Shipping Expenses in the US Go Through the Roof

Amid transportation chaos & delays, high demand, soaring diesel prices, and labor shortages.

By Wolf Richter for WOLF STREET.

Shippers in the US – from manufacturers to mom-and-pop online retailers – have been wailing about it all year in 2021, and it got worse as the year went on: Surging shipping costs. Freight companies, facing numerous obstacles, jacked up prices amid strong demand. And the result is a historic spike in the amount that shippers paid to transportation companies.

The total these shippers spent in December on shipping goods to their customers in the US spiked by 43.6% from December 2020 and by 62.3% from December 2019, according to the Cass Freight Index for Expenditures, released by Cass Information Systems.

The index is a combination of shipment volume (more on that in a moment) and freight rates. It’s centered on trucking, with truckload shipments representing over half of the dollar amounts, rail in second place, less-than-truckload shipments in third place, followed by parcel services and others. It does not track shipments of bulk commodities.

The freight rates embedded in the index spiked by 33% in December 2021 from December 2020 and by 41% from December 2019.

Shippers struggled all year with capacity constraints and delays and chaos in the transportation sector, with containers stranded somewhere, with chassis shortages at ports, with rail yards and ports backed up. Trucking companies complained about driver shortages. Warehouse operations were hampered by staffing shortages that ended up sidelining trailers and containers. Railroads ran into their own bottlenecks at rail yards; and, after having laid off 33% of their workers in six years, they complained about labor shortages. Chaos kept the system from operating efficiently, hampered throughput, and restrained shipment volume.

In December, the Cass Freight Index for Shipments rose by 7.7% from December 2020, and by 14.8% from December 2019, to a new record for December, when the shipping business normally slows down due to the holidays. But there was no slowdown in December 2021.

Note the seasonal low points in January and the distortions during the pandemic. Much of the year 2018 set records that still stand as companies were loading up on inventories ahead of the tariffs – but at the time, the transportation system wasn’t bogged down in the type of chaos that is in the system now.

Trucking rates soar.

The average national spot rate for van-type trailers has been rising for the past 12 months and in June reached $2.99 a mile, up 22% year-over-year, according to DAT Freight & Analysis. Regionally, the average rate ranged from $2.72 in the Northeast to $3.41 in the West.

The average national spot rate for flatbed trailers (heavy equipment, construction materials, etc.) jumped by 24% year-over-year to $3.07 per mile, but has flattened out since last summer, with the average rate having peaked in June at $3.15 per mile. Regionally, the average rate ranged from $2.98 in the Southwest to $3.35 in the Midwest.

Diesel prices jump then dip then…

At the end of December, the average price of diesel at the pump was $3.61 per gallon, up by nearly $1 (+37%) from a year earlier. But it still remains below the $4 range that prevailed in 2012 through 2014.

WTI crude oil traded above $80 a barrel back in October, but by mid-December, WTI had dropped back to the $65 range. This multi-week decline triggered the dip in diesel prices in November and December that you can see in the chart below. But WTI has risen since then, ended December at $75, and now is at $82 a barrel. And diesel prices started ticking up again. In 2012 through mid-2014, WTI traded in a range between $85 and $105. So there is yet something to look forward to:

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  101 comments for “Shipping Expenses in the US Go Through the Roof

  1. Depth Charge says:

    Looking at the recent soundbites coming out of the FED, they’re still hanging their hats on “transitory” while talking tough on inflation. Bottom line, they’re doing nothing about it.

    “The high rate of U.S. inflation will cool to around a 2.5% rate by the end of the year, said Chicago Fed President Charles Evans on Thursday.

    “I expect that the tide of inflation will turn,” he said.

    “It will be coming down. I think its more likely to be 2.5% as measured by the personal consumption expenditure index,” Evans said, in a discussion about the outlook sponsored by the Milwaukee Business Journal.”

    • Depth Charge says:

      More from this clown who got it wrong yet somehow thinks we should believe him:

      “Evans said he was caught off guard by the surge of inflation and said Fed policy is not well positioned to combat it. He said the central bank will spend the year moving away from its easy money policy stance toward a more neutral stance. “It takes us time to change our setting,” he added.

      “I readily admit – I have to be humble about this – I did not expect the inflation rates that we’re seeing and they have lasted longer than I expected. And because they have lasted longer, I know that we need to take action more quickly than I would have guessed last year,” he said.”

      My first questions to him would be: “Why should we believe you when you were blatantly wrong the first time? Who’s to say you aren’t blatantly wrong again right now? Shouldn’t we ask somebody with actual credibility?”

      These guys are dangerous criminals. They keep regurgitating the same rotten tripe over and over.

      • Moosy says:

        When you classify these guys as incapable spineless corrupt buffoons, it all start making sense.

        No need to get upset over it. Corruption, stupidity, greed, cowardness, it is all in human history and in the present as well.

        I suggest to use this knowlegde to your own financial benefit. More productive and better for your health

        • NJGeezer says:

          Sorry Moosy, but beg to differ. Of your four desciptive words, “incapable, spineless, corrupt, buffoons”, I can only agree with Corrupt, and eminently so IMHO. They are neither incapable, spineless, nor buffoons, but rather extremely bold, enabled, criminals. They know exactly what they are doing, and how to do it. Do not be fooled by the ridiculous theater of congressional testimony and FOMC meeting statements.

        • Wisdom Seeker says:

          Not incapable, but incompetent.

          Economics as practiced at the Fed / macro level is mildly wrong when nothing is changing, but catastrophically wrong when things are changing fast. Sadly, that’s when we most need it to work.

          The fact that this doesn’t change, despite repeated colossal failures, tells you everything you need to know about macro: It’s a public relations / propaganda tool, not a science.

          Actual scientists and engineers cannot get paid unless their models work when tested by reality.

      • LK says:

        Not like anyone is holding them to account. Not even the press.

        • Cvillian says:

          Exactly. It feels as though the entire ship is delirious at this point. Iceberg ahead.

      • Mendocino Coast says:

        Depth Charge Re :
        These guys are dangerous criminals. They keep regurgitating the same rotten tripe over and over.
        Now I know I can’t drag you into anything Ever but that’s ok as I agree with all your posts and feel uplifted from with your mention of these ” Current Dangerous Criminals’ ‘ !!!!
        My Personal feelings that I have surround The lack of Law Enforcement ? of these Criminals ?
        Perhaps if someone made a 5 0r 10 Person List
        Of people who are suppose to Enforce the LAW
        “Here on Wolf Street with phone numbers ” perhaps the readers or a Percentage of them may begin Calling, Emailing and Writing to them
        just like they Post here . Now if only 10 % responded that might have an effect

        One can assume that those in Charge , in Power
        not doing anything are in on the Rape of Americia’s Economy so to speak
        Why Else would there be no Law Enforcement ?

        Think Shipping Charges are Hi Now ? they may tripple in a Year and Gas ? well just how hi can it go anyway ?

        Thank You for your Posts DC

      • historicus says:

        DC
        When a group is consistently wrong….IN THE SAME DIRECTION (ie loose money), one can begin to suspect dishonesty. Not dissimilar to some news outlets.

        • Enlightened Libertarian says:

          It makes sense that if you are going to make an error in your judgment to make that error in such a way that benefits your portfolio.
          Better for you than flipping a coin.
          “Let’s see….the data is not clear. Raise rates? Lower rates? Hmmm…low rates helps my portfolio and high rates hurt. Heck, let’s keep rates low a while longer and see what happens. We can always raise rates in 6 months”
          Human nature at work.
          And so Rome burns.

      • joe2 says:

        They are under orders from their owners – the big banks. It all makes perfect sense, but if you said it you would be tagged a conspiracy theorist.

        Fiat has been worthless except as company store scrip for the little people for a long time.

        Look at what the real players own – controlling interests in global conglomerates without competition Look up any real chart of interlinking ownership by BlackRock, Vanguard, Citi and others. The rich don’t save fiat, they borrow it so they don’t care how it inflates. And they own shares in companies that own everything. Those companies can mint money just by raising their prices or having the government require you buy it.

    • dishonest says:

      These guys know they will never be held responsible for the rash, untruthful statements they make. In fact, at their year-end review, they’ll trumpet these deceptions as examples of their loyalty to the system.

    • historicus says:

      What’s never mentioned….
      As long as the inflation measure is positive, that 7% doesnt just go away….it sticks. No retracement. Inflation is cumulative and compounded.

      • Depth Charge says:

        Right. “Transitory” meant “the high prices are here to stay, but the rate of increase will be waning.” These guys will be hiding behind YOY figures for cover, just watch. Unfortunately for them, their doctored figures don’t put food on the table or gas in the tank for the populace.

        The unfortunate reality is that most Americans can’t really do the math on what’s happening, but they can sure see the bottom line on their bank account. When a loaf of bread which used to be $3.99 is now $4.99, that increase might get a little attention, but “it’s only a dollar” is a common refrain among people who aren’t particularly skilled at math or finance. But 25% is a positively massive spike. When you start to factor that across most items, people are in real trouble.

        But Jerome Weimar Boy Powell and his ilk don’t even do their own grocery shopping, or look at the prices. A 1000% increase in food prices, while maybe raising their eyebrow momentarily, wouldn’t even so much as put the slightest scratch in their monthly budgets. These people are ivory tower hacks to the nth degree. They need to be rode out of town on a rail, and that’s putting it kindly.

        • Pea Sea says:

          “Unfortunately for them, their doctored figures don’t put food on the table or gas in the tank for the populace.”

          Unfortunately for us, you mean. They’ll be fine.

    • Augustus Frost says:

      There are no “wizards behind the curtain” at any central bank. No FOMC or other central bank policy committee member gains any unique insight to supposedly manage the economy upon assuming their position.

      Probably the biggest lie in economics and modern finance, along with “the government is in control”.

      There is no correct inflation rate just as there isn’t one for interest rates.

      • Djreef says:

        Exactly. They fly by the seat of their pants just like everyone else. The all knowing, all seeing eye is blind – always has been, always will be.

      • Enlightened Libertarian says:

        Does it seem to you that the guys who think they are the smartest ones the room really aren’t the smartest guys in the room?
        Over the last 50 years I have learned to take common sense over a PhD every time
        It has worked for me

        • drifterprof says:

          Yes there is a large variation in pragmatic effectiveness among people who have PhDs. The process of getting a higher degree is often specialization in a narrow area. And this can be to the detriment of general practical knowledge. This narrowing effect varies greatly depending on the individual and the field of study.

          However, if one looks at what “common sense” was historically, it obviously depends on context and tradition, and has often been wrong and obviously false. Mark Twain opined that: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

          Common sense: “Sound practical judgment that is independent of specialized knowledge, training, or the like; normal native intelligence” … and “a simple perception of the situation or facts.”

          The above definitions indicate possible potential serious flaws of common sense. Since common sense depends on “native intelligence,” we would tend not trust the common sense of someone on the lower end of that scale. And since it it limited to “a simple perception [intuition of the situation or facts,” it often doesn’t apply to complex situations, of which there are many in modern cultures.

          It’s easy to test the concept of “common sense.” Ask a person who has your political views what common sense is on a particular issue. Then ask the same of someone who’s political views who are opposed to yours.

        • NBay says:

          That’s the most well thought out comment so far, drifterprof. When “common sense” comes up I normally just default to Einstein’s, “Common sense is a collection of prejudices usually accumulated by about age 18”. And the Twain quote I have tried hard to make part of how my mind works. The null hypothesis, “is this right, or is the source or me just full of shit”.
          Sadly I see more and more badmouthing of all or specific educational disciplines, with the all TOO popular “Duck Dynasty” being (to me) completely sponsored content, in an effort to trash formal education and all those who have some…or worse, TOO MUCH.
          Every class I ever sat down in (at the college level) I always thought, “Well, this guy has devoted his whole life to one subject, so let’s hear what he has to say”. I considered it a privilege to be there.
          This society is BIG and COMPLEX, and since “situational awareness” is what I believe we have big brains for (and complex follow through based on it) how could one ever go wrong by deciding to make learning things a life-long project?
          Ex: I checked out who DAT was, did, and who they were hiring and what the job titles/qualification/duties were for a half hour.

          They have lot’s of openings, BTW…..lotta WFH stuff, too.

    • Masked Ghost says:

      It is easy to predict what the Federal Reserve will do. They will do whatever is necessary to protect the asset prices of the banks that own them.

    • Harry Houndstooth says:

      Whatever these guys are smoking, I think we should tax it.

    • James says:

      De ja vous, 1982 all over again and these people are singing the same refrain of the ages. “Not my job”.

  2. LK says:

    Interesting to think about a scenario of transportation costs getting so high that it would incentivize the revitalization of brick & mortar businesses, as going to the local store for a limited selection of goods is preferable to having an unlimited selection but exorbitant shipping costs.

    Probably would never happen, we’re headed in the direction we’re headed, but still.

    • Wolf Richter says:

      It wouldn’t do that because people like and have gotten used to the convenience of ordering online (endless choice) and getting the stuff delivered. But if transportation expenses are high enough for long enough, the costs would encourage more local sourcing and production by companies — not by a huge amount, but some. And that would be a good thing.

      • Truckman says:

        Endless choice?
        Amazon’s most common delivery category is, certainly for the stuff I’m interested in, “currently unavailable”. And for the last 9 months, “delivery” means “if delivered at all, dumped somewhere near on on my property, including in snowdrifts, by a guy in a sedan being paid piecework”.

        • Wolf Richter says:

          If you can’t get it online (and I don’t just mean Amazon), try getting it at a brick-and-mortar retailer, hahahaha.

        • Truckman says:

          Actually, this has somewhat surprisingly been possible in some cases.
          Specifically, much of the lower value stuff, under $10, is still available in B&M stores. I suspect this has something to do with shipping and Amazon costs.
          Many independent retailers, especially out of the big cities, may have products that they have habitually always stocked but only had intermittent sales of previously. An air purifier would be one example I’ve purchased recently.
          Lastly, distributors seem to be ensuring trade dealers are being restocked promptly, so I have picked up some circuit breakers from the local trade dealer, who fortunately also sells to retail walk-ins (though they don’t advertise that). Also interestingly, the prices of these items turn out to be cheaper than online or big box, which wasn’t the case pre-Covid.

      • RockyCreek says:

        Our Farmer’s Markets here thrive. There are at least 5 in our small valley. The markets are packed with vendors and buyers. People also sell goods such as homemade rugs, sweaters, hats, soaps, lavender essential oil using lavender grown and processed by local growers, all natural fertilizers, homemade knives, dishes, fermented goods, canned goods, jams, honey, eggs, beef, homemade laundry detergent, etc. It’s a beautiful example of how people are producing various things locally. In the off-season you can visit a vendors farm or place of business to continue buying their goods. Many of the small farmers have heated greenhouses to extend the growing season in these Montana winters.

        • Mora Aurora says:

          I enjoy browsing through our local ‘Farmer’s’ Markets and they do ok but are very expensive (seven dollars for a dozen eggs!) It’s mostly a social feel good thing.

          The runaway best seller year after year are…cupcakes!

  3. Brent says:

    I dont believe the ships waiting to get unloaded at Port of LA are real.An article in “Journal of Commerce” mentions that Walmart occasionally hires independent ships outside of major shipping lines to haul orders from China and pays >$100K PER DAY !

    So,who pays >$100K per day X >100 ships ?

    Maybe Chinese doing charity work,bending over backwards to manufacture stuff and ship it to me at loss ?

    My explanation :

    1.Those >100 ships at Port of LA are decoys like inflatable Sherman tanks during WWII

    2.David Copperfield Magic Show.This guy is capable of anything.As a warm-up he made Statue of Liberty disappear in 1983…

    • WES says:

      The ghost ships are now parked further offshore so you can’t see them!

      China is coming to the rescue by closing their ports.

      • Brent says:

        During WWII Germans displayed their sense of humor by bombing decoy Sherman tanks with bombs made of wood.

        One of these days I’ll travel to West Coast and start pricking ghost ships with ice pick or shoot them from BB gun.

        • Truckman says:

          When you know as many Germans as I do, you will realize that only German Luftwaffe fighter aircrew have a sense of humor. I was lucky enough to work with a few.

          Q: How many Germans does it take to change a lightbulb?
          A: Only von, it is not a difficult task.

        • WES says:

          Brent:

          Thanks for sharing “rubber ducks being taken out to the woodshed”!

          That is a precious little piece of history not in the history books!

        • Truckman says:

          Brent
          Thank you for the Lili Marlene!
          I would say I found all German servicemen I worked with to be thoroughly professional and entertaining, especially a Luftwaffe Patriot Battery Commander I worked with for 3 weeks, but the German dark humor is somewhat different from everyone else’s dark humor ;)
          But to quote one Luftwaffe guy at a NATO course “At least there’s one thing we can all agree on….we all hate the French!”

        • Frengineer says:

          French dude here, I object!

    • LK says:

      Copperfield is such a hack. Saw his Live Show in Vegas before the pandemic. Had as many camera tricks as you’d expect from that egomaniac.

      It’s all about fooling the rubes.

    • historicus says:

      In the WSJ today
      ““Obviously the pandemic disrupted the economy and contributed to inflationary pressures, but U.S. production is higher today, and U.S. ports are moving 27% more goods than before the pandemic. Inflation, driven by excess demand, always faces supply-chain problems as production struggles to keep up. But supply-chain problems increasingly are the result of inflation rather than its cause.” Gramm and Solon

      Facts that never seems to make the debate on the cable shows.

      • Brent says:

        It only looks good in theory.
        Uncle Jerome snaps his fingers,conjures yet another $T into existence and the whole f… world starts pumping oil,melting steel,making stuff and sending it to the US at a huge loss.

        Money,among other things,is a claim on resources.And resources,unlike money,are limited and often unobtainable at ANY price.

      • SocalJim says:

        Sure, in nominal terms, the value of goods moving through US ports is higher than before the pandemic. But, in real terms, the value of goods moving through US ports is DOWN. And, to get the real value of goods, forget using the 7% CPI number being published by the govt. Nearly everything I buy is up so much more than that.

    • El Katz says:

      We have friends who own a home in Belmont Shore, CA (a neighborhood in Long Beach). They recently commented on their disturbed sleep as a result of the fog horns blaring all night from the “ghost ships” you describe.

      Must be one heck of a psyops.

  4. Flea says:

    It’s all transitory as in higher transportation costs, hilarious

  5. The energy market is still broken, Natgas still trades at multiples less than ICE fuel, in terms of BTU. This latest Covid variant may actually be worse for the economy. Will Crude futures trip the line again?

    • Wolf Richter says:

      Natgas has nearly always been cheaper per Btu than petroleum-based liquids, in part because Natgas requires very little processing, but crude oil needs to be refined. In addition, gasoline and diesel are sold by retailers, and they’re backed by distribution channels, and retail margins are added to the price.

      It has been cheaper for ever to operate a CNG vehicle, but in the US that’s just not something people want to do — in part due to the lack of CNG retail filling stations :-]

      • SpencerG says:

        Before he died T. Boone Pickens made a big play for putting CNG filling stations at all the truck stops in America. He wanted to convert the long haul trucks to CNG… which he would obviously benefit from. Nothing wrong with that.

        But it came to naught largely because the aftermarket for used Big Rigs is substantial and most other countries are never going to have CNG filling stations. It didn’t help the effort that fracking made Diesel Fuel prices plummet like a rock. At its peak only about 5% of the big trucks spent the extra money to switch over to CNG. I think he had better luck getting garbage truck fleets to do so… but you don’t need a national network of CNG truck stop stations for that.

  6. Jackson Y says:

    The new rules to prevent Fraud Reserve officials from daytrading their personal portfolios do absolutely nothing.

    They’re no longer allowed to trade individual stocks, but a central banker’s power lies in his ability to affect entire asset classes. There’s simply no way the millions in S&P 500 ETFs held by each FOMC governor doesn’t cloud his judgment.

  7. ThePetabyte says:

    With all of this inflation talk now widespread, you would think the bond vigilantes would make a comeback, but yield repression is a thing now so the activist is more or less deweaponized. Doing my part though and obtained some TBills.

  8. COWG says:

    So now it appears that all of the transitory inflation in now …. Wait for it… “in transit”…

  9. Catxman says:

    So the railroads laid off one-third of their workers and then complain about a labor shortage a short time after.

    This dog went HAW!

    My schadenfreude is tingling with juicy strands of saliva. They deserve every market punishment they can get.

    My point is this: What kind of loyalty can they expect to get from the recalled workers? When the wheel hits the turn in the road, are the recalled ones going to be pulling with the whole team?

    You have to be careful about who you get rid of. The CEOs were obviously just thinking about this next quarter in the business cycle when the let those men go. One has the feeling that Amazon.com — with its longer planning time frame — wouldn’t make the same mistake.

  10. Tom S. says:

    Goods getting more expensive is the tip of the inflationary iceberg. Labor is the crux of the matter and I’m sure labor shortages are also driving up shipping costs. But according to the Fed because we’re at “maximum employment” it’s OK that the rent is skyrocketing and homeless populations and drug use are rampant.

    The economy is scarred terribly with some 4 million less people working than pre pandemic. With a bunch of freshly retired dollars chasing less production we are trending for even more inflation. There is 0 chance this country is inflate young people out into the streets, there would be too much civil unrest, so they’re going to cause a recession instead. Wages lagging inflation, -2.3% real wage growth, how is that the American dream? I see the only option that appeases the truly wealthy and maintains social stability is to tip the stock market domino and crush bubble tech, 401ks, and crypto. It’s going to be an ugly couple of years from there, but the labor market is so tight it shouldn’t be that bad from an employment standpoint. The whole global banking cabal’s magic money printing pandemic response has had the unfortunate side effect of serious economic distortion among the middle class spenders that keep the worlds economy chugging. Feels like the middle class is getting the rug pulled out from under them and has no idea.

    • phleep says:

      Yeah, the trade that needs unwinding has already been done over a long time. Then the question becomes, is the will there (in politicians or the public) to follow through? I haven’t seen that will in years. I blame the public as much as the pols. Maybe people have to get really upset (and express it) for enough nudge to appear. I would say voting out enough incumbents might be a start.

  11. fred flintstone says:

    I agree with most fed heads…….. we need 4 rate hikes this year…..the argument is that they think the hikes should be 1/4 point each…….I think they should range from 3/4 point to a full point each.
    Anything less is the equivalent of watching a forest fire burn while you pump a bucket of water from the well.

    • Truckman says:

      The Fed is full of competent economists. Raise rates at that rate and a huge number of zombie companies will implode. Mortgages will be under water, like 2008, and that kills labor mobility…and labor mobility is actually the biggest problem right now.
      The members of the Fed are trying to get through the next quarter without being sacked by the Government or strung up by the populus. Expect any number of retirements for spurious reasons in the next three months. That’s a firm prediction. If I’m wrong I’ll quit predicting (which I don’t do often).

      • sunny129 says:

        Fed is trapped. They don’t want to admit, but issuing wishy-washy statements about inflation although still buying Treasuries & MBSs in Bilions!
        For those watching index actions, DOW always ended in the green by 4.00 clock all this week except today!
        The spread for Call options for the DIA remains significantly wide, in contrast to SPY & QQQ. This indicates a lot hopium still there. Making a few $ in bounce back calls on DIA (also to lesser extent others), until, DIP buyers give up, one of these days. I think majority of newbie investors think that indexes will go back again – a blind faith in the Fed!? Me thinks they are in for a surprise! Without risk managing tools like option trading, it is virtually impossible to stay invested or put new money into the mkt.

        Daily volatility will continue. I am still long on energy, agriculture, commodities and dipping slowly into semiconductors. I like bear mkts while most hate it! Bull & Bear are the two faces of the same coin. one cannot have it (bull) for a length of time without a chance for the other. Mean to the reversion is a fact even if if Fed tries to stop it. 13 yrs of expansion on easy-peasy money is long enough!

        • historicus says:

          “Fed is trapped. ”

          *Trapped into making real estate and stocks soar….

          *Trapped into depreciating the debt obligation of the US Government who just happens to empower them.

          *Trapped into providing cheap money for programs they admittingly back….Climate, and various Socialistic Programs.

          Trapped?
          They drag their feet as they smile.

        • sunny 129 says:

          historicus

          We are past the peak of Real Estate and also Equities, not just here but all over the world!

          I only see underlying action in daily volatility of of 3 idexes especially DOW is losing ground although slowly. This is how the secular mkt operates (studdy previous BEARs!) S&p and Nasdaq bounced back towards the end of the day. That is ‘bear trap’ obvious only in hindsight! Watch action next week!

      • historicus says:

        “The Fed is full of competent economists.”

        Let me post something that was in the WSJ today…
        in a book review
        “The Lords of Easy Money”

        “To which Chairman Ben Bernanke replied: “President Fisher … I do want to urge you not to overweight the macroeconomic opinions of private-sector people who are not trained in economics.”
        It goes something like this: The Fed and most mainstream academic economists believe that a deft manipulation of monetary levers can increase employment or control inflation. But this implies a direct
        connection between the Fed and Main Street. The truth is that any monetary-policy intervention must be mediated through the financial system, a complex organism made up of millions of individual bankers, pension savers, fund managers, private equity investors, day traders and others, all with their own incentives. The Fed understands startlingly little about how this financial system transmits its policies to Main Street.”

        Hayek was correct in his insistence that the multitude of economic participants collectively know more than any central banker/planner. Those people act on their knowledge, reason, and logic. That collective behavior trumps any central banking guess work, it is the ultimate decider of the effects of those policies.

      • Enlightened Libertarian says:

        I just read an article in the WSJ on inflation and the FED. In short:
        “We sure didn’t see that coming.”
        The exact quote:
        “This kind of caught us off guard, these high numbers and what it implies for our policy and our policy framework,” he said.

        • SpencerG says:

          If their economic models cannot tell them how “sticky” inflation is likely to be… how much are we supposed to trust in the FED’s economic solutions?

        • historicus says:

          ” I do want to urge you not to overweight the macroeconomic opinions of private-sector people who are not trained in economics.”” Bernanke to Fisher

          Just like Powell didnt see inflation coming, but every one else seems to have seen it coming. The “private-sector people who are not trained in economics” are the ones out there making economic decisions, daily. The academics don’t seem to get that. Their academic conceit makes them blind to real life experiences. Has Jay Powell ever been in a lumber yard? Has Jay Powell ever been punished for saving his money as the people today are punished by Fed policy?

        • suny129 says:

          No one saw 2008 crisis coming down the pike in 2007 either! Sub-mortage crisis started some where in mid 2005 – 2006. I was made aware of this by reading blogs. I was prepared! Just like now!

          Re-Call What Mr Barnake said:

          -June 9, 2008: Chairman Bernanke said: “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”
          -July 16, 2008: Chairman Bernanke said that Fannie Mae and Freddie Mac are “adequately capitalized” and “in no danger of failing.”

          Since then, Fannie Mae and Freddie Mac have received a $200 billion bailout and have been taken over by the federal government.
          h/t Mishtalk

    • Old school says:

      I think about 1% is al it’s going to take. Will be interesting if we make it to 3% on 10 year and 5% on mortgages before we go down.

    • Swamp Creature says:

      fred flintstone

      Agree. We need rate hikes of 1% every three months to get the rate up to 4% by Year End. Anything else is just a replay of the 70’s Inflation fiasco.

  12. SocalJim says:

    The current trade is out of financial assets and into real estate. I hear a large retail brokerage firm is providing a record number funds available letters to real estate brokers. All the lemmings are trying to do this at the same time. But, there is nothing to buy.

    • Truckman says:

      Canada has seen a huge number of rental properties being bought by numbered companies in the last 3 months. They’ve paid 3 times over the odds, and jacked rentals anywhere from 20-65% immediately. The company frontman is always a realtor. And nobody needs to be on the streets in a Canadian winter, especially since most of the shelters are highly limited by Covid.

  13. David Hall says:

    There was a recession in H1 2020 to depress transport and fuel prices. With trillions of dollars of stimulus to jump start the economy, then surging demand with the rollout of vaccines in H1 2021, now we get a report of double digit van transport price hikes.

    Inflation rates may not be constant. The long term trend in America is towards rising prices.

  14. Cobalt Programmer says:

    (Words of wisdom from your man Cobalt again)

    1. Large sums of money is flowing into metaverse buying real(?) estate and other properties. Crypto and NFT are so old school. How much of your portfolio is now holding meta dollas?
    2. Proteins and Vitamin C are the most important things to own now for the future.
    3. Lot of people in DC swamp area blame drivers for the shortages. But think about the truck companies having a hard time to fill the drivers into part time positions because, full time positions must provide benefits.
    4. If you have a hammer everything looks like a nail. Fed see a inflation spiral. Elephants see lazy people. Donkeys see wages should go up. Doctors see a malaise to be treated. Hospital management and pharma see a lifelong customer.
    5. Ships on shores are real. You cant fool me. I read the other (real real) ZH website.
    6. There are two options. Raise the rates or elephants in charge.
    7. If books are treasures, why bookstores are never looted?

    • TheRealMRDyno says:

      I think you can go longer without protein than carbs and/or fat, see rabbit diet starvation.

      Also, MetRx Super Cookie Crunch bars seem to last a long time, and have been 4/$6.98 at Walmart for I think 7 years straight. Lots of protein, plus carbs and some fat, and vitamins. 410 calories. Perfect lunch.

    • Anthony A. says:

      #2….add Vitamin D for those who do not go outside (mostly programmers and video game players).

      • historicus says:

        ZINC

      • phleep says:

        For me, 2 hours daily, pre-dawn briskly walking (a few jog intervals) with hand weights. Done by 5:30 a.m. Nature’s antidepressant and immunity builder, pain is banished, also mood and outlook soar. (Yeah, I’m supposedly “old.”) Only had to buy the hand weights once, about 20 years ago. No bogus tech tricks. Checks all the boxes. Just takes work and willpower, but gets easier over time, basically effortless.

      • Old school says:

        I think the latest research is we all need vitamin D supplement as you just don’t get enough naturally unless you are a lifeguard or something. Takes a while to build up in your body once you start taking it.

  15. Michael Engel says:

    JP thanked Satya and Pramila for their wonderful job.

  16. historicus says:

    Regarding shipping…
    the most disquieting item I heard today was that economically, it makes sense to send the shipping containers back to China…….EMPTY.

    Perhaps this is a proof that we just dont make anything here anymore.

    I guess trade deficits DO MATTER, for the most obvious reason that it points out DEPENDENCY. Not to mention when the money comes back (the academic foundation for it not mattering), it purchases power and ownership. (how many Congressmen take money directly or indirectly from the Chinese?)

  17. breamrod says:

    you know Powell thinks his 50 to 100 million will keep him safe and above it all. History has proven him wrong and will again.

    • historicus says:

      All those who promote inflation and downplay its effects….
      have inflation protected pensions for life awaiting … sometimes many govt pensions like Janet Yellen.
      Not to mention the “speaking fees” some refer to as deferred compensation.

    • Pea Sea says:

      Come on. He’ll be fine. You won’t, I won’t, but he will.

  18. Michael Engel says:

    Tianjin China locked down. Winter Olympic cancelled.

  19. SocalJim says:

    Funny watching the FED trying to stop inflation with huffing and puffing. They know most of the inflation is supply side driven and there is nothing they can do about that.

    As I said many times, if they tighten, the economy will slow while inflation will still run hot. Such a move will crush operating margins. Hard assets are the place to hide out.

    • Old school says:

      Most of inflation is demand driven by Congress and Fed over doing it. They filled the demand slack several times over. Larry Summers tried to tell them they were spending too much and that it was simple math, but people in DC live in a different universe.

      • SocalJim says:

        Reduced new automobile production is supply side driven inflation. This is out of the FED’s control.

      • historicus says:

        The oldest game in the book is to take a little from many to elevate the few.
        The “take” is the shaving off the value of the dollar in your pocket. The “gain” is to the fully invested, leveraged up class who own the stocks and real estate. The Fed serves the later.

    • NBay says:

      So take out that soft lawn, liquid pool, and put in Zen rock gardens?
      Would also make for a more interesting and challenging golf course, I would think.

  20. SpencerG says:

    I just shipped something for about 20% less than what it cost me before Christmas. I was pleasantly surprised and I doubt it will last. Crazy market…

    • Serge says:

      Prices won’t come down to 2019 levels. Trucking equipment costs all went up by 30%. I have bought reefer trailers for $75k each last year, now the same trailers are over $100k. Insurance will go up for everyone in the industry also.

      • historicus says:

        Yep
        Even if inflation levels out to the illegal target of 2%, the price increases we now see are baked in.
        This seems never to be emphasized by the powers that be.
        If inflation comes down, they will point to “see, it was transitory”….but that would be a lie. The inflationary price increases are here to stay. If they ever did begin to roll back (unlikely), the Fed would scream deflation and start pumping again.

  21. Anthony says:

    Brent Crude up to $84.39 as I write

  22. These cost bumps are transportation- a-tory… Baltic Dry is back below 2000 and may drop to 500 in the next six months. The Trannies are not confirming the bullish action in the DOW, even with implied pricing power but they look like they can form a bottom here. Translation: lack of bullish confirmation in TRAN confirms the supply chain thesis. Energy costs are eating into profits, and groceries and restaurants are getting ripped off by delivery services.

  23. sunny129 says:

    Since I use option trading as risk management tool, I closely watch daily ‘dance’ and volatility of indexes very closely. I execute buy & sale appropriately.

    As I have repeated, the hopium crowd and DIP buyers are still active. Bounce back call options within 30-60 days) with intermediate long term puts (60 days and just beyond) are giving net positive results for the day. This will go on as long DIP come after ‘deep’ red!

    This method is NOT for the novice but only experienced, nimble traders. Without option trading tools, the retail investors are at the mercy of big sharks and barracudas. (Been in the mkt since ’82) It may be hard iniatially but it worth learning option trading. I learned that lesson in a hard way. If that’s not your cup of tea, then staying invested during oncoming secular Bear is foolish. You don’t lose capital being in cash unlike stocks or bonds, My cash portfolio fluctuates between 40 -60% It is short parking between trades!

    Indexes may bounce back periodically but the long trend is south. Asserting fundamentals are over taking perception managers with all their optimistic horizons, coming soon!
    For example:
    1 Why the retail sales decline could be short lived!
    2 Fed’s Williams ‘sees’ inflation subsiding to 2.5% rate this year! Wow! Just amazing!

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