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00:19Welcome to the Myers Report Fast 15. It is Friday, August 14th. The summer's almost over.
00:26Hi to Don Day, reporting in from the U.S. Hot Air Balloon Championships in Scotts Bluff, Nebraska.
00:35Isaac is back with trucking and logistics issues, and in the cleanup position is Bob Janetsky, economist extraordinaire.
00:44Don, how are you, where are you, and what have you been doing?
00:48Well, I'm in Scotts Bluff, Nebraska, which is in the panhandle of Nebraska, along the North Platte River at the
00:56U.S. National Championship for Hot Air Balloon Competition.
01:00So basically the Hot Air Balloon National Championship. So it's the Super Bowl of competitive ballooning.
01:07One second. I thought the Hot Air National Championships were in Washington, D.C. in Congress.
01:13Yeah, well, a lot of hot air, that's for sure.
01:17So it went well, I take it?
01:20Yeah, so we're here all week. The competition lasts through tomorrow, and so we fly competitive events when the weather
01:29allows.
01:30And we've got 32 teams here from all across the country who compete for prize money and the prestige of
01:39doing a lot of tactical things.
01:43Pilots are given tasks, and they have to figure out the weather, the winds, and the tasks go from landing
01:52on targets or dropping things on targets
01:55or creating shapes in the air that we can use with GPS to do a variety of different things.
02:03Very, very interesting. And you're the one in charge of ground control and the weather and keeping them safe.
02:08Keeping them safe and then giving them the information that they need, and also, you know, for safety, making sure
02:13that we're not flying into bad weather.
02:17Okay, speaking of bad weather, we had a rough week in the Midwest. Can you give us a little more
02:23explanation on that?
02:24Yeah, we have what's called the Ring of Fire setting up, and it's got a little more life in it,
02:30so there's going to be more severe weather likely to come.
02:33Oh, the Ring of... I've only heard that in reference to volcanoes.
02:36Ring of Fire or the Johnny Cash song, right? Ring of Fire?
02:40Oh, yes. Go ahead.
02:41So we call it the Ring of Fire because you get a big high that sets up over Texas and
02:45Oklahoma, and the clockwise...
02:48That's an interesting phrase coming from a balloon expert, but go ahead.
02:52That's true. But we call it the Ring of Fire because you get a big high over the southern U
02:57.S., and the clockwise rotation of the air around it brings up moisture from the Gulf and also from Central
03:05America,
03:05and it just pumps it around the high-pressure ridge, and you get, day in and day out, heavy thunderstorm
03:14activity that is feeding off of subtropical air.
03:19And so it gets to be where you get very heavy rainfall, and you can also get a lot of
03:24severe weather, as we've seen in the Midwest.
03:27It's a classic setup that every summer we get it in some form or fashion, but this one's very well
03:34-developed, and it's going to last a little bit longer.
03:36So there's going to be more severe weather for parts of the middle part of the U.S. here through
03:41the weekend into next week.
03:43Okay. What about a possibility of Hawaii getting some bad weather?
03:47Yeah. You know, this doesn't happen very often. It does happen, but not frequently.
03:52Hawaii is going to experience a hurricane. Tropical storm Lala is forming out in the Pacific, and by...
04:00Lala?
04:01L-A-L-A is how it's spelled.
04:04Okay.
04:05Lala.
04:06So this tropical storm Lala will become Hurricane Lala.
04:10One sec. Is Lala male or female?
04:12I have no idea.
04:14Go ahead.
04:15They started alternating names, but I have, you know, I don't know who's in charge of the names.
04:21It can't be like a Ted or a Doug anymore.
04:26So Lala is going to become a hurricane, probably a Category 1 or 2, so it's not going to be
04:31a monster, but it's headed right towards the Big Island.
04:34So the south end of the Big Island in particular is likely going to get, if it's not a direct
04:41hit, it'll be close.
04:42And then it's going to go up and be close enough to affect the other islands over the weekend.
04:47So we could see some big, heavy rains across Hawaii, winds 90 miles an hour or more.
04:55So it's going to be impactful for that island.
05:01Okay, and what about hurricane activity in the Atlantic?
05:04Anything happening yet?
05:06It's been quiet so far.
05:07Yeah, we actually had a brief tropical storm in the north central Atlantic this week, Cristobal.
05:12That's since dissipated.
05:13We have three other waves forming off the coast of Africa.
05:18So we have activity, but right now we're not expecting these to turn into a hurricane, but at least we've
05:25got something in the Atlantic now that we're keeping an eye on.
05:29So this has still been a pretty quiet, except for this past week, it's been a pretty quiet weather year,
05:37certainly for the U.S.
05:39Am I getting that wrong?
05:41Yeah, no, you're not wrong.
05:42I mean, we still have some very significant drought happening out west, but the hurricane season, this is the time
05:50of year it starts to get more busy, you'd expect it.
05:53But so far it has been quiet, especially on the Atlantic side.
05:56The Pacific has been pretty stormy and will continue to be that way, but the Atlantic and the Gulf, as
06:02we've talked about in previous videos, is likely to have less activity than average.
06:07Okay, thank you.
06:09And now on to Isaac.
06:11Isaac, intermodal volume is up 10% year over year.
06:17What is truckload tender and why is volume flat or falling?
06:25So truckload volumes are flat simply due to fuel.
06:30The cost of fuel right now is, as we all know, it's on the rise.
06:33It's much more cost effective to move freight via rail right now.
06:38So although truckload is far from weak, it is falling slightly, if not flat, flat, if not falling slightly, as
06:48the intermodal gains tremendous market share right now.
06:52Almost every inland rail, every large market right now is growing at a very rapid speed and just picking up
07:01a tremendous amount of market share over truckload.
07:05What would the total be doing?
07:08What would the total be doing?
07:08I'm sorry?
07:09What is the total volume if you count both modes?
07:14Is it up?
07:28Is it up?
07:29Where I don't have the numbers on total volume across truckload.
07:33That's a tremendous number because that number is measured nationwide versus each specific market.
07:39Is that generally up?
07:41Yeah, right now it's flat.
07:43It's lifed up about 60 days ago, Gary and Bob, but right now it's flattened up a little bit due
07:49to the rising fuel cost.
07:50And intermodal gain that additional freight.
07:53Okay.
07:55Can you explain what freight tender rejection is?
07:59Freight tender rejection is when a carrier rejects a contracted load.
08:06Okay.
08:07Then we measure that.
08:08So during COVID, freight tender rejections peaked at 22%.
08:13Today, they're hovering right around 12%.
08:17Under 5%, it's considered very weak.
08:21That means carriers are accepting every contractual freight opportunity coming their way.
08:26That signals a very weak market.
08:29Anything north of 5% is tightening up.
08:32We're well above, we're at 12%, well above 10%.
08:35We peaked about 16% to 18% about 60 days ago.
08:39So that doesn't necessarily mean that the market is simmering down.
08:43But what that does mean and what we are seeing.
08:45So why would a carrier reject a contracted load?
08:51A, lack of driver capacity.
08:54B, equipment malfunctions.
08:56C, moving that truck driver capacity outside of their contracted freight to the spot market.
09:04That's been raging for the last 120 days.
09:08So what you're saying is they'll reject it if the load is uneconomic.
09:11Well, yes, that is one of the reasons.
09:13And that's what's really been driving freight tender rejections over the last three to four months as the spot market
09:19started raging due to the lack of driver capacity.
09:23Where do you see the market going in the next 30 to 40 days?
09:27So what's happened in the last 30 days, rejections have simmered down from 17%, 18% down to 12%, but
09:34that's because the spot market has now pushed contractual rates up.
09:39So now carriers are back to accepting the contractual freight because the rates are simply higher than they were 120
09:47days ago.
09:48So basically what you're saying is the rejection rates are applicable to the spot market as opposed to contracts that
09:58fleets have with particular shippers.
10:01Correct.
10:02Okay.
10:03Dr. Bob, corporate profits were reported this week.
10:09How were they and how did the markets react?
10:14Okay.
10:15Well, let's look at the profits first.
10:17We have about 90% of the S&P 500 companies that have already reported.
10:23And the estimates on profits are, well, to use the expression through the roof, profits, if you take the whole
10:33S&P, all the companies, it looks as though profits are up 50%, 50% from a year ago.
10:42Now, there is a huge one-time kick in the profits for Alphabet and Amazon that attribute to that huge
10:5350% over a year ago.
10:55So if we take that out, we come to the underlying trend, and it's still up very strong, about 30
11:02% from a year ago.
11:04These are extraordinary profit figures.
11:07As a matter of fact, you know, I calculate the long-term trend in corporate profits since the end of
11:14World War II, which has been pretty stable.
11:18And in the second quarter, we are 70% above that long-term trend, which is extraordinary.
11:26We are in a new era, I think, of profits.
11:30We are so far beyond the long-term trend that we often have, that we have to at least suggest
11:36the possibility and maybe the likelihood that that long-term trend is no longer relevant because we are so far
11:44above it.
11:45The profits are coming in that strong.
11:48Now, what does 70% above the long-term trend mean for the prices of stocks?
11:53Well, guess what?
11:55The prices of stocks in the second quarter are 70% above that long-term trend.
12:03My conclusion is that the current prices, as spectacularly high as they seem, are justified because of the profitability that's
12:15coming on.
12:16Now, not only that, but if we look for the year ahead, the analysts are projecting another 10% to
12:2215% increase in profits, so a pretty decent increase.
12:26Now, they were off this past year by about 10 percentage points.
12:31They were forecasting the corporate profits this year for the S&P companies would be up about 20%, which we
12:37thought was extraordinary.
12:39They actually came in, or are coming in, up 30%.
12:43So, they are doing the same thing next year.
12:46And if the AI is really continuing to boom like it has been booming, these forecasts of 10% to
12:5515% profits for the year ahead could, again, be understating the potential for where we end up being.
13:02Bottom line, though, you know, the people who are suggesting these stock prices are just incredible, overflown, overblown.
13:13They are justified by current profits.
13:16Now, we don't know what future profits are going to be, but at least up to now, I do not
13:21see the market as being significantly overvalued.
13:25Basically, it's justified by what we've seen in profitability.
13:29This is the first time you've said that in a long, long time.
13:33Well, it's the first time.
13:34I mean, you just look at these profit figures, and I believe that they are real.
13:41Some people have suggested that they are blown up artificially by AI companies kind of doing business with one another
13:49and committing huge billions of dollars of activity.
13:54The people who are close to the AI have suggested that there is a two-year lag between investing in
14:03AI and seeing the results.
14:06And if that's true, the current spectacular profits are generated as a result of what these companies did two years
14:14ago.
14:15Now, what they're doing is they are seeing such tremendous gains that they are actually increasing their exposure this year.
14:24And if it's true to form, and we're going to get the real results of this two years into the
14:32future, then we have not yet run the gauntlet in terms of taking advantage of the major burst in new
14:39technology that we're seeing out there.
14:41Wow, wow, wow.
14:42Wow, wow.
14:43That's exciting to hear that.
14:45Go ahead.
14:46I remember you saying six months ago, nine months ago, I think the figure you put was 51% overvalued.
14:53Yes.
14:54Wow.
14:55Yeah, and we've jumped.
14:56And now, the interesting thing is, I mean, I've been criticized because I have been taking a fundamental value for
15:03the stock market.
15:03You are sometimes criticized because you're you.
15:06Based on that long-term trend.
15:08And people say, but the long-term trend, you should adjust it for today.
15:12We don't know if today's profits are really going to continue at this rate, but it is unprecedented compared to
15:20history.
15:21We have never seen the profits go 70% above their long-term trend or anything even close to it.
15:28So, I think we have to recognize that we are in a new era, and we may be just in
15:35the early stages of this AI boom, which is affecting not just the S&P 500, but it's affecting other
15:44companies as well.
15:45Because we're seeing similar types of real-to-long-term gains in the small-cap companies and in the other
15:53companies that are not in the S&P 500.
15:57Wow.
15:59Bob, with all this, what happened with interest rates?
16:02And what's the Fed going to do?
16:04Well, I know you keep telling me interest rates are up only slightly, but they were, you know, we were,
16:09I'm dealing with a base of 4%, which is where they were back in February, the beginning of the year.
16:14And they're now up at 4.6%, 4.7%.
16:19To me, that's a significant increase.
16:21And that increase, normally, under normal circumstances, mean that all real assets are worth less because they're competing against a
16:33higher yield.
16:35And that is not true for the stock market, but it's not true because of the fact that the profits
16:40are just running so far ahead of the normal, what would normally be a reduction due to higher interest rates.
16:50And how does the oil market look from your perspective?
16:54The oil market, you know, it's looking okay.
16:58I mean, we're down today anyway to $81.
17:01But when I looked at the futures markets, the latest assessment in the futures markets is that the prices are
17:08going to stay high.
17:10They're going to stay at least to the $75 to $80 range right up through spring of next year.
17:17And that's, of course, based on what's happening with the war in Iran.
17:21Right now, nothing is happening.
17:23And with nothing happening, people tend to extend out their expectations for today.
17:29I continue to believe that the situation in Iran is going to be resolved.
17:33I'm hoping it's resolved quickly.
17:35If it isn't, it's going to be resolved slowly.
17:38And we'll continue to go through this.
17:40But the real strength is that the U.S. economy is doing very well in terms of our corporations and
17:47with respect to profits.
17:50Where it is not doing well is that the higher inflation has undermined living standards.
17:56When I look at living standards measured by workers' salaries, they're down about 1%, 1% to 2% from
18:05the period before the war.
18:07So people are hurting out there.
18:09And they're not very happy.
18:11And the sentiment figures reflect that.
18:13One second, one second.
18:15That's where the problem we have.
18:17I got it.
18:17Isaac, are you seeing any relief in the fuel prices?
18:22Are you still getting killed?
18:24We're still getting our butt kicked right now.
18:26Fuel is well above $520 a gallon for diesel.
18:29And are truck drivers, Bob was talking about their standard of living going down.
18:34Are truck drivers seeing an improvement in their standard of living, even with the fuel prices?
18:39They are.
18:39They are, Gary.
18:40But this just began, right?
18:41After a 40-month freight recession, right?
18:43The lights just turned out in trucking arguably 90 days ago for a lot of truck drivers.
18:48So I think the trucking is probably a special case there.
18:52I think most people that we're looking at have not seen the sort of gains that you're seeing in the
18:57trucking industry.
18:58Yes.
18:59It turns in salaries.
19:00Yes, but that same group, yes, that same, well, again, trucking was in a very deflationary environment for the last
19:0840 months, 4-0.
19:11So 90 days of fun.
19:13Let them have their fun, Bob.
19:15Let them have their fun.
19:16They deserve it.
19:18They deserve it.
19:19To put this politely, the new home industry is in the toilet.
19:22How bad is it?
19:24It's pretty bad.
19:26You know, whereas the stock prices can be justified due to the profit gains, you really don't see that in
19:35terms of the housing market, the market for new homes.
19:37The prices are still strong because of shortages and the cost of labor have gone up so much.
19:44And the higher interest rates, of course, really take the mortgage rates out of the range of more and more
19:51people with each fraction of a percentage point that they go higher.
19:55So we've got a huge excess load of unsold houses in the new home market that's weakening the prices, which
20:05can be good, but not enough to make those houses more affordable.
20:09It would seem that one of the problems is that many people who are sitting with 30-year mortgages in
20:17the 2% and 3% range are going to be reluctant to get rid of those mortgages.
20:23So they're not going to go into the housing market and they're not going to upgrade so quickly.
20:27Yeah, and it's a simple change by the government to allow for the increase in inflation to have raised the
20:36prices of the houses so that you're not taxed on that gains that really aren't there.
20:42And there are gains because of inflation and the huge increase in housing prices.
20:47They really ought to change the laws on that.
20:50And a simple change would correct a real bias in the market that it's due to our tax policy.
20:57You're talking, well, it's more than tax policy.
20:59The key limiting factor are the due on sale clauses in mortgages so people cannot transfer their low interest rate
21:08mortgages so they could buy another house.
21:11Yeah, there are pretty easy fixes and we haven't taken them.
21:14The question of the week.
21:16Should males be allowed to play in the WNBA?
21:20Isaac.
21:26How do you even answer that, Gary?
21:28Of course not.
21:28What do we, what do we, what's this conversation as a society we're having right now?
21:33That's wild.
21:34No, the answer is no, they shouldn't.
21:38No, it's got to stop all the silliness.
21:41It's got to stop all the silliness.
21:43Don Day, you are out there in God's country.
21:47Do you think that women should be allowed, men should be allowed to play in the WNBA?
21:52Oh, absolutely.
21:53I'd pay to see that.
22:03Which part?
22:04On the court or that the men going into the, to the ladies locker room?
22:08I mean, all of, I would say the ratings of the WNBA would go through the roof, yes.
22:15Yes, it would.
22:17Yes, that it would do, Don.
22:22Okay.
22:23What a world, what a world we're living in.
22:26With that note, I want to say thank you to everybody.
22:30Be well, stay safe, and God bless America.
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