VIPs
- While the liquidity provided for the Fed has been a positive for stock market investors, not all are feeling flush; Bloomberg’s Consumer Comfort Index for those making less than $50,000 has fallen for 10 straight weeks, the longest streak since 2010
- The October DAT Trucking Freight Barometer contracted for refrigerated trucks and Flatbeds while Dry Van was marginally expansive due to Black Friday shipments but expected to contract in November; rail traffic’s deepening slump was reflected in the PPI’s 12-month streak of declining pricing power for Long Distance Trucks and Railroad
- Based on Cass Freight data, the freight flow surge from 2018’s ‘Trump bump’ has been fully retraced; preliminary data on October continuing unemployment claims in the transportation sector have surpassed 2016’s industrial recession highs
Completed in 1764 and nestled at the entrance of the New York Harbor, Sandy Hook Lighthouse is the country’s oldest standing tower. As for the first lighthouse constructed under America’s first federal government, that distinction goes to the Portland Head Light, which, beginning in 1791, shined its light from Cape Elizabeth, Maine. Though its original tower was destroyed during the Revolutionary War, Boston Light Station, built on Little Brewster Island in 1716, is still the country’s true first lighthouse. And there resides the country’s only lighthouse keeper. To honor the first light that guided safe passage to our shores, Congress deems that the tower that stands there today, rebuilt in 1783, have its light manually turned on at nightfall, and off at daybreak. Every other lighthouse, with no exception, has long since been automated.
If you’ll pardon the derision, we’ve begun to think that investors like those who follow a lighthouse signal, are finding that paths lit toward a pre-programmed destination. In the event you missed the monetary alchemy, by buying Treasury bills with maturities of one year or less, the Powell Printing Press manually un-inverted the 3-month/10-year curve, where it had been since May, all but advertising “Recession.” And just like that – OK, after committing $60 billion a month to the “not-QE” cause – no more inversion, no more recession risk.
With that wee liquidity injection, stocks were off to the ATH races. No, we don’t need to spell that out. With stocks up 23% on the year, it’s a household acronym.
But it appears not everyone received the memo. As Bloomberg reported yesterday, its Consumer Comfort Index for those making less than $50,000 fell for a 10th straight week, making for the longest stretch since 2010. Against the current euphoric market mood, we found this disconcerting.
And then there was this from Gary Langer, head of Langer Research Associates, who conducts the weekly survey: the weaknesses, “initially focused on lower-income households, have now been expanding in recent weeks to middle-income households. Better-off folks are still well insulated.”
No doubt solid insulation has been key as record-low breaking temperatures sweep the nation. But we suspect the doldrums among those not participating in the market mania is more than just a change in the weather but rather reflected in the nation’s transport sector, which has been sinking into a deep freeze for months. We spoke of the collapse in California port activity earlier this week. But inbound goods don’t terminate in the Golden State; they’re distributed over land by road and rail to key distribution points.
As if on cue, Broughton Capital’s October DAT Trucking Freight Barometer landed on Wednesday. Bear in mind, October is a typically strong seasonal month as trucks rush Black Friday merchandise to its end point. Hence the surprise at the Dry Van reading slipping to 50.4 with industry watchers expecting an outright contraction in November. Refrigerated truck traffic slid into the red, at 49.9, and should see prices fall further in coming months. And finally, at 47.7, Flatbed’s fall deepened, extended its contractionary run into a fourth month.
And then there was yesterday’s PPI. Long-distance trucking firm pricing power has weakened for 12 consecutive months, from October 2018’s 9.2% rate over the prior year to -1.4% last month. Over the same 12-month span, railroad traffic has swung from a modest 2.0% annualized pace of expansion to -7.9% this October. For what it’s worth, at -7.3%, November month-to-date rail data has not perked up.
Finally, the Cass Freight data hit the wires yesterday afternoon. But it wasn’t the depressed string extending into an 11thmonth that caught our attention. It was this (with Cass doing the bolding): “The Index on a 2-year percentage change basis went negative (-0.1%). This suggests that the great surge of 2018, or ‘Trump bump’ as it was characterized by many, has now been completely erased at least from a freight flow perspective.”
The cold front that’s hit logistics has generated enough pink slips to lift the breadth of states with rising transportation continuing claims – workers actually collecting, not just filing for, unemployment benefits – to a preliminary 78% in October. The caveat: only 23 states have reported continuing claims thus far. That said, the early read on October far eclipses the 2015-16 industrial recession June 2016 peak of 65%. The transportation sector is in its deepest rut since the Great Recession.
Broadening out, continuing jobless claims for the nation as a whole rose for a third consecutive week, formally establishing a trend we know will stay intact given this week’s unexpected rise in initial claims. A reminder that this is the first instance of rising continuing claims since December 2009. As for feverish investors, while we’d never fight the Fed, we would caution that we get the sense that the lights are on, but no one is home.