The Los Angeles and Long Beach ports collectively unload just under one million containers a month. For the last year, they have been running at/near a record pace.
In other words, they are running as fast as they can. The problem is they are at their limit.
3/13
The much-heralded solution is to run the ports 24/7. The problem is the Long Beach terminals are already 24/7 and the LA terminals are already running 18 hours a day. These added hours at LA are only going to increase unloadings by 2%-3%. This is not going to matter much.
4/13
There are also problems getting these containers off the dock.
Unfortunately there is a trucking shortage, which has led to soaring trucking rates (chart).
Demanding more trucks at 3 AM to get these unloaded containers off the dock is going to be a taller order.
5/13
So even though the ports are running at capacity, the containers are going nowhere. This can be seen by the stagnate increase in rail car loadings.
The entire supply chain has to run beyond capacity at once for this to work. Good luck coordinating this.
6/13
This is leading to a backlog of ships anchored off LA.
And since these containers are taking longer to unload, shippers now have to factor in this dead time anchored off shore.
This is a disincentive to ship, so the number of empty containers are piling up in the ports.
7/13
This is leading to a recent fall in container rates. No one is in a hurry to ship these containers back to China for reuse if they are going to just sit anchored off LA for many days. Then one has to struggle to find a truck to haul it away.
8/13
Many think the falling container rates mean the supply chain’s problems are being alleviated.
That would be true if these rates were falling along with the no. of ships anchored off LA, trucking rates, and the number of empty containers all falling as well. They are not.
9/13
The impression by many in the financial markets is this supply chain problem will be fixed in a few months.
They also though the same this summer when Biden similarly convened a meeting in June to fix this problem. But today it is worse than ever.
Why?
10/13
Simply, demand is booming. Below is personal consumption since 09, its trendline, and residuals (actual-trend).
Consumption is off the charts at $662B > trend.
Again, we want a record amount of stuff and the supply chain cannot handle it.
Too many stimmy checks.
11/13
So by ‘fixed’ many assume increasing the throughput of the supply chain to meet overstimulated demand over the short term is doable.
But if the problem is the supply chain is at capacity now, expanding will be hard/impossible over the next several months.
12/13
So to bring everything into balance, prices will rise until enough demand is destroyed to bring everything into line with the limits of the supply chain.
We might be seeing this happening as Q3 growth expectations are crumbling as prices are soaring.
13/13
This is otherwise known as stagflation ... which simply means higher than average prices rises (inflation) accompanied by lower than average growth.
Wall Street viscerally hates this word. But that does not mean it is wrong. Just inconvenient if true.
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67% of the US Federal debt outstanding can be tied to military spending.
Getting Europe/Canada and the rest of NATO to take up more of this spending can take a huge weight off US government finances.
Europe/Canada appear to be willing to do exactly this.
🧵
2/14
European leaders have gotten the message from Washington about doing more for their own defense and for Ukraine, too. nytimes.com/2025/03/26/wor…
3/14
Europeans are mooching and that any American military action, no matter how clearly in American interests as well, should be somehow paid for by other beneficiaries.
Uncertainty measures, sentiment swings, and doubts about American Exceptionalism have all been overdone. They set up a sentiment low in markets.
Now, markets are bouncing back.
🧵
2/6
The Policy Uncertainty Index is from the 10 largest newspapers' policy stories that contain words that denote uncertainty.
March 11 this index reached its highest level in over 40 years, higher than 9/11, the Iraq War, the Financial Crisis, and the Covid-19 shutdown.
3/6
Did last week’s buildup to Trump’s April 2 tariff announcement (aka Liberation Day) really exceed the uncertainty surrounding these other events? Investors are reacting as if this is the case.
Investors’ Intelligence is a survey of newsletter writers about the stock market. The bottom panel of the chart below shows that in the three weeks ending March 11, the same day as the uncertainty peak above, the percentage of respondents describing themselves as bullish declined by 21.6%. This is the fastest exit over three weeks since the 1987 stock market crash.
Everyone needs to calm down about the Atlanta Fed GDPnow flipping to negative (chart).
It was driven by one statistic, merchandise trade imports, which can snap back as early as next month and take GDPnow back up.
The world is not ending.
2/4
Here is the Merchandise trade deficit.
I labeled the last three months to show how much it blew out (and March 2022).
3/4
The trade deficit exploded in the last three months, as well as March 2022, due to the surge in imports (orange) while exports (blue) remained relatively unchanged.
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The Ukraine War started in March 2022, and importers rushed to import products (such as grain) from the Black Sea area ahead of potential disruption.
Similarly, the last three months have seen importers rush to bring goods into the country ahead of Trump's tariffs.