Authored by Joanna Marsh via FreightWaves.com,

Roughly 61% of Brotherhood of Railroad Signalmen’s voting members oppose deal intended to head off strike…

Count the Brotherhood of Railroad Signalmen (BRS) as another union to reject the tentative labor agreement that representatives of the rail unions and the freight railroads negotiated under pressure from the White House.

The union and the organization representing the railroads plan to return to the negotiating table, but BRS’ vote further clouds the question of whether a freight rail strike could occur — something that the tentative agreement had sought to stave off. Members of the Brotherhood of Maintenance of Way Employes Division rejected that union’s tentative agreement earlier this month.

BRS announced Wednesday that 60.57% of voting members opposed ratification, while 39.23% voted in favor. 

BRS represents more than 6,000 members affected by the negotiations, which is about 5% of the 115,000 union members involved in the negotiations process.

BRS President Michael Baldwin said the percentage of members who voted — 73.18%  — was the highest participation rate in BRS history.

The union was represented at the negotiating table by the Coordinated Bargaining Coalition and later by the United Rail Unions. The National Carriers Conference Committee (NCCC) represented the freight railroads.

In response to BRS’ vote, NCCC said it was “disappointed” in the outcome, saying that the failure to ratify the agreement would delay the benefits of the tentative agreement for BRS members.

Both NCCC and BRS have agreed to maintain the status quo until early December, which means any potential service disruptions by BRS members would not occur before then. Both parties will be going back to the bargaining table for further contract negotiations.

NCCC says the tentative agreement includes recommendations by the Presidential Emergency Board (PEB), a three-person independent group appointed by President Joe Biden over the summer to work with the railroads and the unions on finding ways to resolve the labor contract impasse and avert a strike. The railroads and unions have been negotiating a new contract since January 2020.

Those recommendations included the largest wage increase in nearly five decades, maintained rail employees’ platinum-level health benefits and added an extra day of paid time off, NCCC said, noting that six other unions had already voted in favor of ratifying their labor agreements. 

NCCC said PEB’s recommendations “represent a carefully considered compromise of all parties’ interests.”

“BRS asserts that the tentative agreement is inadequate because it does not provide for additional paid sick time. However, the vast majority of BRS members work predictable schedules and all have access to time off,” NCCC said. “Like other rail employees, they can and do take time off for sickness and already have paid sickness benefits beginning after four days of illness-related absence and extending for up to a year.

“The structure of these benefits is a function of decades of bargaining where the unions have repeatedly agreed that short-term absences would be unpaid in favor of higher compensation for days worked and more generous sickness benefits for longer absences,” NCCC continued. “The three experienced arbitrators appointed to PEB 250 by President Biden thoroughly reviewed and rejected a union proposal to add paid sick time for short-term absences to the existing system, noting in their report that union concerns had been considered in formulating the PEB’s historic wage recommendation.”

But BRS said the vote “spoke loudly and clearly that their contributions are worth more.”

“I have expressed my disappointment throughout the process in the lack of good-faith bargaining on the part of the NCCC, as well as the part PEB 250 played in denying BRS members the basic right of paid time off for illness,” Baldwin said in a statement. “The NCCC and PEB also both failed to recognize the safety-sensitive and highly stressful job BRS members perform each day to keep the railroad running and supply chain flowing. 

“Without Signalmen, the roadways and railroad crossings would be unsafe for the traveling public, and they shoulder that heavy burden each day. Additionally, the highest offices at each Carrier, as well as their stockholders, seem to forget that the rank-and-file of their employees continued to perform their job each day through an unprecedented pandemic, while the executives worked from home to keep their families safe.”

The six unions that have approved their agreements are the American Train Dispatchers Association, the International Brotherhood of Electrical Workers, the Transportation Communications Union, the Brotherhood of Railway Carmen, the National Conference of Firemen & Oilers, and the mechanical and engineering division of the International Association of Sheet Metal, Air, Rail and Transportation (SMART) Workers.

Two of the largest unions representing train engineers and conductors — the Brotherhood of Locomotive Engineers and Trainmen and SMART-Transportation Division — have yet to vote on whether to ratify their agreements.

As the moment of peak crisis arrives for the left, losing control of the narrative-management tool known as Twitter, there are stories (for example, here at Bloomberg) running rife citing no sources at all while claiming that advertisers are nervous of the nazi, child pron, hate-speech that will inevitably return to the social media platform now that the richest man in the world is in charge.

“There’s no commercial viability for a network that doesn’t have some level of content moderation. Advertisers and users aren’t going to show up and post during their workday alongside pornography and extremism — and Twitter is already reportedly struggling with losing its most active users. So in deciding how “free” Musk wants speech to be, he may have to alienate users to get there.”

The Wall Street Journal also warned that “Madison Avenue isn’t sold on the deal,” suggesting advertisers are anxious to be on the Musk-owned platform.

About a dozen of GroupM’s clients, which own an array of well-known consumer brands, have told the agency to pause all their ads on Twitter if Mr. Trump’s account is reinstated, Kieley Taylor, global head of partnerships at GroupM, said.

Others are in wait-and-see mode. Ms. Taylor said she expects to hear from many more clients if Mr. Trump’s account returns.

“That doesn’t mean that we won’t be entertaining lots of emails and phone calls as soon as a transaction goes through,” Ms. Taylor said. “I anticipate we’ll be busy.”

Ad agency Omnicom Media Group evaluates the major social-media platforms’ progress on brand-safety tools every quarter. In July, Omnicom rated Twitter’s progress behind that of YouTube, Facebook, Instagram, TikTok and Reddit, according to a document reviewed by the Journal. Robert Pearsall, managing director of social activation at Omnicom Media Group, said Twitter has made agreements to improve its brand-safety controls to meet Omnicom’s standards, but it hasn’t introduced those changes to the market yet.

“There are significant concerns about the implications of a possible change to content moderation policy,” he said.

Twitter has said it is working on tools to give advertisers a better idea of where their ads appear.

Advertising provided 89% of Twitter’s $5.08 billion revenue in 2021.

Perhaps in anticipation of such a smear – and to front-run any advertisers’ concerns, Elon Musk has tweeted a brief letter to advertisers…

I wanted to reach out personally to share my motivation in acquiring Twitter. There has been much speculation about why I bought Twitter and what I think about advertising. Most of it has been wrong.

The reason I acquired Twitter is because it is important to the future of civilization to have a common digital town square, where a wide range of beliefs can be debated in a healthy manner, without resorting to violence. There is currently great danger that social media will splinter into far right wing and far left wing echo chambers that generate more hate and divide our society.

In the relentless pursuit of clicks, much of traditional media has fueled and catered to those polarized extremes, as they believe that is what brings in the money, but, in doing so, the opportunity for dialogue is lost.

That is why I bought Twitter. I didn’t do it because it would be easy.

I didn’t do it to make more money. I did it to try to help humanity, whom I love.

And I do so with humility, recognizing that failure in pursuing this goal, despite our best efforts, is a very real possibility.

That said, Twitter obviously cannot become a free-for-all hellscape, where anything can be said with no consequences!

In addition to adhering to the laws of the land, our platform must be warm and welcoming to all, where you can choose your desired experience according to your preferences, just as you can choose, for example, to see movies or play video games ranging from all ages to mature.

I also very much believe that advertising, when done right, can delight, entertain and inform you; it can show you a service or product or medical treatment that you never knew existed, but is right for you.

For this to be true, it is essential to show Twitter users advertising that is as relevant as possible to their needs. Low relevancy ads are spam, but highly relevant ads are actually content!

Fundamentally, Twitter aspires to be the most respected advertising platform in the world that strengthens your brand and grows your enterprise.

To everyone who has partnered with us, I thank you. Let us build something extraordinary together.

Remember his words from yesterday:

“A beautiful thing about Twitter is how it empowers citizen journalism – people are able to disseminate news without an establishment bias.”

Let’s hope this is true.

Finally, we already have a good idea of what his plan will be now that he runs the show.

Via SchiffGold.com,

We have been saying the Federal Reserve is bluffing in this inflation fight because it is holding a losing hand.

And Peter Schiff thinks the central bank has folded with a soft pivot. He explained why on his podcast.

I’m going to go out on a limb here and predict that we’ve already seen the Fed pivot. Now, it wasn’t a pivot in the sense that the Fed has gone from hiking interest rates to cutting interest rates. It hasn’t gone from quantitative easing to quantitative tightening. But it is a pivot in rhetoric. And what it amounts to is an easing of monetary conditions. Because what the Fed is going to be doing going forward is starting to walk back just how aggressive its rate-hiking campaign is going to be.”

The shift may be subtle, but it will be significant. Instead of talking about the urgency of the inflation fight, Peter said he thinks the central bankers at the Fed will start talking about how much progress they have made.

Since they’ve made progress, maybe not completely declaring victory, but indicating they’re seeing the light at the end of the tunnel — that maybe they don’t have to raise interest rates as high as they thought, or maybe leave them as high for as long as they thought. And so the path back down to 2% inflation may not require as aggressive a rate-hiking campaign as they may have previously thought before they started to see the evidence of their success.”

What led Peter to this conclusion?

Last Thursday (Oct. 20), the bond market looked close to a complete collapse. That morning, the yield on the 30-year Treasury nearly rose to 4.4%. Meanwhile, the curve between the 10-year and the 30-year moved positive out of inversion. This was a sign investors were beginning to price in prolonged inflation. Meanwhile, the stock market was also under pressure due to the weakness in the bond market.

The Achilles heel of this bubble economy is interest rates because we’ve got so much debt. And if interest rates rise high enough, the whole thing is going to collapse.”

Consider this tweet Peter sent last Friday.

The 10-year Treasury yield hit 4.33%, its highest since Nov. 2007, when the Nation Debt was under $9 trillion. Today it’s over $31.2 trillion. At 4.33%, annual interest on the National Debt would exceed $1.35 trillion, more than is spent on National Defense or Social Security.

— Peter Schiff (@PeterSchiff) October 21, 2022

That would make the interest on the debt the biggest US government expense. (You can read a more in-depth analysis of the national debt HERE.)

Do you see the problem here? Debt is spiraling out of control and is going to crowd out all of the other government spending.

At the rate the National Debt and interest rates are rising, before the decade ends interest on the National Debt will exceed 100% of federal tax revenue. The entire Federal Government would then consist of the Treasury Department, which would just collect taxes and pay interest.

— Peter Schiff (@PeterSchiff) October 21, 2022

Basically, the US government would become a conduit from taxpayers to bondholders. Now obviously, this can’t happen. At some point, something has to give. And I think that something already gave. I think it gave on Friday morning, and that’s why I think the Fed folded with this ‘soft’ pivot. The reason I’m saying a soft pivot and not a hard pivot is because the Fed is still on the trajectory of hiking rates. I just think it shifted into a lower gear. So that, in and of itself, constitutes an easing. Even if the Fed is tightening, if it’s tightening less aggressively than the markets had thought, then it’s an easing. It’s a forward guidance that is easing conditions a little bit and telling the markets, ‘Hey, you’re too tight. You’re pricing in too many rate hikes. Because we’re probably not going to have to hike as many times as you think. The terminal rate is not going to be as high as you think because we’re already making good progress.’”

The soft pivot was telegraphed to the markets by a Wall Street Journal report saying some Fed members were expressing “unease” and were concerned about overtightening. The story reported that San Francisco Fed President Mary Daly said, “The time is now to start planning for stepping down.”

Peter went on to detail some of the bad economic data the Fed will also have to reckon with including contractionary October PMI, tanking consumer confidence, and rising shelter costs (even though housing prices are falling).

Authored by Julianne Geiger via OilPrice.com,

U.S. energy executives told Jennifer Granholm that shuttered crude oil refineries won’t restart, Valero’s Chief Executive Joe Gorder said on Tuesday.

The comments were made to the U.S. Energy Secretary at a recent White House meeting with energy executives, Reuters reported on Tuesday.

“The one interesting thing that came out of it, too, was there was consideration for the ability to restart refining capacity that had been shut down, and  I think the general sentiment was that wasn’t going to happen,” Gorder said.

Limited U.S. refinery capacity – and perhaps more critically, refinery capacity in specific U.S. geographic areas, known as PADDs – has spared worry in the United States over high gasoline prices and energy security.

US refinery run rates were north of 90% for much of the summer, according to the EIA’s Weekly Petroleum Status Report.

Shuttered refineries unlikely to start back up are the latest nail in the U.S. refinery coffin.

In June, Chevron CEO Mike Wirth posited that there would never be another new refinery built in the United States.

“Building a refinery is a multi-billion dollar investment. It may take a decade. We haven’t had a refinery built in the United States since the 1970s. My personal view is that there will never be another refinery built in the United States,” Wirth said at the time.

Oil and gas companies would have to weigh the benefits of committing capital ten years out that will need decades to offer a return to shareholders “in a policy environment where governments around the world are saying ‘we don’t want these products to be used in the future,’” Wirth added.

Refinery utilization in the United States for the week ending October 14 was 89.5% of their operable capacity, the most recent EIA data shows.

The ECB policy announcement is due at 13:15BST/08:15EDT, with the follow up press conference starting at 13:45BST/08:45EDT; both consensus and market pricing look for a 75bps hike, taking the deposit rate to 1.5%, and according to Newsquawk, markets will also be focusing on discussions around the balance sheet and measures to address excess liquidity.

OVERVIEW: With headline Y/Y HICP in September advancing to 9.9% from 9.1%, policymakers are set to deliver another outsized rate hike following a 75bps increase in September. In terms of market pricing, a 75bps hike is priced at around 80% and a 50bps increase at 20%. Beyond inflationary developments, growth concerns are continuing to mount in the Eurozone with the composite PMI metric declining to 47.1 in October from 48.1 in September. Nonetheless, with the ECB’s 5y5y inflation expectations measure rising to around 2.3% from circa 2.2% at the time of the prior meeting, policymakers will be forced to raise rates again this month. In terms of other measures to be mindful of, source reporting on 13th October suggested that the GC discussed the timeline for the balance sheet reduction at the Cyprus meeting earlier this month. The report noted that the language regarding reinvestments could be tweaked at the October meeting, before outlining plans for a balance sheet reduction in December or February and then commencing QT sometime in Q2 2023. Elsewhere, the upcoming meeting could see policymakers alter the terms of its TLTROs given that banks can currently park cash from operations at the ECB and earn a risk-free profit following recent rate hikes.

PRIOR MEETING: In-fitting with market pricing and against a split consensus amongst analysts, the ECB opted to pull the trigger on a 75bps hike, taking the deposit rate to 0.75%. The statement noted that the GC expects to raise rates further over the next “several” meetings, whilst taking a data-dependent and meeting-by-meeting approach. The ECB opted to continue with its current reinvestment policy whilst suspending its two-tier system by setting the multiplier to zero. The accompanying staff forecasts saw 2022, 2023 and 2024 inflation projections revised higher with the 2024 forecast of 2.3% indicating that further policy tightening is required. On the growth front, 2022 GDP was revised a touch higher, however, 2023 was slashed to 0.9% from 2.1% with the downside scenario touting the possibility of negative growth. With regards to the magnitude of hikes going forward, Lagarde noted that 75bps increments are not the norm, but moves will not necessarily get smaller as the ECB heads towards the terminal rate. Despite guidance that the GC will be following a meeting-by-meeting approach, Lagarde stated that hikes will probably take place at more than two meetings, but fewer than five, so markets will be looking to see if such a viewpoint was alluded to in the account of the meeting.

RECENT ECONOMIC DEVELOPMENTS: Y/Y HICP in September advanced to 9.9% from 9.1% and the core metric rose to 6.0% from 5.5%, with the headline boosted by the ongoing surge in energy and food prices as well as Germany unwinding its discounted transport ticket scheme. In terms of market gauges of inflation, the ECB’s preferred 5y5y expectations measure has risen to around 2.3% from circa 2.2% at the time of the prior meeting. On the growth front, the flash estimate of Q3 GDP is not due until October 31st. That said, the October composite PMI declined to 47.1 from 48.1 in September. Accordingly, S&P Global noted that “The eurozone economy looks set to contract in the fourth quarter given the steepening loss of output and deteriorating demand picture seen in October, adding to speculation that a recession is looking increasingly inevitable.” The Unemployment rate in August held steady at 6.6%, however, concerns about the employment outlook have triggered talks within the EU about the potential revival of the SURE scheme (aimed at mitigating unemployment risks in an emergency).

RECENT COMMUNICATIONS: Since the prior meeting, President Lagarde (14th Oct) said that inflation in the Eurozone is likely to stay above the ECB’s target for an extended period of time and the governing council expects to raise rates further over the next several meetings. Germany’s thought-leader Schnabel (30th Sept) said a robust approach to monetary policy is required given the uncertainty about the persistence of inflation. Chief Economist Lane (29th Sept) said the central bank is still trying to reach neutral, but is not yet taking a stand on whether that will be enough. He added that the exchange rate channel is not significant enough to influence monetary policy. France’s Villeroy (11th Oct) remarked that the ECB should reach the neutral rate of close to 2% by the end of the year, adding that the Bank could move more slowly after reaching a neutral rate. Elsewhere, Slovenia’s Vasle is of the view that the ECB should hike by 75bps at the next two meetings and then could start shrinking the balance sheet in 2023.

RATES: Expectations are for the ECB to hike its key three interest rates by 75bps each, taking the deposit rate to 1.5%, main refinancing rate to 2% and marginal lending to 2.25%. According to a Reuters survey, 27/36 expect the Deposit Rate to be raised by 75bps to 1.5%, 7/36 look for 50bps and just 2/36 forecast 25bps. In terms of market pricing, a 75bps hike is priced at around 80% and a 50bps increase at 20%. The decision to carry on with interest rate hikes follows on from headline Y/Y HICP in September advancing to 9.9% from 9.1% and the core metric rising to 6.0% from 5.5%. Furthermore, since the prior meeting there hasn’t been much in the way of guidance from policymakers to suggest that the Bank will be stepping up or stepping down the magnitude of rate hikes. As a reminder, at the September press conference, Lagarde stated that hikes will probably take place at more than two meetings, but fewer than five. Looking beyond this week, markets fully price in another 50bps move in December, with the deposit rate expected to peak at just below 3% around Q3 next year. In terms of guidance from policymakers, Slovenia’s Vasle believes the ECB should hike by 75bps at the next two meetings, whilst France’s Villeroy remarked the ECB should reach the neutral rate of close to 2% by the end of the year. Note, recent reporting suggesting that an ECB staff model puts the target-consistent terminal rate at 2.25%. That said, the report noted that policymakers were sceptical over the accuracy of the model.

QT: In terms of other measures to be mindful of, source reporting on 13th October suggested that the GC discussed the timeline for the balance sheet reduction at the Cyprus meeting earlier this month. The report noted that the language regarding reinvestments could be tweaked at the October meeting, before outlining plans for a balance sheet reduction in December or February and then commencing QT sometime in Q2 2023. ING takes a more cautious stance, suggesting that markets “have got ahead of themselves”, noting that “even if the discussion might have started at the ECB, with current financial stability risks, the recent UK experience and a very uncertain macro outlook, QT is still some way out”. Furthermore, guidance from President Lagarde has stated that rates would need to be taken to neutral (estimated to be around 2%, according to Villeroy) before QT could begin. In terms of a potential course of action, ING suggests that a beginning of QT would entail ending reinvestments rather than active selling of bonds, something which, under APP could start in Spring 2023 at the earliest. As such, any talk around QT at this stage is likely to be vague. SGH Macro expects that details will not be announced until February.

TLTRO: Elsewhere, the upcoming meeting could see policymakers alter the terms of its TLTROs given that banks can currently park cash from operations at the ECB and earn a risk-free profit following recent rate hikes. Source reporting via Reuters suggested that a decision on what to do about this could come as soon as the upcoming meeting. In terms of the options available, SGH Macro says the ECB could:

• Reset the terms of the original TLTRO loans.
• Adjusting the rates paid specifically on TLTRO-related deposits.
• Instituting a blanket threshold on excess reserves above which the ECB and national central banks will not pay interest.

SGH Macro leans towards the third option by implementing a “reverse tiering” system as per the SNB. ING is also of the view that this would be the easiest system to implement as opposed to resetting TLTRO terms as this would hamper the Bank’s credibility “and would lead to reluctance of banks to ever make use of the TLTROs in the future again”. Alternatively, Rabobank suggests that “reverse tiering would impair the efficacy of the interest rate instrument”. Instead, Rabo believes “lowering the remuneration on banks’ excess reserves equal to their TLTRO use is the most feasible”, albeit it has a low conviction on this call

* * *

In its ECB preview, ING Economics writes that since nearly everyone’s expecting another 75bp hike, the market reaction will depend on

• Stance on further rate rises
• Changes in inflation and growth outlook
• Discussion over quantitative tightening

And here is the bank’s popular reaction matrix:

* * *

Finally, courtesy of Bloomberg’s Ven Ram, here three things traders will be watching, and some of the key elements of what may be expected from the European Central Bank today and how markets may react.

Size of hike & signaling: ECB officials have been more or less consistent in telegraphing a 75-basis point increase at today’s meeting. With President Christine Lagarde herself having commented that rate hikes need to be more emphatic the further the benchmark is away from neutral, markets are well positioned for another big hike. While there is a remarkable scatter of opinion within the ECB as to what constitutes a neutral rate, few in the Governing Council seem to be thinking it would be a number less than 2%. Lagarde may stay noncommittal as to her personal opinion on the matter during the press conference, but if she hints that the ECB may no longer need 75-basis point increases, euro-area rates could find a bid tone.
 
TLTRO & tiering: A crucial point of discussion at the meeting will be cheap long-term loans to banks, or targeted longer-term refinancing operations (TLTROs). With the ECB having gone from a regime of extreme accommodation to one of express hawkishness to contain inflation, how the central bank remunerates the excess reserves that lenders park with it is at once a challenging and contentious issue.
 
The ECB may decide to opt for one or a combination of the following measures:

• Alter the terms governing TLTROs to the effect that reserves parked with it aren’t remunerated at the deposit rate, especially in a context where the latter is likely to climb well above 2%;
• Treat cash parked with it on a par with mandatory reserves that lenders set aside; or
• Introduce tiering, with different rates applying at different thresholds. Bloomberg Economics estimates that a tiering multiplier of six would exempt about 20% of excess liquidity from remuneration altogether

Euro-area lenders will feel the pinch of the moves, so bank stocks may come under a glare after any such announcement.

Quantitative tightening: Another topic du jour will be when the central bank should start shrinking its mammoth balance sheet. While the ECB may discuss the matter, it is unlikely to get going before it is done hiking for the current cycle. Lagarde remarked after last month’s review that the ECB has “probably less than five interest-rate increases” left, suggesting that it may decide to pause in February or March if all goes to plan. (In a situation where inflation is still ebullient, it may be compelled to keep going, though that’s a discussion for another day). That means, perforce, that quantitative tightening will have to wait until then at least.

* * *

All told, euro-area bonds will take their cue from how hawkish the ECB sounds, but the euro — which has been exposed this year against the dollar by deeply negative inflation-adjusted interest-rate differentials — won’t find any quick resolution despite any short-term hullabaloo.

A new SEC rule is being rolled out wherein executives of firms with costly accounting errors could find their personal bonuses on the hook. The Securities and Exchange Commission approved the rule on Wednesday, the Wall Street Journal reported. 

The rule, “required by the 2010 Dodd-Frank Act to discourage fraud and accounting mischief”, was approved by a 3-2 vote of commissioners at a meeting this week. Democrats approved the rule while both Republicans dissented, the report says. 

The rule had been initially proposed in 2015, but was then shuttered under the Trump administration. Democratic SEC Chairman Gary Gensler has said that it will “strengthen investor confidence in corporate reporting, as well as the accountability of managers,” the Journal reported.

Gensler stated: “Corporate executives often are paid based on the performance of the companies they lead, with factors that may include revenue and business profits.”

He continued: “If the company makes a material error in preparing the financial statements required under the securities laws, however, then an executive may receive compensation for reaching a milestone that in reality was never hit.”

The original rule used to apply only to firms that found major errors and had to restate financials. The newer version of the rule is broader and can still affect executive bonuses even with smaller, recent accounting errors. 

“This may result in salary increases, rather than compensation mechanisms tied to financial-reporting measures,” Republican SEC Commissioner Mark Uyeda said. He also argued that the rule “may ultimately weaken alignment of interests between shareholders and management.”

The U.S. Chamber of Commerce and Business Roundtable along with GOP lawmakers and some SEC commissioners had spoken out against the rule. 

Not unlike some Sarbanes-Oxley attestations, firms will now have to include check boxes on the front page of their annual reports to confirm that an error correction or clawback analysis had been conducted before filings are submitted. 

By Craig Fuller, CEO of FreightWaves

For freight companies, this year’s peak will be weak

Peak season, an annual event in the freight industry, serves as the most important season in the calendar for many transportation firms. Depending on mode, peak season kicks off at different points on the calendar, mostly based around the role in the supply chain that a freight provider plays in ensuring that retail goods are on the shelves for the holidays. 

Peak season by mode: 

• Ocean container: July through September 

• Trucking and rail intermodal: October through December 15th

• Parcel: Black Friday through December 24th

With the peak season already completed in ocean freight, we can say with certainty that this year’s peak season will be incredibly weak.

Back in June, FreightWaves reported that ocean container volumes were dropping quickly, based on data found in SONAR’s Container Atlas, which tracks bookings volumes at the point of origin. By tracking point of origin bookings, we get an advanced look at import volumes months before those containers hit U.S. ports. At the time of publication, we believed that the contraction in volumes would happen at U.S. ports by July, but we underestimated how long it would take to clear the backlog of containerships off major U.S. ports and then waiting to clear U.S. Customs. 

In August, it appeared that FreightWaves’ warning was unwarranted, at least looking only at U.S. customs import volume data. That data showed the market was relatively stable and hadn’t contracted. 

But maritime spot rates and container shipping lines’ actions told a completely different story.

Ocean spot rates and imports fell off a cliff this year

First, we saw container rates collapse – suggesting that carriers were rapidly losing pricing power. When we published our June piece, the cost to ship a 40-foot container from China to the U.S. West Coast was $9,630. Today the same container would be transported for $2,470 – 74% lower than just a few months ago. This happened in a backdrop of a significant number of “blank sailings” by container ship lines. The container lines will cancel voyages to pull capacity out of the market.

According to Sea-Intelligence, container lines have canceled more than quarter of sailings across the Pacific in recent weeks. 

Freight transportation is a commodity and responds to the laws of supply and demand. The collapse in container rates reflected volumes that were quickly deteriorating. 

By September, the slowdown in container import volumes was becoming too significant to dismiss, even for the most hardened skeptic. The Port of Los Angeles reported that it handled the fewest number of loaded import containers for the month of September since the Great Financial Crisis (2009). The Port of Los Angeles is the largest port in the United States. 

Weak import volumes weren’t just limited to Los Angeles, but affected all the major West Coast ports. Long Beach posted the lowest September loaded imports since 2016; Seattle/ Tacoma had its worst September for loaded imports in seven years. The decline in volumes will take longer to hit East Coast ports, but it’s already starting – September was Savannah’s weakest month this year for loaded imports, down 9.8% year-over-year.

With an estimated 75% of U.S. container imports related to consumer activity, a sharp drop in volume provides an ominous warning for any mode of transportation that is further downstream and closer to the point of consumption.

How the trucking turndown materialized 

The trucking industry has been struggling since the first quarter. FreightWaves predicted that a freight recession was imminent, based on the drop in truckload volumes and tender rejections in the first quarter. 

The SONAR Outbound Tender Volume Index (OTVI) measures truckload load requests from shippers to carriers, moving under contract rates. From the start of February to the end of March, it dropped by 12%. 

The volume drop continued in April and May, with OTVI registering another 2.5% decline, but stabilized in June in conjunction with the summer construction, beverage, and produce shipping seasons. In June, the OTVI index registered an increase of 1%.

A stable June provided some confidence to carrier executives that the slowdown in the earlier part of the year was just a cooling of volumes from the inflated levels of the COVID economy.

Unfortunately, the optimism at the end of June was short-lived and proved to be an anomaly in a disappointing year.  

The OTVI index dropped by 8% in the third quarter, with the majority of this drop  occurring in the last two weeks of September. The decline has continued into October, with OTVI dropping an additional 3%.

The reality of the market deterioration is starting to set in across all trucking fleets. During the publicly traded trucking companies’ third quarter conference calls executives talked about how muted they expected the peak to be.

Trucking executives are wary

Here were some of the notes (quotes and other market commentary) from the early earnings reports and calls from the trucking industry. 

Knight-Swift – the largest truckload carrier in the U.S.

CFO Adam Miller: “It’s rare that you go into a fourth quarter and not see some type of seasonal uplift and projects and spot opportunities. Especially with companies of our scale, we typically get some of these large, kind of difficult projects to handle and they typically pay a premium; … none of that stuff materialized.”

CEO David Jackson: “Anecdotally, we hear from those that have receivables with small carriers, and it has turned ugly very, very quickly for them,” Jackson said. “The pressures just continue to mount. I wouldn’t be surprised if there aren’t many small carriers that were just holding out hope for a strong fourth quarter to bail them out of a tougher summer with no spot [freight].”

Landstar  – one of the largest truckload carriers, largely made up of a network of small franchise operators: 

President and CEO Jim Gattoni on customer expectations: “Everybody’s [indicating a] flat to a soft, muted peak season. Since our July call, I would say things have clearly softened up compared to the anticipation of a better peak season.”

J.B. Hunt  – the largest surface transportation company in the U.S., with significant operations in intermodal, dedicated, truckload and brokerage:

CEO John Roberts: “Further evidence has presented itself over the course of the quarter that requires an increased level of caution and awareness on broader demand trends and economic activity.”

Head of intermodal Darren Field: “Peak season this year just doesn’t appear to be much of an event, although the company is taking market share.”

Covenant Logistics – a large expedited and dedicated truckload carrier:

CEO David Parker: “As we look toward 2023, we anticipate a difficult freight environment coupled with cost inflation, which will pressure margins.”

Triumph Bank – one of the largest providers of banking, factoring, and payment services to the trucking industry: 

CEO Aaron Graft on factoring (i.e., short-term trade finance): “The decline in freight rates is starting to show up at TBC. September’s gross revenue was $17.2 million, 8.2% less than a year ago. October is already tracking down 19% from a year ago.”

Retailers command trucking by the fourth quarter

In the context of understanding the trucking calendar and sharp decline in container volumes, the slowdown makes sense. Retail has an outsized impact on the fourth quarter trucking market. Even in a good year, construction, agriculture, and beverage volumes slow down in the fourth quarter significantly. Retail becomes king. 

Retailers have nearly all of the products they need in their distribution networks for the holidays (and then some), which means that there won’t be a lot of freight demand as we head into the last two months of the year.

In recent quarters, retailers have talked about how much inventory they are carrying. This holiday season, they will be focused on burning that inventory down – potentially through aggressive discounting and promotions. 

As firms get more nervous about the broader economy heading into 2023, there is little incentive to replenish bloated inventories. This is bad news for most freight companies as they will find far fewer load opportunities. 

While the timing of when the freight recession started will be hotly debated, carriers from the weakest spot participants to the best run are starting to realize that peak will be very weak. 

To borrow a phrase from Mish Shedlock, author of the macro-economics blog, Mishtalk, whether we are in a recession or headed for one, the question is moot.

Authored by Dave DeCamp via AntiWar.com,

House Speaker Nancy Pelosi (D-CA) on Tuesday spoke at the first Parliamentary Summit of the International Crimea Platform in Croatia, a forum that was set up to discuss expelling Russia from the Crimean peninsula, which Russia has controlled since 2014.

In her speech, Pelosi said the US will support Ukraine until a Ukrainian “victory is won.” For Ukraine, victory means expelling Russia from Crimea, a scenario that Russia could consider an existential threat, giving it the pretext to use nuclear weapons under Moscow’s military doctrine.

Emine Dzheppar, Ukraine’s first deputy minister of foreign affairs, said that Pelosi’s participation in the summit means that the US supports Ukraine’s goal of driving Russia out of Crimea.

“Her participation is a direct confirmation that the issue of de-occupation of Crimea is high on the agenda in Washington,” Dzheppar said. “With such support, the return of Crimea is closer than ever.”

Russia took Crimea in 2014 after the US-backed ousting of former Ukrainian President Viktor Yanukovych.

Residents of Crimea voted overwhelmingly to join the Russian Federation, and while the US and its allies dispute the results of the referendum, plenty of polls conducted since 2014 show Crimeans are happy with the change.

In her speech, Pelosi also boasted that Congress has authorized over $67 billion in Ukraine aid and said more is coming. “And more will be on the way when we pass our omnibus funding bill this fall,” she said.

It was a privilege to meet with Speaker of the Croatian Parliament Gordan Jandroković, whose government is hosting the First Parliamentary Summit of the International Crimea Platform.

In our meeting, we reaffirmed our shared commitment to stand with Ukraine until victory is won. pic.twitter.com/3Tru0fNwlT

— Nancy Pelosi (@SpeakerPelosi) October 24, 2022

NBC News reported last week that Republicans and Democrats in Congress are considering passing a new massive aid package for Ukraine that would likely be attached to an omnibus spending bill. The Ukraine aid is expected to be worth roughly $50 billion, which would bring total US spending on the war to over $115 billion.

In what may be a watershed moment in Western society’s approach to purportedly transgendered children, the UK’s National Health Service is now warning that such feelings “may be a transient phase, particularly for pre-pubertal children.”

The NHS points to “scarce and inconclusive evidence to support clinical decision making…and a lack of evidence to support families in making informed decisions about interventions that may have life-long consequences.” 

The NHS says healthcare providers therefore shouldn’t hastily push children into changing their names, pronouns or bodies — and should consider mental health issues that are frequently present among this universe of children. 

“Just consider all of the young children, all of the young people whose lives have been irreversibly ruined by the NHS, like other health authorities across the western world, not taking this simple, sensible, adult and pragmatic approach years ago,” Douglas Murray, author of The Madness of Crowds: Gender Race and Identity, told Sky News. 

The NHS’s cautionary tone is struck in a pair of new documents by which the agency is proposing changes to its delivery of “specialist gender dysphoria services for children and young people.” 

In a move seemingly intended to impose greater discipline, one such proposed change would require that the clinical lead for handling “gender incongruence” cases must be a medical doctor.

Currently, there’s no specification for which type of professional can take that role. “Oversight of the service by a medical doctor is appropriate given that the service may provide medical interventions to some children and young people,” says the NHS. 

Similarly, the NHS seeks to significantly narrow the range of people with authority to make patient referrals:

“The current service specification for [Gender Identity Development Service] states that referrals can be made by staff in health and social services, schools, colleges of further education and by voluntary organisations. The new interim service specification proposes that referrals may be made by GPs and NHS professionals.”

The NHS notes an explosion of referrals into its Gender Identity Development Service, from under 250 in 2011-12 to over 5,000 in 2021-22. The enormous increase has been accompanied by a striking shift in the composition of the group, from predominantly “birth-registered males” a decade ago to predominantly “birth-registered females” today. 

What’s more, “a significant number of children are also presenting with neurodiversity and other mental health needs and risky behaviours, which requires careful consideration.” 

Perhaps most importantly, the NHS warns about the perils of hastily moving a child down the gender transition path: 

“The clinical approach has to be mindful of the risks of an inappropriate gender transition and the difficulties that the child may experience in returning to the original gender role upon entering puberty if the gender incongruence does not persist.” 

The NHS also issues a warning about “social transition” for pre-pubescent children — a term that refers to children publicly proclaiming a new gender, changing their names, pronouns, clothing, haircuts, restrooms, etc. 

Noting “evidence that in most cases gender incongruence does not persist into adolescence,” the NHS says: 

“The current evidence base is insufficient to predict the long-term outcomes of complete gender-role transition during early childhood…it is important to acknowledge that it should not be viewed as a neutral act...it may have significant effects on the child or young person in terms of their psychological functioning.” 

A variety of people have long warned that many or most of these children are simply going through a phase — encouraged by a woke-hijacked society gone mad — and that doctors and parents shouldn’t be so quick to plunge into name changes, restroom changes, hormone treatments and surgeries.

People warning about the trend have been vilified as intolerant bigots. Now, however, the UK’s NHS is putting forth very much the same cautions. As with those whose once-taboo stances against vaccine mandates and lockdowns have now been vindicated, those who’ve been right all along about the gender-transition mania shouldn’t expect any apologies. 

By Alex Kimani of OilPrice.com

Whereas supplies of Russian pipeline gas–the bulk of Europe’s gas imports before the Ukraine war–are down to a trickle, Europe has been hungrily scooping up Russian LNG.

Europe has been working hard to wean itself off Russian energy commodities ever since the latter invaded Ukraine. The European Union has banned Russian coal and plans to block most Russian oil imports by the end of 2022 in a bid to deprive Moscow of an important source of revenue to wage its war in Ukraine.

But ditching Russian gas is proving to be more onerous than Europe would have hoped for. Whereas supplies of Russian pipeline gas–the bulk of Europe’s gas imports before the Ukraine war–are down to a trickle, Europe has been hungrily scooping up Russian LNG. The Wall Street Journal has reported that the bloc’s imports of Russian liquefied natural gas jumped by 41% Y/Y in the year through August.

“Russian LNG has been the dark horse of the sanctions regime,” Maria Shagina, research fellow at the London-based International Institute for Strategic Studies, has told WSJ. Importers of Russian LNG to Europe have argued that the shipments are not covered by current EU sanctions and that buying LNG from Russia and other suppliers has helped keep European energy prices in check.

LNG Deluge

Maybe Europe’s LNG imports from Russia can be justified on a purely economic basis.

Natural gas prices in Europe have plunged over the past few weeks with CNBC reporting that a  “Wave of LNG tankers is overwhelming Europe in an energy crisis and hitting natural gas prices.” According to MarineTraffic via CNBC, 60 LNG tankers, or  ~10% of the LNG vessels in the world, are currently sailing or anchored around Northwest Europe, the Mediterranean, and the Iberian Peninsula. Such vessels are considered floating LNG storage since they cannot unload, something that is impacting the price of natural gas and freight rates.

It’s a fair bet that a good chunk of those vessels originated from the United States.

Europe’s natural gas demand has skyrocketed as the EU tries to lower its reliance on Russian natural gas following its invasion of Ukraine. Europe has displaced Asia as the top destination for the U.S. LNG, and now receives 65% of total exports. The EU has pledged to reduce its consumption of Russian natural gas by nearly two-thirds before the year’s end while Lithuania, Latvia and Estonia have vowed to eliminate Russian gas imports outright. Unlike pipeline gas, supercooled LNG is much more flexible and can be shipped from far-flung regions, including the U.S. and Qatar. 

Europe is not alone here. Shipping data has revealed that China has imported nearly 30% more gas from Russia so far this year, typically at a steep discount.

Thankfully, there’s a clear upside to imports of Russian LNG to Europe: the continent  has managed to fill its gas stores well ahead of schedule, with Reuter’s gas meter revealing that 93.8% of the EU gas storage is currently filled.

Financing Putin’s war machine

Still, it’s hard to argue that buying Russian LNG even in relatively small quantities is not playing a part in financing Putin’s war machine. Although Russian LNG has accounted for just 8% of the European Union and U.K.’s gas imports since the start of March, the trade runs counter to the EU’s efforts to deprive Russia of fossil-fuel revenue.

A lot of blame falls on Switzerland, with 80% of Russian raw materials traded via the Central European nation and its nearly 1,000 commodity firms. Switzerland is an important global financial hub with a thriving commodities sector despite the country being far from all the global trade routes and without access to the sea;  no former colonial territories and without any significant raw materials of its own. In fact, Oliver Classen, media officer at the Swiss NGO Public Eye, says that “this sector accounts for a much larger part of the GDP in Switzerland than tourism or the machinery industry.” According to a 2018 Swiss government report, commodity trading volume reaches almost $1 trillion ($903.8 billion). 

Deutsche Welle has reported that 80% of Russian raw materials are traded via Switzerland, according to a report by the Swiss embassy in Moscow. About a third of it are oil and gas while two-thirds are base metals such as zinc, copper and aluminum. In other words, deals signed on Swiss desks are directly facilitating Russian oil and gas to continue flowing freely.

This definitely is a big deal considering that gas and oil exports are the main source of income for Russia, accounting for 30 to 40% of the Russian budget. In 2021, Russian state corporations earned around $180 billion (€163 billion) from oil exports alone.

Again, unfortunately, Switzerland has been handling its commodities trade with kid gloves.

According to DW, raw materials are often traded directly between governments and via commodities exchanges. However, they can also be traded freely, and Swiss companies have specialized in direct sales thanks to an abundance of capital.

In raw materials transactions, Swiss commodity traders have adopted letters of credits or L/Cs as their prefered instruments. A bank will give a loan to a trader and as collateral receive a document making it the owner of the commodity. As soon as the buyer pays the bank, the document and thus ownership of the commodity are transferred to him/her. What this does, in effect, is grant traders more credit without checking their creditworthiness, while the banks get the commodity value as security.

This is a prime example of transit trade, where only the money flows through Switzerland but actual raw materials usually do not touch Swiss soil. Thus, no details about the magnitude of the transaction land on the desk of the Swiss customs authorities leading to highly imprecise information about the flow volumes of raw materials. 

“The whole commodities trade is under-recorded and underregulated. You have to dig around to collect data and not all information is available,” Elisabeth Bürgi Bonanomi, a senior lecturer in law and sustainability at Bern University, has told DW.

Obviously, the lack of regulation is very appealing to commodity traders–especially those that deal with raw materials mined in non-democratic countries such as the DRC.

 “Unlike the financial market, where there are rules for tackling money laundering and illegal or illegitimate financial flows, and a financial market supervisory authority, there is currently no such thing for commodity trading,” financial and legal expert at Public Eye David Mühlemann told the German broadcaster ARD.

But don’t expect things to change any time soon.

Calls for a supervisory body for the commodities sector based on the model of the one for the financial market by the likes of Swiss NGO Public Eye and Swiss Green Party proposal have so far failed to bear fruit. Thomas Mattern from the Swiss People’s Party (SVP) has spoken out against such a move, insisting that Switzerland should retain its neutrality, “We do not need even more regulation, and not in the commodities sector either.”