COMMON SENSE

Pearl Harbor Portfolio Day 18:

Merry Christmas and a Silent Night for Arrow Trucking

Dec. 25,2009

Last week’s Quadruple witching day for  re-balancing stocks in the current indies,the Dow Jones Index is set to close on the high for the year. YRC Worldwide, who were dropped from the Dow Jones Index earlier this month are still renegotiating their near $537 million debt for equity swap to ensure the company’s continued survival.  YRC is a major player delivering individual freight to small and medium sized companies who cannot order a full truck load of freight.   They serve LTL, (less than truck load ) market, usually delivering 1-2 pallets of freight to customers.  The LTL freight rate charges are higher to their customers than a Full Truck Load carrier.   Theoretically LTL freight companies, like YRC,  should have higher profit margins.

However, YRC has been bleeding money due to the poor economy.   YRC has unionized drivers, most are paid and hourly rate and a combination of mileage plus delivery charges.  YRC union, the International Brotherhood of Teamsters, has given concessions, but the  small and medium sized customers of YRC  have not be able to have reliable lines of credit for operations. Therefore, YRC has continuing high overhead while suffering from the slowing economy.

The same thing happened to the UAW workers, who gave concessions to automakers, but the small auto part suppliers were not given a reliable lines  of credit to continue with operations, many have gone out of business.  The American consumer has demanded lower prices, and the best way for companies to cut prices is to use non-unionized transportation companies.  Unionized companies cannot make money competing in a non-unionized world due to their higher legacy costs and benefits.

This should be a sign for the Obama Administration, that small and medium sizes businesses are till suffering.   The credit crisis is still alive, despite the Stock Market making year end highs.

Trucking serves as a barometer of the U.S. economy, representing nearly 69 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Non-unionized Trucking firms operate on low margins, several hundred companies exit the business each year.  In 2008, blindsided by higher fuel prices and the in-ability to recoup  fuel surcharges on freight, a whopping 3,065 trucking companies with five or more drivers went under. Currently the  trucking industry has lost 1,255 companies through the third quarter and will likely go higher just after the first of the year.   Trucking is a cyclical business with freight slow during the first quarter of 2010.

Economy  Kept Alive By Trucker’s Sacrifice

Non-unionized trucking companies have the majority of trucks on the road.  The non-unionized companies which survive in 2010, their drivers will be overworked and under paid even in a slowing economy.   There will always be a need for food and fuel, no matter how bad the economy failing.  ONE FACT:  95% of all the truck drivers currently on the road,  have less than 5 years driving experience.  According to the American Trucking Association, which started collecting data on driver turnover rates in 1995 and reported the 127% annualized rate for the first 3 months of 2007. The 6 percent increase from the last three months of 2006 showed the trucking industry ended the quarter with 1.8 percent fewer drivers than in the beginning.

Here is one of the reasons why trucking has a high turnover rate.

Non-unionized drivers are overworked and underpaid for the hours of service they provide their companies.  The Federal Government has imposed rules for safety, however the rules cost the drivers money not the company. Federal law states that a driver cannot be on duty, (loading/unloading) and driving more than 60 hrs per 7 days.   Once the driver begins work, he cannot stop his work time, and the maximum hours worked per day is limited to 14 hours in a 24 hr period.  So,Under the current guidelines, a driver who delivers in the morning at 6 am has a maximum work day ending at 8pm that night.   Then he has to go to the sleeper berth for 10 consecutive hours.

The problem arises when a driver does not have another load until 3-6 or 9 hrs  hours later. (6am to 8pm = 14hrs)  During a slow economy, a trucker may have to wait up to 24 hrs hrs for another load.  If a trucker does get a load, it may be later that day.  For example , at noontime, he has lost 6 hrs of pay for that day.  The average pay for drivers is between $18-20 per hour while driving.  If a Non-unionized driver is not driving, he is not getting paid.  So you can see this has a significant impact on his weekly paycheck!  There is no other industry in America, where you are required to show up to work, and give the company 3,4, or 6 hrs, or more  of  time and not be compensated for it!   Truckers that work for non-unionized companies have been helping consumers keep prices low, while sacrificing their own pay to keep a job. see chart below

“Consuming Nation”

Everything you buy at a store is shipped on a truck and most people are completely oblivious to that fact.

The Unionized trucking companies such as the newly merged Yellow/Roadway, will begin failing just at the banks have.  Unionized Trucking Companies have tremendous overhead from unfunded mandates and pension plans. The first signs of trucking trouble last year was with Yellow /Roadway trucking company.   Wall Street saw it as the “last merger” to benefit the big investment bankers.  The Yellow/Roadway would  benefit both  unionized companies.  Wall Street sites cost savings benefits for every merger.   I have always maintained that any and all company mergers are a warning sign for you to sell the stock!  All mergers, have had their share prices drop years after the merger has completed.  If you can find one merger in the last 10 years, whose company stock did not decline by more than 50% after the merger,  please bring it to my attention. As with the case of Yellow and Roadway merger being completed this year, those who headed my warning about selling early should be smiling.

Unionized VS. Non-Unionized

The current political climate is right for more unionized companies like Yellow/Roadway to have serious clout in the White House.  I expect more pressure to be placed on non-unionize companies as times begin to get tougher for truckers.   The non-unionized companies have kept transportation cost down for the consumer, lowering prices at the retail level.  Unionized trucking companies will increase the cost to the shippers and consumers.

The main contention between the unionized truckers and non-unionized truckers goes back to the last great Teamster strike and the disappearance of Jimmy Hoffa in the mid 70’s.  During the 70’s, the The Teamsters  controlled the majority of drivers for manufacturing and production in the economy with over 500k members.  Today, they have less members, but their political influence is still strong.  The Teamsters are the 11th largest contributor to the United States Election Campaign fund, with 92% of their 24 million dollars going to the Democratic party.  During the credit restructuring  and merger, YRC  received substantial credit assistance, leading non unionized trucking companies to cry foul.

Meanwhile Arrow Trucking of Tulsa Oklahoma, a non-unionized company, have sent their workers and drivers  home and suspended operations.  Many of their drivers have not been paid over the last 2 weeks, and the checks they did receive, bounced.   Maybe leaving their drivers stranded was not their intention, but without a line of credit to fuel the trucks, the Arrow Trucking  may not not had a choice.  If Arrow Trucking would had  similar unionized political clout as YRC, maybe they would still be in business.   The  failure of Arrow Trucking, with some 1,400 flatbed trucks and 2,600 trailers operating throughout the US,  will create ripples throughout the trucking industry. Non-unionized  company drivers should take heed of the current events affecting Arrow Trucking. The message  from the White House Administration is clear, if you are unionized you will be protected.  If you are not unionized, then may find yourself out in the cold in one Silent night!

Remember, non unionized drivers are being paid for miles driving, not for sitting, so as non-unionized companies struggle to find lines of credit and freight in a slowing economy, more drivers will be joining the unemployment line in 2010!

Meanwhile Congress Bails out Fannie and Freddie Again!

• Fannie And Freddie Receive Unlimited Future Funds To Stay Afloat (huffingtonpost.com)
• Arrow Trucking Strands Drivers During Layoff – ABC News (abcnews.go.com)
• YRC Shares Sink After Debt Exchange (abcnews.go.com)

Technorati Tags: Add new tag, business, Dow Jones Industrial Average, Economy of the United States, Federal government of the United States, Jimmy Hoffa, Transportation and Logistics, Trucking, United States

Day 7 of the Pearl Harbor Portfolio follows with an S &P Downgrade of Greece’s Sovereign debt rating.  The lack of interest in the failing Euro Zone countries is disturbing and the silence is deafening within the American News Media sources.  The American people deserve “real  news”  for them to make a better decision about their most important assets.  Many have sounded the warnings, years ago, about the market media matrix, only producing ‘Pop news” for “Pavlov conditioning” effect on the American public.  When you hear the news stories, they alternate “bad news stories” with “pop culture news,”  leaving you in a “purple happy pill” altered state of mind.  In fact, half of all Americans are taking some long term medication.  Historians in the future, (if there is a future), will be studying the effects of all the drug interactions that are affecting the way people think.  Forgetting all the bad news stories in the American culture and remembering all the pop news culture is the  motto of our society.

Debtor Nation:

If you had a stack of $1000 bills 4 inches high, you would have a million dollars.  If wanted a Billion dollar stack of $1000 bills, your stack would be 333 feet tall.  To get a Trillion dollars, your stack would have to be 63 miles tall!   Currently the U.S. national unfunded liabilities, (IE. debt we promised to pay) is now equal to 100 Trillion dollars.   Placing $1000 bills from Bangor Maine to San Diego California, and Tacoma Washington to Miami Florida, would equal the amount of money we have agreed to pay. ( without “health insurance or any other spending)  Can u see how foolish the amount of government spending is?

Greece is the “canary in the coal” mine for Europe.

The Greek Finance Minister Giorgos Papaconstantinou said,  “Since assuming office two months ago, the socialists had been “truly shocked” at the scale of the economic mismanagement. Under the centre-right New Democracy party, government waste had skyrocketed, with out-of-control recruiting policies, a proliferation of public-sector committees and overpaid heads of state utilities. Ministries approved obscenely high phone and newspaper bills, while senior civil servants had spent lavishly on unnecessary foreign trips, he said. “It was as if they regarded the national treasury as the spoils of war and raided it.” Papaconstantinou, doing the interview rounds stopped to explain his situation to UK’s The Guardian where he made comments that should resonate well with American readers.

Yup, sounds like the Greek Finance minister is talking about the “U. S. Congress and the Democratic Party Machine out of Chicago!”  You see, there is one underlying factor about all socialist/communist, they want to “force people” to do the right thing according to their logic. Why, because you are incapable of deciding what is best for you and your family. Ronald Regan said, these are the scariest words the American people can ever hear, ” I am from the government, I am  here to help.”

When more  Americans  believe the  government can help, ” we are definitely on the wrong road to recovery.    The source of all  financial problems is the Government! The “government bureaucrats and elected officials” have caused the financial problems we have today! The newly elected Obama governmental Socialist/economic/Marxist government is on the road to fundamentally change America as we know it.  I feel Obama’s goal is to fundamentally destroy the fabric of the Constitution and Capitalism to achieve his idealistic goals established by his heroes.  The  market media news  matrix is in locked step with the Socialist /Marxist government, who will stop at nothing to impose their agenda on the American taxpayer for generations.  Enslaving the American People with generational debt is the only rational answer to “what the government bureaucrats” are doing.

Meanwhile  you are told to take your “purple  pills” and keep spending and consuming by the market media matrix. The market media matrix relies on pop culture for advertising revenue, witness  the lack of reporting “real financial news vs. Tiger Woods pop news.”   Compare a “Google search using the last week filter of “Greece debt ratings” and “Tiger Woods” story.  It is not shocking to find 166 million stories on Tiger Woods and less than 193,000 stories on Greece’s debt rating.   The market media matrix perpetuates the “happy feelings of pop culture” until reality meets actuality.   Just like the Pearl Harbor attack, information is only important if you have a plan and enough time.  You need to  have a plan before the financial crisis begins.    The reality of the situation is that you have time to protect your “Pearl Harbor Portfolio from a sudden and decisive  wealth destruction attack. If you have the necessary information, but the market media matrix is not giving your the proper information to defend your wealth.

Maybe your stock market gains have recovered a little, but not as well as you would think.  The Sp500 still needs to gain another 40% to reach 2007 highs. If you would have been a long term holder of the Sp500 index since 12/12/2000 to 12/12/2009, a full 9 years, you total return is still down over -15%! So after 9 years of being invested, your total rate of return is still negative!  So much for the buy and hold theory.  The “buy and hold Myth” may be your financial plan based on historical optimism, yet that plan of action will be a recipe for disaster.

During the last financial crisis, the government encouraged you to spend and consume.  What idiot proposed that idea?  You have been condition to spend and consume, in order to create jobs.   The definition of a “JOB” is “Just Over Broke.’ If you are not able to save 10% of your money in a savings account, then you are not being paid nearly enough from your job.  When there are no jobs, who will continue to  spend and consume?  The government will continue to print more money and spend more money, but giving you the taxpayer the i.o.u.s in the form of government bonds.  Digging a hole deeper in debt, so that your children and grand children will be obligated to pay back current government spending. The financially irresponsible road the Government is taking is financial suicide.

The perfect storm is upon us, as I predicted  with the destruction of housing and stock market.  The baby boomers are looking for, no grasping for  help.  Are you a baby boomer, doing the same things you did in the past with your stock portfolio’s and your 401k’?  If you are a baby boomer and doing the same thing, then your wealth is a sitting duck for another Pearl Harbor Attack.  What will you do?  Your choices are  a  “Jimmy Carter” decade or a “Franklin Roosevelt” decade?  Time is running out and the baby boomers are the ones with the most wealth.

Now, some of you voted for “hope and change”, for a man with no business experience, and with idealist social justice goals.  His administration is filled with  idealistic people whose only goals were to tear down capitalism and promote socialism. Your eternal optimism  about who you trust will not be justified by this time next year.    The “new america” is ruled by czars, ex-felons, tax cheats, and other malcontents.  You thought you voted for “hope and change” thanks to the market media matrix,  never knowing you were getting the chains of poverty and bondage of debt .

We are going bankrupt, there is no way out of this perfect storm.  Stay tuned to this blog for more information….

Doctrader

Other Related articles

• Howard Dean Turns on Senate’s Latest Health Care Overhaul Bill (blogs.wsj.com)
• Greek unions protest against cuts (news.bbc.co.uk)
• Papandreou unveils radical reforms to salvage Greece’s public finances (guardian.co.uk)
• Greece Downgrade Hits Euro, Bank Stocks (online.wsj.com)
• Why don’t we get more foreign news? (investoralist.com)

Technorati Tags: Debt, debtor nation, Democratic Party, Franklin D. Roosevelt, government, Government bond, Greece, Pearl Harbor, Pearl Harbor Attack, Pearl Harbor Portfolio, Ratings, stock market, Tiger Woods, United States

Please comment on this tag cloud. Do you like or don’t like?

Also, the Health Care AD run by the AFL-CIO UNION

Technorati Tags: AFL-CIO, Barack Obama, health, Health Policy, History, Labor, Society and Culture, United States

L. William Seidman is the chief commentator on cable network’s CNBC-TV and publisher of “Bank Director” magazine. He is also one of the principal founders of Grand Valley State University in Michigan, where the Seidman College of Business was named in honor of his father…

Prior to that, he served as the fourteenth chairman of the Federal Deposit Insurance Corporation from 1985 to 1991. He became the first chairman of the Resolution Trust Corporation (RTC) in 1989 and served until 1991.

During his tenure at the FDIC, the agency handled over one thousand bank failures and took over the administration of the insurance fund of the S&L industry. While at the RTC, he supervised the creation of an 8,000 person agency handling over $400 billion in assets from failed S&Ls. He brought to the position a record of accomplishments as a businessman, educator and public servant.

Gazette – http://www.thenedgazette.com/

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Technorati Tags: Bank failure, Federal Deposit Insurance Corporation, Grand Valley State University, insurance, L. William Seidman, michigan, Resolution Trust Corporation, United States