• 2 months ago
The Meyers Report 09_06_2024 Fast_15
Transcript
00:00Welcome to the Friday Meyers Report Fast 15.
00:08It is September 6, 2024.
00:12Don Day, our favorite meteorologist and climatologist, and yes, I can now spell it.
00:19You were right.
00:20August and now into early September are cooler than normal, at least in the Midwest.
00:26What's coming next, Don?
00:27Well, it is going to warm up a little bit finally, although that's going to be followed
00:31by another cool down.
00:33So you're going to find that the early part of fall in the central and the east is going
00:37to be really quite pleasant, comfortable temperatures, nothing too hot when it warms up again.
00:43And there's probably some early fall cold coming in October.
00:47Okay.
00:48How about some rain?
00:51Not much.
00:52Not much.
00:53So right in time for our pumpkin latte from Starbucks, right, Don?
00:58There you go.
00:59We've been waiting for it.
01:02Hey, Don, last night I had a conversation with two high-level executives from one of
01:10the big three automakers in the United States, one of whom was the CFO for their company,
01:17had been previously the CFO for their Australian division.
01:22And while they knew that mandating electric cars was a big product mistake on the part
01:26of their company, they also seemed to think that they actually thought that carbon dioxide
01:32made up 40 percent of the Earth's atmosphere.
01:36I hear things like this all the time.
01:40These people seem to not know basic middle school science.
01:45How is this happening?
01:46Well, first of all, they're really not teaching that in middle school.
01:50Very few people actually know the composition of the atmosphere.
01:54You ask most people what's the biggest gas in the atmosphere, and nine out of ten will
02:00tell you oxygen when it's really nitrogen.
02:02If it was oxygen, we'd all be dead.
02:06Yeah, exactly.
02:07So there's just a lot of ignorance with the atmosphere and how the weather and the climate
02:12works.
02:13And so people are real susceptible.
02:14You know, it's really easy to get a number wrong.
02:17You know, you get so much bad reporting when it comes to science.
02:24I do interviews with journalists all the time, and it's shocking the lack of science knowledge
02:31that they have.
02:32And sometimes I talk to, quote, science reporters.
02:37So there's just a lack of basic understanding.
02:40That's why it makes it so easy for people to be manipulated when it comes to weather
02:44and climate.
02:46What is the answer, John, 0.02% or 0.022?
02:500.04.
02:510.04.
02:52Actually, 0.0034.
02:53Yeah.
02:54It's three and a half tenths of a percent.
03:01Yeah, it's pretty minuscule.
03:04So you know, and for every carbon dioxide atom that goes into the atmosphere, it actually
03:11makes the radiative properties of carbon dioxide less than the molecule before it.
03:16So there was actually a paper that came out last week.
03:22It's kind of rocking the climate world a little bit.
03:25You're not hearing about it, but the paper stated that sea surface temperature changes
03:32are responsible for the changes in carbon dioxide in the atmosphere, not humans and
03:39creating CO2, because the temperature of the oceans dictate how much carbon dioxide
03:45is released into the atmosphere.
03:48And it's a paper from a well-respected scientist and well-respected, but it could blow the
03:55lid off things if it ever gets out.
03:57Well, it will get out, I'm sure.
04:01OK.
04:04There are serious questions about government economic reports.
04:08Approximately 800,000 previously reported jobs were removed from the statistics for 2024.
04:15Some are saying that regardless of the numbers, a recession of what the numbers being reported
04:20are saying, that a recession may have actually started several months ago.
04:26Is this true?
04:28Today we have, we welcome with us one of our old friends, Kathy Ruzicka, a commercial banker
04:34who's making loans to small and mid-sized companies.
04:37Kathy, you look at company tax returns and P&Ls all day long, and you can gauge the economy
04:45from that perspective.
04:47What are you seeing?
04:49What I'm seeing is that nobody, now these are companies up to 30 million in sales and
04:54nobody's making any money.
04:56They're lucky to be break-even.
04:58They're lucky to hit 1.2 times debt service coverage ratio.
05:02The cost of labor is so high, cost of fuel is so high, and they are not charging enough
05:08to make money.
05:10And I feel inflation needs, I mean, the prices need to go up.
05:15And if you look at the tax returns, you know, they're eating away at their capital.
05:19And I think it's going to be a big problem after the election.
05:23You think that eventually, it seems like from what you and I had discussed, that the companies
05:30are either going to have to raise their prices or go out of business.
05:33Is that accurate?
05:35Absolutely.
05:36We at the bank, you know, we're, our deals are well-collateralized and we've had to-
05:42Kathy, are most of those companies manufacturing or are they all over the place?
05:47They're all over the place.
05:48Hotels, gas station service, manufacturing.
05:51In the Chicago area, though?
05:54Midwest.
05:57So the bottom line is, if these companies raise their prices, in order to survive, if
06:02they raise their prices, we're going to see a big jump in inflation.
06:06No?
06:07Absolutely.
06:08I'm sorry, Kathy, are you seeing more, which industries are you seeing suffering the most?
06:15Trucking is bad.
06:18Office is just, just done.
06:21You know, nobody, you know, we were hoping that people would go back to office and maybe
06:25spread out a little bit or go back to work.
06:27That's not happening.
06:28We do think that the higher ups are understanding work from home is not really working very
06:33hard or well.
06:34So we see some companies pulling back and wanting to go to the office.
06:39We are one of the few lenders that will actually lend to office companies.
06:45Strip malls are doing okay, but the problem is the old rents aren't keeping up with the
06:50new loan interest rate renewals.
06:52So even this whole year, let's say primes at eight.
06:56So bankers like myself are lending anywhere from seven to 9%.
07:00The leases aren't, they're just not keeping up.
07:03So you have to reamortize the loan out to 25 years because the interest rates are so
07:07high compared to as when they wrote the leases four or five years ago.
07:12So that's a problem.
07:14And so, you know, they say rates are going to come down and if they do, they're not going
07:18to come down fast enough with the leases that have already been written.
07:24And the other problem with that too, that they don't talk about is people like me and
07:27you that own six flats and 12 flats and those other types of apartment buildings, you know,
07:33their rates, you know, and renewals are, you know, again, seven to eight and a half percent.
07:39And you know, especially out in the suburbs, people are only paying, I don't know, maybe
07:44two grand a month for rent, but the property taxes are through the roof and the loan rates.
07:49So the leases aren't keeping up with the loan payments.
07:53And so there's a whole nother slew of problems.
07:56We're going to see more inflation on the rental side, commercial and residential.
08:03You know, people who had, just real quick, Gary, the people who had an increase in their
08:07wage to, you know, $22 an hour, let's say, they're not going to take a pay cut.
08:13They're not going to go back down to $18 or $19 an hour.
08:15So those people are at $22 an hour.
08:18Then you have new staff that comes in, they want to get paid $23 an hour, but your loyal
08:23employee at $22 an hour now wants $25 an hour, and you have not increased the price of your
08:29goods because you feel your customers won't pay it.
08:33Where is that money coming from?
08:34So I'm just saying, the only hope they have there is the cost of fuel going down if the
08:40election goes the right way.
08:43Isaac Issa, you are on the leadership track for the Illinois Trucking Association and
08:49the American Trucking Association.
08:52Is what you are seeing and hearing matching what Cathy is reporting?
08:56Cathy, spot on, spot on.
08:58Again, our industry has been in a great recession.
09:00It's been 30 months now, 3-0.
09:03A lot of these, we expected a bloodbath in 2023 that just didn't materialize.
09:10In 2019, our last bloodbath, Freight Waves, which is a big transportation publication
09:18that posts out all types of different data, they were reporting 10 to 15 bankruptcies
09:23a week.
09:24Up until about three months ago, they were reporting about one or two a month.
09:30Now we've started seeing bankruptcies accelerate at a huge pace over the last two to three
09:34months.
09:35You got the PPP loans that people are now starting to pay back, and just all of these
09:39economic conditions are just piling up.
09:41Everything, Cathy mentioned it, cost of fuel, cost of labor, cost of insurance.
09:46Insurance is going up for most, almost all carriers are, we're coming up to renewal December
09:501st.
09:51We're expecting a 20% increase.
09:52Mind you-
09:5320%?
09:5420%.
09:55They're underwriting across the board.
09:57What is it costing, Isaac, what is it costing to insure an average over-the-road truck?
10:05Depends on a lot of different factors.
10:10Depends on the age of the fleet, the amount of trucks.
10:11So I'll give you an example.
10:13We pay about $6,500 a truck.
10:15Many, many, many carriers, three years or less in business, pay over $20,000 a truck.
10:21It's a massive difference, massive difference.
10:26In all this that's happening, guys, as volumes are surging, our volumes were up 18% in August.
10:34We're getting very close to COVID level volumes, which was great for us, but we're just not
10:39seeing the rates, which shows us there's just way too much capacity still in the market.
10:45Unfortunately, we have to wash this market out.
10:48People have to leave.
10:49Isaac, are the-
10:50Do you see people paying you on time?
10:52No, no.
10:53All of our vendors are extending our, yeah, absolutely not, no.
10:57That's what we're seeing too.
10:59So, Kathy, you said you were seeing payments, accounts receivable going from 30 and 45 days now,
11:08or 30 to 60 days now, going out 45 to what, 100, 120 days?
11:14I think 30 is now 60, 60 is now 100, and 90 days is probably, I don't know, 140.
11:22Nobody is paying on time.
11:23And how about-
11:24140.
11:26A lot of these carriers work off of broker freight, transactional spot market load boards
11:31where there's no relationship.
11:32Then you got to worry about getting nickel to dime of any, all the extra detention charges,
11:38your surcharge that they don't get.
11:40So it's a lot of pressure on a lot of carriers, and although volumes are coming back, they're
11:45coming back strong for many, many, many trucking companies, it's too little, too late.
11:49Well.
11:50Bob Janetsky, what do you think of what Kathy and Isaac are saying?
11:54Are they right?
11:55Well, the interesting thing that we just got some data that are through July on shipments
12:00and orders, which would affect the trucking industry.
12:04And what they show is that shipments and orders year over year are up like 2%, so it's probably
12:10zero after inflation.
12:12However, interestingly enough, in the past six months, the growth has been at a 7% annual
12:18rate for both shipments and orders.
12:22And so these data, incidentally, are inconsistent with, well, they're consistent maybe with
12:28some of what Isaac said about the strength in the orders and the volumes and stuff like
12:33that, but they're inconsistent with some business surveys that show manufacturing companies
12:38are in a recession.
12:39So basically what we have is a lot of mixed data, and it's very difficult when you have
12:44data pointing in different directions, really have any confidence as to exactly where the
12:49economy is now.
12:52Most of the data that I'm looking at show that the economy is holding its own.
12:57It's weak, but the weakness is still consistent with very moderate growth.
13:04Bob, you wrote a book, Rich Nation, Poor Nation, and you studied 115 years of economic policy
13:13for the average American citizen.
13:16What worked and what didn't work?
13:19What worked and what didn't work in terms of policy?
13:21Well, basically what I did is I developed a whole series of economic data that were
13:26consistent from 1900 to 2015.
13:30And then I looked at the policies in each year, and I separated them into what I call
13:35classical economic policies, which are free market type policies, low taxes, minimal constraints
13:43on government, and progressive, so-called progressive policies, which are just the opposite.
13:50And what it showed was, very consistently, when we have classical economic policies with
13:57low taxes, minimal government, we had most of the increase in living standards, 87% of
14:04the increase over that 115 year period, came from we had only 50 years of what I call really
14:12good sound economic policies.
14:15The rest came during war years when policies were up and down.
14:18When we had progressive policies, and we had that for 52 years of all the cycles, we basically
14:27had no increase in living standards.
14:29The interesting thing is I just updated the data from 2015 to 2023, and what it shows
14:36is we had two more cycles.
14:37We had a good cycle, classical economic principles from 2015 to 2019, we had the major tax cuts,
14:45we had limits on spending and government spending and regulations.
14:50And what happened is incomes for the workers after taxes went up 5%.
14:57That's a big increase in four years.
14:59Since then, we've reverted back, and the reversion back started in 2020 with all the government
15:04spending and controls.
15:07And when we look at the period from 2019, the last four years to 2023, there was a 6%
15:14drop in workers after tax incomes.
15:17So if you're wondering why people are laughing when the commentators tell them how great
15:22off they should be, and people just laugh and say, no, we're not really great off.
15:29They're not.
15:30When your after tax incomes are down 6% in four years, and when you're below like $3,000
15:36a year in salary for what you were earning four years ago, these are not good economic
15:44conditions.
15:45I don't care what some of the data tell you.
15:47Okay, in a word, as we are doing from week to week, in a word, this week, who do you
15:53think is going to win the election?
15:56Who will want to wind up back in the White House, Harris or Trump?
16:00Kathy?
16:01Trump.
16:02Unless they cheat.
16:03What?
16:04Unless they cheat again.
16:05Sondé?
16:06You're on mute.
16:07Isaac?
16:08After Harris's last interview, Trump.
16:09Sondé?
16:10Mute.
16:11Mute.
16:12Bob Zinetsky, who do you think?
16:13I think he said Trump.
16:14I'm going with the Betty Knott sign.
16:15Just make it simple.
16:16Sign.
16:17Sign.
16:18Sign.
16:19Sign.
16:20Sign.
16:21Sign.
16:22Sign.
16:23Sign.
16:24Sign.
16:25Sign.
16:26Sign.
16:27Sign.
16:28Sign.
16:29Sign.
16:30Sign.
16:31Sign.
16:32Sign.
16:33Sign.
16:34Sign.
16:35Make it simple.
16:36Make it simple.
16:37Sign.
16:38Sign.
16:39I looked this morning at the betting odds, and they've got Trump by three percentage
16:40points.
16:41So I'm going with the betting odds at this point.
16:45OK.
16:46As am I.
16:47I think as the truth comes out.
16:49Don?
16:50OK.
16:51I'm not muting anymore.
16:52I'm expecting a lot of drama.
16:54I, honest to gosh, don't think the powers that be are going to let Trump win.
17:00There's going to be so many roadblocks thrown up between now and November.
17:04I don't think we've even seen the start of them panicking.
17:08So I don't know.
17:11I'm not confident.
17:12OK.
17:13I think there's a higher power than the powers that be.
17:18Maybe this is for another time, Gary.
17:21But what happens if Trump doesn't win in this country?
17:23I know, right?
17:24Well, that's what we'll cover.
17:27We're going to cover that in our September 25th meeting, the economics of the day.
17:34And what happens if either side wins?
17:37All right.
17:38With that, I would like to say thank you to everybody.
17:41Stay safe.
17:42Have a good weekend.
17:43And God bless America.
17:44Take care, guys.
17:45One second.
17:46Have a good weekend, everybody.
17:47I changed me back.
17:48I'm trying to stop recording.
17:49Got it.
17:50Yeah.
17:51Yeah.
17:52Yeah.
17:53Yeah.
17:54Yeah.
17:55Yeah.
17:56Yeah.
17:57Yeah.
17:58Yeah.
17:59Yeah.
18:00Yeah.
18:01Yeah.
18:02Yeah.