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Rolling Down The Highway

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.



Trucking names, as measured by the DJ Total Market Trucking Index, have been hot, hot, hot for the last 18 months, returning in excess of 55%. The group has benefited from a combination of rising demand and decreasing capacity, the latter caused by the disappearance of a number of companies that did not survive the 2001-2002 recession, the subsequent demand recovery, and a serious scarcity of drivers. According to a small company I follow in the refrigerated transport sector (where capacity is even tighter than for standard freight), truckers have been able to pretty much auction off services to the highest bidder. Freight rates rose about 10% in 2004, and as much as 15% in some sub-sectors. Similar increases are expected for 2005.

The question is whether the good times can keep on rolling. The search for drivers appears to have erupted in an all out bidding war. A major national carrier is running a barrage of radio ads touting the highest salary and benefit packages in its history (still trying to verify rumors that as part of an organized hedgies revenge, hundreds of the poor (pun intended) souls are being spotted rumbling down the highways squashing critters of their choice - Hear me Hoofy?). And on my roundtrip to Indiana for Thanksgiving (which with two kids strapped to the back seat is also a 100% effective form of birth control) I-70 looked littered with billboards one-upping each other offers for willing drivers.

For now shippers are eating the rate increases (which are in addition to the standard fuel overcharges) but one has to wonder how long they can bear that type of price pressures. Meanwhile, most EPS estimates seem to assume a best case scenario for the companies.

At least some analysts suggest that the truckers' happy days are going to stick around for a while, because this time is different. However, those are scary words fit for critters with flat wet-noses, pink skins and curly tails, and definitely not worthy of the 'Ville.

And, of course, none of the above has any broader inflationary implications for the economy because . . . the Fed says so.


Minyan Fil Zucchi



R.P.

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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