WEBVTT - We're In the Midst of Trucking Bloodbath 2.0 0:00:10.080 --> 0:00:14.640 Hello, and welcome to another episode of The Odd Loved Podcast. 0:00:14.680 --> 0:00:15.880 Time Joe whysan. 0:00:15.640 --> 0:00:17.080 Thal and I'm Tracy Alloway. 0:00:17.400 --> 0:00:21.040 Tracy, you know, we've been talking about supply chain and 0:00:21.160 --> 0:00:24.760 logistics questions for years and it's nice because we're now 0:00:24.840 --> 0:00:27.160 starting you know, we talked about the bullwhip effect big 0:00:27.200 --> 0:00:30.120 time theme, but we're actually starting to see like the 0:00:30.240 --> 0:00:34.800 opposite sides of these cycles in pretty extreme degrees than 0:00:34.840 --> 0:00:36.280 the first time we started covering them. 0:00:36.400 --> 0:00:36.680 Yeah. 0:00:36.720 --> 0:00:39.240 Well, for those who don't remember, one of our favorite 0:00:39.240 --> 0:00:41.960 things ever, the bullwhip effect is this idea where you 0:00:42.040 --> 0:00:46.159 have these small changes or sometimes large changes in customer 0:00:46.240 --> 0:00:49.040 demand and that sort of ripples through the rest of 0:00:49.080 --> 0:00:51.800 the supply chain, so all the way through to retailers 0:00:52.000 --> 0:00:56.639 and suppliers and manufacturers, and it feels like we are seeing, 0:00:56.840 --> 0:00:59.800 as you said, Joe, the reverse of some of the 0:01:00.040 --> 0:01:02.200 first ripples that we saw. So if you think back 0:01:02.200 --> 0:01:05.679 to the pandemic, there was an expectation that people weren't 0:01:05.720 --> 0:01:08.440 going to buy anything, and so we had a lot 0:01:08.480 --> 0:01:12.640 of retailers and manufacturers who cut back, but in actuality, 0:01:13.000 --> 0:01:15.640 people who were stuck at home did end up buying 0:01:15.720 --> 0:01:18.880 quite a lot, and so everyone had to scramble to 0:01:19.040 --> 0:01:22.000 get things to them so to produce the goods that 0:01:22.040 --> 0:01:25.919 people actually wanted. At that time, we saw inventories start 0:01:25.959 --> 0:01:28.520 to build up. And now there's the question of whether 0:01:28.560 --> 0:01:31.000 we're seeing all of us go into revers. 0:01:30.800 --> 0:01:33.679 Yeah, and you know, we're recording this on May second, 0:01:33.840 --> 0:01:35.840 and I was last week. I was spending a lot 0:01:35.840 --> 0:01:37.400 of both of us were spending a lot of time 0:01:37.440 --> 0:01:40.920 reading through earnings calls, and a lot of my interest 0:01:41.040 --> 0:01:43.800 was sort of like on the inflation consumer pricing standpoint. 0:01:44.080 --> 0:01:47.360 But basically every company I saw said, like, the one 0:01:47.440 --> 0:01:51.080 area where they're definitely seeing easing isn't freight costs. Yeah, 0:01:51.280 --> 0:01:52.760 they all they all said. 0:01:52.520 --> 0:01:55.400 That, although you know, you mentioned pricing, and this is 0:01:55.440 --> 0:01:58.480 something that we've been covering for you know, that we've 0:01:58.520 --> 0:02:00.920 been interested in for a while now. But this idea 0:02:00.920 --> 0:02:06.080 of price over volume, and if companies are sacrificing volume 0:02:06.160 --> 0:02:08.400 in order to jack up prices or making that up 0:02:08.440 --> 0:02:12.200 with price increases, then it suggests there are fewer goods 0:02:12.520 --> 0:02:16.480 moving around, right, which you would think would be bad 0:02:16.720 --> 0:02:19.840 for the companies that actually move and ship those goods. 0:02:20.000 --> 0:02:22.200 I think it definitely has been and I think if 0:02:22.200 --> 0:02:24.760 you look at the lines of any sort of truck 0:02:24.840 --> 0:02:28.519 or freight pricing index and also ocean freight. It's pretty 0:02:28.600 --> 0:02:31.080 far down, so we're going to dive into what's going on. 0:02:31.200 --> 0:02:34.600 We know the lines are down for freight pricing, but 0:02:34.680 --> 0:02:37.440 the question is like, how much of this is a 0:02:37.560 --> 0:02:41.480 trucking or freight specific story over supply leading to undersupply 0:02:41.560 --> 0:02:44.560 leading to oversupply of capacity versus something that says something 0:02:44.600 --> 0:02:48.000 about the broader economy. We have two guests are friends 0:02:48.040 --> 0:02:51.440 from freight Waves. We have Craig Fuller, founder and CEO 0:02:51.520 --> 0:02:53.799 of Freight Waves, who we first talked to I think 0:02:54.000 --> 0:02:57.640 two years ago, and out Rachel Kremac, editorial director of 0:02:57.680 --> 0:03:02.520 Freight Waves, who recently wrote a piece declaring trucking blood 0:03:02.520 --> 0:03:05.639 bath two point zh. Thank you both for joining us. Rachel, wait, 0:03:05.720 --> 0:03:06.839 what was trucking blood bath? 0:03:06.880 --> 0:03:07.480 One point zero? 0:03:08.040 --> 0:03:08.320 Yeah? 0:03:08.360 --> 0:03:12.440 So in twenty nineteen, the trucking industry, when we're recession, 0:03:13.200 --> 0:03:15.760 really as a result of a lot of these Trump tariffs, 0:03:15.840 --> 0:03:18.720 a lot of manufacturing in the US started to really 0:03:18.720 --> 0:03:21.760 slow down, and as a result, that caused this slow 0:03:21.840 --> 0:03:26.600 down more broadly in trucking. This blood bath we're seeing 0:03:26.680 --> 0:03:28.640 right now is more on the I would say more 0:03:28.680 --> 0:03:32.400 on the consumer side rather than strictly on the manufacturing side. 0:03:32.840 --> 0:03:36.720 But yeah, just generally, when we see these big drawbacks 0:03:36.760 --> 0:03:41.360 in various industries, that results in drawbacks in the trucking 0:03:41.360 --> 0:03:42.080 industry as well. 0:03:42.440 --> 0:03:46.520 Yeah, so this is a notoriously cyclical industry. And I'm 0:03:46.520 --> 0:03:50.160 glad we started out with trucking bloodbath one point, oh, 0:03:50.240 --> 0:03:54.119 because that kind of encapsulates the idea. But what are 0:03:54.160 --> 0:03:57.200 we seeing in terms of the data now? Because there 0:03:57.200 --> 0:03:59.920 are all these different cool charts that you know, for 0:04:00.200 --> 0:04:02.800 waves especially, it puts together all these different things you 0:04:02.840 --> 0:04:07.280 can look at, like the outbound tender rejection index, things 0:04:07.320 --> 0:04:10.720 like the contract load accepted volume index. Walk us through 0:04:10.720 --> 0:04:12.320 what you're seeing in terms of the numbers. 0:04:12.720 --> 0:04:14.920 Yeah, you know, if you look at what's happened in 0:04:14.960 --> 0:04:17.559 the trucking industry, and this also happened in twenty nineteen, 0:04:17.600 --> 0:04:19.120 So not only did you see a slow down in 0:04:19.839 --> 0:04:23.239 volume related to for the industrial economy, but you also 0:04:23.279 --> 0:04:25.520 saw an overbuild of capacity. So there was an ELED 0:04:25.640 --> 0:04:28.640 mandate which really regulated the logs or how many hours 0:04:28.640 --> 0:04:31.320 the driver and the monitoring of those hours the drivers 0:04:31.320 --> 0:04:34.680 could have in the truck. And because everyone expected a 0:04:34.720 --> 0:04:37.599 massive capacity crunch. The opposite happened. The market corrected, and 0:04:37.680 --> 0:04:41.720 actually a large capacity build happened in the industry. This 0:04:41.839 --> 0:04:45.440 also happened during COVID, is that there was a massive 0:04:45.440 --> 0:04:49.880 shortage of capacity and everyone sort of, you know, thought, hey, 0:04:49.920 --> 0:04:52.200 I can start a trucking company, I can become a 0:04:52.279 --> 0:04:54.640 you know, an owner operator. I go out and buy 0:04:54.640 --> 0:04:57.360 a truck. And they just flooded the market full of capacity. 0:04:57.400 --> 0:05:00.480 And what we have is a situation where, really, over 0:05:00.520 --> 0:05:03.000 the last you know, since twenty eighteen, we've seen twenty 0:05:03.040 --> 0:05:06.040 eight percent increase of the dispatchable capacities. We've seen a 0:05:06.080 --> 0:05:11.080 massive surge in trucking capacity. Over the last just year, 0:05:11.760 --> 0:05:14.240 there's been an increase as much as eight percent of 0:05:14.240 --> 0:05:17.760 the dispatchable capacity of the market. So this situation where 0:05:17.800 --> 0:05:22.000 it's completely flooded. There's so much capacity out there, and 0:05:22.560 --> 0:05:26.800 because trucking is a capacity constrained market, the market, the 0:05:26.839 --> 0:05:30.440 providers of trucking, the trucking companies, in the fleet operators 0:05:30.720 --> 0:05:33.159 are always trying to add trucks to sort of match 0:05:33.200 --> 0:05:36.719 that demand. Well, what happened is the market just over corrected. 0:05:37.279 --> 0:05:41.320 Classic commodity a boom cycle that has now played out 0:05:41.760 --> 0:05:44.960 the tender rejection index that you mentioned measures the percent 0:05:45.120 --> 0:05:48.760 of freight that is rejected, and the reason that's important 0:05:48.839 --> 0:05:51.839 is it helps us measure the balance of supplying demand. 0:05:51.920 --> 0:05:55.159 So looking at volume is only one aspect of it, 0:05:55.200 --> 0:05:57.520 but you also have to look at capacity to understand 0:05:58.120 --> 0:06:00.560 really the metrics of the industry. So we look at 0:06:00.560 --> 0:06:03.240 the tender rejection index because what it tells us is 0:06:04.000 --> 0:06:07.440 how many loads are getting rejected. So think about an airline. 0:06:07.720 --> 0:06:11.000 You have an airplane and there's a finite number of seats. Well, 0:06:11.040 --> 0:06:13.040 everybody who's ever been on an airplane knows that the 0:06:13.080 --> 0:06:17.560 airlines want to overbook that aircraft. That's the goal. Anybody 0:06:17.560 --> 0:06:20.640 that runs a hotel wants to overbook the rooms and 0:06:20.680 --> 0:06:23.920 they're going to intentionally bump some players in that market. 0:06:24.600 --> 0:06:26.800 And the same thing happens in trucking is the trucking 0:06:26.839 --> 0:06:30.520 companies will over commit, to overcommit to capacity versus what 0:06:30.520 --> 0:06:34.760 they can actually handle, knowing that at times they're going 0:06:34.839 --> 0:06:36.960 to have to reject some freight. So back in the 0:06:36.960 --> 0:06:40.479 peak cycle a year ago, we saw rejection rates as 0:06:40.560 --> 0:06:43.120 high as thirty percent, So that meant thirty percent of 0:06:43.160 --> 0:06:46.159 all truckloads in the market in the contract market are 0:06:46.200 --> 0:06:48.640 being turned down. That rejection rate right now is about 0:06:48.640 --> 0:06:51.920 two point seven percent, which is the lowest it's ever 0:06:51.960 --> 0:06:55.080 been outside the COVID extremes, and it just means the 0:06:55.080 --> 0:06:57.560 market is completely flooded with capacity. 0:06:58.240 --> 0:07:00.520 And Craig mentions an interesting point, which is that in 0:07:00.600 --> 0:07:04.440 twenty eighteen there wasn't enough trucking capacity. It was a 0:07:04.520 --> 0:07:07.960 really hot time in the trucking industry. And that followed 0:07:08.320 --> 0:07:11.080 and as a result, a lot of you know, new players, 0:07:11.200 --> 0:07:14.040 new employees of these trucking firms, started to flood the market. 0:07:14.760 --> 0:07:18.360 And you know, as soon as that capacity really started 0:07:18.360 --> 0:07:21.360 to ramp up, of course that demand for trucking services 0:07:21.360 --> 0:07:22.360 also declines. 0:07:22.760 --> 0:07:24.200 The same thing is sort of happening this time. 0:07:24.240 --> 0:07:27.000 There was an incredibly hot market in at the end 0:07:27.000 --> 0:07:30.360 of twenty twenty through twenty twenty one, you know, even 0:07:30.400 --> 0:07:36.160 beginning of twenty twenty two. And yeah, basically, basically, these 0:07:36.280 --> 0:07:40.080 really hot times follow these incredibly slow times, and a 0:07:40.080 --> 0:07:42.520 lot of this does relate to sort of how we talk. 0:07:42.400 --> 0:07:43.280 About the trucking industry. 0:07:43.280 --> 0:07:45.680 There's a lot of talk of a truck driver shortage, 0:07:46.160 --> 0:07:48.440 and when you keep hearing, oh, there's a shortage in 0:07:48.440 --> 0:07:50.600 this industry, I should jump in, I should you know, 0:07:50.640 --> 0:07:53.040 make a quick box. I should you know, really profit 0:07:53.120 --> 0:07:57.120 off of this? Too many folks get in, and pretty 0:07:57.160 --> 0:07:59.400 soon after that, you know, what goes up must go down. 0:08:00.040 --> 0:08:02.840 I mentioned the sort of like analogy to airlines, but 0:08:02.920 --> 0:08:05.040 I think like the key thing there and sort of 0:08:05.040 --> 0:08:08.000 why we get these cycles that are sometimes like economic 0:08:08.120 --> 0:08:11.720 cycles magnified, is that you can't just add new airline 0:08:11.840 --> 0:08:14.880 capacity trivially. Whereas I think the first time we did 0:08:14.880 --> 0:08:17.440 a trucking episode, like we joke should we start a 0:08:17.440 --> 0:08:20.400 trucking company? Should Tracy start a trucking company? And the 0:08:20.480 --> 0:08:23.200 lesson is like, it really is that simple to get 0:08:23.240 --> 0:08:23.840 into the space. 0:08:24.120 --> 0:08:26.840 There's no bears to entry. So you think about so 0:08:26.880 --> 0:08:29.280 a truck today probably cost you know, brand new trucks 0:08:29.280 --> 0:08:32.160 two hundred thousand, and used truck can be anywhere from 0:08:32.400 --> 0:08:35.480 you know, fifty to sixty thousand to you know, we're 0:08:35.520 --> 0:08:37.840 talking to relatively low mile truck you know, three to 0:08:37.880 --> 0:08:41.319 five years to one hundred thousand dollars. And so it's 0:08:41.360 --> 0:08:44.120 a situation where you know, the banks are happy to 0:08:44.160 --> 0:08:46.720 lend the trucking companies because they have this perception that 0:08:46.760 --> 0:08:50.080 trucking is always needed and because they believe that there's 0:08:50.120 --> 0:08:56.280 a perpetual driver shortage, they increasingly provide capital for would 0:08:56.320 --> 0:08:58.120 beyond our operators to go out and start the down 0:08:58.120 --> 0:09:01.080 trucking company. And because of the ration of load boards 0:09:01.160 --> 0:09:04.680 and digital matching apps, it's never been easier to actually 0:09:04.840 --> 0:09:08.480 access freight and access the brokerage market. And so what 0:09:08.600 --> 0:09:12.240 happens is that you have new entrepreneurs that look at 0:09:12.280 --> 0:09:14.520 it and say, hey, there's no real I don't have 0:09:14.559 --> 0:09:18.280 to be that sophisticated to run a business. This isn't required. 0:09:18.360 --> 0:09:21.560 It's not a very complex job, and it's incredibly easy 0:09:21.600 --> 0:09:24.160 to get started. And so when they see the fundamentals 0:09:24.160 --> 0:09:25.959 of the market really heat up like it was over 0:09:26.000 --> 0:09:29.000 the last couple of years, you know, really during COVID, 0:09:29.040 --> 0:09:31.800 during the code peak cycle, they get very attracted to 0:09:31.840 --> 0:09:33.880 those markets and they're thinking, you know, you think about 0:09:33.880 --> 0:09:37.400 the fact that we're talking at the peak four dollars 0:09:37.480 --> 0:09:40.000 a mile, and to put that in perspective, a truck 0:09:40.040 --> 0:09:43.000 will do approximately two thousand miles a week. So on 0:09:43.120 --> 0:09:46.680 four dollars a mile, we're talking about somebody making approximately 0:09:47.360 --> 0:09:50.240 three fifty to four hundred thousand dollars a year. Wow, 0:09:50.320 --> 0:09:54.280 And without any kind of formal education required, and so 0:09:55.120 --> 0:09:57.800 it attracts a lot of folks that look at it 0:09:57.880 --> 0:10:00.200 and say, hey, I can make a lot of money, 0:10:00.240 --> 0:10:03.000 I can do very well for my family. There isn't 0:10:03.080 --> 0:10:07.000 any sort of requirements of tenure to get into this industry. 0:10:07.000 --> 0:10:09.640 It's a you know, it is a trade, and it 0:10:09.679 --> 0:10:12.320 doesn't require a lot of sort of understanding of how 0:10:12.840 --> 0:10:15.960 the market is constructed. So it tended to attract a 0:10:15.960 --> 0:10:18.199 lot of folks that really weren't cut out or are 0:10:18.200 --> 0:10:20.079 not cut out for the downcycle. And that's what we're 0:10:20.080 --> 0:10:22.079 seeing right now is a situation where a lot of 0:10:22.080 --> 0:10:23.640 people are attracted to the peak of the market that 0:10:23.760 --> 0:10:26.520 went out and bought the expensive trucks. You know, those 0:10:26.520 --> 0:10:28.880 trucks I talked about that were that are used where 0:10:29.120 --> 0:10:32.120 sort of precycle could have been forty thousand dollars at 0:10:32.120 --> 0:10:34.240 the peak of the cycle. Those same trucks that were 0:10:34.240 --> 0:10:37.200 five years old at forty thousand pre COVID, we're going 0:10:37.200 --> 0:10:39.000 for one hundred and forty one hundred and fifty thousand. 0:10:39.000 --> 0:10:40.960 They were actually going for more that we're five years 0:10:41.000 --> 0:10:43.640 old than what you would have bought a new truck 0:10:43.720 --> 0:10:45.760 pre COVID, And so they bought at the top of 0:10:45.760 --> 0:10:49.080 the market, and they anticipated that four dollars a vial 0:10:49.559 --> 0:10:52.760 rate staying perpetual and we're not prepared for the downturn 0:10:52.800 --> 0:10:53.800 which we're facing right now. 0:10:54.000 --> 0:10:56.320 Well, so, just on this point, I mean, it is 0:10:56.360 --> 0:10:58.600 true that we have seen a lot of the smaller players, 0:10:58.679 --> 0:11:02.120 the independent owner op operators, start to get out and 0:11:02.160 --> 0:11:05.160 take capacity out, as evidence by the truck prices that 0:11:05.200 --> 0:11:08.600 you just mentioned, and I guess people giving up their licenses. 0:11:08.640 --> 0:11:12.040 I think it's called revocations trucking authority and you'll have 0:11:12.080 --> 0:11:16.160 to take me through the latest numbers on those. But 0:11:16.440 --> 0:11:19.400 at the same time, it's true that we've seen some 0:11:19.480 --> 0:11:25.120 of the really big players add capacity. What's going on there? 0:11:25.240 --> 0:11:27.880 Is this just like a market share grab or are 0:11:27.920 --> 0:11:31.559 people really scarred from the previous couple of years where 0:11:31.640 --> 0:11:33.960 there was so much demand that they were kind of 0:11:34.679 --> 0:11:35.960 struggling to catch up with. 0:11:36.160 --> 0:11:39.760 Yeah, the problem was through twenty twenty twenty one, early 0:11:39.800 --> 0:11:43.200 twenty two, most of twenty two. Really that usually these 0:11:43.280 --> 0:11:46.400 large fleets prefer to buy new trucks, they don't usually 0:11:46.440 --> 0:11:47.960 prefer to buy use trucks. 0:11:48.360 --> 0:11:49.719 Obviously, through the. 0:11:49.679 --> 0:11:54.679 Early twenty twenties there was no manufacturing capacity. So these 0:11:54.880 --> 0:11:58.640 large trucking fleets, you know, these large public companies, they 0:11:58.679 --> 0:12:02.720 were not able to span capacity. Now, on the one 0:12:02.840 --> 0:12:07.240 to five truck fleet side, we saw that portion of 0:12:07.240 --> 0:12:11.760 the market really start to boom in the early twenty twenties. 0:12:12.120 --> 0:12:14.360 Large fleets on the other hand, group by maybe their 0:12:14.360 --> 0:12:17.920 capacity at like one to four percent I believe was 0:12:17.960 --> 0:12:22.800 the number. So yeah, basically what's going on now is 0:12:22.880 --> 0:12:25.360 there are too many of these small players. In the 0:12:25.400 --> 0:12:27.960 first quarter of this year alone, we saw nine thousand 0:12:28.200 --> 0:12:32.199 trucking fleets have their authorities revoked. At the same time, 0:12:32.400 --> 0:12:36.960 these large fleets are pretty rapidly expanding, pretty rapidly hiring. 0:12:37.280 --> 0:12:39.839 That's kind of how the market is shaped. Is shaking 0:12:39.920 --> 0:12:40.520 up right now. 0:12:40.760 --> 0:12:43.480 And it's not just a access to trucks. So trucks 0:12:43.520 --> 0:12:45.720 is one thing, but it's also the driver. The driver 0:12:46.080 --> 0:12:49.480 population is really the capacity constraint. So you know, truck 0:12:49.640 --> 0:12:52.680 manufacturers can continue to produce trucks and if ultimately the 0:12:52.720 --> 0:12:55.840 larger cares felt like they had demand, they could bid 0:12:55.960 --> 0:12:57.679 up the new trucks and sort of they have a 0:12:57.720 --> 0:12:59.360 lot of power over that. The problem is that if 0:12:59.360 --> 0:13:01.920 they can't get dry rivers to populate those trucks. They're 0:13:01.960 --> 0:13:03.280 not going to go out and buy new trucks. And 0:13:03.280 --> 0:13:05.760 that's what really over the last couple of years, if 0:13:05.800 --> 0:13:07.920 you shoult of look at the COVID cycle is you know, 0:13:07.960 --> 0:13:11.560 from two thousand, late twenty twenty to really twenty two, 0:13:12.400 --> 0:13:14.959 they could not get new could not get truck drivers 0:13:15.440 --> 0:13:17.599 were they were losing a lot of drivers to the 0:13:17.679 --> 0:13:20.000 owner our operating market. So a driver saying, hey, I'm 0:13:20.000 --> 0:13:22.839 making you know, fifty sixty seventy thousand dollars years and 0:13:22.840 --> 0:13:25.040 over the road truck driver says, hey, why am I 0:13:25.160 --> 0:13:27.560 not making the two hundred or four hundred thousand dollars. 0:13:27.840 --> 0:13:29.480 So they went out and started their own trucking company. 0:13:29.480 --> 0:13:32.600 And those trucking companies dealt with what we call unseated trucks, 0:13:32.600 --> 0:13:35.599 whereas there isn't a driver, so they had their own 0:13:35.760 --> 0:13:39.880 sort of driver shortage inside their operation. And because of that, 0:13:40.640 --> 0:13:43.360 really what we end up with is a situation where 0:13:43.360 --> 0:13:46.280 they did not grow in the early part of the cycle, 0:13:46.440 --> 0:13:48.680 and now, because of the conditions in the market, a 0:13:48.720 --> 0:13:51.600 lot of those would be or had become owner operators 0:13:51.720 --> 0:13:56.800 or would be operators are now joining fleets. And that's 0:13:56.960 --> 0:13:59.880 enabling the larger companies to grow market share. 0:14:00.240 --> 0:14:02.520 Just real quickly. So before we move on and I 0:14:02.559 --> 0:14:05.280 forget to ask, at the peak, it was an average 0:14:05.280 --> 0:14:07.080 what four dollars a mile? What do we what's the 0:14:07.160 --> 0:14:08.760 latest freight wave stat on this? 0:14:08.920 --> 0:14:10.600 Yeah, so if you take out four dollars a mile, 0:14:10.640 --> 0:14:12.240 by the way, it includes fuel. If you take out 0:14:12.280 --> 0:14:14.560 fuel out of that equations is about three dollars and 0:14:14.559 --> 0:14:16.559 twenty cents a mile at the peak. But if you 0:14:16.600 --> 0:14:19.720 look at it from sort of net of fuel, you're 0:14:19.720 --> 0:14:22.800 around a dollar fifty six a mile. So we're talking 0:14:22.840 --> 0:14:25.640 about rates going down more than half of what they were. 0:14:26.000 --> 0:14:27.840 And there's a really important factor in this. It's just 0:14:27.880 --> 0:14:30.960 like your own income is a lot of the The 0:14:31.040 --> 0:14:33.440 rate per mile only tells you what the revenue is, 0:14:33.960 --> 0:14:35.760 doesn't tell you a lot about the cost components. And 0:14:35.800 --> 0:14:37.160 so one of the things to look at is the 0:14:37.200 --> 0:14:39.080 cost components. And we go back to that last quote 0:14:39.120 --> 0:14:42.440 unquote blood bath, the freight recession that happened in twenty nineteen. 0:14:43.040 --> 0:14:45.480 You know, the lowest rate ever painted and in our 0:14:45.560 --> 0:14:47.360 data was a dollar and this is net a fuel 0:14:47.400 --> 0:14:50.480 a dollar forty seven. We're to buck fifty six today. 0:14:50.640 --> 0:14:52.840 So you think about a nine cent increase. That sounds 0:14:52.840 --> 0:14:55.720 on the surface, okay, until you realize that the operating 0:14:55.760 --> 0:14:58.040 cost of trucking companies and I'm netting out fuel, I'm 0:14:58.040 --> 0:15:00.560 not including fuel in this equation, but operating costs for 0:15:00.600 --> 0:15:03.640 trucking companies increased by thirty cents a mile. So if 0:15:03.640 --> 0:15:06.960 you look at the net increase or the net decreases, 0:15:07.000 --> 0:15:10.000 we're talking about a situation where fleets are actually in 0:15:10.040 --> 0:15:13.920 a worse situation than the lowest paint in twenty nineteen 0:15:13.920 --> 0:15:16.080 by twenty one cents a mile for every mile they run. 0:15:16.600 --> 0:15:18.800 And that's just when they can get freed. A lot 0:15:18.840 --> 0:15:20.920 of the other sort of thing that hasn't factored into 0:15:20.920 --> 0:15:23.240 the rate because there is a point where carriers will 0:15:23.240 --> 0:15:26.080 just not take a load if it's below their operating cost. 0:15:26.600 --> 0:15:28.240 There's just not enough loads out there. So there's a 0:15:28.320 --> 0:15:32.120 combination of not enough demand combined with a low rate environment, 0:15:32.200 --> 0:15:34.400 which means it's pretty dire for a lot of these 0:15:34.400 --> 0:15:50.200 truck comments. 0:15:51.720 --> 0:15:54.960 So we've been talking a lot about the idiosyncrasies of 0:15:55.000 --> 0:15:58.680 the actual trucking industry. What are we seeing in terms 0:15:58.760 --> 0:16:01.480 of demand. Just to go back to our original framing 0:16:01.480 --> 0:16:04.280 of this, episode, which is, you know, the trucking bloodbath 0:16:04.320 --> 0:16:07.000 two point zero. How much of that is about the 0:16:07.160 --> 0:16:12.160 general economy and maybe demand for goods actually finally going 0:16:12.200 --> 0:16:16.400 down or companies needing to run down their inventories versus 0:16:16.480 --> 0:16:19.920 these industry specific issues that we've been discussing. 0:16:20.080 --> 0:16:23.440 So demand is approximately twenty nineteen levels right now, So 0:16:24.040 --> 0:16:25.640 you know, it depends on your perspective if you look 0:16:25.680 --> 0:16:28.040 at four years of if we went through an economy 0:16:28.080 --> 0:16:31.000 where it didn't grow for four years, because remember, trucking 0:16:31.040 --> 0:16:33.720 is directly correlated to the goods consumption of the economy, 0:16:33.800 --> 0:16:37.440 So you know, when trucking does well or the economy 0:16:37.440 --> 0:16:39.440 does well, trucking will do well, and when trucking's not 0:16:39.480 --> 0:16:41.680 doing well reflects on the sort of conditions of the 0:16:41.680 --> 0:16:43.560 goods economy. But if you sort of think about the 0:16:43.600 --> 0:16:46.320 fact that we're back to twenty nineteen levels that would 0:16:46.320 --> 0:16:49.120 suggest and a normal economy forget that COVID happened, that 0:16:49.160 --> 0:16:52.720 we've basically lost four years of growth or three years 0:16:52.720 --> 0:16:54.840 of growth, and so we're in a situation where twenty 0:16:54.880 --> 0:16:58.640 eighteen levels in terms of volume combined with a real 0:16:58.840 --> 0:17:02.600 surge incity. You know, as I mentioned, you're up twenty 0:17:02.640 --> 0:17:05.520 eight percent from where we were just in twenty eighteen. 0:17:05.560 --> 0:17:08.000 Twenty eighteen was actually a slightly better market by about 0:17:08.040 --> 0:17:10.480 three percent of twenty nineteen levels. And so we're in 0:17:10.520 --> 0:17:13.399 a situation where now we've had so much capacity added, 0:17:13.800 --> 0:17:17.720 so much cost added, and volumes are basically back to 0:17:17.760 --> 0:17:20.080 where they were in twenty nineteen. So we're in a 0:17:20.080 --> 0:17:22.719 situation where there just isn't enough freight, and that I 0:17:22.760 --> 0:17:26.439 think really warns us. You know, trucking will lead the 0:17:26.480 --> 0:17:28.760 broader economy by as much as six months. And you 0:17:28.800 --> 0:17:31.080 saw this last year. We reported in the free Recession 0:17:31.600 --> 0:17:32.600 on March thirty first. 0:17:32.840 --> 0:17:34.800 You got a lot of pushback on that lot of 0:17:34.840 --> 0:17:36.280 I think you remember, Yeah. 0:17:36.119 --> 0:17:37.879 A ton of it. And the reason is that a 0:17:37.920 --> 0:17:40.800 lot of the data that people look at through traditional 0:17:40.840 --> 0:17:43.800 models and trucking are based on lagging data. So we 0:17:43.840 --> 0:17:46.120 use what we call high frequency data, which refetches every day, 0:17:46.119 --> 0:17:49.240 and it looks at the demand, real transactional data from 0:17:49.280 --> 0:17:52.080 shippers to carriers as one of the core data sets. Well, 0:17:52.080 --> 0:17:55.240 that data is way upstream, so it leads the broader 0:17:55.520 --> 0:17:58.440 sort of government data, traditional models by six months. You 0:17:58.480 --> 0:18:01.240 can actually look at it. We called the very early 0:18:01.280 --> 0:18:03.919 part of the cycle in COVID, as early as mid 0:18:04.000 --> 0:18:07.400 April of twenty twenty, at the point somebody on Bloomberg 0:18:07.480 --> 0:18:10.400 TV actually called me the most bullish guy in America 0:18:10.400 --> 0:18:13.000 at one point, because we were incredibly bullish about the 0:18:13.080 --> 0:18:15.680 v shape recovery. And it was really throughout the summer 0:18:15.720 --> 0:18:17.959 of twenty people were there was a lot of vitral 0:18:18.000 --> 0:18:20.760 directed at us because we were very bullish, and people 0:18:20.760 --> 0:18:22.760 couldn't understand how you could be so bullish when all 0:18:22.760 --> 0:18:25.800 the economic data was actually very soft. But the reality 0:18:25.840 --> 0:18:27.880 is that the data we look at, the high frequency data, 0:18:28.000 --> 0:18:30.239 leads those indicators. So when you think about it from 0:18:30.240 --> 0:18:32.160 the perspective, what does this mean for the goods economy? 0:18:32.400 --> 0:18:34.080 And I'm only talking to goods economy, and I'm talking 0:18:34.080 --> 0:18:38.120 about broader GDP, the approximate forty percent economy that's reliant 0:18:38.160 --> 0:18:42.120 upon trucking services to move their products. It does suggest 0:18:42.240 --> 0:18:47.600 that the US goods economy has continuing to slow and 0:18:47.760 --> 0:18:50.800 it doesn't bode well for really the indicators. And we 0:18:50.840 --> 0:18:53.640 saw that last year we called the freight recession, and 0:18:53.840 --> 0:18:55.919 you know the end of the first quarter, it was, 0:18:56.080 --> 0:18:58.600 you know, six weeks later when all of the big 0:18:58.640 --> 0:19:00.960 retailers came out and said they had too much inventory. 0:19:01.080 --> 0:19:03.280 Yeah, I wanted to ask just on this point. When 0:19:03.280 --> 0:19:06.840 it comes to the goods economy, are you seeing specific 0:19:06.960 --> 0:19:09.639 areas of weakness, Like is it those who were most 0:19:09.760 --> 0:19:13.280 affected by the bullwhip effect you know in twenty twenty 0:19:13.320 --> 0:19:17.160 and twenty twenty one, is that where demand is really slumping. 0:19:16.840 --> 0:19:20.320 It's anything really related to consumer outside of auto. So 0:19:20.720 --> 0:19:23.879 auto just because of the lack of being able to 0:19:23.880 --> 0:19:26.920 get access to new cars because it can produce them, 0:19:26.920 --> 0:19:29.800 because of shortages of products. The auto has actually been 0:19:29.840 --> 0:19:33.160 quite resilient even today in terms of freight demand data. 0:19:33.600 --> 0:19:36.199 But if you look at anything exposed to consumer, that's 0:19:36.240 --> 0:19:39.439 where you're seeing particularly weakness. Consumer packaged goods. You know, 0:19:39.560 --> 0:19:43.560 Rachel's written about the cardboard box industry actually having. 0:19:43.720 --> 0:19:47.119 We've never done a cardboard box other types. 0:19:46.840 --> 0:19:49.320 Of boxes, so we just, yeah, we should do it. 0:19:49.520 --> 0:19:52.320 We should. So we actually brought on an analyst used 0:19:52.359 --> 0:19:54.560 to be at a bank, because an analysts studied the 0:19:54.560 --> 0:19:57.240 packaging cardboard industry. He's now part of the Right Ways 0:19:57.280 --> 0:20:01.320 team and he's it's interesting how tightly quardal cardboard shouldn't 0:20:01.320 --> 0:20:03.199 shock anybody. It sort of looks at the economy, but 0:20:03.240 --> 0:20:06.760 how tightly correlated the packaging and cardboard industry is to 0:20:07.000 --> 0:20:10.119 trucking cycles and how much they matched. So one of 0:20:10.200 --> 0:20:12.160 the things that was really interesting is back in January 0:20:12.200 --> 0:20:16.240 of this year, we actually thought that the freight economy 0:20:16.320 --> 0:20:18.440 was starting to recover because it looked like some green 0:20:18.480 --> 0:20:21.720 shoots in January. We injured the first quarter, thinking hey, 0:20:21.800 --> 0:20:24.119 maybe the freight recession is over with, and the fourth 0:20:24.200 --> 0:20:27.000 quarter was sort of the bottom of it. The cardboard 0:20:27.280 --> 0:20:30.800 box the packaging industry saw the very same thing happened 0:20:31.080 --> 0:20:33.520 in January, where they all of a sudden said, wait 0:20:33.560 --> 0:20:37.040 a second, maybe the softness that we saw is actually 0:20:37.080 --> 0:20:39.720 over with and maybe we're starting to see a recover. Well, 0:20:39.720 --> 0:20:42.280 they saw the same thing in January, and then in 0:20:42.359 --> 0:20:45.560 February it got worse, and in March it hours. In 0:20:45.600 --> 0:20:48.040 April it was so bad. It's so bad for trucking. 0:20:48.200 --> 0:20:51.200 So what's really interesting is that January thus far has 0:20:51.240 --> 0:20:55.440 been the best month in trucking and in the packaging industry, 0:20:55.520 --> 0:20:59.080 and that that is an unusual development. Usually January is 0:20:59.119 --> 0:21:01.080 one of the worst months year and it's just not 0:21:01.119 --> 0:21:03.399 happening this year. And I'm talking specifically volume we have. 0:21:03.520 --> 0:21:05.439 You know, we talk a lot about capacity. It's an 0:21:05.480 --> 0:21:08.879 important part of our industry, but as you mentioned, Tracy, 0:21:08.960 --> 0:21:11.719 it doesn't really tell you a ton about the broader economy. 0:21:12.359 --> 0:21:15.679 But what we do know is that volumes are basically 0:21:15.720 --> 0:21:18.399 perverted back to where they were pre COVID, largely because 0:21:18.480 --> 0:21:20.119 retailers have so much inventory. 0:21:20.440 --> 0:21:24.240 Another thing that's definitely challenging or confusing volumes right now 0:21:24.400 --> 0:21:27.280 is these massive floods we're seeing re recently song in 0:21:27.320 --> 0:21:32.360 California that's throwing off the harvest season. Typically, I think 0:21:32.359 --> 0:21:34.679 it was late March early April. That's typically when we 0:21:34.720 --> 0:21:37.560 start picking you know, lettuce, strawberries, these other sorts of 0:21:37.960 --> 0:21:41.639 ground crops. But those fields were so flooded that people 0:21:41.640 --> 0:21:44.880 couldn't even get into the fields to pick those crops. 0:21:45.280 --> 0:21:48.359 That sets everything back a few weeks. Planting a set 0:21:48.400 --> 0:21:50.760 back a few weeks. All these sorts of things are 0:21:50.880 --> 0:21:53.080 just kind of thrown into chaos, and a lot of 0:21:53.080 --> 0:21:56.440 truck drivers view it's called you know one hundred days 0:21:56.480 --> 0:21:59.159 of summer. That's really the hot time in the trucking industry, 0:21:59.240 --> 0:22:04.280 especially for or refer carriers that haul these refrigerated goods. 0:22:04.880 --> 0:22:07.320 So drivers who are really hoping for this. 0:22:07.280 --> 0:22:11.800 Hot period basically right now are finding that things are 0:22:11.840 --> 0:22:14.399 just thrown into chaos and that kind of dependable volume 0:22:14.480 --> 0:22:15.280 is not happening. 0:22:15.480 --> 0:22:18.439 Wait, Rachel, can I back up or actually move ninety 0:22:18.440 --> 0:22:21.560 degrees for a quick question? Did I see something recently 0:22:21.800 --> 0:22:25.760 speaking of floods? Oh, that the barge crisis is back, 0:22:25.800 --> 0:22:27.480 except this time there's too much water. 0:22:28.119 --> 0:22:29.200 New barge crisis. 0:22:29.400 --> 0:22:31.159 So what's going on with the new barge crisis? 0:22:31.200 --> 0:22:31.360 Where? 0:22:31.400 --> 0:22:33.320 Because like we did that last Summer's like, oh, there's 0:22:33.320 --> 0:22:34.720 no water. What's happening now? 0:22:35.240 --> 0:22:41.040 Basically Mississippi River levels are incredibly high and this also 0:22:41.840 --> 0:22:46.119 screws up the baringem marg shipping. It's not quite as 0:22:46.560 --> 0:22:50.160 drastic as it was in the fall, because the fall 0:22:50.280 --> 0:22:52.600 is when all of those crops are moved out and 0:22:52.680 --> 0:22:55.080 all of those crops are you know, that's kind of 0:22:55.080 --> 0:22:57.600 peak harvest season for the Midwest. You're trying to get 0:22:57.640 --> 0:23:00.800 all that weed out, especially to or in markets. So 0:23:00.880 --> 0:23:03.199 it's not quite as bad as last year because the 0:23:03.240 --> 0:23:06.760 timing was so bad last year. But yeah, I don't 0:23:06.760 --> 0:23:07.800 know what's going on with this river. 0:23:08.080 --> 0:23:10.119 And anyone who says supply chain is boring has not 0:23:10.200 --> 0:23:12.240 been listened to the odd last podcast, But these you 0:23:12.240 --> 0:23:17.280 guys have featured how incredibly volatile and sensitive these noices? 0:23:17.400 --> 0:23:17.800 I don't know. 0:23:18.320 --> 0:23:22.439 Yeah, who would say that fly chains are endlessly fascinating? Okay, 0:23:22.520 --> 0:23:27.639 so folks just crazy people say that. Okay, So, just 0:23:27.680 --> 0:23:31.280 going back to the trucking bloodbath idea, I guess two 0:23:31.359 --> 0:23:34.719 interrelated questions. But do we have any ideas of how 0:23:34.920 --> 0:23:38.720 extreme this cycle could be? Would we expect it to 0:23:38.760 --> 0:23:42.680 be worse than twenty eighteen twenty nineteen? And then secondly, 0:23:43.200 --> 0:23:45.800 how will we know when it's over? You talk about 0:23:45.880 --> 0:23:49.200 high frequency indicators, what should we be looking at? 0:23:49.320 --> 0:23:51.239 Yeah, the tender projecting data is going to be the 0:23:51.240 --> 0:23:55.080 first indicator because that is actually highly sensitive. To remember, 0:23:55.119 --> 0:23:59.160 it's it's basically orders that come from large retailers. Large 0:23:59.320 --> 0:24:03.560 manufacturers are sending these transactions electronically to trucking companies, and 0:24:03.600 --> 0:24:05.560 they're going to either accept or reject those loads. And 0:24:05.640 --> 0:24:08.680 it happens within two days so or two days from pickups, 0:24:08.720 --> 0:24:11.480 so they will get you a big Bucks retail off 0:24:11.520 --> 0:24:14.240 Walmart sends over a transaction to a small trucking company 0:24:14.320 --> 0:24:17.200 or a big drug company in the contract market, electronically 0:24:17.680 --> 0:24:19.879 that tender data will see that and then look at 0:24:19.880 --> 0:24:22.560 whether or not the trucking company accept it or rejected it. 0:24:22.640 --> 0:24:26.440 So you'll start to see the tender rejection data will 0:24:26.480 --> 0:24:30.359 start to basically turn around, and you'll see it accelerate. 0:24:30.480 --> 0:24:34.000 If there was a situation in the market that suggested 0:24:34.040 --> 0:24:37.400 that a capacity was starting to tighten, we're not seeing 0:24:37.440 --> 0:24:40.720 any indications of that. There's zero even as volume has 0:24:41.040 --> 0:24:42.840 we've seen it in the last week. We've actually seen 0:24:42.880 --> 0:24:46.680 volume increase. We've seen some really sort of strange many 0:24:46.680 --> 0:24:49.159 surges that look like there may be a directional change, 0:24:49.280 --> 0:24:51.240 could be seasonality. We didn't see it at all in April, 0:24:51.280 --> 0:24:55.119 as Rachel mentions, as things heat up, guardian equipment construction, 0:24:55.240 --> 0:24:57.760 all of that sort of drives beverages sort of drive 0:24:57.800 --> 0:25:00.600 freight demand. So we've seen some level of season out 0:25:00.600 --> 0:25:03.040 in the last week which sort of has broken that 0:25:03.119 --> 0:25:06.320 down cycle, but we've not seen anything in tender rejection 0:25:06.480 --> 0:25:09.480 data which actually suggests that we're still in it for 0:25:09.520 --> 0:25:11.439 a while. And I think, Tracy, this is going to 0:25:11.440 --> 0:25:13.359 be you know, I think if you listen to some 0:25:13.400 --> 0:25:15.320 of the larger carriers, they'll tell you it's probably going 0:25:15.359 --> 0:25:17.480 to get better in six months, the second half will 0:25:17.520 --> 0:25:19.399 be better. I don't buy it. I think this is 0:25:19.440 --> 0:25:22.080 a situation where it's going to take a while to 0:25:22.080 --> 0:25:24.560 get rid of all the excess capacity. And one of 0:25:24.560 --> 0:25:26.679 the things that's really hard to sort of identify is 0:25:26.720 --> 0:25:29.640 how much capacity has been added in the market because 0:25:29.680 --> 0:25:34.000 the government data, while it's accurate, it's very lagged. As ever. 0:25:34.119 --> 0:25:36.479 You know, Elon Musk would say the government data that 0:25:36.520 --> 0:25:39.480 the Fed's looking at is all lagged, and it's right, 0:25:39.560 --> 0:25:41.520 and the same thing exists in trucking is it's not 0:25:41.640 --> 0:25:43.360 the cleanest data. So it takes a while to sort 0:25:43.359 --> 0:25:45.040 of figure out how much capacity has been added and 0:25:45.040 --> 0:25:47.520 how fast it evaporates. But one of the things that 0:25:47.680 --> 0:25:49.520 Rachel did in an articles you did a week ago 0:25:49.600 --> 0:25:52.240 shows bravocations. If you look at the chart of the 0:25:52.320 --> 0:25:54.879 peak cycle sort of peaked during the covide cycle, how 0:25:54.960 --> 0:25:59.239 much higher those increases of fleets in terms of you know, 0:25:59.280 --> 0:26:01.679 eight to nine dollars and new fleets entered the trucking 0:26:01.720 --> 0:26:04.640 market a month. We're only talking about two to three 0:26:04.640 --> 0:26:06.520 thousand a month right now that have left. And that 0:26:06.560 --> 0:26:09.399 went on for as much as fourteen to eighteen, fourteen 0:26:09.440 --> 0:26:11.960 to sixteen months, so sort of peak increases, so we 0:26:12.000 --> 0:26:14.280 have a while to sort of get rid of this 0:26:14.359 --> 0:26:18.000 capacity that's added. And that's assuming that the US economy 0:26:18.040 --> 0:26:20.639 sort of stays at this level and doesn't take another 0:26:20.800 --> 0:26:23.880 downward leg. One thing that I'm looking at and really 0:26:23.880 --> 0:26:28.960 concerned about is what happens when those college loans and 0:26:29.119 --> 0:26:32.920 student financial aid payments resume. Because one of the real 0:26:33.000 --> 0:26:36.680 sensitivities of trucking and freight, particularly the consumer side of 0:26:36.680 --> 0:26:40.280 the economy is consumption. And the people that are consuming 0:26:40.400 --> 0:26:43.840 products tend to be those folks that, in terms of 0:26:44.040 --> 0:26:46.360 just the impact on the market tend to be those 0:26:46.359 --> 0:26:49.400 folks that live, you know, that are younger and sort 0:26:49.440 --> 0:26:53.200 of live paycheck to paycheck, and so the sensitivities of 0:26:53.240 --> 0:26:56.399 that will really impact the freight market. And so we 0:26:56.400 --> 0:26:58.879 could see another downward leg and volume in the second half. 0:26:59.400 --> 0:27:02.480 And going back your question on how bad this could be, 0:27:02.800 --> 0:27:06.240 we saw during the last earnings call, the first quarter 0:27:06.320 --> 0:27:09.080 earning Shelley Simpson, the president of JB. Hunt, you know, 0:27:09.119 --> 0:27:12.639 one of the largest trucking companies in the US, she said, 0:27:12.840 --> 0:27:15.399 you know, this market is reminding us of two thousand 0:27:15.440 --> 0:27:18.400 and nine, and that's certainly not something that I've ever heard. 0:27:18.480 --> 0:27:20.560 I've never heard a two thousand and eight two thousand 0:27:20.560 --> 0:27:23.720 and nine comparison in the six years or so that 0:27:23.800 --> 0:27:26.400 I've been covering the trucking industry. So to me, that's 0:27:26.440 --> 0:27:29.399 a pretty scary sign. I spoke to, you know, on 0:27:29.440 --> 0:27:31.280 the other side of the coin, I spoke to a 0:27:31.320 --> 0:27:34.760 truck driver last week who shut down his authority after 0:27:34.840 --> 0:27:37.720 sixteen years of being in the industry. He also kind 0:27:37.720 --> 0:27:39.560 of agreed that, you know, this could be a two 0:27:39.600 --> 0:27:41.840 thousand and eight two thousand and nine type situation or 0:27:41.880 --> 0:27:45.480 even worse simply because parts are so expensive and so 0:27:46.000 --> 0:27:49.600 difficult to access even now. So yeah, just with that 0:27:49.680 --> 0:27:52.399 cost being incredibly high, that's certainly something that's concerned. 0:27:52.480 --> 0:27:54.639 Yeah, I was actually just gonna ask you. So it's like, 0:27:54.800 --> 0:27:58.920 obviously for the market to come into balance, there has 0:27:58.960 --> 0:28:01.840 to be reduction in capacity and people have to tap 0:28:01.880 --> 0:28:04.919 out and say, like, yeah, the economics are working for me. 0:28:05.000 --> 0:28:08.800 In the people that you speak to about why they're 0:28:08.880 --> 0:28:11.600 leaving the market, whether it's drivers, whether it's smaller fleets, 0:28:11.640 --> 0:28:14.080 et cetera, what are some of the reasons that they're saying, 0:28:14.119 --> 0:28:16.560 or like, what are other commonalities and they're like, yeah, 0:28:16.600 --> 0:28:17.199 I'm out of this. 0:28:17.640 --> 0:28:20.000 Well, diesel and fuel is certainly more affordable than it 0:28:20.160 --> 0:28:23.400 was last year, so that's you know, a positive tailwind 0:28:23.440 --> 0:28:27.240 for these folks. But the parts is definitely an issue. 0:28:27.600 --> 0:28:31.760 Increasing regulations as a frustration. The fact that rates have 0:28:31.880 --> 0:28:35.280 greatly decreased, that's a big issue a few of these companies, 0:28:35.359 --> 0:28:37.720 especially kind of like the mid size fleets, they're seeing 0:28:37.720 --> 0:28:41.320 their contracts either you know, get pulled back or contract 0:28:41.440 --> 0:28:45.080 rates you know, significantly lower. So it's both on the 0:28:45.200 --> 0:28:48.040 spot market that is tends to be more dominated by 0:28:48.040 --> 0:28:50.720 these smaller players, as well as the contract market, which 0:28:50.760 --> 0:28:54.960 tends to be dominated by larger, more established companies. So 0:28:55.480 --> 0:28:58.000 rates on both sides of the equation are certainly lowering, 0:28:58.040 --> 0:29:00.800 and that seems to be the you know, the big 0:29:00.840 --> 0:29:03.080 reason is its basically rates are too low to run. 0:29:03.680 --> 0:29:05.080 It's all cash flow at the end of the day. 0:29:05.120 --> 0:29:08.000 I mean, ultimately, we can talk about insurance increases, we 0:29:08.040 --> 0:29:11.320 can talk about maintenance expenses, we can talk about higher 0:29:11.400 --> 0:29:14.280 driver salaries. You know, think about just the cost of 0:29:14.320 --> 0:29:16.480 mechanics to hire those and how much more that has 0:29:16.520 --> 0:29:17.280 sort of flown through. 0:29:17.600 --> 0:29:20.040 And this is like that other thirty percent. So when 0:29:20.080 --> 0:29:22.520 you talk about like, okay, why is just even setting 0:29:22.560 --> 0:29:26.800 aside gasoline, operating of operating trucks just thirty percent more 0:29:26.840 --> 0:29:28.800 costly than it was at the bottom in twenty nineteen 0:29:28.800 --> 0:29:29.840 to these are the difference, that's right. 0:29:29.880 --> 0:29:32.880 So maintenance is a big increase. You know, parts are 0:29:32.880 --> 0:29:34.320 one side of it, but also just the fact that 0:29:34.320 --> 0:29:37.480 you can't get access to mechanics. There's a mechanic shortage 0:29:37.520 --> 0:29:40.000 across the country that can handle diesel and work on 0:29:40.080 --> 0:29:42.600 diesel trucks. That's a big problem. You look at the 0:29:42.600 --> 0:29:44.720 cost of capital. One of the things that remember is 0:29:44.720 --> 0:29:48.320 the trucking is an industry. It's a capital intensive industry. 0:29:48.720 --> 0:29:50.880 It actually has one of the lowest returns on capital 0:29:50.880 --> 0:29:53.360 of any industry on the planet, but it requires a 0:29:53.360 --> 0:29:55.640 lot of capital. A lot of these trucking companies finance 0:29:55.720 --> 0:29:58.000 their working capital and they finance their trucks. Well, we've 0:29:58.040 --> 0:30:00.800 seen a pretty dramatic increase in cost. You know. One 0:30:00.880 --> 0:30:03.360 of the sort of crazy facts of this industry is 0:30:03.400 --> 0:30:06.080 even if you sort of average the operating ratio, which 0:30:06.480 --> 0:30:09.280 you know, operating ratio reflects on the profitability, so it's 0:30:09.280 --> 0:30:12.000 an inverse of sort of profit operating profitability for a 0:30:12.040 --> 0:30:15.320 trucking company. So an operating ratio right now or on 0:30:15.400 --> 0:30:17.560 average is typically a ninety seven is sort of the 0:30:17.600 --> 0:30:20.040 average for a trucking company. That means they're generating for 0:30:20.120 --> 0:30:23.200 every dollar, they generate three cents in profit. And that 0:30:23.320 --> 0:30:26.200 is across the industry in a normal sort of cycle. 0:30:26.600 --> 0:30:28.880 And so when you're talking about a situation where the 0:30:28.920 --> 0:30:31.560 cost of capital has gone up so much, many of 0:30:31.600 --> 0:30:34.920 these companies just aren't even able to basically pay the 0:30:35.040 --> 0:30:37.480 debt and service their debt on their equipment because their 0:30:37.520 --> 0:30:40.360 cash flow is down so far, and so that is 0:30:40.400 --> 0:30:42.840 what's causing them to basically go under. Now, one thing 0:30:42.880 --> 0:30:47.920 I would point out is the industry got really financially strong, 0:30:48.040 --> 0:30:50.840 balance sheets got incredibly strong because of the real robust 0:30:51.160 --> 0:30:55.200 operating conditions over the last couple of years. So we 0:30:55.320 --> 0:30:59.320 have not yet seen a situation where a large or 0:30:59.440 --> 0:31:02.080 mid size carriers are going out in mass A lot 0:31:02.120 --> 0:31:05.960 of the revocations that Rachel's reported are really single operators. 0:31:06.080 --> 0:31:08.160 They're the ones that are most sensitive to that. But 0:31:08.240 --> 0:31:10.040 I don't think we can call a bottom, or we'll 0:31:10.040 --> 0:31:12.040 call a bottom until we start to see some of these, 0:31:12.320 --> 0:31:15.760 you know, a real wash out of very large companies, 0:31:15.800 --> 0:31:18.160 and we've seen a couple of bankruptcies. Started in March, 0:31:18.600 --> 0:31:21.880 we started to see some sort of increase in bankruptcies 0:31:21.920 --> 0:31:23.920 a couple of one hundred trucks at a time. I 0:31:23.920 --> 0:31:26.480 think there was at least you know, seven or eight 0:31:26.520 --> 0:31:28.760 stories of companies that had you know, more than one 0:31:28.800 --> 0:31:32.320 hundred employees that you know, just suddenly shut their doors. 0:31:32.840 --> 0:31:34.840 We're not seeing what I call hosts sell back. In 0:31:34.840 --> 0:31:38.280 twenty nineteen, we saw as many, you know, at one time, 0:31:38.320 --> 0:31:41.840 we were doing as many as ten sizeable bankruptcies a week, 0:31:42.320 --> 0:31:44.880 with the largest culminating with a company called Seldon, which 0:31:44.920 --> 0:31:49.560 is publicly traded, had four thousand trucks and file bankruptcy. 0:31:49.680 --> 0:31:53.120 And so we're not yet seeing a situation where there's 0:31:53.160 --> 0:31:55.200 been a wholesale wash out. In my opinion, and until 0:31:55.240 --> 0:31:57.560 we see that, I think this is going to is 0:31:57.600 --> 0:32:00.280 going to continue to exacerbate. I will sort of point now, 0:32:00.720 --> 0:32:02.600 you know, not only has Shelley Simpson talked about the 0:32:02.640 --> 0:32:05.880 comparisons of two thousand and nine, I've heard people across 0:32:05.880 --> 0:32:08.720 the industry, both small and big, have said this matches 0:32:08.800 --> 0:32:10.880 there what they experienced in two thousand and nine and 0:32:10.920 --> 0:32:12.600 one of the things that did not happen two thousand 0:32:12.600 --> 0:32:14.560 and nine is not only the inflation, but the freight 0:32:14.640 --> 0:32:17.520 brokerage industry, the sort of cottage industry. It was a 0:32:17.520 --> 0:32:19.160 cottage industry back in two thousand and nine. It was 0:32:19.160 --> 0:32:23.360 a relatively small piece of freight. It has exploded in 0:32:23.480 --> 0:32:25.280 terms of its percent of market share. 0:32:25.360 --> 0:32:28.360 This was going to be my next question, what's going 0:32:28.400 --> 0:32:30.840 on with the freight brokers, you know, speaking of costs 0:32:30.880 --> 0:32:32.920 and also this is one of the things we learned 0:32:33.160 --> 0:32:38.080 at your supply chain conference last year. The freight broker model, 0:32:38.240 --> 0:32:40.080 as far as I can tell, seems to be an 0:32:40.160 --> 0:32:45.360 extremely lucrative middleman industry with profit margins. I mean, we 0:32:45.440 --> 0:32:48.240 heard whispers of like twenty percent when we were in 0:32:48.360 --> 0:32:50.800 Arkansas last year. I don't know if that's still true. 0:32:50.800 --> 0:32:52.200 But what's going on there. 0:32:52.320 --> 0:32:54.520 Well, there's so it depends on what part of the 0:32:54.560 --> 0:32:57.160 market they serve. So it's really interesting because freight brokers 0:32:57.640 --> 0:32:59.440 have one of the highest return on a capital of 0:32:59.560 --> 0:33:02.960 Indians street, so trucking asset has the lowest, and freight 0:33:03.000 --> 0:33:06.160 brokerage and forwarding actually has one of the highest. And 0:33:06.200 --> 0:33:08.760 because they don't actually own anything outside of computers, and 0:33:08.800 --> 0:33:11.400 maybe some real estate. They're not going to just suddenly 0:33:11.400 --> 0:33:14.920 go bankrupt, so they can downsize their operations, their trading floors. 0:33:14.960 --> 0:33:16.360 Just like you would see a trading floor at the 0:33:16.400 --> 0:33:18.720 Chicago Board of Trade in the old days, this is 0:33:18.760 --> 0:33:20.880 what a freight broker floor looks like. It looks like 0:33:20.880 --> 0:33:23.480 a trading floor of commodity because it's effectively what they are, 0:33:24.000 --> 0:33:27.560 and so essentially they depend on sort of two KPIs 0:33:27.560 --> 0:33:30.000 are really important to freight brokers. One is what is 0:33:30.040 --> 0:33:33.880 the spread between spot and contract and that is actually 0:33:33.920 --> 0:33:36.520 as much as ninety cents a mile. It's the widest 0:33:36.520 --> 0:33:39.040 it's ever been. In a normal cycle. It should be 0:33:39.040 --> 0:33:40.959 about thirty five to fifty cents a mile, but it's 0:33:41.040 --> 0:33:43.800 ninety cents right now, which means the spot rate's going 0:33:43.840 --> 0:33:45.600 to continue to pull down that contract rate. But as 0:33:45.640 --> 0:33:48.480 long as that variance is so high, that delta is 0:33:48.520 --> 0:33:51.120 so high, then on a per transaction basis, the freight 0:33:51.120 --> 0:33:53.680 brokers are actually making a lot of money. The problem 0:33:53.800 --> 0:33:55.600 is that there isn't any of a volume for them. 0:33:56.120 --> 0:33:59.400 And when you look at what shippers, shippers being the 0:33:59.640 --> 0:34:03.200 custom of these trucking companies, the customers of freight brokers 0:34:03.440 --> 0:34:06.640 you know, big box retailers, manufacturers, et cetera. They want 0:34:06.680 --> 0:34:08.920 to do business with people who have assets. They want 0:34:08.920 --> 0:34:10.879 to know who is hauling their load, and they want 0:34:10.920 --> 0:34:12.440 to make sure that it's not broker it out to 0:34:12.520 --> 0:34:14.719 somebody who's going to steal the cargo or you can't 0:34:14.719 --> 0:34:16.920 find the cargo. So what's happened is now with shipperds 0:34:16.960 --> 0:34:18.760 is they're saying I want to work with the asset 0:34:18.760 --> 0:34:21.279 based carriers. So a lot of that access volume, that 0:34:21.360 --> 0:34:23.879 overflow that went from the large carriers into the spot 0:34:23.960 --> 0:34:26.640 market and brokers sort of handled it, is starting to 0:34:26.719 --> 0:34:28.160 dry out for a lot of the freight brokers. So 0:34:28.160 --> 0:34:29.600 it's a volume problem for them. 0:34:29.640 --> 0:34:29.879 Now. 0:34:29.960 --> 0:34:33.440 The spreads are incredibly high, but the volume of transactions 0:34:33.520 --> 0:34:34.359 is actually quite low. 0:34:35.400 --> 0:34:38.280 And just to sort of explain what the freight broker 0:34:38.360 --> 0:34:40.479 world looks like and how they managed to take these 0:34:40.520 --> 0:34:45.200 big margins, I actually shadowed a dispatcher slash broker last. 0:34:45.000 --> 0:34:47.760 Week, and so you were on the trading floor. 0:34:47.920 --> 0:34:50.319 I wasn't a trading floor, it was he was more 0:34:50.360 --> 0:34:52.560 of a dispatcher than a broker, but he has his 0:34:52.640 --> 0:34:54.480 broker license, so I was able to kind of look 0:34:54.520 --> 0:34:57.319 at that side of things as well. Basically, Let's say 0:34:57.440 --> 0:35:02.160 Acme Clothing Company says, someone needs to move my truck. 0:35:02.200 --> 0:35:04.640 Who can my load? Who can take it? A bunch of. 0:35:04.600 --> 0:35:06.800 Broker's bien you know, I'll bit take it for a thousand, 0:35:06.840 --> 0:35:08.480 I'll take it for nine hundred, I'll take it for 0:35:08.520 --> 0:35:10.000 eight hundred and ninety nine, and I'll take it for 0:35:10.040 --> 0:35:14.839 eight hundred ninety eight. Lowest bidder wins. That broker then says, Okay, 0:35:14.880 --> 0:35:16.920 I'm going to make eight hundred and fifty dollars on this. 0:35:17.719 --> 0:35:20.239 They post on the load board saying who can take 0:35:20.280 --> 0:35:23.560 this load for five hundred and fifty dollars? And then 0:35:23.800 --> 0:35:26.480 a truck driver is looking through the load board trying 0:35:26.520 --> 0:35:27.799 to figure out their next job. 0:35:28.200 --> 0:35:29.600 They see this for five point fifty. 0:35:30.080 --> 0:35:32.080 They called the broker maybe they ask, hey, can I 0:35:32.120 --> 0:35:35.000 take this for six fifty? The broker says, how about 0:35:35.120 --> 0:35:38.480 you know, six hundred, and that's what they decide on. 0:35:38.560 --> 0:35:39.799 That's what the driver drives for. 0:35:40.040 --> 0:35:42.800 But that broker is taking that was it two hundred 0:35:42.840 --> 0:35:43.920 and fifty dollars in profit? 0:35:44.560 --> 0:35:46.480 So that's what it looks like on the on the 0:35:46.480 --> 0:35:49.000 ground floor. I guess of what this all looks like yeah. 0:35:49.000 --> 0:35:50.719 I remember when we were at the when we were 0:35:50.719 --> 0:35:54.360 at y'all's conference last year and we interviewed Matt Pyett 0:35:54.360 --> 0:35:56.279 that arrived here, and then a few months later I 0:35:56.280 --> 0:35:58.960 got to I went to Arrive's offices in Austin, and 0:35:58.960 --> 0:36:00.480 it really is like a trade of what is it 0:36:00.480 --> 0:36:03.239 called the Chicago model of Uh, it's the Chicago model 0:36:03.840 --> 0:36:05.839 having the shippers side and one side of the room 0:36:05.840 --> 0:36:07.759 and the carrier side and another side of the room, 0:36:07.800 --> 0:36:09.680 and they like sort of you know a wall down. 0:36:09.680 --> 0:36:11.640 Well, so one of them, you know, one of them 0:36:11.680 --> 0:36:13.719 books the freight, yeah, right, and then one of them 0:36:13.840 --> 0:36:16.200 buys the capacity, so it's one is sort of long 0:36:16.320 --> 0:36:20.200 in the market, yeah, short, and essentially a lot of 0:36:20.200 --> 0:36:22.480 the brokers. The reason Chicago has proliferated it is a 0:36:22.480 --> 0:36:24.560 couple of reasons, sort of foundational companies that sort of 0:36:24.560 --> 0:36:27.800 started the Chicago model. But really the reason that it 0:36:27.880 --> 0:36:31.080 has been so successful is the model is they have 0:36:31.200 --> 0:36:33.279 followed what the Chicago Board to Trade and the CEME 0:36:33.480 --> 0:36:35.480 used to do. Is they would go hire people who 0:36:35.480 --> 0:36:37.960 would normally go to the CBOT or the CME and 0:36:38.000 --> 0:36:40.799 go on trading floors and as those things when electronic, 0:36:40.920 --> 0:36:43.400 they realized, hey, this is the same batch of people. 0:36:43.440 --> 0:36:45.959 So they started recruiting the same way that somebody would 0:36:46.000 --> 0:36:48.080 normally go into the sort of the trade bits. They 0:36:48.120 --> 0:36:50.640 started recruiting the same types of folks to go onto 0:36:50.680 --> 0:36:53.520 freight brokerage floors. And that's exactly what they do. The 0:36:53.560 --> 0:36:55.680 difference is that a freight broker, you know, Tracy, you 0:36:55.719 --> 0:36:57.960 mentioned that the margins on it, the margins can be 0:36:58.080 --> 0:37:01.040 you know, twelve to eighteen percent and almost cycle depends 0:37:01.040 --> 0:37:02.640 on sort of what part of the cycle we are. 0:37:02.840 --> 0:37:05.120 Some of those are as high as twenty twenty plus percentage. 0:37:05.120 --> 0:37:07.280 That's why Joe and I went from joking about starting 0:37:07.360 --> 0:37:09.360 a trucking company to starting a freight broker. 0:37:09.400 --> 0:37:13.880 But you know that would be better, I know. 0:37:13.960 --> 0:37:15.840 But you know, then I got the impression from athlet 0:37:15.920 --> 0:37:18.880 It was like a lot of like X big ten athletes. 0:37:18.680 --> 0:37:20.279 All that, Oh yeah, that's hard. 0:37:20.360 --> 0:37:20.560 Yeah. 0:37:20.640 --> 0:37:21.959 So it's like that's not me either. 0:37:22.080 --> 0:37:22.640 Unfortunately. 0:37:22.680 --> 0:37:24.840 I also feel like the median freight broker is like 0:37:24.920 --> 0:37:25.600 twenty five. 0:37:25.680 --> 0:37:30.520 It's a very bro bros. It's a very bro culture 0:37:30.680 --> 0:37:33.759 and it's a I mean, it's a very dominated by 0:37:33.880 --> 0:37:36.719 men typically, is what you'll see in these businesses, and 0:37:36.800 --> 0:37:40.600 it's a very bro culture. Freight brokers as an industry 0:37:40.880 --> 0:37:43.719 used to be a word, you know that that represented 0:37:43.800 --> 0:37:46.320 sort of a very small sort of cottage industry, and 0:37:46.320 --> 0:37:48.360 these are become massively big businesses. 0:37:48.480 --> 0:37:51.560 Yeah, they didn't exist just you know, a few decades ago. 0:37:51.760 --> 0:37:54.560 It was illegal to broker freight. Saint Robinson was actually 0:37:54.880 --> 0:37:57.320 now the largest freight broker, was actually a produce broker 0:37:57.440 --> 0:38:01.080 that fought to allow after trucking deregular lated in nineteen 0:38:01.320 --> 0:38:05.640 eighty They really fought to allow for brokers to exist 0:38:05.680 --> 0:38:07.720 in the market, and that really didn't happen in nineteen 0:38:07.719 --> 0:38:08.160 eighty five. 0:38:24.920 --> 0:38:26.759 All Right, we have to wrap up almost but I 0:38:26.760 --> 0:38:29.880 have one last question and there's so many more questions 0:38:29.880 --> 0:38:32.560 I have, but last question, Craig, you tweeted something about 0:38:32.640 --> 0:38:35.520 load fraud in trucking and how AI is going to 0:38:35.560 --> 0:38:37.800 amplify it, and I'm sure, like you know, this is 0:38:37.880 --> 0:38:39.279 the start of many things. 0:38:39.239 --> 0:38:42.000 Before say, we should just start a new segment every 0:38:42.000 --> 0:38:44.560 All Thoughts episode. We should just ask how is AI. 0:38:44.400 --> 0:38:45.480 King to make this worse? 0:38:46.440 --> 0:38:48.839 But real quickly, can you just explain your concern here? 0:38:48.840 --> 0:38:51.200 And you know one day there will be a separate episode. 0:38:51.239 --> 0:38:51.919 But what's going on. 0:38:52.000 --> 0:38:56.000 So loadboard fraud is a real problem in the industry, 0:38:56.040 --> 0:38:59.120 and what's happening is that the brokers, because of the 0:38:59.160 --> 0:39:03.680 proliferation of broke capacity, the load boards effectively are these marketplaces, 0:39:03.719 --> 0:39:05.839 but they're not really exchanges and the way you would 0:39:05.880 --> 0:39:08.880 think of them for financial exchanges. They're more like Craigslist, 0:39:08.920 --> 0:39:11.920 where a broker will post a load and basically put 0:39:11.960 --> 0:39:15.520 it out into the marketplace and ultimately a driver, you know, 0:39:15.680 --> 0:39:17.640 drivers will call in because they don't even do it 0:39:17.680 --> 0:39:20.759 electronically mostly, but they will call in or email and say, hey, 0:39:20.760 --> 0:39:23.200 I want that load, and they'll do this negotiation process 0:39:23.239 --> 0:39:25.320 on the phone. Well, they come up with a price 0:39:25.400 --> 0:39:27.040 and they pick it up. The problem is that the 0:39:27.040 --> 0:39:29.600 brokers that use those load boards, the load boards don't 0:39:29.680 --> 0:39:33.799 regulate who's actually on their loadboard. So really, much like Craiglist, 0:39:33.800 --> 0:39:36.520 it's posting and you sort of you know, you may 0:39:36.560 --> 0:39:39.719 get a legitimate trucking company and you may get a 0:39:40.000 --> 0:39:43.680 illegitimate trucking company. Well, there's been this proliferation of illegitimate 0:39:43.680 --> 0:39:46.120 trucking companies that you have basically have gone out and 0:39:46.160 --> 0:39:49.480 registered information that's fake with the government and the government 0:39:49.480 --> 0:39:52.880 doesn't regulate it, and so essentially what happens is the 0:39:52.880 --> 0:39:55.320 person that is accepting that load has agreed to a price. 0:39:55.840 --> 0:39:58.280 They'll ask for what they call fuel advance, which means 0:39:58.320 --> 0:40:01.520 that the broker will advance the money. And in the 0:40:01.560 --> 0:40:04.280 market like this, fuel advances are really important because drivers 0:40:04.320 --> 0:40:06.040 need to pay for fuel and they don't want to 0:40:06.040 --> 0:40:08.480 deal with the cash flow collection cycle, so they get 0:40:08.520 --> 0:40:12.719 an advance and then basically that broker is fake and 0:40:12.760 --> 0:40:15.920 does not exist, and we'll just take that fuel advance. 0:40:15.920 --> 0:40:17.880 So that's one form of fraud. One of the emerging 0:40:17.920 --> 0:40:20.719 forms of fraud in double brokering is that some so 0:40:20.800 --> 0:40:23.680 the broker, the fake broker, will then broke it out 0:40:23.719 --> 0:40:26.800 to another broker and what they'll do is a truck 0:40:26.800 --> 0:40:31.040 will pick up and basically, no, there's no chain of custody, 0:40:31.120 --> 0:40:33.160 so nobody knows where that load went. It will pick 0:40:33.280 --> 0:40:36.040 up and go, Or you could have a situation where 0:40:36.080 --> 0:40:39.680 the broker is colluding with a fake trucking company to 0:40:39.760 --> 0:40:43.560 actually go and pick up the load and then walk 0:40:43.600 --> 0:40:45.960 out with the cargo, so that the load never arrives 0:40:46.040 --> 0:40:49.120 at the destination and nobody actually knows what happened. To 0:40:49.160 --> 0:40:51.799 that commodity and it's sold on the black market. So 0:40:52.200 --> 0:40:56.440 freight brokerage fraud or loadboard fraud is a massive problem 0:40:56.520 --> 0:40:59.680 and it's emerging as a big issue, and AI is 0:40:59.680 --> 0:41:01.880 just going to proliferate that because now I'm no longer 0:41:01.880 --> 0:41:05.040 dependent upon humans to sort of execute this fraud. I 0:41:05.040 --> 0:41:05.600 can actually do. 0:41:05.600 --> 0:41:09.640 It right now. 0:41:09.680 --> 0:41:13.760 There's no oversight, you know, and if there's already no oversight, 0:41:13.800 --> 0:41:15.040 that makes me worried for the future. 0:41:15.239 --> 0:41:17.440 The load boards have the only part of the government's 0:41:17.480 --> 0:41:19.480 never going to regulate this. And the problem is the 0:41:19.520 --> 0:41:22.160 fraud we're talking about is typically a couple hundred dollars 0:41:22.200 --> 0:41:24.759 to a thousand unless they steal the cargo. When we're 0:41:24.800 --> 0:41:27.400 talking about sort of traditional loadboard fraud, it's so small 0:41:27.480 --> 0:41:31.319 and they're typically offshore operators that the government is never 0:41:31.400 --> 0:41:34.719 going to investigate these crimes. And so because it's just 0:41:34.880 --> 0:41:38.080 it's happening so rampant that really it's the small carriers 0:41:38.080 --> 0:41:40.160 that end up really sort of taking it off. 0:41:40.200 --> 0:41:42.600 Okay, so this is a new business model idea for 0:41:42.680 --> 0:41:47.200 US Joe instead of freight brokerage. Freight brokerage AI enabled fraud. 0:41:48.120 --> 0:41:51.360 It is a big booming cottage industry trace you just 0:41:51.400 --> 0:41:55.600 have to live outside a lot of Eastern European And 0:41:55.640 --> 0:41:57.600 I think it's also like a lot of the folks 0:41:57.600 --> 0:41:59.960 that are proliferating and actually used to be in trucking, 0:42:00.000 --> 0:42:04.120 there's been this emergence of offshore dispatch operations and offer terior. 0:42:05.760 --> 0:42:07.439 Yeah, so they know the system. And so what's happened 0:42:07.520 --> 0:42:09.879 is the market's gotten so soft that they can't find 0:42:09.960 --> 0:42:12.279 legitimate forms of making money, and they realize, hey, this 0:42:12.360 --> 0:42:14.960 is a really lucrative way to make money. And I'm 0:42:15.000 --> 0:42:18.040 not going to get prosecuted because frankly, it's an fbis. 0:42:18.120 --> 0:42:20.560 It's the FBI's domain to sort of investigate these crimes 0:42:20.600 --> 0:42:24.400 that are overseas, and the crimes are a missed so misunderstood, 0:42:24.560 --> 0:42:26.840 and anyone who can actually understand how all the stuff 0:42:26.880 --> 0:42:29.279 works has got to be in the industry for many years. 0:42:29.320 --> 0:42:32.160 Even as much as I know, I still learn something 0:42:32.200 --> 0:42:34.719 almost every day about how the how different things work 0:42:34.719 --> 0:42:36.560 in the industry. So it's hard for the regular for 0:42:36.640 --> 0:42:39.680 the authorities to sort of understand it, much less investigate it. 0:42:39.719 --> 0:42:41.719 And the crimes are so small in terms of the 0:42:41.760 --> 0:42:44.640 dollar value, they just don't care. And so this crime 0:42:44.719 --> 0:42:46.960 is going to proliferate, and tell the load boards, the 0:42:47.080 --> 0:42:51.960 parties that manage these marketplaces until they actually put real 0:42:52.160 --> 0:42:55.720 systems in place, it's going to proliferate very quickly. 0:42:56.400 --> 0:42:59.000 Is there anything that could be done to reduce the 0:42:59.040 --> 0:43:02.840 cyclicality of the trucking industry and would it be desirable 0:43:03.040 --> 0:43:06.080 to reduce the cyclicality of the trucking industry, Because on 0:43:06.120 --> 0:43:09.040 the one hand, it sounds bad if we're talking about 0:43:09.120 --> 0:43:11.760 trucking blood bath two point zero, But on the other hand, 0:43:12.160 --> 0:43:15.040 maybe it's a good thing that, you know, truckers can 0:43:15.120 --> 0:43:19.520 sort of rapidly build up capacity and then rapidly wind 0:43:19.560 --> 0:43:20.640 it down as needed. 0:43:20.840 --> 0:43:23.640 The number one thing that I think would reduce cyclicality 0:43:23.640 --> 0:43:26.839 industry would be making it harder to open one's own 0:43:26.880 --> 0:43:29.719 trucking company. This is not a point that will make 0:43:29.760 --> 0:43:32.000 me very popular among my readers. 0:43:32.239 --> 0:43:34.480 Actually, I think Rachel, the folks that are in it 0:43:34.520 --> 0:43:37.400 would actually really appreciate it. This myth of a driver 0:43:37.560 --> 0:43:41.480 shortage is proliferates because you read about that and you're like, oh, 0:43:41.520 --> 0:43:43.040 I'm going to go start my own trucking company because 0:43:43.040 --> 0:43:45.279 it's always there. But I think to Rachel's point, you 0:43:45.320 --> 0:43:47.520 have to cut off the supply of new entrants, and 0:43:47.560 --> 0:43:49.200 the only folks that can do that are the banks. 0:43:49.560 --> 0:43:52.840 So when the banks stop lending money and start stop 0:43:52.920 --> 0:43:56.080 financing new carriers to get in the industry, that will 0:43:56.160 --> 0:43:58.480 restrict capacity. But let's just be you know, let's be 0:43:58.520 --> 0:44:01.520 frank here, when the market turns back around and it's lucrative, 0:44:01.600 --> 0:44:05.400 the banks will again resume lending money. So Tracy, at 0:44:05.440 --> 0:44:09.719 one point, trucking, like all transportation, was regulated, pricing was regulated. 0:44:09.920 --> 0:44:13.520 Amazon's business model JIT freight, e commerce would not be 0:44:13.600 --> 0:44:14.920 possible without deregulation. 0:44:15.040 --> 0:44:17.080 I remember, Rachel, we had you on to talk about 0:44:17.120 --> 0:44:17.799 this exact point. 0:44:17.880 --> 0:44:18.120 Yeah. 0:44:18.840 --> 0:44:22.480 So it is a situation where unless we were to 0:44:22.480 --> 0:44:25.440 see a reregulation, which nobody wants, it's just going to 0:44:25.440 --> 0:44:27.120 be a boom and bus cycle. We're just all, you know, 0:44:27.880 --> 0:44:29.879 we're all going to watch this from afar, or if 0:44:29.880 --> 0:44:31.960 you're in the industry, you're going to unfortunately be exposed 0:44:31.960 --> 0:44:32.160 to it. 0:44:33.080 --> 0:44:36.080 Well, there's so much going on, and there's such a fascinating, 0:44:36.320 --> 0:44:39.360 fascinating time I hadnot I mean, it's one thing to 0:44:39.440 --> 0:44:41.840 hear twenty nineteen, it's another thing to hear two thousand 0:44:41.880 --> 0:44:44.040 and eight. Two thousand and nine, which I was not expecting. 0:44:44.640 --> 0:44:46.440 Rachel and Craig, thank you so much to both of 0:44:46.480 --> 0:44:47.880 you for coming back on upline. 0:44:48.120 --> 0:45:01.000 Thanks for having us. 0:45:01.880 --> 0:45:05.879 Tracy always like talking trucking. I think one thing that 0:45:05.960 --> 0:45:09.480 you know, in addition to that sort of megacyclicality, the 0:45:09.560 --> 0:45:12.319 sort of the persistent inflation in the space, and so 0:45:12.400 --> 0:45:14.640 the fact that like, okay, we're back to twenty nineteen 0:45:14.760 --> 0:45:18.960 levels and some measures, but twenty nineteen nominally, you know, 0:45:19.120 --> 0:45:22.400 is like, yeah, parts mechanics, et cetera. It seems pretty brutal. 0:45:22.560 --> 0:45:22.880 Yeah. 0:45:23.080 --> 0:45:25.440 I was also thinking we need to put together some 0:45:25.560 --> 0:45:27.960 of the data points that they both mentioned, get like 0:45:28.000 --> 0:45:30.239 a series of charts going and take a look at that. 0:45:30.840 --> 0:45:34.120 I do think, going back to the big question, the 0:45:34.160 --> 0:45:38.040 sort of macro versus micro, it does feel to me 0:45:38.680 --> 0:45:43.040 like there are some specific things about trucking, including the 0:45:43.040 --> 0:45:46.520 fact that the barriers for entry are still quite low, 0:45:46.640 --> 0:45:51.600 that make what's happening maybe not entirely indicative of what's 0:45:51.640 --> 0:45:54.520 happening in the real economy. But also when you hear 0:45:54.560 --> 0:45:56.560 people talk about two thousand and eight, two thousand and nine, 0:45:56.920 --> 0:45:59.719 the slowdown in volume, which Craig mentioned, I mean that 0:45:59.840 --> 0:46:01.480 is a real thing that is happening. 0:46:01.800 --> 0:46:04.759 Yeah, I mean, it seems like it's obviously real, economy 0:46:04.840 --> 0:46:07.040 rooted and there are issues with demand. It's just that 0:46:07.360 --> 0:46:10.080 it's so it feels so magnified the fact that. 0:46:10.400 --> 0:46:13.040 It's like the bullwhip effect on the bullwhip effect kind of. 0:46:13.160 --> 0:46:15.239 I think that's really I think that's really well put. 0:46:15.320 --> 0:46:17.840 And then, you know, to Craig's point, it's like we 0:46:17.960 --> 0:46:20.680 have seen some departures apparently from the industry, but they're 0:46:20.680 --> 0:46:23.640 still at the small level, whereas past cycles bottomed with 0:46:23.719 --> 0:46:27.319 like serious, like sort of medium sized carriers, including one 0:46:27.360 --> 0:46:29.840 publicly traded company a few years ago going bankrupt. 0:46:29.920 --> 0:46:30.920 So maybe there's more to go. 0:46:31.200 --> 0:46:33.040 Yeah, for sure. Shall we leave it there for now? 0:46:33.040 --> 0:46:34.399 Though, Let's leave it there all right. 0:46:34.560 --> 0:46:37.400 This has been another episode of the All Bots podcast. 0:46:37.480 --> 0:46:40.040 I'm Tracy Alloway. You can follow me on Twitter at 0:46:40.080 --> 0:46:40.880 Tracy Alloway. 0:46:41.080 --> 0:46:43.840 And I'm Joe Wisenthal. You can follow me on Twitter 0:46:43.960 --> 0:46:47.720 at The Stalwart. Follow Craig Fuller on Twitter at Freight Alli, 0:46:47.880 --> 0:46:52.480 and Rachel Premac on Twitter at Our RPR. Follow our 0:46:52.520 --> 0:46:56.480 producers Carmen Rodriguez at Carmen Arman and Dashel Bennett at 0:46:56.560 --> 0:46:59.560 dashbot and find all of the Bloomberg podcasts under the 0:46:59.560 --> 0:47:03.960 handle podcasts. And for more Oddlots content, go to Bloomberg 0:47:04.000 --> 0:47:06.440 dot com slash odd Lots, where we blog, we have 0:47:06.480 --> 0:47:09.520 a transcript, a newsletter that goes out every Friday, and 0:47:10.080 --> 0:47:13.200 hang out with other oddlocks listeners in our discord. It's 0:47:13.200 --> 0:47:15.640 really fun. We talk about all this stuff all the time. 0:47:16.040 --> 0:47:19.600 Twenty four seven. Go to discord dot gg slash odd 0:47:19.680 --> 0:47:22.680 Laws join the conversation there. Thanks for listening.