much-needed infusion of freight.
“In terms of freight levels, we could get back to where we were at the end of the first quarter through the second quarter of 2008,” Broughton said. “It’s very possible the second quarter of ’09 will be a ‘lather, rinse, repeat’ of the second quarter of ’08.”
In February 2008, freight levels had pretty much bottomed out and the trucking industry started to enjoy a bounce back in freight levels. Then skyrocketing fuel costs hit the scene slowing the economy and ending the uptick in freight.
In predicting economic growth that will lead to more freight for truckers, both Broughton and Freidell cautioned that a repeat of record fuel prices in 2009 could most certainly put a damper on any growth.
“As long as commodities don’t spike through the roof like they did (in 2008), then the rebound in demand should indeed help pull us out,” Broughton said.LL
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Looking for daylight
The economic storm of 2008 leaves truckers wondering when it is going to end
By Jami Jones
senior editor
Many feel as though the economic storm of 2008 has left them dripping wet and hoping that someday soon the sun will surely break through the clouds.
What started with financial forecasters calling for rough economic conditions through only the first part of 2008 turned into a torrential downpour that still hadn’t let up heading into the end of the year.
Banks closed up shop. The “Big Three” automakers cut their work force and cut it again and again. Wall Street’s fickle bunch couldn’t seem to decide day to day which way the market would go, but opted for down more than up. Even OPEC was whining because fuel and oil prices were, in terms of recent history, unexpected record lows.
We’ll remember 2008 as a year where buzzwords like bailout, short sells, record lows, housing crunch, and credit meltdown invaded our language.
Many of us who didn’t know a bull from a bear found ourselves watching the daily data paint a grim picture of the financial crisis that started on Wall Street and entangled the rest of the economy.
On Main Street, fears are similar to that of the recession of the early 1980s, when the jobless rate hit 10.8 percent. It’s been speculated that unemployment could hit 8.5 percent before things start getting better.
As with any storm that won’t let up, most people are looking for signs that the clouds are going to break and there will be better times ahead, and soon.
Banks will loan again
Trucking has always been a barometer of the overall health of the economy. When consumers start buying less and the economy starts slowing down, trucking takes the hit first.
The upside is that when the economy starts to rebound and climb out of the depths, truckers lead the way.
The start of the upswing may not be that far off into the future either, according to Steve Freidell, senior vice president of DeWaay Financial Network.
“We already started to see some positive change occurring out there with the ... bailout program the Fed got passed through Congress,” Freidell said.
Banks started getting some of the bailout cash in early November. That was expected to give the economy a boost in a couple of different ways, he said.
First, while even asking for a loan through a chunk of 2008 was a joke in and of itself, that was likely to change because of the bailout money.
Banks make money a couple of different ways, by either investing in securities or loaning money. With the markets down and securities at a 50-year low, the one surefire way for banks to turn some profit is to start loaning money again.
So the days of holding onto money and not loaning it to anyone are numbered.
How loose credit will become remains to be seen. The “loose and wild” lending habits of banks in early the early 2000s have been blamed for the crash in the home and lending markets.
Freidell said hopefully banks will learn from those mistakes and avoid making them again. Nonetheless, as credit loosens up qualified lenders will be able to get their hands on loans again – sooner rather than later.
A stock market rebound will follow because businesses will be able to get loans for expansion and productivity.
The November general election is also certain to have an impact on the economy.
“Elections create a euphoric attitude. Regardless of who you voted for, you have to (acknowledge) that Obama has captured the country’s attention,” Freidell said. “There’s a perception, be it right or wrong, that he will be able to turn things around quickly.”
Psychology plays a huge roll in economic conditions. To oversimplify, if people think it’s good, they’ll spend. If they think it’s bad, they’ll hold on to their money.
“It’s just the psychology alone that, many times, will (boost economic growth), regardless of what actions the president might take,” Freidell said.
A sharp rebound in stocks could happen in the first quarter, maybe even sooner, because of that optimistic psychology. If that does happen, the optimism will build on itself and things will improve in our economic situation.
Psychology alone won’t bring the economy around. While the markets could experience a boost in the next few months, in order for full-blown economic growth to take a strong foothold, consumers will have to be willing to spend. Until that happens, economic news will continue to report on a down economy through the end of 2008 and into early 2009.
Wall Street will see times of volatility with the markets up and down at least through the first three quarters of 2009, according to Freidell.
Economically it will take a while for the U.S. to be out of the woods completely.
When might retirement funds dependent on the market recover?
Freidell said it could be three years, admitting he may be optimistic in his prediction.
While the recovery is ongoing, Freidell said that the injection of money into the banking system and business will more than likely drive the value of the dollar down.
With the dollar weaker than foreign currency, it makes U.S. goods cheaper. This could actually make the economy grow. There isn’t the incentive to import goods from other countries.
That helps U.S. manufacturing businesses grow because not only are their products being bought in the U.S., but they are also more attractive for export.
That will lead to more U.S. businesses beefing up their operations and even bringing production back to the states. Add that to President-elect Obama’s plan to give a tax benefit to companies that bring jobs back and domestic manufacturing could more than likely see a lot of growth in the future.
That seems all well and good, but what does that mean – specifically – for truckers. It will be growth led by truckers.
Truckers will lead
It is a virtual impossibility for the economy to recover without trucks.
With a shift from importing everything we seem to need, to manufacturing it again, that will mean freight, and a lot more of it, for truckers.
“When you import a car, you pick it up at the dock and deliver it to the dealership,” said Donald Broughton, a long-time trucking analyst with Avondale Partners.
“When you’re making those goods domestically, that’s a lot more ton miles.”
In other words, it’s going to take a heck of a lot more than just one truck ride from the port to the dealership for a car to hit the showroom floor.
Expanding on his car example, Broughton anecdotally pointed out that trucks will have to haul the ore to the steel plant, the steel to the parts plants, the parts to the manufacturing facilities. Finally, in the end, the cars to the dealerships. And that’s just scratching the surface.
In addition to building goods for U.S. consumers to buy rather than ship them in, the weak dollar means more U.S. manufactured goods will be exported. So exporting freight lanes to the ports and train yards are certain to get a lot busier through the course of this economic recovery.
Freight, and a lot of it, is coming. And truckers who have found shelter in the economic storm of 2008 are in prime position to reap some huge rewards. A lot of those will be owner-operators, too.
Owner-operators: no strangers to the rain
Through a big chunk of 2008, more trucks were shut down because of companies closing than at any other time in history, according to Broughton. Although it was about the same number of companies that failed in the downturn of 2000 to 2001, the size of the companies failing in 2008 was much larger.
“The bulk of the market remains owner-operators and small companies, and it’s clear that the small guys will be the most impacted,” said Jon Starks, transportation analyst for FTR Associates. “The larger fleets continue to show strong asset sheets, although it may cost them more to get less.”
Starks stressed the resilience of owner-operators. “The owner-operator, in theory, has been in demise for the past 20 years or so,” Starks said, “but they’re still kicking.”
And they will continue to. “All of the large fleets have been downsizing … and these owner-operators will be that swing capacity when freight comes back,” he said.
As the fleets have downsized, there really wasn’t much of a market for used equipment, so a lot of it went overseas. There isn’t a glut on the used truck market the way there was in the early 2000s.
The return of freight
Fact: the freight will come back. The math is pretty simple from there. With fewer trucks hauling more freight, shippers will be competing for truckers to haul their freight by paying better rates – really good rates if capacity is very tight.
Owner-operators will be the most nimble in the recovering market. It’s easier for a one-man, one-truck operation to maneuver into new or expanding freight lanes and pick up new business.
With a potential shortage of used trucks on the horizon and the downsizing in manufacturing many of the heavy-duty truck manufacturers have gone through, it’s not likely fleets will be able to buy trucks and trailers to accommodate the inevitable deluge of freight.
That will put owner-operators who took care of business during the downturn of ’08 in the enviable position of being able not only to pick and choose from high-paying freight if they continue under their own authority, but also to pick and choose a company to lease on with. In either case, rates will be good.
When will those rates hit? Obviously, it remains to be seen.
The moves being made by the federal government will put the floor in, but those things take time.
Estimates vary on the recovery of freight volume, with some estimates saying truckers may have to wait until 2010 for healthy freight levels return.
Broughton and Freidell think some economic health should return sometime in the second quarter of 2009. That could very well mark the start of a much-needed infusion of freight.
“In terms of freight levels, we could get back to where we were at the end of the first quarter through the second quarter of 2008,” Broughton said. “It’s very possible the second quarter of ’09 will be a ‘lather, rinse, repeat’ of the second quarter of ’08.”
In February 2008, freight levels had pretty much bottomed out and the trucking industry started to enjoy a bounce back in freight levels. Then skyrocketing fuel costs hit the scene slowing the economy and ending the uptick in freight.
In predicting economic growth that will lead to more freight for truckers, both Broughton and Freidell cautioned that a repeat of record fuel prices in 2009 could most certainly put a damper on any growth.
“As long as commodities don’t spike through the roof like they did (in 2008), then the rebound in demand should indeed help pull us out,” Broughton said.LL
[email protected]
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