FreightWaves Today | September 11

0:00Hey, I like your new Rav4. Thanks, yours too! What does Rav stand for anyway? To me, it's the remarkably advanced vehicle. Really? To me, it's the runway approved vehicle for its amazing style. What about remarkably adaptable vehicle because of its versatile cargo space? Or really admired vehicle? Oh, or really awesome vehicle! It really is the recreational activity vehicle. This stylish 2026 Toyota Rav4 limited. What's your Rav4? Today, I can't see. Good afternoon and welcome to Freightlapse today. I am Huey, baby camp joint today by Malcolm Harris. It's going to be a great show.

1:01We have National Funding Founder and CEO Dave Gilbert to talk about why a full order book doesn't always mean trekking business is ready to expand. We also have the COO of Service Up, Andy Klabnock. Talking about how his company is untangling one of Fleet Management's biggest headaches and getting vehicles repaired without the paperwork chaos. So, lots going on and great lineup today and so happy to have you here, Malcolm. Happy to be here. It's been quite a week here on Freightlapse today. We had of course myself as X-Rick Lynn yesterday. Then of course, us on Wednesday. It's been a fun time. A lot of great conversations and today heading into the weekend is going to be no different. Yeah, it's going to be great. We've got a great lineup for next week as well. We are going to be traveling a bit in the beginning of the week. We have an event in New York that we will be hosting and then we'll be back for the normal show, the back half of the week with with a great guest lineup. So, lots going on at Freightlapse and Sonar. Lots happening in the market as well. Or not a lot happening in the market. It's kind of a little bit of the slow summer, doldrums early fall still when it comes to what's happening with Freight.

2:05For sure. And I think to your point that you mentioned earlier in the week, you can't really get a good snapshot of everything close to Labor Day. And so you get like an actual sample size of data to refer to. So I think we'll see some, you know, I don't want to say this. I guess a proper alignment and movement next week as we have more data to look at. We'll see. I hope so. So I hope to see everybody at F3 for those that are not there. I know we're going to keep plugging in, but the feature of FreightFestBlock, October 27th and the 28th is going to be a fantastic time. We spoke on it a little bit on what the truck earlier and throughout the duration of the week here, but tickets are on sale. It is going to be one of the best events of the year. So make sure that you are visiting us here in the heart of the scenic city here in Chattanooga, Tennessee, October 27th, as well as the 28th at the signal. And I'm excited for this. Most importantly, I'm excited for the morning minute. Very great stories. Let's get to them now. We kick things off with a severe warning from the Teamsters Union to United Parcel Service.

3:06Brace for a strike when their contract expires in 2028. Teamsters president, Sean O'Brien, has put UPS and its 330,000 unionized drivers and package handlers on notice through a series of union podcasts. He's declaring that rank and file members will walk out if the company doesn't meet demands for even better terms than the current agreement. Among the key strike triggers are expected attempts to roll back health and pension benefits, automation and deployment of autonomous trucks, and alleged outsourcing of last mile delivery to non-union subsidiaries like Rody. O'Brien has been blunt about his pessimism, stating, I am not optimistic of coming to a tentative agreement without striking UPS. Over at the ports, construction is officially underway on Delaware's largest ever maritime infrastructure project. It's a massive $669 million container terminal along the Delaware River. The Delaware container terminal, cited on 137 acres of former Dupont Industrial Land in Edgemore, began major construction in 2026 after federal dredging and seawall permits were reissued in April.

4:11The facility is designed to handle 1.2 million 20-foot equivalent units per year, served by 2,700 feet of key, 7-ship to shore gantry cranes and 26 rubber-tired gantry cranes. The terminal will feature a 45-foot birth depth capable of accommodating post-pandemic vessels of up to 16,000 TEUs, positioning it among the top tier of East Coast terminals. State officials project the terminal will create nearly 6,000 new jobs once fully operational. The first water side phase is targeted for completion by the end of 2028, with first containers potentially moving through by late that year. Finally, 25 people in China were killed after a cargo ship that was undergoing repairs caught fire. The fire broke out Thursday morning at about 11.15 a.m. and put out around 2.30 that afternoon, according to Chinese state media. The vessel identified as the Liberia flagged dry bulk carrier ocean melody, had 42 people on board at the time of the incident. 12 individuals were evacuated safely, and five were injured and taken to hospital in stable condition, while the remaining 25 were later found dead.

5:16The 20-year-old ocean melody had arrived at the Qingdao Shipyard on August 31st, for repair and inspection when the fire erupted. The cause of the fire remained unclear as of Thursday evening, with authorities saying an investigation was underway. All right, Malcolm, so lots to unpack here. I have some thoughts on some of the stories that we'll get into, but I don't have a lot of thoughts on the third story other than it's really sad. So 25 dead as a fire and Gulf so cargo ship in China, 42 were on board, five injured, 12 evacuated, cause of the fire unclear, just a sad situation. We don't have a lot of details on what happened to our head. I talked about this a little bit on what the truck earlier this morning, but it was just a bit odd, I guess, the timing of everything, and just to kind of hear the statements that were following up in the lack of details. Obviously, you want to be mindful of the tragedy. I mean, this is awful stuff, but the lives lost, and just kind of hearing from the leadership there, it was a bit odd the statement that I thought about.

6:20It's going to be fine. I know you're supposed to say those things, but it just necessarily felt very weird. So Michael, myself, we debated on what the time was. I didn't read those statements, so what was it just, did it feel cold? It's just very, very corporate more than anything. There wasn't necessarily a warm intentionality. Yeah, cold, I would say, would be the good words surrounding it. So I was very different. So what a total of 12 folks evacuated safely, and then there's 25 that unfortunately lost their lives with another five missing. I thought there were five injured. Are there still missing? Yeah, yeah, there's some, there's some people this number will go up. That's terrible. Yeah, it's awful. Okay, well, the other two, I have more thoughts about it. Yeah, please. So I think that they both can sort of be combined into. So I would say there is going to be a lot of commentary and a little bit of drama, and certainly some opposing viewpoints on both of these topics. So you could say it sort of progress versus.

7:21I don't know what you call the other side, but. The attack. So the container terminal in Delaware. Seems like a huge opportunity to me, right? $669 million facility being built on 130 second seven acres, hopefully done 2028 and should handle 1.3 million to use per year and create 6000 new jobs. When I read the article, though, there is a little bit of. There has not, it has not been an easy road from Anderson to get to this with a portion year that have been pretty against this being built and things that it will create to much fragmentation. So depends on where you fall. I don't want to get hate from either side, but I think competition is always healthy, right? Competition is always healthy, but ultimately so is job creation. And each time there's 6000 jobs that are going to be created specifically in a per capita city, excuse me, state like Delaware. I'm all for it, but also looking at the opposite side of the coin here, Julie, is that there are different ports, port of Baltimore that could be able to utilize a lot more innovation and things happening.

8:31So I get that as well as that you're looking at this. This forces that. 100% more innovation because that yeah 1000% but how do you justify that cost spend seeing I mean, all right, it's like we're doing this. Why don't we just streamline more business and funnel more business into this new upgraded port. We can kind of take away you soon. I'm saying without saying it. So yeah, yeah, I don't know the detail. I mean, I don't have enough info on it to have a viewpoint on that. But yes, I think the positive is the job creation. So all right, let's talk about the teamsters and UPS. But oh my god, this guy is a character. Yes, what's his name Sean. Sean O'Brien. Yes. So certainly some very biting comments regarding UPS's leadership. He says things that this is why I say as a character, he says that his initials are SOB for a reason, right? He certainly is creating some talk, right? And maybe that's maybe that's that's his whole maybe that's this whole stick, but they're getting it to this really early.

9:33I mean, the contract doesn't expire until 2028. They're demanding that UPS. Improve like they're there were they're going to pull back on some of their benefits for pension and health care. And they're against outsourcing of last mile delivery to non-union subsidiaries like Rody, which has amazing marketing, by the way, I don't know if you've seen Rody. I think that it is they just have great marketing. I'll leave it at that. They are against automation, right? They don't want autonomous trucks and some of the automation to happen. I assume that they assume it will take jobs. And then they're going through the actual details of the story that weren't just in the headline. There is a lot there. Oh my god, we could talk about this for 40 plus minutes. I will say, I do not want the the teamsters to overplay their hand on this. And it feels like that's what they're going to do because correct me if I'm wrong. I could absolutely be wrong.

10:35I think UPS is going through that is now equipped obviously with Rody and different capabilities that UPS has. They can now handle a strike and be fine with outsourcing with the relationships with backfilling and oh yeah, with automation. It is human nature to think you're more important than you are, right? And that you're not replaceable. I think everyone is replaceable. And I think some of the comments that like the CEO only cares about the bottom line and she's holding well, that's her job. Right? Like that. I'm sure she also cares about the employees, even the drivers and the union members. But her job is to make UPS the most profitable and successful business she can. That is what a CEO is. And so I just think some of his comments are a little bit out of touch. And I also think they've gotten a little uglier than they should.

11:38And it's timing was very early and they do have a best in class comp package when you, you know, kind of look between UPS and FedEx and other providers as well. When you just broke down the numbers, UPS does lead the way. So I'm interested to see how this is going to go. And I think these comments on this podcast for those that are not aware what we're talking about. Don't want to get some bleeps in here. But definitely read the full article. Read the full article. Some colorful language to say the least to say the least. And yeah, I want to give a quick plug. I went through the innovation lab for Kinko for the grand opening yesterday prior. And so I think it's not a lot of people who are able to worry about it. And just autonomous and fully just automated things in a warehouse facility has never really set in my mind until I wouldn't saw it. Now when I'm looking at articles like this, I'm just like, OK, this is just showing me what the future is going to look like. It's just high touch, very, very focused on getting the most out of less. But there's still a human component with it.

12:43It's really to keep the merger of the human aspect, reduce time and maximize efficiency and safety and safety. Can agree more. I just I think that things that can be automated that do create safety concerns for people working in facilities like this, whether it's manufacturing or warehousing or what you know picking off of high shelves, those sorts of things that you can do to reduce safety incidents for your employees. I don't know how you argue against that. You should. I'm just fantastic stuff. So great warning minute segment. That was awesome. And I'm excited for this next guest because Dave Gilbert has spent nearly three decades financing small trucking and transportation businesses. And he says a full order book doesn't just always mean a fleet is actually ready to expand joining us now to talk about it is again, Dave Gilbert founder and CEO of national funding. Dave, welcome to Freightwaves today. How's it going, sir? Going great. I enjoyed the earlier conversation. So we welcome your thoughts. If you have any to add, certainly.

13:47So we finance trucking for almost 30 years, whether it's financing their vehicles to providing working capital once there's some just historical issues that are always been around about the thesis behind small businesses. What doesn't really crush you is is all the politics. It's it's how you racked a lot of this. It puts a lot of downward pressure on confidence, but at the end of the day. And the managing the company financially is probably the most important in terms of liquidity. Having enough cash on hand right now, you have repair bills out of control gas bills out of control. Confidence is down. The use price market's gone up. So you have a lot of dials that. Whether it's from earlier today, but just in general, you know, certainly something that is important when people borrow money. So from that perspective.

14:47That'd be my view. I don't know all the details of earlier except for the consumer confidence number kind of came out low, but then it has that effect trucking specifically. Well, we've always seen as people when they're in historical heavy issues. It's not really because of work or payment. It's really the downtime. How do you maximize that? And so we can go through all that. But the confidence right now is just tough to manage any business with your trucker or or any other industries that we've finance. Yeah, so we've seen and I think we're seeing a lot of what you're saying in that demand has really not picked up. It's remained relatively steady with with a few a little bit of falling, a little bit of rising. And that but we have seen rates increase significantly for trucking right with a lack of capacity. Are you seeing that as well or are what you're sort of leading to alluding to is that all the regulation and the other pressures insurance costs maintenance costs all of that on carriers is still outrunning in many cases.

15:53The increased rates rates in the market. Correct. I mean, the compound effect of multiple negative dials doesn't help. So you know, it's been going for a while in terms of the rate increases to, you know, the tariffs to the current war situation and gas prices. So we've seen a lot more discipline type of our we've seen the news 30 years. So we see a lot of repeat business that come through now. But what they're real focus on is duration. You know, can we meet the needs in a short duration, I put them in the wrong products because you know, is it a repair bill. We want to help finance that for you so you can get back on the road. But a lot of people aren't looking for new vehicles because of all the prices that the create the cost of purchase done doesn't weigh the profit. So even with carriers having optionality, let's say, in freight to haul higher pricing freight.

16:53A lot of these small carriers are still cash poor based on all of these other pressures, which is what leads them to reach out financing. Yeah, always. I mean, the smaller guy right now in any inflationary market is probably pressured the most, whether it's labor costs. I think you know repair costs just that the obviously insurance is a big topic, you know, of all that, but just all that's going up as a game pass through and can they raise their pricing. Do they have that type of power and then on the flip side, I think small small businesses have a lot more leverage than they used to. So you're talking about an industry that use AI tools to help people that own smaller companies, smaller fleets to manage their business better than they probably used to be able to do from a financial discipline. They what's the exact real dollar cost of a truck sitting idle for a week versus taking on financing to get it on the road faster.

17:59It really is just depends on we measure that differently based on what they can control what they can't control. And that's been because the parts who I don't follow that as closely in terms of do they need to borrow for like 90 days and you borrow for 120 what's the best solution for them. But the cost has gone up from a percentage basis something that that's more meaningful than that they can bear in pass on. In situations like that, are you seeing more in these smaller trucking fleets, are you seeing more financing happening for things like repair and maintenance or for actual replacement of their vehicles. More replacement, I think we're seeing that all over the place, you know, it's a lot cheaper to replace and repair. I think it goes historically to everything we've ever taught as kids, you know, fix it, treat your equipment the best you can. It's probably cheaper to do that to buy new equipment and when you're in this type of period where all the used equipment all the used vehicles are going up, use trucks and that the new ones with all the different fees associated the math doesn't make sense to buy.

19:12So if you're going to buy a used one that's more expensive so everything's about maintenance, how do we do shorter term bridge loans more maintenance base when people ask time, some people have 60 day needs, some people have 90 180, but we try to keep it short for the purpose of their need and repairs probably the number one right now. So when people come to you looking for financing, whether you know, be short term like you mentioned for 60 days or a year or however long, how do you and how walk them through how they can. Way fuel insurance maintenance costs, payroll costs, all of that into whether taking on this new financing right now makes sense. And at what time frame do you kind of walk them through that process or do they come to you already through there. It's a combo on that process. There's a lot of right people out there. They are kind of know their math some don't know their math. We try to help them through that are most important things identifying the true need.

20:14Clarifying that with with the company, do you have that need plus any other needs. And then I think that's the biggest thing is where away what people truly value need versus a want and then matching the duration and know that there were where there's or thumb sometimes they have down times they need lenders are flexible that really understand that industry and like, you know, how do you support a trucking company that's in a bad spot. Now it can be a seasonal as we get closer to winter and that creates all different industry issues for that space. And we're used to financing people through that, especially on these coasts. Dave sticking with that question from Julie talking fuel as well as insurance, of course they both climbed mightily this year. How has this changed the calculus for small carriers that are coming to you right now. I know it's I think we're still at the confidence level right they know their cost are they might not know whether it's nominal or or not they just go because they're small they go.

21:22And are more focused on the discipline of the short term and I think it's more of a kind of like a slugfest to get through a period where all the things are moderating certain parts of it that net is more. And can they pass that through and then at the end of the day their their vehicle. The vehicles are most important right without quality vehicles without reducing downtime. Treating equipment right. That's the best way to reduce downtime. Making sure that the routes are, you know, as organized as possible maximize that as well. And then. I think there's a lot more knowledge out there in general to help support that network. And I think that's what I think it's like how how do they use that how they focus on it and and leverage the current fleet that they have. I don't agree with that as well and there's a telltale sign when it comes to this specifically with this next question about barrier. Barrier data showing you know certain things what does it show specifically about the state of trucking and local fleet businesses right now on behalf of national funding.

22:31Just like real estate. So what's not regional is just I think confidence our job is to provide that we we've been doing this forever. So when people come with their needs. We really try to understand that and work with the client to gather you know is it fear is a growth. Because you don't want to put people in extra debt that that don't need it. So a lot of things are regional right now and then you have a lot of good hardworking people that just try to make a living in uncertain world where I just try to coach you know short periods of strategy because if you know you're not going to buy new vehicles for the foreseeable future then take care of what you have. And then you can work with reliable vendors and down time always kills you so you know making sure your quality. Everything that goes into operation. When you say there you know that there that it's regional.

23:34You give us some examples are there specific regions where you're seeing more of a need for financing or or or a different kind of need in certain regions compared to others. So there's going to be a lot of work around there so that's kind of obvious you know how do you target and support areas over in that region. It's been a really warm summer so you know how does that affect trucking versus you know a rainy period you know so. We usually more more focus on the winter period of how that affects not the demands of the functionality and. And if those extremes I think trucking gets hit just as hard from the smaller customer in terms of cash management which is probably something I didn't talk about enough is just having enough cash on hand for rainy day does mostly apply on rainy days not as much when it's overly warm but then you have from a regional you're going to report different issues to.

24:34And you know tariffs to all that stuff that is hard on the trucking companies to to navigate both region which is within their own regions and then confidence of how much to invest in those areas. So with the framework of being a bit tighter and you alluded to some increased demand based around specifically locations where I data centers are being built. As small carriers look to expand what what's the biggest met misconception you see there about when the right time is to expand and then how do you separate genuine growth opportunities from what becomes a cash flow trap sort of as you are alluding to early. So I would say it's more greed you know versus expansion like you don't need your never forced to expand so is our view yet to be disciplined and wait for the opportunity tracking is no different than any industry is you know. The math is pretty simple in terms of is this the right time is this the right niche do you have the right customers who's supporting you both from the people paying you your vendors your whole supply chain to your finance company.

25:49When you make the right moves I think when you get the right opportunity you know so someone's selling some truck at a discount that's just because they have a liquidity crisis somebody's crisis will become your fortune. So I was just pretty speaking discipline conservative and and and it when times get times get tough there's and there's winners and losers and the more discipline you are in and I would say this 2026 the more likely you're winning. And some people want to grow just for gross sake and adding one more vehicle doesn't mean you added profit it might have had more liabilities without now. Dave I want to kind of talk about some of the we've just mentioned which is cash flow I mean how do you help a business owner separate genuine growth opportunities and organic growth opportunities from an actual cash flow trap. Yeah the organic ones are the tough right where you know you got these great opportunities it's knowing your margins making decisions and your organic growth sometimes you're forced into it and it's beautiful but if you're not set for success with the contract upfront.

27:03It's it's doing for failure so kind of look at the economics make sure the agreements are the some people like long term agreements some people in this market might want more short term agreements because of the volatility and and focus on the duration of all your your obligations and your revenue. So I'm interested in kind of you know this this next one as a metaphor going under the hood what does the qualification process look like for a trucking business seeking equipment financing versus actual tangible working capital. Products are simple you know 90 days to one year just depends on the purpose of the loan that goes back to if it's for repair if it's for a bigger gross strategy that they have in mind for a variety of reasons on financing vehicles you know we do three to five years is the traditional for.

28:10You use you know a little bit will obviously longer for new stuff but for the smaller guy right now there's a retraction and demand for for buying equipment but the process is simple and basically you're looking at a one page application and you're looking at bank David bank data on cash flow and between a bunch of data that you pull it's pretty simple. To decide who's going to get right who's not the question is we want to make sure that the client is in their best interest and so the equipment sites pretty easy you know if you want to vehicle we can make different offers on the working capital it's more delicate side because that is their cash flow that's our obligation help support them and not put them in a trap and making sure that. The understand concerns and it's kind of a working relationship that we've had with customers that taking on 40 plus loan so it's kind of a cool thing that we do when we get help people at either dream.

29:12Imagine that is the rewarding part of it so you've alluded to a little bit of this before but if you had one piece of advice for a small care trying to decide whether to finance growth right now or hold off what would it be. The contracts the margins the opportunity. So yeah just making sure what you're signing up for there's a guarantee March and opportunity because the risk you just don't want to take on that extra risk. So make sure that you understand the opportunity understand the contract with the customer and what your. The property should be right so I'm. The length of term of the contract how much for it they've been promised. Correct yeah and I think that's getting easier with plot and stuff to be honest I keep pushing people to cloud. And that don't know the why questions and so I keep saying you can go to cloud now.

30:16That's all the questions that you're insecure about like if you're going to actually be nervous you can have all these cool tools out there. Just it might not give you perfect answers but it gives you a lot more rational you can feed a lot more financial data that you ever could. So you're seeing more quicker adaptation to some of that newer technology that you wouldn't expect maybe from this industry which is kind of cool. Yeah I agree wholeheartedly I use well yeah I mean I use cloud. Everyday often every day. It reduces the debates on a lot of areas. It's starting point right I mean. I'm sorry especially when you asked you a question you think it's completely the wrong way. So then you kind of want a baseline of cloud to start the discussion and then it's kind of a cool tool because you feel it's not biased even though that you know it could be biased. It's a some level but it's a good baseline and as you said.

31:19I think cloud for me specifically as a creative it takes away the it channels my creativity to form something you know what I'm saying does that make sense. Yeah I thought you were going to say it takes away creativity but I do understand. No but this for me like I have a tension deficit obviously and I have a brain that goes like much faster than most people around me right like I just I'm not good at slowing down. It allows me to like brain dump all of that and then get it into an organized fashion that other people's brains understand right and that is incredibly valuable for me. Dave we really appreciate you again Dave Gilbert founder and CEO of national funding. Thank you for being here on for eight ways today looking forward to having you back on the show very very soon sir. Thank you guys thank you for your time we appreciate you. Much more is on the way coming up you think your trailers are covered you know what centerline insurance is Andy Kuchar is on the coverage gap that most fleets don't see coming we have that and a sonar deep dive do not miss out more

32:25freight webs today on the way only here. One spot cost some of fleets costliest collisions samsara's AI gives you 360 degree visibility into risks on the road so you can protect your drivers in real time learn more at samsara dot com. The world doesn't wait so neither do they wheels on the interstate boots on the sides hands on the ship we build for the world out here and we build it with the people who live it. Ideas from the field made real by world class R&D to keep the operation sharp the front lines safe. And the world moving from one cab to a global network billions of miles trillions of data points everyone making your operation better and we never build it alone.

33:36Samzara built with operators. Once a year the entire freight industry stops what it's doing and comes to one place Chattanooga Tennessee this is F3 the future of freight festival it isn't just a conference it's the largest festival in freight built to pull you all the way in the energy the ideas the atmosphere and the people who move this industry forward over 50 speakers for events across three days found. Founders executives innovators and disruptors all under one roof all asking the same question what comes next on the main stage the sharpest minds in freight take on the biggest questions in the business the trends the technology and the forces shaping what's ahead then the clock starts seven minutes no exceptions the cutting edge of freight tech goes head to head live battling for best and show when the times up the lights go out and in between the conversations that don't happen.

35:05The connections that change the trajectory of your business the relationships you'll carry long after you leave because when the sessions end the festival begins live entertainment unforgettable experiences a celebration of the world of freight and an energy you won't find at any other event in the industry the leaders you need the access you won't get anywhere else this is where knowledge is shared where deals get done where the future of freight gets decided F3 future of freight festival October 27th and the end of the day. October 27th and 28th the signal chat a new good Tennessee will see you there register now at live dot freight waves dot com. Welcome back to freight waves today it's one of my favorite parts of the show let's get into a sonar deep dive right now.

36:34Is Friday September 11th and for today's sonar update I'm going to give a little bit of a market overview nationally and then I chose five markets that I really want to dig into to show why context matters and why additional data points matter and being able to take in multiple data points from sonar really give you a much clearer picture of what's happening in a market national level is great you want to know what's happening when the freight market overall but also really cool to be able to see what's going on in the market. But also really cool to be able to dig into a specific market and take multiple data points into account to see how it's varying either from the national level or what the drivers are and what's happening in that market so tender rejections and volumes remains stable they're falling slightly but far it's continued to remain strong on a national level STRI those sonar truck load rejection index is at 13.22% that is down 9% week over week and down about 3.2% month. And over month STVI that tender volume index is down 10% week over week and month over month so we are seeing volumes contract a bit that's far it's remains strong we saw a tiny dip in lay August heading into Memorial Day but we are into Labor Day but we're continuing to see them rise since then and back up to 343.

37:54So as I mentioned I wanted to dig into some specific markets I chose to where spot rates are increasing the most rapidly which are Detroit and Cincinnati and then I chose three markets to look out where spot rates are declining and then add some additional data points to really paint the picture of why that's happening. So we'll start with Cincinnati Cincinnati's week over week spot rate increase is 20% the rejection increase is also up 15% week over week and the volume is up about 7% week over week I think it's interesting to also compare the sonar haul index to see the amount of freight going to and from that market how much is going in versus how much is coming out that whole index for Cincinnati is at a 25.9% 6 so it is up so you can see around everything rejections are up that market is tightening volumes are up rejections are up rates are up and as a solid head hall market right now so everything is pointing in the same direction when you look at Detroit it's a little bit more complicated spot rates are up 13% week over week but rejection rates are falling they're down 14% and volume is up about about 2% and then that whole index though is going negative at 7.26.

39:11So rate strength doesn't look to be capacity driven here so interesting to take all of those things sort of into account right volume is up slightly out of that market but it's not necessarily just a clean tight market so there is some nuance there when you look at the markets where rates are falling I mean jolly at is the clearest stand out here spot rates week over week are down 15% tender rejections are down 12% and volume is down 14% it does remain a head hall market that whole index is still positive 34 but and there are more trucks going out of Chicago than coming in that jolly at metro area as always it will always be a head heart held hall market however rate still fell 15% week over week so both rejections and volumes falling so it makes sense it's a market that is absolutely clearing cooling off and demand is pulling back so this is more than just a capacity story lack of capacity it also is demand falling in that market

40:24when you look at Miami it is always a back home market right it sits at that negative 34.5 for our hall index and rates fell week over week spot rates 24% rejections fell 9.5% but the big thing here is volume also fell 17.8% so consistent market where capacity is easy to find trucks are likely to be available all of the data is pointing the same direct action similar with Houston they're really falling on every metric rates rejections and volume are all down week over week spot rates are down in Houston 15.4% rejections are down 25% volume is down 13% and it is showing a back home market and negative 7.41 so really unambiguous just a soft market there right now now why does all of this matter looking at the market level so now is really good context of what's been happening what's trending and what we expect to happen based on what's coming in bound to the market as well when you can look at that hall index so gotten a few graphics throughout this video obviously showing national tender rejections and volume and national spot rate did a few market overviews of some of the specific markets that we have looked at but then I also show the entire hall map

41:52which gives you a really good idea of what's happening back all the head hall by market and what that balance of inbound versus outbound volume is doing so really good tools to use in sonar again the key takeaway is that even with volumes and rejections falling a bit spot rates are remaining elevated here you still have some negotiation power in the market to continue to drive those spot rates up but it is absolutely nuanced market by market throughout the country with some markets softening more quickly than others while others continue to remain a little bit stronger. All right that was another sonar great update from you Julie question that I have for you because I was sitting over here and all I go okay it makes sense but it doesn't Houston you spoke about Houston yeah and I was very not confused because you explain it on the back and so I get it with your point but I guess my question is why and you know I tried to look into that a bit because I was wondering the same thing after I finished the update I felt like I was not clear enough.

42:59I'm what's going on in Houston it could be inbound volume to that port and I only found reports going through the first half of the year was down about 4% but there's outbound volume from the port as well so that should be bringing freight in and out I don't know well I mean that would make it a destination but there wouldn't be for coming out of it so maybe it is that maybe it's just these like a reality Houston's one of those markets that like historically when I started pricing it was like a dead back all but it changed over the course of my career and and so it could be seasonality and then just a short term Houston is not seeing demand right there's not that much freight out of there and maybe the imports are creating capacity there and there's just not enough right out of the moment I mean the exports are creating. I'm not sure if I can cut with you put in though I understood the point about Miami as well as really so like that that made total sense to me too but now I thought that was a very very interesting point about Houston I want to bring it to your attention so.

44:00Yeah we'll keep watching it and see what happens with Houston over the next couple weeks back up. Absolutely and I'm sure that Fred economics will get with that with with Zach it's going to be fantastic so coming up we're going to have a great interview again Andy Cropnog. I'm Andy Cropnog he's a COO of service up don't go anywhere only here on the freight waves today. If you ship the parcels at scale you know the drill one system quotes the delivery date another picks the carrier another prints the label and some third party audits your invoices six weeks later ship

45:09ship you replaces all of it one platform from promise to payment including their brand new always on audit product which replaces your auditor with real time monitoring that never sleeps check it out right now at ship you at ship you don't come that's ship you don't come. The world doesn't wait so neither do I wheels on the interstate boots on the sides hands on the ship we build for the world out here and we build it with the people who live it. Ideas from the field made real by world class R&D to keep the operation sharp the front lines safe and the world moving from one cab to a global network billions of miles trillions of data points everyone making your operation better and we never build it alone.

46:20Sam Zara built with operators once a year the entire freight industry stops what it's doing and comes to one place Chattanooga Tennessee this is F3 the future of freight festival it isn't just a conference it's the largest festival in freight built to pull you all the way in the energy the ideas the atmosphere and the people who move this industry forward over 50 speakers for events across three days found ers executives innovators and disruptors all under one roof all asking the same question what comes next on the main stage the sharpest minds in freight take on the biggest questions in the business the trends the technology and the forces shaping what's ahead then the clock starts seven minutes no exceptions the cutting edge of freight tech goes head to head live battling for best and show when the times up the lights go out and in between the conversations that don't happen in the end of the day. The connections that don't happen anywhere else the connections that change the trajectory of your business the relationships you'll carry long after you leave because when the sessions end the festival begins live entertainment unforgettable experiences a celebration of the world of freight and an energy you won't find at any other event in the industry the leaders you need the access you won't get anywhere else this is where knowledge is shared where deals get done where the future of freight gets decided F3 future of freight festival October

47:4727th and 28th the signal chattanooga Tennessee will see you there register now at live dot freight waves dot com again that will be October 27th and 28th it will be the event of the year excited for F3 and excited for this upcoming segment yeah that's going to be the 27th and 28th they brought it to us and excited for what is to come but right now service up has just partnered with the Lancaster's pro one giving for the pro one giving fleets on its to platform direct access to more than 2500 franchise dealers with repairs dispatched tracked and build entirely through one system joining us now is Andy Klopnock he is a COO of a service up Andy welcome to for it waves today how's it going there. It's gone well thank you for having me thank you so much for being here it's been quite the show quite the week and I'm excited to have this interview with you I saw a couple of these questions and initially the the first thing I wanted to start out with was this partnership still in this for one what is this actually unlocked for fleets very curious about this.

49:00Yeah so in fleet maintenance and warranty repair it's a huge fan because as you probably know dealers are not owned by the aliens there are franchises that are operate either independently or you know maybe through a larger group of of dealer a dealer network and so when it comes to repair you have to deal with. This vast number of businesses to get your fleet repair across the US and so what we've done in our partnership is to say fleets you now have the ability to manage all of your slantist relationships across the entire network across the entire US in one single platform and so a flea can create a repair order it doesn't matter if that dealer is an independent dealer or a part of a larger deal network. We handle all of the billing and all of the approvals directly within our platform and so the fleet doesn't have to worry about which dealers are in their preferred network versus not not no relationship we manage all of that for them and so they can get repairs done a lot faster.

50:03So Andy speaking of that talk us through some of the biggest holes or inefficiencies that the traditional repair process has. Yeah, that's a big one. So in general and fleet repair visibility is a huge huge problem right and so a lot of fleets manage repair in house and so you have ultimate visibility on that but the minute that it goes to a third party provider there aren't a lot of systems out there today that give you visibility into what's going on in the repair process with that third party provider and so what our platform provides is everything is going on. So we're going from when did the vendor get the assignment when did the vendor provide a estimate how long did it take for that estimate to get approved what's the part status our parts in stock on back order when did they arrive how long did the repair actually take and then all the invoicing on the back end of that and so a lot of the holes today are really the visibility and then access to the data to say what's going on within the cycle time of this repair so that we can

51:12create some efficiencies and figure out where the bottlenecks are and improve those. Now Andy you said this just isn't a listing agreement what makes this different from a typical deal in network partnership. Yeah, we have a preference agreement with them to where you know we have a lot of fleets that are primarily still antistieicles and so through the partnership we're going to go to market together to allow those fleets to not just use our product. We have a platform for all of the slantist network but you know fleets aren't always going to send everything to the dealer and so our platform allows them to send it to third party providers as well so that could be you know Bob's automotive your local independent or that could be you know a large chain like good year and so you know through this partnership we're not you know we're going to the ultimate goal is to improve the fleet users experience so that they can manage all of their repairs through one of the

52:12set of one platform one set of data to be able to measure those efficiencies and then obviously we're going to feed a lot of the slantist data back to them so they can see by dealer how are they performing for the fleets within our network. So speaking of kind of one set of data one platform I read the fleet managers can now dispatch any participating still antistieiler and get one consolidated monthly bill. So we're going to talk through the benefit of this and why billing is such a persistent point when it comes to free repair. Yeah so billing in general is a pain because a lot of the billing today is done through invoices and PDFs and so what we've done also through this partnership is digitize that and so everything is coming through the system in a structured data format. We are a via MRS standard and so when fleets get an invoice it doesn't matter which dealer network is coming from dealer networks operate on their own DMF dealer management systems and so there's you know half a dozen of them out there from CDK to Reynolds to you name it and so what we do is we've standardized that and so it doesn't matter which dealer system a dealer is working off of when they we ingest that invoice and that estimate we are mapping it to our data standard and so when we pass that off to the fleet.

53:32They get one invoice in one format against one data standard and then we manage all of the billing pipeline and so we will invoice the fleet on their terms and then we will pay still antists on the back end based on those terms. That makes it a lot easier I'm sure you mentioned a little bit earlier that many of the vehicles are still antists but this also works for fleets who don't run still antists branded vehicles as long as their light duty correct and then what made you decide to open it up that broadly. Yeah 100% obviously we are going to build a continue to build a great relationship with Stellanus they can work on more than just the Reynolds vehicles but you know for us we are kind of vendor agnostic it doesn't really matter to us it's class one through eight can be managed via our platform and we can send those assignments to anyone within our marketplace obviously you know through the Stellantis relationship we're going to communicate with them.

54:36We're going to communicate with them and help them learn how to grow their fleet business and better operate with fleets but for us it's you know service office a platform is really for fleets to standardize this across all of their providers. Now Andy how are fleets thinking about future proofing their repair operations and where does AI and agentic technology fit into this piece and this puzzle rather. Great question so you know fleet repair historically has been pretty analog and so the first step in the process is how do we digitize all of this and so everything from getting rid of those you know PDF invoices or paper invoices that I talked about to capturing the data of the cycle time and so where that's what we do is kind of that initial step so we capture data in three ways which is all of the repair data so what are the line items what's taken place on the in the. Repair the cost the quantity everything along those lines the cycle time data so how long did every step in that repair process take and then the repair shop information so who are they what can they do what type of assets do they work on everything on those lines when you combine the three of those you have a lot of data and a lot of context you can feed AI and so we have AI agents that take that context and will do things that a human would typically have to do and so of the way that we can do that.

55:59And so a very easy example is I have to call to say is this car going to be done on Friday right why does somebody need to call to do that through our platform we can have our AI agents look at the cycle time data look at the estimated completion day and follow up with that shop or that dealer and say hey just confirming this is going to be done or hey did those parts arrive as expected and so our goal is to eliminate or at least reduce the administrative cost for fleets. By leveraging AI agents to streamline the process another example might be fraud detection right and so obviously this isn't going to happen with the dealer but you never know in the third party shop or did we have an oil change done you know 2000 miles ago and we really only do it every 10,000 miles and so we have AI agents that track the repair history and they're going to approve or decline those repairs based on all of that data in that context that I spoke about. That makes a lot of sense yeah I was going to ask more about agent but I think you answered it and gave really great examples.

57:04I believe you guys are also continuing to work to expand the shop front footprint and bearing more options into your network can you tell us a little bit about how that is expanding right now and what the plans are. Yeah yeah well so we're we've got about 25,000 shops in our network today we obviously want to continue to grow that and then segmented by class of vehicle and so and repair type and so in the class one through three space we're definitely heavy on the brick and mortar shops to where you know you can you can take your vehicle in we're going to continue to expand our network on the mobile side and then in the class kind of 4 through 8 space. We are in active discussions with a lot of the large 3p providers to say hey how do we how do we streamline the intake for you to be able to do those assignments to your your technicians that are on the road to basically drive some efficiencies in the process and so we expect by year and we should be close to double that so going from about 25,000 to 50,000 shops within the overall network.

58:09So Andy provides some more color and context of this because what's exactly in it for Stellantis dealers themselves when it comes to a partnership like this. Yeah it's it's visibility into the the fleets the fleet volume and and driving assignments right and so Stellantis you know I'm sure you guys know is you know as car owners the dealers aren't necessarily the first choice for a lot of car owners because dealers tend to be a little bit more. Expensive and so you know what we can provide is visibility into where the fleets are going not necessarily sharing data that we're not allowed to share but just overall insights into what are the labor rates in the markets and how can they be more competitive to drive more volume right into those into those fleets or into those dealer dealers shops. Additionally which dealers are performing well for fleets not all dealers you know have a large fleet business right and so a lot of dealers are primarily consumer focused and don't do a lot of fleet business and so where can we kind of helps to land us and understand where there's opportunities to drive more fleet volume.

59:18That makes a lot of sense. So what's next for service up as you're building out these relationships with either other OEMs in the future. 100% you know our goal is to you know expand the shop network to make sure that we can cover all aspects of all types of repairs whether it's preventive maintenance mid to major mechanical glass collision so continuing to build that out and then ultimately hey how can we get more fleets on the platform to drive volume to those to those partner. So what's next for us is that we're going to have a lot of customers within our network and so for us our goal is to serve both sides of the equation to say fleets we want to streamline the process provide you the data that you need to make better decisions but ultimately try to automate as much of the process as possible and then same thing on the shop side making sure or the dealer side making sure that they're getting assignments that they can work on they get visibility and they can eliminate some of the overhead that they have right no dealer wants somebody calling every three days to say

1:00:19give me an update through our platform a fleet can go in and log in and just see what the actual live update from that dealer without having to call. Yeah that makes a lot of sense I am that person calling saying like when is when you take this into a personal kind of when is my car going to be ready. Oh I have been that person a time all the time all the time. I make really really good friends with the lady they're sitting at the desk. Yeah she yeah love her. Andy any any big plans as we head into the weekend and anything that we need to be on the lookout for when it comes to service up as the segment comes to a close. Yeah I would just say you know over the next probably two to two to three months we're we're going to have a lot more partnerships like these a lot more on the fleet side as well that we're going to be announcing and and some updates to the platform and so. You know I think we're we're trying to be that marketplace to to all fleets and all providers and really streamline the process as much as possible and I think there's just a tremendous amount of opportunity.

1:01:23You know five years ago my CEO said to me when he tried to recruit me he said you know in the future cars are going to know what's wrong with them you know they fire DTC and fall codes and other things but they get a need to know to go where to go in the physical world. And I didn't believe it then but now I see that as a reality to where you know automation and AI is driving this to where vehicles are going to continue to fire those fault codes and DTC codes but that doesn't necessarily tell you what needs to be done to the vehicle and if we've mapped that to the physical world in the repair vendors and the dealers they can do that work in the future we'll be able to say hey for that code that's going to cost 800 box and your vehicles going to take three days and you should go to this vendor because they're going to get it done the fastest. And so that's the ultimate vision of what we're trying to build and I think we're we're headed in that direction very quickly. Yeah that makes so much sense. No, absolutely. We will be watching for those additional releases and partnerships to come out. Thank you so much for being with us today Andy. Andy thank you. Thank you. So I really want that for my car you know like a good air message because something all way you know like there's just some light on.

1:02:29Well or just like we'll tire pressure I hope you know what to do about that. Yeah you go get your tires. You know what to do about that. What's my aerodome? Yeah so like I have a personal problem soft closed doors and so there's constantly like a locking malfunction on one of the. So Joe. Back door no no that's what I'm saying it like doesn't lock so like I get the air message all the time and it's like refer to the user manual and I'm like. I have an app and it's showing me they like can you not like why do I have to go to the user manual can they have not show me this you know and so that's. And then yeah where it or just say. Yeah the user manual you can't it needs to see a dealer in here. You should go right exactly. We're just talking about this is what I want for. Myself to right like not just in a business world so it makes a lot of sense. Good not to agree more and yes I do know. Don't become my soft where my soft closed doors like that is the first world problem. It's okay. Joe. It's that my kids yank it too hard or push it to they don't they don't understand how. I don't have children so that's why I don't have that problem so that's only one day.

1:03:29It's also a defective couple of things when we head out F3 we're excited there's going to be a lot to talk about. We're getting fully into swing to prep for it now I feel like. It's gracious. Yeah this week I feel like I've really jumped into. No thinking about it for sure for sure Jen Ashley in the rest of the team they've been working out for a long time. I feel like I've just had brain space this week. Yeah it's going to be awesome I saw what what's it going to be a couple dinner events that are new this year that are going to be at F3 that I saw. Oh the evening before. Yes the evening before I don't think that has that ever been a thing or have a better. So you have supply chain day before which we have had for the last few years which is. Invent only for shippers but if you're shipping you like to come reach out we would love to have you. Where we do kind of focus that content a little bit on shipper specific content to versus really the F3 overall content is a little bit broader right and then tech and all of that. And then we have prior had like a shipper of choice dinner those evenings but we are adding some additional.

1:04:33Diner is right in a freight. I should know the details but you're right the night before there are some additional events. I saw and I was like I was curious I was like have we ever done something like that I know freight tech 100. We've done plenty in the past but I think there's going to be more so an event catered to that. And there's also going to be I guess an opening some type of event I should. It's an award dinner it's an award dinner. It's that F3 awards dinner and evening celebrating the Shipper of choice and the freight tech award so we're bringing them together. We've done Shipper of choice that brand the past but this will all be together the freight tech award and the Shipper of choice. That first evening leading into show and then the second night we've got a great venue set up at Erlinger Park. It's going to be great to be on the ball field under the lights so it's going to be a good it's going to be a good. Good time and and some good content be a good time some good content. It's been a great show today we have much more on the way our to here on freight waves today. Freight economics is coming up make sure you stick around only here on freight waves today.

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1:06:39Visit centerline pc.com to learn more. The world doesn't wait so neither do they. Wheels on the interstate boots on the sides and on the ship. We build for the world out here and we build it with the people who live it. Ideas from the field made real by world class R&D. To keep the operation sharp the frontline safe and the world moving from one cab to a global network. Billions of miles. Trillions of data points. Everyone making your operation better and we never build it alone. Thames are built with operators.

1:07:42Once a year the entire freight industry stops what it's doing and comes to one place. Chattanooga Tennessee. This is F3 the future of freight festival. It isn't just a conference it's the largest festival in freight built to pull you all the way in. The energy the ideas the atmosphere and the people who move this industry forward. Over 50 speakers. 4 events across 3 days. Founders, executives, innovators and disruptors. All under one roof. All asking the same question. What comes next? On the main stage the sharpest minds in freight take on the biggest questions in the business. The trends, the technology and the forces shaping what's ahead. Then the clock starts. 7 minutes. No exceptions. The cutting edge of freight tech goes head to head live battling for best in show. When the time's up the lights go out. And in between the conversations that don't happen anywhere else. The connections that change the trajectory of your business. The relationships you'll carry long after you leave.

1:08:43Because when the sessions end the festival begins. Live entertainment. Unforgettable experiences. A celebration of the world of freight and an energy you won't find at any other event in the industry. The leaders you need. The access you won't get anywhere else. This is where knowledge is shared. Where deals get done. Where the future of freight gets decided. F3. Future of freight festival. October 27th and 28th. The signal. Chattanooga, Tennessee. We'll see you there. Register now at live.fraithwaves.com. To the second hour of freight waste a day. Also known as freightonomics on Thursdays. I'm Zach Strickland, head of freight market intelligence. And joining me for the first half of the hour are head economist. DJ Donna Hugh. And we're going to break down a few of the large economic releases.

1:09:44And then in the second half we're going to bring on Thomas Watson and break down some of the top transportation. Topics of the day along with looking at some FMCSA data. The lot of, I think probably some of the biggest questions I get. VJ. Recently on the economic side. A lot of it of course, AI derivative. What is this actually doing? We'll get into that here in a minute. But also just they want to know a lot about what demand is going to do. You know, we've got this inflationary overhang that people are still like, well, we've gotten away with it so far because consumers have been relatively, I guess, resilient. If expectations to start the year weren't super rogue. Like they were good. Then we had the Iranian conflict. And then inflation came back on the table. And then the trade policy stuff kind of like muted out for a minute. And now it's back on the table once again with the Canadian stuff, which we'll talk about too. But we got some economic releases this week.

1:10:45One of them of course, inflationary data. The PPI producer price index. So I want to get first off your take here on the PPI. And then we'll work our way downstream as we go through some of this data. So what did it tell us? Well, PPI overall was the final demand figures were about 0.4%. That's July to August month of a month. The latest numbers coming out from BLS were the August numbers. So a small gain month of a month. A little bit of increase in prices. Nothing to really write home about. But it was a substantial increase over last year, 5.4% year over year. That's a pretty big figure. I mean, we're the Fed's target is 2%. And the PPI, it doesn't translate perfectly. We know that because it's largely upstream. It's not the finalized goods and the retailers. It's the all sailors. But it does have pressure on the downstream. It does. And we actually saw some of those numbers. And that difference come out in interesting places.

1:11:45The big number from PPI, this story was energy. Energy prices are usually pretty volatile of nature. But we've seen a lot of bouncing around, particularly with the Iran conflict. And this last month, energy was up 4.2% month over month overall. But 24% up year over year. So we saw nearly a quarter price increase in the year over your price for all of energy. Now the biggest driver on that was diesel prices. Diesel prices, especially for freight and trucking, touch just about everything. Because you got to worry about diesel prices for trucking. Diesel prices not just for the guys who drive the big diesel trucks coming out of the duly's coming out of the back woods. But you know, diesel prices have a large weight of touching everything because diesel electrical odomokives, locomotives. Yep. And so the diesel prices remain high right now. John Kingston wrote a great article about it. And as of the last EIA reading on the seventh, we're looking at 5.967 diesel price right now. So almost $6 a gallon for diesel, very, very high prices. That particular price is up 21.4% month over month.

1:12:48So it's still 24% higher than last month. And 77.8% year over year. That's insane. Yeah. I mean, that's a huge jump. I mean, you can't ignore it. I mean, as much as you think it's transitory or what not at this point, it's been there. And that's a big jump. And it's going somewhere. Some are paying for it. And of course, it is. It translates largely into the earnings of the providers, the retailers as well as some of the upstream guys, the big oil companies. And they're earning show it. Yeah. And that's actually some place we saw this breakout kind of happen. You know, whenever you're talking about cost of increase, produce or prices, who actually pays for it is always questioned. Does the consumer get all that cost or does where it is that cost actually show up? This time we actually saw it show up in some of the diesel retailers because while trade itself was down to percent, 0.2%, excuse me, month over month, not a big movement. We actually saw it in 11.3% drop month over month in the fuel and lubricant index. Now, this is a trade index.

1:13:49Trade index measure changes margins received by wholesalers and retailers. So this is the change in their profits that they're seeing. Okay. So we're not talking about the pump price in themselves. We're talking about how much the retailers are seeing at the end of the day. And so the drop of 11.3% month over month tells us that the retailers are eating a large chunk of the recent increase. And we tend to see that usually. Yeah. You know, when you see volatile markets like the WTI West Texas Intermediate or the Brent crude, those can tend to be announced up and now whereas retail prices tend to be more stable in relative terms. We have a great chart on this that I showed on my sonar update. If the team back there can pull up the DTS and the DOE, there it is right there. Yeah. So what you're looking at here is, you know, the top two lines, the white line is going to be the DTS figure. So the diesel truck stop figure for the average retail price of diesel gets reported daily. You can see it correlate highly with the DOE figure that you just talked about, which only gets reported weekly on Mondays.

1:14:49And then normally gets implemented on Tuesdays for a lot of the fuel surchargers that the shipping community pays. And you see it continues to rise, you know, even beyond Monday, we're seeing, you know, pressure. And then below that, now this is the thing that helps explain what you were just talking about, that gray line, that is the upstream rack or wholesale price of diesel. We call it ULSDR and in sonar. And that has increasing pressure. Now, the top line, the top two lines retail, the bottom line is going to be your KPI, if you will, or you know, for a better analogy, that is your upstream cost. And you can see that that is far more volatile. It goes up and down much more erratically. And a lot of times the retailers who, you know, fuel their gas stations and all that, they pay that price and bulk up front or over a period of time and get smoothed out. It's almost a hedge, if you will, depending on when they bought their fuel. So it doesn't move on the daily. It's kind of like truckload spot rates versus truckload contract rates,

1:15:53a little bit, not quite as pure as that. But what you were just talking about, I think, is an important thing. Like retailers don't always immediately pass along their upstream costs. Yeah, there are economic demand. I'll also explain that. The king demand curve talks about, you know, that's a flawed model that never talks about how it gets there. But there's a disincentive to move your price. If you try to raise your price, you're going to lose share. Right. Because people are going to go to your competitors. But if you try to lower your price, then it's going to cause a problem with, you know, your margins, not only that much, but either way. I don't want to get too deep in the weeds on that because we're short on time. But the idea is that energy is driving everything. Yeah. And to get back to our topic at hand, the transportation and warehousing market also saw some increases, which is really of direct importance to our customers. Yeah, for sure. We saw it up to 2.3% month over month and 13.0% year over year. So they are seeing increases as well. The interesting thing is that freight trucking itself was one of the primary drivers for that.

1:16:532.3% had two big numbers in positive space. One was the air passenger. So not freight, but air passenger was up 4.2%, which was driven by again fuel prices. Not diesel, but energy of fuel overall. Like jet fuel, jet A. An air passenger was up 15.8% year over year. The other one was freight trucking 2% month over month and 14.3% year over year. So we're actually seeing PPI increase trucking prices show up in the data as well. And of course, trucking prices are increasing due to a lot of the stuff that we talk about here. Tender rejection rates are high. It's a tight market. So it's inflationary. And I think this one largely though biases towards some of that contract rate stuff. If we want to pull up the tender rejection index, I mean, it's been tight all year. This is independent of fuel though. This tender rejections don't care about fuel. So when you see elevated rejection rates, as we talked about earlier on the show, 13.5% means that shippers are not getting the service that they need.

1:17:54So carriers aren't showing up as frequently or as on time as a shipper would want them to. We normally see an acceptable level for a shipper. So we're around that 5% to 6% rejection rate area. It's normally where we don't see any rate inflation or deflation. It's kind of a balanced market. Market capacity is supply and demand are meeting fairly regularly. But this is not that. And I think that's a hard, when you look at these figures like the PPI, you've got this 2% figure. How much of that's fuel? How much of that is just the market conditions itself. And it's hard to really parse those two things apart, right? Yeah. I mean, you know that fuel is having the impact. Now, how much that impact is on the, you know, how much of the PPI increase in tracking costs is fuel? How much is relatable to a tight market? Right. That's going to go a lot more deeper than the BLS data has available. For sure. Could we answer it? Sure. But that would be like a whole different sit-rep. Well, that's why you get that's why you get sonar. Exactly. Yeah.

1:18:54So moving on, we've got our next major release was the consumer credit release. Federal Reserve releases G19 every month that talks about how much consumers are spending with regard to their, they're revolving in non revolving credit cards. So not just credit cards, but mortgages, loans, things of that nature. We saw a seasonally adjusted analyzed monthly rate of 4.2% for July up from a 3.4% June increase. So again, you got to remember that the numbers coming on in this are a little bit lagged. When you see, we actually have this interstone R in the, what is it? CCO, CCO R. The CCO and CCO RG. So both those show up the ones that are ready to growth. One is the straight amount of opinion here. Yeah, the actual figure. What we're seeing with this is that the year-over-year growth slowed. So there was July increase of 1.42%. June's increase was 2.06. So people are still increasing the amount of credit they're using, but not as fast as they were. Right. A lot of times we'll see these kind of dips in June.

1:19:54This time that came a little bit later in July. And I think that one possible explanation that people are starting to kind of save up to get ready for the holiday season. This is the revolving credit card. These are credit cards. We have not seen an update to the rates yet. You know, we're still, because they don't release rates, but every quarter. Right. So we'll see, I think, rates update coming out this quarter or later this month. But we haven't seen that yet. And the rates have still been very historically high. You know, we're still seeing, I think it was like 22% for credit cards. So yes, people are still paying through the nose for credit, but that hasn't really stopped them taking out increasing amount of credit card loans. Yeah. You know, it's slowed, but it hasn't stopped. It hasn't decreased. Yeah, I think that's, it's always interesting to me when we, when we talk economics and we talk about revolving credit. I mean, it's, it's one thing when you see credit card increasing and freight demand simultaneously increasing with it. You've got, you know, that has viewed very positively from the freight market perspective, transportation service providers and shippers, because that means they're selling stuff.

1:20:59But over time, it starts to show up in consumer health, which is a longer term problem for freight and shippers and economically, because if they're holding that, I mean, at 22%. I mean, these guys are, that is a phenomenally high annualized rate. If you're holding that amount of credit card data, 22%, I mean, you're paying through the nose for the use of that money and it's not sustainable. Like if you hold that, if you hold high credit balances over time, it's not sustainable. So this to me is more of a long term risk and in the question becomes how long do we sustain it? The fact that they're slowing down, I think is a fairly positive long term signal, but it's not a great short term signal in my mind. So look at the data, what we're seeing right now is this slow down we saw from a month of our month perspective, we look at the red line on the chart we brought up a second ago. We're seeing that this is well within the range of kind of like a stable, you know, it's a stable range that we've seen since the movement from 225.

1:22:01So I got to bring up a note on this. In 2024, November, 2024, the Federal Reserve changed the data source that they were utilizing. So in our data and in the feds data, you see a big drop near the end of 2025. That's not that. Yeah, that's not actually a drop in consumer credit usage. That was a change in the way the Federal Reserve. They changed their data source. So they actually brought in somebody else, they brought in a data source that ties directly to Equifax line and loan level data. So it's supposed to be a more accurate read, but it also shows a big drop when a drop didn't actually occur. Right. So if we're looking at this from about April on, we can see a slow increase in over time. It's not a huge jump month over month, but we're still seeing increases in the amount of credit utilized, but it's still kind of a narrow range. So this month over month slowing down, I'm not really worried about it one way or the other. We're still seeing increases, but it's not a dramatic increase. What this tells me to kind of put this in context is that we have to keep an eye on the end of this month, because given the last few months, the comments from German wars that we've seen, the mixed vote that we saw back in August, the high rate guidance, the comments from German wars have focused on we need to get prices stabilized.

1:23:21Yeah, we're also going to see a, and we saw that also in PPI with the IPPI numbers, particularly around energy. We want to make sure that we keep an eye on prices because he says that, again, he's going off PCE not PPI, but he is very tightly focused on price inflation. And so that combined is we've said it before, and I think it's going to still hold true that later this month from the Federal Reserve's meaning of the FOMC, the Federal Open Marketing, it's likely that we're going to see an increase in rates or an increase in target rates. Now, it may not be anything more than like a quarter point, not likely a half point. But the trick is that we're probably going to see an increase in rate, and which is going to drive those credit card rates even higher, which is crazy too, because we had credit card rates stay high, even when they were cutting rates. Like, because this is market condition, the market can view risk, and that's what this is effectively as a pricing of risk by the credit card companies saying, like, look, we know that we're borrowing at lower rates, but we're stable financially.

1:24:26We don't view the consumer of this as stable, so we're going to have to keep the risk premium in the credit card rate for you guys, because you're not as stable, and that's kind of a, that's a finance 101 situation. It goes beyond that, I think, because particularly when we're looking at, and again, we're looking at rates with a two month lag on, you know, those were last released in May, but given how the Fed's guidance hasn't changed, so that must, I don't think we're to see much of a change there. But the risk premiums coming in from the direction, remember what happened with the cent in the treasury, you know, we're seeing a highly unstable financial market, because you have the treasury moving in to try and guide monetary policy in ways that it has never done so within the last I think 100 years, the Fed is supposed to be an independent monetary policy body, and when you have the Treasury Secretary moving in and saying, I'm going to start changing my long term bond buying policy and my short term bond policy with an eye to lower long term bond rates. That's impacting monetary policy in a way that has been done.

1:25:26Now, did the cent come out and say that was his purpose, or is that something that kind of people were implying? I don't think that he ever said it. I don't know that I've got a direct quote on it, so I'm not going to put my name to that. I think a lot of people were talking like that. Now, it does look like that that's true. I'll say that. Like from my perspective, you know, as a finance guy, that clearly looks like people can claim liquidity. I can tell you how to quote, but if I were to crawl correctly, he actually went on saying long term rates are too high. So if this is smooth, then it means that that which is weird, because the markets just said, okay, short term, they came down, but then they went right back up. Which it still makes no sense to me, because if you're looking at this from a long term rate, you're looking at long term rates that were decided large part. Yeah. You know, that's going to be for new bonds issued going forward. But if you're talking about long term rates, you're talking about rates that have been locked in for 15 or more years, right? So you're the best analogy I heard on this was taking the mortgage and putting on the credit card.

1:26:29You're taking a bet on short term rates coming down and influencing law, you know, by it makes no sense to me. I'm not going to try and say what's going on inside the administration and that's not my place, but we don't get. I'm not interested in the politics. It's not my spot, but it seems to me that we're trying from what he's doing. He's making a bet on short term rates. And history shows that that does not play out the way you think it's going to, because if you ever look at the difference between a variable short term mortgage and a locked in higher long term mortgage, the smart play has always been go for the slightly higher long rate mortgage, because you get your rate locked in. And you can always refinance lower if you need to, but if you've got that variable rate mortgage and you end up going and the rates go up before you can lock it in sooner, you're stuck paying a serious premium on that. Well, I mean, I think a lot of people in 2008, 2009 learned that harsh lesson. And of course, we all have short memories.

1:27:31But there's not a lot we can do about that. What would you tell people over the next month, what are you looking at from this inflationary rate increase potential perspective that people need to think about? My best thing would be if you're, because credit cards are always on a revolving basis, you always have to pay the current rates on your, or that this, say you're always tied into the highest rate whenever new credit cards are issued. So I would always say if you're looking at this and you're anticipating a rate increase, pay down debts. Yeah. I mean, just now that's typical consumer advice when it comes to businesses. Yeah. If they want to kind of front load their budgets and try and get dispensened in the credits cheaper, that might be wise. Yeah. But yeah, I mean, you got these capex budgets that people were expecting to spend more money on, but then inflation and trade policy and things. It's not just high prices. It's also high cost. I mean, I'm going to be watching the STVI for a little bit of pull forward. If these guys are saying like, you know what, my capex, I need to spend some, I need to spend some extra.

1:28:32I was thinking that we were going to be in a rate cut environment in the second half of the year. And instead we're in a rate elevation environment. I don't know, I don't know what this means for for freight specifically, but we need to get into this trade war. Yes. The Canadian products thing, you did a phenomenal thing here by pulling this chart out, but go ahead. Okay. So most recently, there was a continued escalation of the trade war between us and Canada, in which the administration stated that they were going to have a full ban on certain classes of Canadian imported products. Specifically beer, molasses, motorcycles with engines over 800 cubic centimeters, 800 CC, non-alcoholic beer, spirits, dairy, specifically, way when you look at the categories. It's not a broad dairy ban. Right. And then wine. So I've done a little bit of research on this in a couple areas here. First off, here on the chart, you're going to see what was the 2025 import value in million US dollars. So how much stuff in value?

1:29:36And we actually bring in from Canada across all these categories. And you can see that this is not necessarily tiny numbers. We're talking 19 million, 80 million. We're talking about spirits, 673 million. That's primary Canadian whiskey. Right. Way and dairy, 34.9 million, but in doing some further research, Canada is like number three for way imports in value, but much higher. I think number one in volume. Right. So they're actually sending us a lot of bulk, way product. That's not necessarily expensive, but it is there is a lot of it. And then we've got wine 62.1 million. Now, so they're cheap on their way production. Yeah. Like we're buying cheap way from them. Yeah. Because they Canada makes a lot of milk. Now, I used to work for the dairy program at USDA Ag Marketing Service. And that's cool. One of the interesting things you find out there is that cows tend to like cold weather. And so that's why I see a lot of our dairy industry in this country in place that have longer winter Wisconsin, Wisconsin, Pennsylvania, Vermont for a small size as a substantial dairy industry.

1:30:40So Canada actually produces a lot of dairy as well, because they have much longer cold seasons. I like it when it's cold. Right. So for that, they produce a lot of dairy products. Now their dairy policy has always been kind of lost out of course. There has been a lot of import and export restrictions on Canadian dairy coming to the United States. But when I understand that has actually been more towards making sure their dairy gets. They're around at a large way towards the EU as opposed to the US. It's more that they want to establish better relations with EU maintain relation with the EU as opposed to worrying about the US because. That's why I brought in the next column, the US market size. If you look at the way dairy size in the US market, 1.8 billion dollars. 1,800 million dollars. That's 1.8 billion. So yes, we're importing almost $35 million worth of Canadian way. But we consume 1.8 billion. So the imports are relatively small portion of our consumption. And so I add that just for context, you know, 1.9%.

1:31:45And that's the highest figure we have on the chart. Right. You start looking at other categories. Bringing in Canadian beer like your moulson 0.5%. Yeah. So this doesn't look like it's going to have a huge or meaningful influence on any kind of freight volumes or economic stuff. Correct. I don't think so. Well, it's not to say that's going to have no impact. I think that given. Well, obviously for those that deal with this is a very specialized group of, you know, food and. More specializing you think because particularly in the wine section, there is a wine surprise that you would not think about because. I don't know if you know much about wine making generally need to a much warmer climate because the areas that you see major wine production of France and Italy in particular. And California major wine areas, Mediterranean climates, much more Mediterranean climates, but Canada has a specialized wine type you wouldn't know about ice wine. Wine that is made after the first where the grape harvest is not harsh until after the first frost. Very highly specialized, very sweet profile can be similar to like some of the southern musket on wines, but not really competing for the same market.

1:32:51Okay. Regardless, we do have some imports there, very small amount. Spirits are one of the other big ones, the Canadian whiskeys. Right. You see there is a very relatively large trade balance. We import six or 73 million dollars in Canadian spirits every year. So the trade balance, we actually send them a lot less than they send to us. So the negative numbers in the last column, that's the foreign ag service trade balance in the million USD. So that is if it's a positive number, we send more than they send to us if it's negative, they send us more than we send to them. So the largest one there is in spirits, $495 million, almost $496 of Canadian spirits come into the US every year. Again, primarily Canadian whiskeys. So it is going to have an impact there. I think it's probably going to be your biggest area that you see just because of where the trade balance is. That's also the largest import value that we see on the left hand side, $673 million worth of Canadian spirits get imported into the US every year.

1:33:53So if we're going to see it anywhere spirits, spirits is probably going to be your biggest area. Malacas shows up to very, very, very small percentage. I think the only reason Malacas was included because I saw one number haven't had time to verify it, but that when it comes to Canadian molasses, we're like their primary buyer. This goes back to a market power question because whether or not a tear of his effective is always a question of market power. On one side, you've got monopoly, which everybody knows about, about your cable company, one cell, lots of buyers. The other side of that coin, which is much more important when it comes to tear conversations, is not sunny. It's where you have one seller, lots of buyers. If you have just one seller and all your, you know, strike that reverse it. I got that back. So monopoly once, one seller, a buyer. Yes. So you've got like your cable company, monopsony is one buyer, lots of sellers. There you go. That's right. Think about your rural hospital. You've got one little hospital and all the medical labor in the area has to sell their labor to this hospital.

1:34:59And so in that case, the hospital sets the price. Right. So when you have a monopsony situation, you have one person who is buying all your product. If you've got the all the Canadian molasses that's being exported, being purchased by the US, then you can, the US has price power. They can set the price. And so the tear of can actually work backwards through the Canadian producer market and the Canadian producers ought to eat them now. This is not talking about the Canadian overall size production is strictly their exports from one I understand. Canadians produce of their most of their own internal molasses production. And we can't have the export is relatively small. The US is the primary buyer. It's a small portion of the molasses market. So it's so so wrap this into a bow for me and tell me what the what the influence of these tariffs could do for the overall relationship in economy. And if I had to make a statement on it, I would say that this is much more political and performative than actually economic. And it's in so the people outside of the industry specifically targeted here, you know, the spirits industry looks like this is a big deal.

1:36:05But automotive, which is a large portion of the cross border traffic up there, especially around Detroit, like they're not, I mean motorcycles are on here too. But that's a relatively small component of this. Yeah, and when it comes to motorcycles and motor parts more broadly, you know, we're talking motorcycles that are just over 800 cc, you know, the smaller cc moped's the smaller motorcycles are exempt. And I don't know how many large cc motorcycles are coming. Yeah, maybe your can and the big spiders are technically considered motorcycles because like one wheel in the back. Those are probably going to be the most likely affected, but we're not talking hardly. Yeah, you know, the giant cc, you know, the giant ones are oftentimes either Chinese or American may. If we're talking about automotive parts more broadly, the conversation becomes more complicated because while yes, we do have 50% tariffs remaining in place for Canadian parts imported into the US. However, the interplay gets much more complicated because we turn around and Canadian consumers are buying finished US cars.

1:37:10Right. So while yes, they send parts over here, we put it all together with other forms, like from going from China and other places and then ship the whole car back to them. Yeah. So it's not a clean cut like you see like the ice wine industry where they're the only ones who make it. Yeah, I love that. I love that breakdown. Well, DJ, thank you so much for coming on. We are going to kick to a short break and then when we return, we're going to talk to Thomas Watson. Stay tuned. If you haven't evaluated Motor City System software applications and integrations, it's time to take a look. Motor City's team brings deep industry knowledge to help improve carrier operations with its software and integrations, including roller, customizable driver app and workflow. Relay, advanced messaging and communication, torque, integration platform, wire, modern EDI, tuts, visit Motor City dot systems to learn more.

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1:41:38We've got this cross-border Mexico situation. NoemiHoney wrote about to start things off. Then we got a little maritime as well as the final thing that I want to talk to you about. Because this is like your old life. You know, you go through and kind of vetted and like work with some of that back in MC or the 150s and all that. And you know, FMCSA has kind of had a little bit of movement on their back end systems that I just want to parse that apart because one of the questions I get most often is what's capacity doing. I mean, that's what everybody wants to know is capacity growing. What's care Montgomery Caree doing and CA drop in. Of course, it's still involved in this ongoing legal battle. So that'll be the context there. The maritime stuff. Of course, I want to break apart a little bit. I know that's not necessarily your lane, but I also want to get you kind of like from an outside standpoint maritime data. Like what's your take here in that space? So first things first. Let's kick it off. Thomas Wasson for your return trip. Let's talk about this article NoemiHoney covers the course.

1:42:44Cross border traffic. He writes borderlands. The segment on freightwaves.com does a fantastic job. And the short version of this story is that there is. There's truckers protesting along the border with United States. And what they're protesting and he lines this out very cleanly in the article. I appreciate this. I told him this yesterday on our call. That I really respected the fact that he gave me this specific example of what people were upset about. And it's really just the vagueness and the inconsistency of the enforcement of what is on, you know, what's considered, you know, to be you transporting freight from point to point in America. In some cases, you've got an empty trailer. You're not transporting freight, but you're allowed to move an empty trailer in America. But some of the enforcement officers consider that freight because they have a trailer because also there's this whole conundrum of. Do you open the seal on the trailer, which is a huge issue because once you break that seal, you know, the shipper, you know, is now exposed to damages and claims and all sorts of stuff. And of course the carrier is.

1:43:58In the situation and they don't want to mess with that. And so there's some, there's some stuff there. But from my perspective, though, you know, I looked at the data on our end. And, you know, regardless of some of these protests, you know, we've got this ongoing geopolitical stuff, the trade policy. And again, you know me on this side of the, like, I don't, I don't try to play in politics. I'm not here to speak to politics. There's plenty of other shows to go on there. But from a fear and pure impactful situation, this cross border traffic and trade and DJ and I just talked about this from the northern side of the, the border, got the 50% terrace as well as the ban that maybe going into place later in the month. For some goods, probably not that meaningful, but Laredo, specifically the largest cross border traffic in the United States. Thomas, I look at this Laredo tender volume index. And this thing's pretty much collapsed over the last month. And I've gotten some anecdotal evidence on this. And I don't know that it has anything to do with this protest or some other things.

1:45:11But we also have an article out on Freightways.com that Malcolm and I covered earlier that talked about highest value all time crossing the border. Now, AI of course has to be a component of this that Mexico has become an increasing producer of electronics and components. It's kind of eroding share slightly from China and Asia and Taiwan and all that. I mean, Taiwan is still massive. But when we're talking about Freight, volume matters more than price or value and a lot of situations, not always from an insurance standpoint. Somebody will probably be like, no. But from a pure freight volume standpoint, you've got this weird shift going on. A lot of the Mexico cross border stuff been automotive. You cover this beat to an extent. I want to hear kind of your perspective here. Is this something that's a little nuanced and temporary? Or do you think there's more going on under the surface as we see this kind of trade policy back and forth as well as a commodity shift in terms of preference on the cross border trade? What's your takes here?

1:46:19There's a lot going on. I'm going to tackle this in three areas. So the elephant in the room or more knowingly the data center in the room. You mentioned with the situation on data centers, Mexico has been making more electronics. You think of the electronic stuff. We've heard about that even before the data center build that. So that's the first one I'm going to touch on. The reason why we're seeing so much in terms of value is because as these data centers are being built out, the higher value goods. I mean, this is the only thing I can put this in perspective. The last time we spent enough to build crap to move the GDP by like points was the early telecom rollout in the 2000s. Remember the early 2000s? I wouldn't lay down telecom line, fiber lines. And then like 10 years later, we figured out what to do with all of them. This is the modern day equivalent of the telecom rollout. So we are when we're seeing the impact. I was talking to a large warehousing maker as well. Like one of the thoughts is what's the impact of these data centers? You know, will that impact warehouse construction for raw materials? And so we look at Mexico. Mexico has a part to play because electronics, raw materials and other stuff coming up. You mentioned automotive. I was on a call earlier with ZF. That's ZF, one of the large tier one OEM suppliers for those who aren't in the in the know. They said that like look, it's not gangbusters right now. But we are seeing steady growth in the last eight moves. And so, you know, when you're thinking like why is automotive okay? You know, not bad, not good. Like it's Chernobyl. You know, it's not bad. It's not good. That's one of the reasons. So data centers is definitely going to be a lot of things.

1:47:44Data centers is definitely have an impact. Automotive is slow and steady. But right now we're thinking of the freight. That has been one of the under reported aspects that I'm hearing in conversations has been the fact that an open debt capacity data centers hundreds of open debt deliveries. Right. You've got entire generations of workers who are doing job site constructions making 100 200 300 $100 a year to build one and they roll to the next. We have a labor component that's having impacts on the broader supply chain. The consumer itself has not really shown up and buying more stuff. But that's being offset in our government economics data because of the data center rollout. So yeah, data centers is a big one. And we can hit on part two, which is part of an overall trend why we're hearing the Mexican capital. But I did want to highlight for this first part the data centers are having an impact. And it's trickier to find out because it shows up like you said in very weird ways. A lot of Mexican electronics, a lot of steel from the specific place concrete, etc. Yeah. And I, you know, I also I didn't. Pull this up for this, this show, but tender rejection rates along the border actually increasing to like so it's like low volume and I'm curious. And I don't know the answer this question because you mentioned the data center stuff a lot of those components move on the open decks, the flatbeds.

1:48:55Tender data biases towards, you know, consistent contract freight, not as much flatbed in there that goes on the spot market a lot of times, even though there is a flatbed component. And I'm just thinking that, you know, if a lot of these carriers are prioritizing some of that spot freight along the border. You know, they're not hauling this freight. And of course, with the automotive sector kind of lagging a little bit, you know, as we enter August and September. Not as much movement there because I have another data point that also corroborates this the next volume that I want to pull up here. This is invoice data. By the way, totally different data set and it's showing a similar kind of downturn and it lags by several days because it's invoice data. So again, we're talking about a little bit slower indicator of demand over all. And it's not exposed evenly to all sectors mind you. This is probably going to be more exposed to heavily to the automotive that consistent freight. You know, while this data center build out stuff is occurring, I expect that to be an increasing portion of this freight, but a lot of that still seems to me, especially in these early stages with the power grid stuff still not really moving yet a little bit slower.

1:50:01Now the next component of this, this is a, this is not this helps me understand a little bit more. I want to pull up the O rail. So the loaded container volumes for Mexico. We talk about this in North America. So I want to know if you've heard this or gotten any sense of this because in United States, we've seen shippers increasingly using modal conversion, intermodal, you know, they keep it on the international containers and move it inland or they they translate it. We've seen the biggest growth in the domestic size containers here in America. This uses both domestic and international container volumes coming across the border, coming into the United States. And this growth mirrors similarly to what we're seeing in the United States. So I mean, to me, this is a no brainer like the rail, the intermodal, I mean with Mexico being what it is in terms of a chaotic environment. This only makes two, it makes more sense to me that they're doing this coming across the border for Mexico. But is this really that as fungible in your mind to use intermodal cross border, you know, with trucking as it is in America?

1:51:07Yeah, it's the same principles right now. So we mentioned the volume talk, which is we've seen the lower volumes, but in the current environment, and this is my spicy take, no, that matters. Volumes don't matter because it's capacity driven. Right. We are cracking down on every single truck. We're cracking down on cabotage. We're cracking down on Mexican cross border truckers. We're cracking, we're cracking down on both domiciled and non-domiciled. We're cracking down on CDL schools. The Department of Justice and FBI is basically investigating some of these fraudulent Eastern European backed carriers who are either laundering money or operating somewhat nefariously. There is an entire, it is so hard to to really reiterate the fact that in a normal thing two years ago, you and I would be talking right now. Yeah, why is that volume down? What's the specific thing? But this is like, what does that show with the Drew Care, where the points don't matter? Who's lying? Who's lying? Who's lying? Who's truck isn't anyway? Like, where the numbers don't make you or making it up as we go? That's the biggest thing because you mentioned the cabotage.

1:52:08There is going to remain a structural constraint on capacity causing higher prices. To the rejection rates, 10, 12, 13% of the drive-an sector, carriers are repricing their business. I spoke with one carrier off the record. They're not dumb. They're going to be a lot of money. They're not dumb. They're going to prioritize better paying customers and better operational customers. They will, I spoke with one. They're taking like a few months ago. They're only taking half their commitment. So they made a commitment for like, let's say 100 loads a week. They're only taking 50 because they know they can get it from either other parts of their mix or spot. So we are seeing this behavior. That's why when you're saying, you know, when we're looking at the additions and spot rates and everything, this will continue into the second half of the year because we are, while we are gaining more capacity, even if whether it's Mexican, American, etc. We are just really cracking down on it. So yeah, make sense why you put it on the rail because now in this larger context, one, things are too expensive for truckload. So let's put it on rail. Two, there's a lot of tariff and other uncertainty. So I'd like to front load if I can. And then, you know, three, rail has made a lot of progress.

1:53:12They're invested. Look at hunt. And everyone was trying to, you know, get their car loads, car load capacity is really nice. And so it's kind of that triple whammy. But yeah, the elephant in the room is just the nature of capacity is having such an outsized impact on volumes. It makes it difficult for me to isolate if the volumes matter as much until we sort out what the new floor on rates are going to be after three years of crap in the bed. Yeah, I was actually talking to somebody last week about the cross-border traffic. And I was like, listen, man, at Mexico is always kind of a conundrum to me from a data perspective, as well as just a natural hard to understand environment. And they were like, no, for the first time in a while, we're actually seeing more capacity. We're actually seeing a shortfall of capacity moving south. Or no, I'm sorry, they saw more coming north to south than they did from south to north. And they were like, this is nuanced. Like this is a very different world that we're operating in right now because there's just so much going on.

1:54:14Like you said, there's a lot of moving parts here. But tender rejections are now moving back up. I mean, we're back above 10% Laredo. So I think whatever it was, maybe a blip. I'm curious to keep an eye on this border crossing volume though. Watch the north-south volumes because remember, if we have problems with cabitage, think of it like salsa in case I'm doing my Mexican restaurant analogy because I love Mexican food. So, you know, in cabitage, you go up, you take a load up to like Kansas City from like Laredo or actually let's say, moderate a Kansas City, you deliver your auto parts. You gotta come straight back and normally price that round trip. So that way you're covering it. What has happened over the course of years is they were double dipping their metaphoric, casso, and salsa, where they would take a return load back. There were comments by CEOs and trucking people two quarters ago about how the average mixed carrier coming up from Mexico would like hang out in the US for like 14 to 21 days past when they should have. So if we see the crackdown theoretically, South to a Laredo handoff and then a domestic carrier, that's how he used to express, will we see them go all the way up and back? Or if that changes, we will see a difference in northbound.

1:55:21The north-south interplay will change and the thing we have to watch is, is it being translated or handed off at a terminal and an El Paso, a Laredo, a FAR or whatever, or is it going all the way? I have a feeling that it will cause more complexities because with all this extra attention on cabitage, maybe we can only get it to my warehouse in Laredo and then I gotta pay in the higher cost. There's an angle here. And that's exactly why I was shocked at the Laredo drop is because I was expecting it to not go to Dallas anymore and it just stick in Laredo. But that seems to be obvious. Maybe it's just a blip, we'll find out. The next piece, international focus, still for now, we're gonna move into the maritime. So fuel congestion, push trans-Pacific ocean rates near $9,500, Stuart Charles of course writes this. And he also talks about the influence of weather. We talked about El Nino earlier in the show with one of our guests and its increased influence. And this is, of course, I'm a weather nerd. But I wanna break this apart a little bit because shippers, of course, are having to deal with inflation on all sorts of fronts from a transportation standpoint.

1:56:29And the ocean markets are the one that I think most people are probably the most dubious of because there are a limited amount of suppliers of ocean capacity and they tend to, you know, they're considered somewhat like an oligarchy, if you will. And alliances. Alliance is. Alliance is. You know, nobody wants to use the seawater here, but I mean, you hear it all the time in the industry. But the rates, and I wanna pull up the freight coast exchange rates here to put this into a visual. So you're looking at China, to North America's east coasts on top, China, to North America's west coasts on bottom. And then the spread between the two, which is something you're only concerned about if you're moving a lot of this freight, you know, domestically into the center of the country or points east, maybe, I guess. But the spread still way cheaper, you know, to move it on the ocean from China to the east coast than it is to move it into the west coast and then ship it to the east coast, which is kind of the traditional flow supply chain flow for a lot of inventory levels.

1:57:36And of course, we're entering the time of year where a lot of that freight needs to be in the east coast, whereas you hold it upstream and the west coast terminals earlier in the year. That's September is kind of the big first big push of all that replenishment. Everybody, all the retailers getting ready for the late season stuff. So this elevation and rates, like seems to be, you know, and I mentioned the IOTI earlier in the show before you showed up here, but demand is, it hasn't really changed that much, which I guess from that perspective supports elevated rates continued, but demand is still lower than it was in the peak of last year and there it is right there. I mean, and it's lower than it was in 2023. Ocean rates were lower, much lower, significantly lower than they are today with, you know, the current amount of demand that we're seeing is just not supporting the rate. So you've got fuel that's cited in this article and then you've got typhoon driven congestion, which this one makes some sense to me.

1:58:41I also have the Red Sea and the Iranian conflict, which I don't buy that as being as big of an influence on rates as they want to sell it as. I mean, we've been dealing with Middle East confrontations for several years now. The hoodies attacking the ships were a bigger deal in 24 than they are today. So there's more ships transiting all of that now than there was back then, and there's more uncertainty around that then. Now we know, hey, go around. So I don't buy that as big of an end of this now this the first thing that I want to talk about this typhoon situation. El Nino, I want to pull up this weather map and or this map of typhoons that have been hit night when we talk about El Nino, super hot, eastern Pacific ocean, compared to the rest, you know, what it normally is. There have been several typhoons that have landed in China, so this box gets checked in my opinion. So the current ones, is that all the routes of the brand? That's what this season has happened in the western Pacific.

1:59:41So this typhoon, they call them typhoons in the western Pacific, they call them hurricane still in the eastern Pacific. But this is all the stuff that's been going on, and a lot of this happened in July, and we just had one make landfall here last week, so this past week. And it was a pretty big deal, and it does have an influence. And again, it doesn't have to make landfall to influence the boat. And this box checks to me, and then the other thing, the fuel cost component, that makes a ton of sense. When we look at the freight toast rates, they didn't increase right away in March though, if we pull up that chart, like most of the rates for freight toast increased in June. Like it was a slow crawl higher, and then all of a sudden it's like rate increase in June. Well, I think, I'll give you an angle on that. I think there's two or three ways to look at this. But my trucker had on because it's like boats, but trucking, it's all the same hustle if you think about it. So first, never let a good opportunity go to waste. And trucking, we would blame crap all the time on whether to get higher rates. If you'll go up, I'm going to, I just need a reason to charge you more. And when you run a global shipping alliance, think of it like Star Wars, the Trade Federation.

2:00:44You know, you got to continue to maintain a level of pricing discipline. Otherwise, it falls apart because everyone buys too many boats, and then they ruin the whole party. So, you know, the typhoon is real. We looked at that image right there. That is like playing pinballs. We have an operational complexity. We have a fixed clot. We have a variable, we have fuel impacting it. But I think there's a third length. And this is my spicy take for you on this. Here we go. I have started dabbling in more into the final mile space. And as I have went down this Odyssey, I spoke with Mayor's and a few other folks. They want to go full into end. So the global shipping folks are now no longer content with saying we're going to get it to L.A. and hand it off. They're like, I don't want that. I can penetrate this market. And guess what I'm going to do? They're making their like, I'm going to have an interview later with a few weeks with their ground freight person. They're basically going full into end because if you want to order a pair of shoes, you want the right buying experience. You can blame Amazon. They really set the bar high now. And so we're seeing that. So when you're asking why is it that the East Coast is more attractive? Why are they willing to go from China all of the East Coast? The supply chains because of last mile being like 40% of your transportation costs.

2:01:46Wow. It is the wild west, my friends, for box trucks and vans. They're okay with that. They're like, look, you're right. Now that we know there's extra complexities, higher transportation costs at L.A. I'm going to, they have the data and visibility to know that I no longer need to do this. L.A. is probably most at risk. Look at Louisiana and the Dredging. Yeah. The East Coast is like, I want to get in on this action. I need deep, I need a deep birth for the big boats. And because of how our supply chain, especially in last mile and E-Com has changed, these folks are a lot more comfortable because now the visibility and the capability when before they had to hand it off to some other pesky person and deal with it. So the ecosystem in the past five years has changed to such an extent. Post-COVID consumers are more comfortable with Rando showing up at their house. They're more okay than expect more visibility top down. We are seeing a larger trend similar to Mexico in the broader supply chain because a national security that it would make sense why this behavior is expected because the other ports are catching up and customers and supply chains are naturally saying we can do this different way. Yeah.

2:02:46So a lot of moving parts and the things. So the thing that I really want to talk about, and of course I didn't leave enough time to really break this apart as much as I want to, you know, John Kingston writes this article about C.A. Robinson and of course they get asked a bunch of questions at a tech conference about insurance and liability. Of course they're the center point of this Montgomery Careeb thing where broker liability has now come into the environment. And there's this big question on what does this do to capacity overall? Because brokers are now going to be held as liable as carriers, theoretically, insurance costs becoming a thing. I think some of the quotes in here, and again I don't have time to really do this justice, because I want to get your takes. But C.A. Robinson expects insurance costs are going to increase by a very manageable number. And the majority of it will get passed through to freight rates anyway. I think it's a very bold statement, and I'm not, again, I don't have time to really break this apart. But I want to get to its influence on capacity. So brokers now are going to theoretically have to vet the carriers like a carrier

2:03:46would vet their own thing, because now they're going to get sued, potentially just like a carrier would. So let's pull up the CDNCA figure. So this is net changes and operating authority. Doing the exact opposite thing that I would expect, increasing. So I did a little research on this, and you've got familiarity with FMCSA data. So also I will go ahead and quickly pull up the net revocations figure. So you know, now we're negative. So this would tell you that capacity is growing, not so fast. They just changed their system in May. So it's creating a huge noise in their data on the current weekly basis. So be very careful when you're looking at this data. And the last data point I want to pull up here is the FCFH, the Total Four Hire. You see that capacity is actually still down in that little blip in July. This is just a day. Wasn't the data set. Yeah, and not look, wrapping this up because you're right, we could dive another 30 minutes in this. Yeah. It's all about incentives. Carbide and everything are the early areas of incentives to where brokers can no longer get away with the capacity they bought.

2:04:50We will see more capacity attrition. We will also see more capacity enter because when rates go up, folks enter, you strike it out. It's like a boom bus cycle. It's like, it's like wildcatting in the Permian. And you know, we put on our Texas hats and let it rip. So at the end of the day, I think this is a positive development because the incentives are there. I'm flying out to Germany for IA next week. You bet your sweet, but the airline in the pilot has an incentive not to screw that up. Yeah. In trucking, we did not really have that when we hauled goods. Right. So I'm glad to see that because of the impact of trucking on people, we are now treating trucking that needs, it needs a due diligence to deserve. So yeah, this is, this is like the second inning. And so it makes sense why CH will say there's technology there. There's tons of things. I know we're coming up on time. But at the end of the day, we will have in the next two years from now a more safer, more vetted, better overall capacity at a higher price. This is what we've needed for the past 20 or 30 years. It has not been where it should have been. We're starting to see the crackdown, regardless of administrations, if the incentives stick, this is going to be a positive development. But this will be painful. And this is the pain time, unfortunately.

2:05:50And capacity is not meaningfully growing at this point in time. So we're still working our way through it. I think it's my big takeaway. It's churned. Second inning. Perfect example. Thank you, Thomas Watson for jumping in this week. And thank you all for watching. I guess Freight Waves today will return tomorrow at noon. And I will return next Thursday. Have a great week. Thank you.