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Episode 25: The State of Global Transportation with Lee Klaskow of Bloomberg Intelligence

Brent – 00:00:01:

Welcome to Freight Nation: A Trucking Podcast where we explore the fascinating world of trucking and freight management. We dive deep into the freight industry and uncover why the trucking industry is more crucial to our country now than ever before. Stay tuned to uncover the driving forces behind successful trucking businesses and hear from the hardworking truckers and leaders who keep the world moving. Let’s hit the road. All right, well, welcome back to Freight Nation, a podcast by truckstop.com. Man, am I glad you joined us today, everybody out there in Freight Nation. Whether you’re able to watch and listen or just listen, we appreciate you giving us your time today. Today’s going to be a really fun episode because hopefully today is a day you get to learn something about our marketplace and its effect and impact on the US economy and the global economy through one of the industry’s leading experts and my good friend. We’re joined today by Lee Klaskow, who is the Sector Head and Senior Analyst for Freight, Transportation, Logistics for Bloomberg Intelligence. And for those of you that don’t know Bloomberg, boy, you’re going to get to know it today. It’s an industry-leading communication platform for all the financial marketplaces globally. They are the leader and the player in the world for this. And I’m lucky enough to be friends with the main man who leads their transportation logistics sector. I got the meeting back when I started at Truckstop back in 2013. I was very lucky to became friends with him and we’ve remained friends ever since. And we’ll talk a little bit about our relationship with two companies. But Lee, thank you so much for joining us today. And I appreciate you giving us your time.

Lee – 00:01:31:

My pleasure. Glad to be here, and hello, Freight Nation or Mr. Nation.

Brent – 00:01:35:

Mr. or Miss Nation. There’s kind of both. We get kind of both sides. As they said in Blues Brothers, both sides, country and Western music. You got to get a good Blues Brothers reference in there. Well, Lee, thank you. I really appreciate it. The relationship between Truckstop and Bloomberg, we’ve had it for 15 years plus. And so we’re fortunate to be associated with you guys. But there may be some on the call that we move freight, we move stuff across the country on trucks. And there may be some on the call that don’t really know who Bloomberg is really from a market standpoint or communication standpoint. And if you wouldn’t mind, before we jump into Truckstop’s relationship and how you got to freight and what are some of the cool things about the market and things that are going on from a high level advice standpoint, tell a little bit about Bloomberg so the watchers and listeners would know more about you.

Lee – 00:02:17:

Sure. So Bloomberg, it’s a huge organization. It has a number of businesses, but its main business is a terminal business. It’s like a trading and information platform that most decision makers that are involved in the financial markets one way or another kind of have at their desk. So if you ever watch a movie about Wall Street, usually the trading platforms with the screens that are flashing green and red are usually a Bloomberg platform. And what it brings together is data information and analytics to our customers. And we have roughly around 330,000 customers around the globe. And again, these are decision makers. They can be someone that working at a hedge fund, a pension fund, someone that works for treasury department within a company that works for the CFO. Pretty much it’s a broad-based type of customers and a geographic-based. But it’s really, you know, we like to think that we help people do their jobs better through the information, data and analysis that’s available on the terminal. And then also we have other businesses as well. A lot of people might be familiar with Bloomberg TV or Bloomberg Radio or Bloomberg.com or Businessweek Magazine. These are all things that are kind of fed through what’s going on in the terminal and through the news organization that Bloomberg has. And I’m part of a division within Bloomberg called Bloomberg Intelligence. And we’re their research arm. Quite a lot of us around the globe. I think we have about like 450 professionals around the world. We cover over 2000 companies. We don’t do buy, hold, sell recommendations. Like, a typical sell side analyst. But we do bring people through the investment cycle and kind of hand the baton off to them and make up their own decision. And we cover companies, industries from an equity standpoint, a credit standpoint, an ESG standpoint, regulatory litigation. So it’s pretty much one stop shopping for anything you need to know when trying to make an investment decision. And again, that can be if you’re looking to invest in stocks, bonds, hard assets, commodities, anything.

Brent – 00:04:08:

Wow. Did you say over 330,000 terminals?

Lee – 00:04:12:

Yeah, subscribers. I think that’s the last number that I’ve seen. It’s around the globe as well.

Brent – 00:04:17:

Yeah. So when did Bloomberg start as a company? What year did it get established?

Lee – 00:04:21:

Oh, now I’m going to get in trouble.

Brent – 00:04:23:

Roughly?

Lee – 00:04:24:

40, 50 years, something like that.

Brent – 00:04:26:

I’d have to Google that. Yeah.

Lee – 00:04:28:

I should know that,

Brent – 00:04:29:

But I don’t. Sorry to catch you off guard. Well, long enough to be the global leader for financial market information, without a doubt. And I’ve been to Bloomberg’s offices in New York City when I got to visit Lee and the team there. And not only do they have a really cool data company, they’ve got a really cool building itself. It’s just very unique in how they architected this building, where people are constantly around each other. And it’s very unique about how they approach things. And so Bloomberg is a staple within the financial markets. And when I mean financial markets, I mean the money markets, where people are investing money and doing things to try to grow businesses and grow their own personal financial places in the market. So it’s really cool. Bloomberg’s a great company. Truckstop’s proud to be partnered with Bloomberg on our data-end. But Lee, the thing that I love to talk about, I love to always kick it off, is that, you know, trucking and transportation is so big. Most people, until maybe the pandemic, there’s many US consumers that really, I mean, they kind of know it if you sit and think about it for a second, but they don’t ever think about it day to day on how big the transportation industry is and what an impact it has, not just in our lives, but how it affects the US economy or it’s a reflection of the US economy. So, so many people have come to transportation from somewhere else. And so I love for the Freight Nation listeners and watchers to hear your story on like, how did Lee Klaskow get from where he was to being inside of transportation? You’ve been inside transportation almost 14 years now. And so it’s not like you just jumped in and you’ve been here a couple of years and you’re looking to see what’s next. You’ve been around and you’ve become a real trusted staple, speaking at the ATA, speaking to CSCMP, speaking at all these industry leading associations and events where they trust your data and they trust your feedback.

Lee – 00:06:07:

And speaking to Freight Nation as well.

Brent – 00:06:10:

Well, hey, and the Freight Nation listeners on Truckstop, we’re the top of the pyramid, no doubt. But how did this happen for you? How did you end up in transportation? And then why do you stick around?

Lee – 00:06:18:

Yeah, I think for a lot of people that aren’t born into it, a lot of people kind of step into it, if you will. I had a lot of jobs on Wall Street, banking, even worked for a real short stint on the floor of the New York Stock Exchange. And I was looking to do something different. And I got into research. And the first research job that I got, I was working actually covering property casualty insurance. It’s as exciting as it sounds. And then my boss left and he left me. So I had to find a new home and I found a home in an industrials team. And I worked for a great analyst there at Prudential. And after working with him for about a year, he was like, you’re ready to get promoted. Why don’t you cover transports? And I was like, I kind of want to be a casino analyst. I don’t want to cover transports. But, you know, his rationale was the fact that our customers are mutual funds, hedge funds. And the people that would buy an industrial stock like a GE or a Honeywell are the same people that would buy a railroad stock like CSX or a trucking stock like Warner. So, like, I knew the customers already and I would hit the ground running. And it was a smart idea. It was his idea, not mine. And that’s kind of how I stepped into it, if you will. And I did it on Wall Street as a sell-side analyst for about five years before coming to Bloomberg 14 years ago. So I’ve been covering freight, transportation and logistics as an analyst, at least as a senior analyst for close to 19 years now. And my operational chops, if you will. A couple of summers I worked for a now defunct LTL company called. APA in New Jersey. I was a scab worker. It was a unionized facility and they would like higher college kids to work the night shift. And that was the year when I first started doing that. The next semester I went back to college. I got started getting straight A’s from let’s call it a C minus average because it was hard work. And I was like, I’m not made for this. You know, unloading trailers at 100 degree weather at two o’clock in the morning was a tough job and paid very well. It was great for beer money. But that was kind of my journey into covering transports. And it’s been fantastic. You know, I’m really happy that I listened to his name is Nick Haman. I’ll give him props from Prudential. I’m really glad that I listened to him. He was a great mentor and, you know, he helped me develop into the analyst I am today. So I owe him a lot.

Brent – 00:08:35:

Yeah, no doubt. There’s always somebody, one or two people in your life that really motivate you, that kind of gets you to see the bigger picture. Really interesting that you were working, loading LTL trucks in kind of a miserable weather. For me, it was a landscaping job that I realized this is not what I want to do. Nothing against landscaping jobs, nothing against working with a truck, just not the direction that I wanted to go. But it’s cool that you had some experience of knowing inside a little bit inside the trucking marketplace. Mine was using a fork truck and loading trucks and taking inventory on my dad’s dock. Where we had a small steel processing company. I was a round truck driver since I’ve been around about 12 years old. So I always thought that was super unique and neat. I mean, as a kid who didn’t love a big truck, and that’s always cool. So, hey, quick question. You said you were actually on the floor for a while of the stock exchange. So is it exactly as the movies paint the picture? Is that real, or what’s the reality about being on the floor?

Lee – 00:09:25:

Yeah, I mean, listen, there’s a lot of energy. It is exciting. It was fun. But it was also during a time where you just kind of saw the writing on the wall where technology was taking over a lot of these positions. So if I started that 40 years earlier, maybe I would have had my whole career there because it was fun and it paid well and it was interesting. And at the end of the day, at five o’clock, you’re done. You go out and maybe entertain some clients, and that’s about it. So, yeah, it was a very short stint while I was there, and it kind of motivated me to try to find something that I thought that, because of technology, would provide a career path for me that was longer in nature, which it ended up to be. And, you know, also we’re talking about, like, transportation-type jobs. I also spent a summer delivering lobsters. I learned how to drive stick with a box truck on the hills of West New York, which, if you’re not familiar with it, it’s, like, right by the George Washington Bridge, and the hills are crazy. I’m pretty sure I burned a couple clutches in that job. So I have truck driver delivery guy I can put on my resume as well. Those are my operational chops. I’m sure a lot of your listeners are rolling their eyes right now. I can’t wait for the hate mail.

Brent – 00:10:38:

Yeah, sure. I get it. I think there’s so many young adults, you know, the idea of sort of the lore and just driving a truck is just a cool thing, you know. I mean, no doubt. I have driven a truck, and I saw a little bit what it feels like to feel like you’re the king of the road, because in a Class A truck truck going down the highway, you are the king of the road. There’s no doubt, man, because of what you see and the power that’s into that. All right, so let’s shift a little bit. Around 15 years ago, we got this inquiry, Truckstop day, I got this inquiry from this group called Bloomberg that you’d like to look into some truck data. So when all that started, what motivated Bloomberg to reach out to the market and want to get the freight data information? I know we’re not sure on the resources. You guys have lots of resources for the data, but you reached out to the spot market and wanted to get some data on that. Why was that relevant to Bloomberg? And then what motivated you to kind of reach out to Truckstop?

Lee – 00:11:29:

Yeah. So, I mean, I was driving my car to work, and I listen to Road Dog Trucking every once in a while. And someone, I don’t remember who it was, was talking about the MDI report. And I was, oh, this is really, really interesting. And at the time, I might have been at Bloomberg Intelligence for a couple of years. And one of our initial mandates were not only to create this research division, but put all the industry data that someone that’s doing their own research would want on the terminal as it relates to various, whatever industry you cover. Because, you know, they were great with financial data, SEC filings, and all that sort of information. But they didn’t necessarily didn’t know exactly what someone who covers trucking would want to see or what someone that covers the rail industry would want to see. So the first couple of years, we brought a lot of data sources onto the terminal. And so when I heard the MDI on Road Dog Trucking, it really piqued my interest. And I think I just reached out to your company. And you and I ended up getting in touch with one another and kind of went from there. And we also not only were able to onboard that data onto the Bloomberg terminal that’s available to our clients. But we also have a great partnership where we do a number of surveys throughout the year on the trucking, on the brokerage industry. And the reason why, you know, trucking transportation data is so important, not only to someone who covers, you know, J.B. Hunt or Schneider or Werner, or even the rail industry who wants to look at like pricing. Why it’s important is it’s really the canary in the coal mine for the economy. And that’s one of the things that I probably love most, coming transportation. Not at my own back, but like, I know a lot because I’m not just looking at an industry. The industry’s end market is everyone else’s industry. So it kind of almost makes you, I’m not going to say an economist, bu it really gives you a macro view of the US economy, the North American economy. And then, you know, we also look at the global economy. And I need to know these things because it’s kind of like a flywheel. The freight data shows you what the economy data is going to do. But then the economy data is kind of like telling you what maybe the freight data is going to do. And so it’s like a constant loop that you really need to be plugged into. And what the trucking spot data did for me, in addition to getting a better understanding of the companies that participate in the spot market, it’s a leading indicator of where contract rates are going to go. Most of the publicly traded trucking companies, they play predominantly in the contract market. So if the spot market starts inflecting negatively, that can mean bad things for contract rates. If they inflect positively, it could be a good sign for contract rates. It’s a good bellwether in terms of where brokerage margins are going to be. So, you know, that’s the main reason why we onboard it. But my smarter colleagues use it in their own research. You know, if you’re covering, call it the grocery industry, you know, you can look at reefer rates and get a good understanding about supply-demand dynamics or things you can take away from that. Or if you cover the truck OEMs, the manufacturers of the trucks, you know, knowing the health of the trucking market really help you kind of understand where demand’s heading. So there’s a lot of implications and use cases for spot data outside of just like what’s used, why it’s used in the industry, obviously, to say, hey, should I take a load or not? Is it worth my time? And am I going to get an ROI on this? So, yeah, it has broad implications for me as a transportation analyst. And it also, so some of my colleagues, I cover different segments.

Brent – 00:14:58:

Yeah, no doubt. One of the things, and thank you for explaining that. I’m glad that that data is of value to you. One of the things that as a little bit of a data nerd like you are as well, and yeah, I did call you a data nerd. Ed, I think it’s appropriate.

Lee – 00:15:10:

I’ve been called worse.

Brent – 00:15:12:

So in the modern world, ever since the advent of the intranet, or as my dad used to say, the intranets, data is more available. And if you’re managing anything and you’re not looking at the available data within the market segment that you’re in, you’re behind the timing of being able to do something in the market that’s the most beneficial to you. So I just think about the spot market data and looking at the overall truck data is good, but it does have a little bit of a lag to it. It’s delayed by a certain time period. Sometimes 30 days, sometimes 60 days, sometimes 90 days, because it is a trillion dollar industry. So it’s really big and it’s got hundreds of thousands of players in it. And so it’s hard to get that data. But with the spot market data being aggregated into a network like Truckstops, you’re able to get a complete view of a segment of the market. And the data is only seven days old. So how unique is like seven day old complete like segment of a market data to a big data processor and data analyzer like Bloomberg? How impactful is that?

Lee – 00:16:13:

Yeah, well, so, you know, timeliness is always a good thing. I’m not going to name names, but, you know, we have other data sources as it relates to transportation on the contract and spot market. One of our contract providers provides us monthly data that’s a three-week lag. So that data is not…

Brent – 00:16:29:

That’s still pretty fresh.

Lee – 00:16:30:

Yeah, but it’s monthly and it’s three-week lag. So we all get January data on February 21st. And that’s fine when you’re looking at big picture stuff. But if you’re kind of trying to figure out what’s going in the quarter, the weekly data is much better. We also have a provider that provides us contract data by the week. So the Truckstop data, it provides us very timely insights. And if we could get daily data or hourly data, there would be somebody that would trade on it. So everyone looks for an edge, if you will, when they’re making their investments. It’s not just trying to know everything. It’s also having data that other people might not have readily available or taking that data and trying to do some sort of regression or correlation where you can figure out other things. So the more timely, the better. And when it comes to industry data, usually weekly is the best that we can do. And so we write about the Truckstop MBI and the Truckstop spot rate, every week. It’s part of my, what I consider maintenance research, where it’s to keep your thumb on what’s going on in terms of the pulse of the overall industry. You know, it’s really important to continue to write upon that because, listen, we have a thesis about when we think the market’s going to turn. So again, we’re looking more at contract rates because of the companies that we cover that play predominantly in the contract rates. But we’re using the spot market to see if our thesis on contract rates are off-kilter or need to be adjusted. And currently, our thesis is that, you know, we expect contract rates to start to improve late in the first half and then growth to accelerate into the end of the year, which could yield low to mid single digit rate increases. That’s probably going to be some of the more optimistic outlooks out there. But I’m a, you know, I tend to be a glass half full kind of guy.

Brent – 00:18:20:

Well, that’s one of the things I admire and appreciate about you. I think your and Bloomberg’s estimations on this are some of the more broadly held optimism for the marketplace. I think the justification behind that, what we see at Truckstop, and I’m sure you may see this in the data as well, is that when you think about the buildup curve during the pandemic, it was obviously a lot longer than the standard curve. Most of those things are anywhere between nine and 18 months. And this one was tremendously longer, a couple of years, 24, 28 months. So it wouldn’t surprise me if you look at the data that you see the same thing beginning to build back middle of the year. Those curves would sort of agree with each other. And that’s something you pay attention to. So for Freight Nation people out there, the point of this is that you want to look at if waves go up at a certain height, they come down at a certain height. So you always look at the wave and how long it lasted. As the impact on when things are going to recover or when they might be going back down into some true normality or even potentially a market depression. So super important to watch. All right. So one of the great things about Bloomberg is you guys have a global footprint. The United States is the largest transportation market on the planet. I think last time I asked us the question, it was a little over 40% of all the freight movements, total freight movements are in the contiguous United States. So we are a major player. However, the world’s a flat place, Lee. After the advent of the internet. Everything about it can communicate as quickly as a second, you know, with each other. And so you get to see something that most don’t, which is you get to see the domestic or the North American marketplace in the United States marketplace. But you get to see that from a global standpoint. So as I look to global markets, we’ve seen a lot of things change. Give us Bloomberg’s take on what’s the status of the current transportation logistics marketplaces and how much have they recovered? And then what’s the overall thought on where they’re going to go?

Lee – 00:20:07:

Right. So in addition to covering trucking and railroads and logistics companies, I cover marine shipping for Bloomberg Intelligence. I do it along with a colleague, Kenneth Lowe, in our Singapore office. I was just out in Asia two weeks ago. We did a three-country tour where we talked to our clients and to people that are involved in the shipping industry. You know, obviously, you really can’t listen to the radio or read a newspaper without hearing about the Red Sea and, you know, supply chain concerns again. And so that’s the biggest change because going into 2024, we were expecting, you know, extreme doom and gloom for the container liner market with a lot of liners losing money. And now because of the run-up in rates, rates are up to 300% depending on the lane. Expectations are that, you know, maybe a lot of these liners might not lose money this year. And a lot of that, again, is being driven by these higher rates as capacities being sucked out of the market. As ships avoid the Red Sea and the Suez Canal and go along the Cape of Good Hope, which is the southern tip of Africa, to Europe and to the east coast of the United States. And that can add, you know, anywhere between 10 and 12 additional days. And so that’s just taking up a lot of capacity. And you have that. Plus, you have the issues in the Panama Canal, which is low water levels. Then you have, you know, the still effect from the impact of the Russia war with Ukraine. And you have a seaborne supply chain that is strained. And it’s not like we’re during the heights of pandemic. You know, not kind of a dislocation, but it is messing things up. And so then shippers are going to have to think, well, do I want something on the water for 10 or 12 more days? Is it going to get to where it needs to go? And we haven’t even had the increase in congestion at the ports yet from these changes in voyages. And that’s going to happen. And again, it’s not going to be like during the pandemic where there were 102 ships outside of Southern California waiting to dock. But you could see some slight increased congestion, could see some shippers instead of going to the East Coast or the Gulf Coast. You know, maybe they’re just going to the West Coast. That’s good for trucking. That’s good for rails, longer lengths of haul for freight that’s going across. But we started this question with, you know, what are the global markets? So I think the global markets are really in flux. And the reality is it really is going to depend on how long the Red Sea crisis is the crisis of the Houthis stop attacking ships, which we would assume would happen if the Israel-Hamas conflict comes to a close. You know, things will just go back to normal. Rates will sink. Liner rates will sink back. Because the Liner industry was facing supply growth that was expected to outpace demand. It happened last year. It’s supposed to happen this year. And it’s also expected to happen in 2025. The order of books for ships. I mean, these are big ships. They’re $100 million ships. So we all know what ships are being built when they’re being built. There’s a lot of data on that. So you can have a lot of good visibility about, you know, what the supply picture is. Obviously, things do change. Demand can change because of the longer voyage times. They could change because China decides to stimulate its economy. And China is also something that we look at. I mean, that economy is cooling. You know, it’s not nearly growing at the pace that a lot of people are expecting it to. It seems to be on the cusp of a lot of issues with its housing market, which could moderate its economic growth even further. So, you know, we look at China a lot because, as you know, they import a lot of basic materials. So, like, stuff going through a dry bulk ship or a tanker ship. And then they make it into stuff. And then we consume the stuff. And so, you know, you just really have to look to see what’s going on in China. Just to dovetail on China, you know, one of our, like, longer-term thesis is more and more nearshoring in Mexico. And we’re overly bullish on any companies that have exposure to Mexico. And it’s not going to be a light switch. It’s not going to turn on overnight. It’s going to be like watching paint dry or grass grow. I don’t know really what the analogy would be. I mean, right now, companies are looking at going to Mexico. They’re maybe starting to pour concrete. Nothing’s really being manufactured. But, you know, the automotive supply chain has done a pretty successful job at building their supply chain, connecting, you know, Canada, US and Mexico. And I think a lot of other industries can learn a lot from what they did. And that would provide a lot of long-term growth for transportation companies domestically. And then going back to the Suez issue, you know, that’s also having a positive impact on air freight rates. You know, air freight rates were loosening up. And now they’re tightening up because shippers are like, well, because of that delay, maybe I’ll air freight stuff to Europe and then put them on a boat and then send them to the US or I’ll just send them to the US. You know, it obviously has to be high-value goods. They’re not going to be doing that for a container of toothpicks or T-shirts.

Brent – 00:24:58:

Yeah, for sure. What a great explanation. So Freight Nation, I think the thing to take away from this is that everything creates an impact on transportation.

Lee – 00:25:05:

It’s like the butterfly effect, right?

Brent – 00:25:07:

That’s it. Like the cold weather we just had recently in the United States, rates went up because of the cold weather. Anytime we have a natural disaster or crisis or a pandemic or something, it affects everything in a small amount or a large amount. So it’s important that you pay attention to this. If you’re out there moving freight, that you look at the data that’s available, look at what’s going on. And if you educate yourself or you inform yourself on it, then you can actually take advantage of the opportunities that are in the market. So let me ask you, Lee, you mentioned China, which is always interesting. And I think as an American, we always go, oh, we don’t want China to be strong. We want China to be weak, you know, because we want to be strong. So is a stronger China better for the United States than a weaker China?

Lee – 00:25:44:

That’s a great question. A lot of this is my own opinion. I think that what is happening now should have happened a long time ago. I think most companies began to rely too heavily on China and that can truly impact supply chain. Listen, this is an election year. The former President Trump, he’s talking about tariffs. Just because you put a tariff on an import doesn’t mean we’re just going to start manufacturing in Delaware. It really just becomes an inflationary tax on consumers. It’s not necessarily what it’s trying to accomplish. A lot of times it doesn’t happen. It can protect domestic industries. But if you’re doing a broad-based tariff, that is really, it’s just going to be inflationary and a tax. I think that the closer we’re tied to, the less chances are something bad happens between the two countries. But, who knows? That is out of my purview in terms of the geopolitical risks between the US and China. But I think that the decoupling is a good thing, even if it moves further south into Asia, whether it’s Vietnam, Philippines, or what have you. But again, Mexico is an interesting alternative, especially for goods heading to the United States. And it’s a great opportunity for Mexico too. It could really grow a middle class there a lot faster than it has. But obviously there’s the crime element that needs to be addressed there for a lot of companies to be fully comfortable with making huge investments in Mexico.

Brent – 00:27:12:

There’s risk reward and everything that goes on. And certainly after the pandemic, when you saw the nearshoring, which is manufacturing closer to the United States, or you’ve got reshoring where people are manufacturing within the United States proper. And I think the biggest point you made, Lee, and I think this is very important for you Freight Nation listeners and watchers, is that we’re talking about economies of nations and they don’t move quickly and they’re not designed to move quickly. If they move quickly, you could train wreck everything. Dispersion of trains. I’m just saying that is a descriptive, but truckers, we’re not super against trains. We get our share. But my point though, is that these things don’t turn quickly because they’re not designed to, they really can’t. And so the idea is just to watch them change. And certainly the manufacturing that’s going on in Mexico has increased tremendously where Mexico is our biggest trading partner now. And the amount of freight that’s coming back from Mexico, if you do a lot of cross-border stuff, is an opportunity for you if you do that, or if you want to get into that to make more profit for yourself. So these are opportunities that you see. But if you don’t know the data in the market, you don’t pay attention. You don’t get the benefit of that. All right, Lee. All right. So with 19 years in transportation, two decades, that means you’ve gotten to see a lot of things that have changed. In a marketplace that was really kind of old and kind of brittle from a standpoint of how it went about running itself, you’ve seen a lot of change. So what are some of the biggest changes that you’ve seen in your couple of decades and what impact have they had inside of freight transportation?

Lee – 00:28:36:

Honestly, I think it’s probably what technology has done in terms of creating more efficient networks, giving people the ability to make better decisions, you know, in your world, in the nation’s world, if you will, like the smartphone. So, you know, now an owner operator can make a very early informed decision about whether or not they can take a load. And I think people that leverage the tools that are just on their phone, they probably can truly improve their ROI. And that technology benefits not only the owner operator, but the C.H. Robinson and the J.B. Hunts and the CSXs and the FedEx of the world. So I think the technology aspect, you know, and listen, I’m not saying that, you know, AI is here and they’re going to drive trucks and they’re going to make freight markets more efficient. I think the additive benefits of AI and other technologies that have come out over the last 20 years, call it, have really helped transportation companies be more productive, do more with less. And from my vantage point, be able to return capital to shareholders, whether it’s dividends or share buybacks, because I cover the stocks. That’s kind of like what I’m looking at. And then I would also say there’s been portfolio management. And when I say portfolio management, so you have companies like J.B. Hunt that are diversifying into other businesses or like Knight-Swift that are diversifying other businesses. And then you have companies that are like, we need to focus on what we’re good at, like an XPO. You know what they did and what we heard from UPS today, they had their earnings call and they announced that they were going to look at strategic alternatives for their brokerage business, Coyote Logistics, which they only bought in 2015.

Brent – 00:30:22:

Big rumor about that. Yeah.

Lee – 00:30:24:

Not a rumor. They said it. Oh, it’s going to happen. So whether or not that strategic review ends up in them selling it or just keeping it and doing something different with it, who knows? But I think that’s been pretty interesting where you’re seeing some of these carriers either take a U-turn and focus more inward in their core competencies or looking to diversify. And the ones that are looking to diversify, they’re looking to diversify for a lot of reasons. A Knight-Swift, for example, they were a really well-run trucking company, a truckload carrier, and they still are. But they decided that they wanted to reduce the cyclicality of their businesses, reduce some of the asset-intensive aspects of their business. So they started doing more asset-light businesses. And then they stepped into the LTL world, I guess that was like 2021 or 2022, and they bought two regional carriers. And I think that’s a pretty interesting kind of development and evolution of not only of a company that was probably one of the best-run truckload carriers, and they’re making a name for themselves, I think, in the LTL world, I think when you fast-forward 10 years from now, they’re going to be considered probably one of the top national carriers.

Brent – 00:31:31:

Yeah, well, Kevin Knight, his MO was always running with efficiency and then he bought Knight-Swift and brought them into efficiency. Now they bought U.S. Xpress. I’m sure they’ll bring that into more efficiency. I mean, you can’t say transportation without saying those three company names as far as like things go. So I appreciate your point of view on what’s sort of been some of the really impactful changes. And honestly, that’s what created the relationship between Bloomberg and Truckstop, which is the data explosion. It used to be you had to really go find the data. Now, the data is aggregated into networks and systems where you can take it and really make something meaningful out of it for a completely another part of the world, another part of a marketplace. So super impactful, meaningful. So you said that you and your friends all looking at the maritime world were over in Singapore and Asia and made a bunch of stops and did some talks over there. You also got to speak at our association within trucking, the American Trucking Association, the management and conference event that they had this year, which was really super great to see my friend up there. Your focus on it was called The Rhythms of Change: Navigating the Future of Trucking. If you wouldn’t mind, give a couple minutes on your recap on what you spoke on.

Lee – 00:32:36:

I think we were just talking about the outlook for trucking in general. And, you know, that was back in October. You know, I think when we were back in October, we thought that the market would right size itself a lot quicker than it has. And then obviously, you know, lower diesel prices have really provided a lifeline for a lot of trucking companies out there, a lot of smaller trucking companies. Because, you know, you’re mentioning during the pandemic, a lot of people joined the market. And when they came into the market, the ones that were buying used equipment or new equipment. Obviously, a lot of them buying used equipment, they were very high costs. And if you’re charging $5 a mile, then it’s fine. But, you know, when you’re sub $2 a mile, it doesn’t make any economic sense. Not to totally deflect the direct question, but it’s what I do. So, you know, I think the more interesting thing now, like what we’re trying to take a better look at and better understanding, and you probably have some great data on this, is insurance. Only are more carriers saying, I don’t want to insure the trucking market. And if there’s fewer carriers, that means rates are going to go up and rates are also going to go up because the verdicts are getting out of control. And so I think that unless rates improve soon, people aren’t going to be able to pay their insurance, their new insurance, because A, they may not even be able to find a carrier that’ll insure them. And B, if they do, it’s going to be significantly more expensive and you need higher rates. And the problem with the truckload market or the beauty of the truckload market, depending on how you look at it, especially the spot market, it’s so fragmented and so easy to get into. And obviously people don’t want to leave unless they absolutely have to leave the market because they need to make a living. So in a perfect world, rates would be steadier and people would be able to figure out what their cost-based is so they can really make an educated decision about whether this is a business they want to be in. But when you have rates, going from like $5 a mile to $2 a mile in your cost-based is based on $5 a mile. It can get ugly.

Brent – 00:34:32:

Yeah. Diesel fuel and insurance, insurance and diesel fuel. Those are the two big.

Lee – 00:34:36:

Do you see numbers on, because do you guys provide insurance?

Brent – 00:34:39:

We do. With our RMS product, we have the greatest view into the small market insurance coverage through the onboarding and insurance monitoring we do for them. So we see their coverage amounts. I don’t know if I could report on what they pay for it, but I do know it’s been increasing. I look at the report that I believe Knight-Swift just put out. It lowered their earnings, their hit they took on their insurance this past quarter, I think the last quarter of last year. So insurance is going to continue to be a problem. And the federal government’s also going to continue to come at it from a standpoint of it needs to be adjusted. The coverage amounts need to be adjusted because it hasn’t been adjusted in quite a long time. So that’s another thing for a nation to pay close attention to, whether you’re a broker or whether you’re a carrier or whether you’re a shipper, all costs matter, you know, because it goes into whether or not you’re going to have available capacity or you’re not going to have to be able to get goods to market because we’ve got to have the trucks there in order for that to happen. Well, Lee, I appreciate your time today, man. The 45 minutes went super fast.

Lee – 00:35:33:

That’s it?

Brent – 00:35:33:

As it always says, I don’t know, that’s it. Just two old friends just catching up, man, in the market. Man, thank you so much for your insight into the marketplace. And thank you for your encouragement for the Freight Nation listeners and watchers to pay attention to the data. You know, Bloomberg’s a great resource for that. So just appreciate all you do to help the industry.

Lee – 00:35:51:

Well, thanks for having me. And it’s always a pleasure to talk to you, whether it’s being recorded or not.

Brent – 00:35:56:

Well, I tell you what, it was recorded that we can just put a better side of us forward every single time. We’ll, Lee, on behalf of Freight Nation, thanks a lot. And Freight Nation, don’t forget, man, just don’t forget to work hard, be kind, and stay humble. We’ll catch you the next time. Thanks for watching and listening. On behalf of the Truckstop team, thanks for listening to this episode of Freight Nation. To find out more about the show, head to truckstop.com/podcast. If you enjoyed this episode, make sure you hit subscribe so you don’t miss any future episodes. Until then, keep on trucking and exploring the open roads with Freight Nation: A Trucking Podcast.

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