FreightWaves Today | September 15

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1:00Tom, you worked on Wall Street. We're talking earlier on air because this is our train day. Yeah. Our rail day. It's our favorite day of the week. It's Wednesday. As the railroads go, when you started your career in Wall Street, there was nobody really monitoring the railroads. Yeah, it was a really special time. So while I'm knowing more for trucking and my role around that for the last three plus decades, my early coverage was built around the railroads. There were 15 public railroads and only two to three analysts per public railroad. Nobody wanted to touch them. Money managers didn't want to touch them. Today, I think there's five public railroads and everyone's got at least 30 analysts. So we could get in and make gigantic calls that were different. The first one that we did was the old Santa Fe. They had paid a special $40 share dividend back in 1989 to fend off some corporate raiders. They took on all this debt. I had a boss who was like, this company is asset rich.

2:01And so we're going to his thesis to me and he made me go research. It was the company's going to have to split up an IPO, all these divisions. So they had the railroad, which owned at that time, it was incredible. I think they owned 2% of California, 2% of Arizona, 1% of Nevada. So they took public or real estate company. They had Santa Fe. You made the real estate real estate. They had a land map. Yeah, right. Yeah. I mean, they owned and so it was a public company. I think it was called catalyst CAT, ELL, US. That's huge. They had Santa Fe energy that they took public, Santa Fe gold in the railroad. I think there was a fifth one, but we made a killing for investors. All right. So it's interesting. I have been and really knows this because I talk about it often. I'm just a name or with history, and basically the railroad history. And it's interesting how these businesses, these railroads, I mean, they built America. Yeah, like that is the reason we have this massive manifest destiny expansion. But it's interesting how much incentive, you know,

3:04there was a lot of corruption. This is the gilded age, but also like how much the federal government working with the territories really wanted this expansion and infrastructure was willing to fund it to really build what is the modern economy. Yeah. It's amazing how these families and these companies just acquired so much real estate. I mean, the whole state of Florida was built by railroads. Yeah. That was it. The flaglers that built that entire. I believe so. Yeah. That entire state is just really fascinating. It is. In all the railroads that used to be around, you know, I grew up in a near St. Louis, but there used to be a railroad in my town called the Galton Railroad. And they were one of many thousands that went away after the Stagger's Act in 1980. But it was a fascinating time I loved it. There were railroads that eventually got bought out that, you know, we covered when nobody covered them, Chicago, Northwestern. There was a little bitty one down in Memphis called the Mid-South Railroad that got bought out for a killing. And so we could get in and make a difference.

4:10We had a similar call on the Burlington Northern that it was going to be more worth some of its parts. And so we made a call that they would split up as well. And again, nobody was following we followed Conrail. And eventually I shifted full time more to the trucking industry around 93, 94. So let's talk a little bit about you got your career started on Wall Street. You've come through all of these cycles. You sort of when did you start in freight? Like when was your first born-on date? 1989. Okay. So you came in, deregulation was nine years in. We sort of passed the initial shock. A lot of the pre deregulation motorcars that filed bankruptcy. Yes. And this is still at a time when the railroads were a disaster. Right. Right. They were sort of getting their act together. They were de-leveraging. They were having to respond to market conditions. They were, but they hadn't had the presidential emergency board yet. So they were still running five-man crews. But one of the first stock calls that we made in trucking was the old American

5:11freightways. They had gone public in 1990 in 1991. I think it was. There was a unionized LTL carrier down in Arkansas called Jones that was overlevered. They filed bankruptcy and American freight back then it was Arkansas freightways. Free American freightways. The stock more than double the very next day. And then they ended up having an earnings. Because of the bankruptcy. Because of the bankruptcy, a unionized LTL carrier in their backyard went under and went under. And so again, nobody was following these things. And so we had a lot of fun. And American freightways eventually gets bought by FedEx a couple years later for Smith wants to be in LTL and is it buying it? Well, it was really about nine or ten years later. It was 2000 when that happened. So Tom, how would you describe the current market? If you've gone through all these cycles, what is the current market look like? Well, I think it's the most fascinating supply dynamics I've

6:12seen in my career. Demand has been so, so. But I think it got a little bit better in June and July. One of the things that we look at Craig and Julie is if you look at the purchasing manager's index report, people look at all the traditional numbers there. But I also like to look at the sentiment. They also, they always tell you out of the 18 surveys or industries that are surveyed, how many are actually growing? And I went back and looked at that. So in September of last year, only four out of 18 industries said they were growing. And this is really tied to industrial production. It is. But then in January, it was nine. So finally, half of the industries reporting in June, it was 14. And then in July, it was 15. So we have seen demand improve. I think I don't know that anybody's using the word robust. It's still overwhelmingly a supply story. But finally, there was some demand improvement in the second quarter. Well, even what monitoring the data since really November is when we saw the turn in demand.

7:16It's interesting because we cover the railroads extensively. If you look at the AARs monthly report they put out, state of rails, essentially, what they said was that the rail freight index was the second highest number since 2008. And what's really interesting about that, as we'll get into it with Bill Stevens later in the show, is just the railroads tell you what is actually happening, what's moving by commodity. And what's interesting is you talked about ISM data and PMI broadening in terms of activity. You're also seeing that in the railroads. Is the kind of the commodities. If you take coal out, which coal is in a perpetual decline, no matter how often the federal government keeps trying to prop it up to give the West Virginia coal miners and Pennsylvania coal miners some love. It's not going to matter. Coal is a doomed commodity. But what's interesting about it is that the other stuff is actually growing. And we're starting to see more physical goods production in the United States, which really hasn't existed

8:22for at least a decade in terms of its own. Well, in the two commodities, I like to track are chemicals, which I actually haven't looked at for the last two or three weeks. But that's always a proxy for future industrial activity. And then the scrap metal. Because that can be remade into anything. So, well, poke is also one of my favorite things to look at because it tells you a lot about steel mills. Yep. Yep. Poke is not what you drink. It is the stuff that goes into making really heavy metal. Yes. So they use it. They need a lot of heat. And that's where they use the coke because it is burned so efficiently at a very high heat. And that tells us a lot about steel. And we're seeing coke shipments up at significant levels. The one that always surprises me, but we've seen is the grain shipments. Because you hear about the trade war, the impact on farmers. Right. And the categories, I think, soy specifically, there have been some significant impacts to farmers due to trade. But if you look at grain shipments, I mean, they're, I think the largest

9:25grain shipments we'll have from Bill later today is like 1993. That's outstanding. Wow. Wow. What we're seeing in the road roads. Well, I know it's going to be a bumper year for corn as well. All the rains throughout the Midwest, Southeast, upper Midwest. There's some farming in my background. Not first, you know, first generation anymore, but I've always had a soft spot for the farmers. So what do you think of the corn? Is a lot of rain good or bad for corn? A lot of rain. It's going to be a bumper year for the corn. It's good. I mean, you say bumper. Yeah, for those that are farmers. Okay. Good. I'm not a farmer. Don't play one on TV. I talk great. So we're talking about a good year for farmers. Yeah, for exports. So does that? No, a good year for cattle, though. Cattle. Not a good year for cattle. No. No, but it hasn't had a good year for cattle for many years, right? Yeah. I mean, the soldiers are talking about corn. It's not about corn. It rains. So yeah. But what is the deal with, I mean, I know Kevin Martin is a far, is a cow farmer. Everyone's a hobby farm. I don't know. We should have him come and talk about it. We should talk about it. Tyson is closing two facilities because of. But a lot of it was a

10:29disease or something with the cows. Something I've been, I read about this a while ago. There's a cattle shortage. That's all I know. There's a cattle. Why? And then beef prices, the beef consumption. They're closing their facilities. They're going to go away and Utah to keep the protein in the middle of the country. Because because beef has such a high concentration of protein, one of the most protein, protein efficient foods you can eat is that there's a big level of demand for beef. Well, although I think if we look at more of the recent numbers because of the affordability issue with inflation and that chicken has had better momentum in the last year or more, I don't get down to that level with beef versus chicken. But I know the chicken, public chicken companies have had pretty good public or volumes to report. I don't know about their profits. So Tom, let's talk about current environment and trucking. You guys ever lions see the renewals are happening. One of the things that we have been talking and even are maybe debating is the right term. Is this

11:34view about whether or not we're going to win or we're going to see the cycle correct? So I think you would agree with this. Is that we're clearly in a up swing in the market. There is some momentum in the freight market. You could argue as capacity driven. But regardless, this carriers of gaining right pricing power. How long does the cycle go from your perspective? Well, so I look at it two ways, Craig. If I mean, there have been sort of five big events that have impacted supply. So we know about the ELP or English language proficiency, the non-domiciled situation. We've had an announcement, no more self-certification around the CDL institutions and then a move away eventually from self-certification with ELD. So that's four. And then there's the Montgomery, SCOTUS and all the fall out, the recent big CA, Robinson, Vertict, etc. If all of the regulatory progress stopped with those

12:34five things and a lot of things that are being discussed, don't come to fruition. Then the cycle will be over by the end of next year or Q1 of 28. But if some of these other things are enacted, there's normal, if all in the normal cycle, it's interesting we've had in Adamo, 18 months. We've had Dr. Jason Miller on, we've had, we had, one of the great things a little bit of the show is just how the differing perspective. One of the things that I think in Adamo would argue formally with DAT is that the government because of pressure on shippers is going to loosen. That's his case. There's too much pressure in the market. Something has to go. Now, Jason Miller has argued that there is actually, which is interesting because I think his position shifted on this. There's more demand than people realize, which is an interesting sort of take. But he thinks that the market will correct because the larger fleets will come in over correct capacity. Well, so there's two angles there. Number one is if the government does do more, like for example reform what it takes to get

13:37a CDL or they raise the insurance minimum, they raise the freight broker bonding requirement, they do any number of things. Like I think there's a discussion to have a national clearinghouse for VIN numbers. That's been part of the problem around death, fraud, non-compliance, etc. And I've got other ideas that we've certainly shared with the government. But if those things happen, then I think the odds of us having more than a two-year cycle increased dramatically. But back to, you know, I listen to your conversation with Ken and I have a lot of respect for him. I'd be very surprised if they could convince the government to come up with some relief bals. If they can't, if it took this long to get enhanced enforcement around non-compliant carriers, unsafe practices, I mean that's something that's more bipartisan than favoring, you know, the Shipper community. I don't think the Shipper community, I mean, has any juice. I don't think I do. Look, you've talked a lot of shit. I think you're a point. I don't know

14:40the care. They don't. They don't. They're trying to report their earnings this morning. Broad consumer sentiment really seemed to be standing up that overall and a huge increase in same-day deliveries. So people are still paying for that convenience, which would be one of the first things you pull back on. We're talking about demand, but not once did they mention transportation a lot. I don't think it's a big deal. Or tipping or I mean, like it's not on their mind. It's on our minds, but as we've learned talking to, you know, we sell typically to large enterprises is who buy so-and-r. And what's interesting about it is it's not as much of a priority as we would like it to be. Like we wish they were like all in on saving money on freight. But that is, it is not. And you talk to the CFOs of these companies. And they will tell you that of all the things that they have to do, transportation's pretty low on the list. It's one of those things, it gets stuck with procurement. And while we wish that they would prioritize it, when you talk to them, it is lower on the list than we would like. And I think that means, I mean, theft, retail theft

15:46is much bigger. If you talk to the retailers, says much bigger. In Corko, we can't get a bill. I know. They're Congress. And so I don't think, like the FMCSA will tell you straight up, that they do not regulate anybody but motor carriers. That is their, they will say, we don't even regulate brokers. They're technically, like, was at this rate, but that's beside the point. But they will say that their role is to regulate the motor carriers. And so as the motor carrier authority, they want to do everything they can to manage the motor carriers. And that is their single charter. And so when you think about it from the perspective of what would really drive change in, in sort of a change in perspective, you would have to have somebody moving Congress to really shift the focus back towards the shippers. I don't think the shippers, even if they wanted the Jews, have the Jews, that don't think they care about it. And I think the ones that the big companies that have the Jews are focused on so many other things. I think they're tariff.

16:48They care of some far more important. Some of the tax bills are more important. Some of the incentives are more important. And I will learn, I mean, look, we talk about this often. I don't think any CEO is brave enough or maybe stupid enough to pin in your perspective to go against the administration. Right. Right. Because you've learned that this administration for better or worse will punish you as a business. They are somewhat ruthless and they're holding CEOs and check. Now, there are a lot of people who have problems with that, it's fair. But I don't think this whole idea that the businesses are going to come and force the government to stop doing immigration regulation. The other thing here, Tom, I'd love you to hear thoughts on it, is if you look at throughout history, anytime you see an industry go from a deregulated market to shift and you worked on Wall Street. And you know how I use that as a great example is Wall Street went from a very deregulated market to all of a sudden lots of regulations. Big time. And it's continued to

17:50shift that way. Maybe now the pendulum is shifting a little bit back, but it was what? 15 years of more and more and more. Well, that's what made it a lot less fun. So it started in 2003 with the Elliott Spitzer reforms. Actually, that made me a better analyst because public companies at that point couldn't talk freely. And it was post-enron. It was. It was one of the aftermaths and the concerns about insider trading and all that. Is that what reg FD came about? Yes, exactly. So I had to develop a network of private motor carriers and that's where really I began to develop relationships with shippers, which served me well when I went to sell it on. It still serves me well with our conference last month. We had like 12 shippers come to our event including five on a big panel, which makes reliance a little bit different as an insurance agency to get trucking customers to our event. But yeah, it became a very different world and I could go on and on with a lot of stories. Let's keep it to trucking currently though. But the idea that you're going to have a

18:53deregulated market. You're going to see the you're going to see hands off and then you're going to see a need for some reform later on. And maybe that's where trucking is today. I don't think anybody wants to re-regulate the pricing and the lane for the analysts to show up. No one's going to do that. But safety is paramount. That was never deregulated. If anything, the government doesn't really know how to regulate that aspect. I'm very grateful for Derek Bars and the team behind him really putting an emphasis on the S word again safety. And they said that way. Yeah. And so speaking of that and FNC say, and you've mentioned that you have ideas that you have brought them forward to the to the government with, you got to what July 29? I mean January 20th. January. And what would be your top things that you would like to see get done? Well, so there was the announcement about the elimination of self-servification of ELDs. But there really hasn't been any teeth put into that. So that's kind of be one of the things. And I don't know if our audience understands

19:56how dramatic the change will happen. So there's a thousand ELDs give or take a dozen right now. In Canada, there's 41. One of the companies is based in Grand Caymans. The other 20 are based or 20 are based in Canada. Those 20 are not going to come into the United States market. So then there's 20 US ELD companies that also serve Canada. So we're going to go from a thousand ELDs to 20 or less. So GeoTab is based there. It's the largest. Oh yeah. They're okay, right? They're okay. Sam Saur. All the big names. Well, Sam Saur is based in the US. But well, I didn't realize that GeoTab, they're obviously they got a ton of US consumers as well. Got it. What I should have said is many of those 20s. There's also complete that's up there. Yeah. But we'll end up with a much smaller day. For sure. As we should. I mean, there's ridiculous that you could have a critter back door. It gets shut down and then it's the certification process is there's over 500 things that are looked at. Her ELD to be compliant

21:01in Canada. Now, whether that'll be exactly what happens in the US, I don't know. But it will be a dramatic change. We know a lot of people are still cheating. So that to answer your question, they've got to put more teeth behind that. They've got to put more teeth behind the English language proficiency. Bines to the driver. Fines to the motor carrier. Maybe the freight is possessed by the government. So I'm looking for more teeth. I'm looking for changes to the new Entrant Program. And there was recently a notice or proposed rulemaking. I'd love to see any new fleet have to undergo a questionnaire of maybe 100 questions or more before they can even get a deal. Yeah. Things around maintenance, hours of service, driver skills on and on. So I think there's more coming, which will give the opportunity, or give the opportunity, yes, to make this more than a traditional recovery of 18 to 20 months. So really falls on to enforcement.

22:03Enforcement and more things being laid out on the table. But I'm confident there will be. It may not be everything that's on my wish list. But like, you know, for example, what if the cost of a new DOT number instead of being 300 bucks or so becomes $5,000 to $10,000? We're not going to see people cobble together DOT numbers today. I've argued that. And again, this is eight now since for this, but the government should restrict them. Yeah. Like at least short term, you're doing the tax of medallions. All of a sudden, this thing becomes valuable. And you know why you do that is if something has value, you don't destroy it. Correct. And that is why I've argued that you should cap it. Like we have what? How many registered DOT numbers are there? 800,000? I look at the annual number last year. It was about 60,000 brand new DOT numbers. That sounds about right. I don't know. I think there's 930,000 total when you could buses, but approximately in

23:06motor and and four higher motorcares like 800,000. And if you tap that number and wouldn't issue new ones, then then you would have a secondary market where those that those numbers would go off. And you could do it in a five year period. But right. You would have is if you're going to destroy something, if you're going to go out and have accidents and unsatisfactor rank and that value of that registration zero, no one wants it. Right. That to me would be something. Again, I've been accused of being a communist for that. I'm still a free market capitalist. I actually think you're letting the markets set the price. And if you have it, you're going to hang onto it. People people take care of things that have value. And if it has no value like these DOT registrations, you're just going to destroy the damn thing. And that's exactly what's happened. Blind spots cost some of fleets, costliest collisions. Simpsara's AI gives you 360 degree visibility into risks on the road. So you can protect your drivers in real time. Learn more at simpsara.com.

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26:16And 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.fratewaves.com. Dr. Jason Miller is here. We have Ken Atomo. It's going to stick around for a second. Ken makes the case that this cycle is not as long as I've argued that it is. Jason, I know you study this. Let me get your take here. Yeah, so on the employment side, I mean, I will agree with Ken. Rates are high enough that capacity is being incentivized to enter. I'm expecting that looks nothing like the entry we saw in 2018 through mid 2019. And certainly nothing like the entry we saw. And really the back half of 21, but especially most of 2022. So I believe that new entry piece, which is your biggest

27:21marginal source of capacity and the industry comes from the creation of new carriers. That's going to be slower than we've seen in prior cycles. We're all through a little bit, Renkel. And as the data I look at, I think there's a lot more of a demand side story in terms of why the market is tightened this year compared to a lot of the consensus. And that's because of just this incredible build out of data centers. And I don't think a lot of that freight is really well captured by traditional metrics. Let's say, CAS, which just came out and is further down year over year, for example, in July, like four and a half percent. But that number just Jason CAS has a higher proportion LTL, which is often missed in the data than it does truckload. I mean, it's a bigger portion. So LTL is consolidating. Continue, sorry, to interrupt. No, no, exactly. But this is where I think the demand side is important to look at and where we have to start thinking about what's the Fed reserve going to be doing this September.

28:21I still think they'll be hiking interest rates because the August inflation data, certainly on the producer side, is going to look worse than the July data. That is a given based on where energy prices are at just by itself. But we also have, you know, if you look where bond yields are at right now, I mean, the 30 year is now at the highest level it's been since 07. You've got the 10 year, itching up a little bit more. We are in no sort of sign that the Hormuz situation is closer to a resolution. And so what I'm starting to question is how much of a demand runway window do we have? And also, is there any sign that the hyper scalers decide to start scaling back any of the, you know, CapEx we're doing? And so in terms of sort of the time into the market cycle, if you look typical expansionary cycles last somewhere between 18 months, the COVID cycle was closer to 21 months. And so if we basically, you know, roll back the clock,

29:28December of 25 is when the market shifted, that would suggest that we've got some running room, maybe into the first part of 2027 here. But if the Fed starts a rate, rate hiking cycle, all bets are off because we saw how quickly the market turned in the back half of 18 into 19. And a lot of that was interest rate driven and that took out demand from the system. So for me, a lot, we're going to have a lot more clarity come September once we see what the Fed does. So so Jason, the demand side is something we've been arguing, we look at the rail data, it's really robust right now, particularly the industrial side, which I think to your point, it's not being captured very well. We were looking at the tender lead data. A lot of the stuff is in the big mining country, big petroleum country, where the data, like, you know, we're not getting a lot of the sort of tank, you know, the stuff on the per million base and mining trucks are just, the stuff is sort of done in these own proprietary networks. If at all, it's probably just orders and fast machines. But but but having said that, you're making the case, at least I want to make

30:33sure I'm interpreting what you're saying is that demand is stronger than a lot of folks give it credit because of AI data centers and some of the material gains that we're seeing. Is that is that what I'm hearing? Yeah. No, I mean, when you look for example at, you know, just take even air freight imports, they're up 17% year over year right now. That stuff said moving expedited truck, you know, that your computers, your GPUs, all of these things, your electrical goods heading to these facilities. I don't think we have clarity on tenders on data center website or data center construction projects. How much of that is automated versus again is going to be more of a pick up the phone, facts type of situation where we may not have as much visibility. But we can see that certain manufacturing sectors like primary metals are up year over year. A lot of that steel, which is related to data center construction, electrical goods, switch gear things like that is up. A lot of machineries up. We've seen that with caterpillar earnings. And so that's where when you start

31:36looking at caterpillar, eat and commons, all of these heavy equipment manufacturers, especially in the case of cat and commons, saying, hey, we're doing more volume this year than last year. That's where it's hard to square with the idea that freight volumes are down. And so to me, that's where I start asking the question more, is there something coming down the horizon in the next six to nine months that could cause demand to weaken? And I certainly think that there are the concerns there, especially if the Fed does raise interest rates because a rate hiking cycle has historically resulted in a material drop in trucking demand within three to six months. Yeah, I mean, Walder has definitely got his, he's going to have pressure from the White House not to raise, but he's also got a credibility issue that he's got to establish. So Jason, it is interesting. We counted it up. I think we're over 70 CEOs. We've interviewed over 160 people at this point. 70 of them CEOs, many of

32:37them, the largest LTL logistics companies in our space. I ask the question on every single person that's on this show, what is volume like? And they're all, it's interesting because they always say, well, we think the economy isn't as robust as we're seeing it. However, our volumes are really strong. And what's funny about it is a lot of them go, but these are our initiatives that are driving volume. And it does tell me what, similar to what you're seeing is that I think volumes are stronger than a lot of people. The market is so fragmented. It's hard to know, but you look at the railroads. We always, I always say Wednesday's my favorite day because they are data. It's incredibly robust. Bloomberg's Chief Economist last week posted something about the fact that earnings have come in so strong and demand's much stronger than they're expected. They believe the economy's ripping. I mean, that is Bloomberg's Chief Economist, US Chief Economist, would have tested that we're in a really substantial recovery right now, at least in our industrial and it's fanny now. I understand there's risks here, but if this volume in momentum were to

33:40sustain, what do you think that means for freight? Well, I mean, right now, so if you take that thesis and then say, okay, volume is up from last year, I'm going to peg it at maybe about one to one and a half percent in comparison in 2018, we were looking at three and a half to four percent up. So it's not the type of all industry freight growth that we saw would that be eight years ago in comparison. So I think where that puts it to me as if I go with that thesis, but then I look and say, tender injections have settled down and Craig, you've got the exact number, but somewhere around 13% right now, we can start to see metrics. I think I'm just waiting for FTR and truck stop to publish their weekly update on the spot market. See where their market demand index is at. But we've seen that regular seasonal cooling things haven't tightened anymore. And so what that does suggest to me is I don't think there's that much additional capacity exiting the market right

34:41now. We likely have some capacity getting eliminated by further regulatory enforcement, but that is getting replaced essentially by new capacity. Net operating authorities are up a little bit from where they had been. And when you look even at new heavy truck sales is picked up by the BIA who gets the data from wards, you had this horrible period from about September of 2025 through April of this year where heavy truck sales and literally had fallen off a cliff. Now we're kind of back to that 450,000 unit a year annualized basis. It was kind of consistent with the sort of 2024, 2025-ish levels. And so it would seem that at least we've seen a little bit of recovery there. We've had very strong new orders. And so that's where I do expect a little bit this fourth quarter, but especially next year we will start to see some capacity start to trickle

35:42in. And that's really a question that if can demand keep growing more rapidly than that capacity can add itself. But Jason, the drop off and truck demand a lot of that as I understand it, you have some different data on this, was that engine question of like what does emissions look like fleets are like, hey, until we get resolution and some clarity, we're just going to go to the sidelines and wait. Right. And so now that boom that you're applying to of more truck orders is those emissions standards are going to and it's replenishment because they wait a longer to do the replenishment. In many cases, then just new truck like you. I'm not hearing anything. I mean, the larger carries that we've interviewed are just talking about that they can't find drivers right now. And John Kingston had the employment data. I know you track this stuff very closely. Transition employment hasn't most since February. So again, I'm still struggling. I understand the arguments that Ken's making. I understand your concerns about going forward. You also have made the case that every cycle we see, eventually the market finds a price and drivers have replaced

36:45that this happens. But where are these drivers going to come from? The data, at least I can't find it, is not showing that drivers are showing up. Are you seeing something else? So if you look specifically at general freight trucking long distance truck loads, so that is the industry sector that most closely approximates what we think about is sort of drive-and operations, we are up a little bit from the low point, which was February. So in February, the bottom that was estimated was at about 490, 494,000 or at about 500,000. So a very slight uptick. No, again, it's a very gradual rebound from that. And again, I'm not expecting next couple months, it's going to be very, very, very slow if we see much of an uptick. And in 27, it's again likely to be a slower process in terms of increases compared again to prior cycles.

37:46But I'm a firm believer that labor markets work. You'll see wages go up. Wages start going up. That'll pull people in from other occupations that are not seen as rapid of wage increases. There's a good paper for everybody out there. It's publicly available by Stephen Berks and Christa Monaco from 2019 from the Bureau of Labor Statistics that looked at essentially where do people enter trucking from, so what other occupations. And it really is a hodgepodge. It's folks coming from material handling jobs. It's folks coming from office jobs. There's not a disproportionate construction story that we'll often hear about. And that is using the actual population representative data from the current population survey. So my statement is it's going to take time. And we always see this with every cycle. I mean, in 2017 into 2018, the market really flips more primarily as a demand side story and late Q2, early Q3 of 17. We don't start seeing capacity meaningfully

38:52really coming online until mid 2028. So there was almost a year lag there. If you again say the market really kind of flipped December last year, but we weren't really sure whether that was weather or other things to call it late February, you're not looking at significant entry until mid 2027 based on sort of that nine month to one year lag. Can any thoughts on that in terms of your perspective on capacity? I mean, I think I said this the last time I was on. I think 2027 will be one of the best years for brokers in recent memory. That's because I think I'm maybe a little bit longer in the front half of the cycle than Jason. I think probably somewhere after the fourth next year, mid year next year heading into peak. We'll see rates kind of start to tip and lose their year over year steam. But I don't know, like we say that I assume you're in use. Well, it's not in then contract probably. I actually starts to trough and drop from comps. No, no, sorry, yeah.

39:56Spot rates mid year trending towards kind of the end of Q3 and then contract rates probably won't get picked up until the the big RF PCs and sit after peak. So, you know, I think it's a typical three to six months lag. But also like going back to where the drivers have come from. Like we're all sitting here and we've been talking about nonstop for the last nine months that the Biden trucking action plan, like I would not be at all surprised if we're sitting here this time next year and there's still large fleets can't find drivers, large private fleets, right, the rise of private fleets. My guess is there'll probably be government jobs programs to like you're already starting to see the veterans, right? I forget there's a really cool name for it that they're trying to put forward to like assimilate more. And I could tell you from deep statistical analysis, the single best owner operator, small fleet owner is ex-military and ideally running the business with a spouse. Like that is the best of the best. So I think you'll probably start to see more and more jobs programs to get folks into driving. And that's where the drivers will come from. It's the market will clear a price to get them in. So Jason, my, I have a different

41:02thing Ken does. I think anytime and I'd love to get your take throughout history, anytime we see an industry go from no regulation to all of a sudden regulation momentum, the pendulum tends to swim into much tighter regulation. If you look at the banking sector, is it, you know, for years, there was a movement to really tighten on regulation, you could look at even decarbonization. You know, that those cycles of regulation, when we start to see that momentum go in an industry, at least the incumbents want more regulation, is that pendulum doesn't swing back very fast? Any thoughts there? So I think that, you know, the small carriers of the world all get votes as well and so do all the owner operators in every congressional district. So I think you will. There'll be a pushback, I think, from a very vocal voting block in case they view things as, you know, getting, you know, too over-regulated. I think one of the challenges right now we have as well

42:05as, you know, you heard you all talking about, and there's no doubt of this. Brokers are trying to figure out, okay, in a post-Mont Gumray world, what is reasonable care for sourcing capacity? How do we go about using publicly available data from the FMCSA to make informed decisions? With that, I think, I think, or I think brokers tried various different approaches in the immediate aftermath of Montgomery, probably tighten things down a little too much and then they started to realize some of the nuances of the data that's available and likely made some changes. I think, you know, the idea that at some point FMCSA is ever going to publish a list of unsafe carriers, that will never happen. There's no way that available safety data could reasonably be used to make essentially a kill decision on a carrier's operating authority based solely on that. That's why we have the audits in place. So I think that we've seen, you know,

43:09some shift that way, but I don't, you know, I think the industry is, you know, very strongly deregulated. You know, and at the end of the day, one of the cautions I always have is, again, thinking about the Federal Reserve, there's a 2024 study that found that the elevated freight rates and trucking were the 10th most important industry in the country for explaining the year-over-year price changes we were seeing in 2022 relative to 2021. So the only industries that are higher, things like, you know, petroleum refinery, you know, steel production and chemical production, trucking sitting down here at number 10. And so that is an industry, the Fed is watching closely. And so that's one where what the industry should want is pricing creases that are allowing for safe profitable operations, but are not so steep that it makes the Fed start thinking, okay, we've got an overheated economy.

44:11We need to start breaking out the interest rate hammer and cool this down a little bit. Jason, O'Aida has been very vocal. We've had them on the show a number of times. They want tighter regulations. I mean, they're the most powerful independent association. So when I, when I look at the parties that influence Congress, these lobbyists are going to say, you look at the, and you can go over the list. It's all alphabets too. ATA, tighter regulations, TCA, tighter regulations. These are two of the most powerful NPTC tighter regulations, like the O'Aida tighter regulations. Like, it strikes me that all of these, that rarely get along, by the way. Like, I, the ATA and I've had a couple of back and forth at times. They are actually, you know, are, they have a line in incentives in this case, right? Well, everyone realizes that regulation got too loose. And higher rates, more barriers to entry, all of that leads for these groups for their constituents to be more

45:15profitable, right? I think they all realize when you deregulate so significantly and eliminate the barriers to entry, it's not the larger cares that end up winning. I asked my brother, who was on the board of the ATA a couple of years ago, now he's building homes, which is another difficult market right now. Why was the ATA pushing this driver shortage narrative? And he basically said, look, they never believed that the brokers would ever play a role in, in major, in radio routing guys. It didn't see it. It was sort of an old school, old way of thinking. And they thought brokers would be a secondary player, a backhaul player, and that the guys that would have the freight. And again, if brokers get freight, it's the small carriers that win. They never thought the brokers would be primary position routing guys. So they thought that by lowering the burst of entry for truck drivers, that those truck drivers, the only way that they could get freight and jobs was to go join the larger carriers. What they didn't expect to happen was that the bottom would fall out when you deregulated the industry, the bottom fall out. And so I don't see, I understand Ken's point. And I think if we looked at historical trends,

46:20I think he's right. But I also think this industry is starving for more regulation, which is a very weird thing to say in the history of trucking, I bid it my whole life. They want more regulation at the state and federal level. So I don't see how all of a sudden they're going to change and realize, oh my gosh, we've overcorrected. That is, we'll see the case for that. So when I would argue, what I would argue is what they're really looking for is they want more what we call state capacity from an enforcement standpoint to get the bad actors out of the equation. So what I see this more as is a call for we need more state capacity, more regulatory capability of getting those bad actors out. The chameleon carriers, the shockingly unsafe fly by night new entrants and things of that sort. What I don't think we'll see is a shift towards actual economic regulation. So I think what we've had happened is you've had a, you know, speaking as an economist, you've had basically a technological innovation in the production

47:26technology of the industry. And that is, as you mentioned, Greg, brokers now playing a primary role and a lot of shippers routing guides. It was not something that we foresaw 20 years ago. What that has done is it has made it more possible for small operators to survive and even thrive. The challenge is small operators of far less incentive to operate safely. And so now what we have is more of a regulatory capacity challenge because capacity is more fragmented today than what it was a decade ago. When you look at the number of firms that are out there and trucking versus a decade ago, you can start to say, okay, the average firm size is declined tremendously. So you have an issue of needing more, you know, essentially regulatory capacity. And so that's the language I wish we would all use because that's what I think we're really all talking about is we need more regulatory capacity. Jason, I agree 100% with what you said. Nobody wants more economic regulation,

48:33rate regulation. No one's arguing for that. Except some, you know, some really called fringe voices on on social media want to go back to the Motorcareer Act days and I see CDs. That's never happening. That's not going to happen. Amazon could not survive with if we had the types of regulations we had during regulated regulated days. I don't think there's any case for that. But I do think the industry is worried about who is driving our trucks. And they've seen far more concerned about it than they have ever been because they realize that it's your point. The small actors did not have the incentive to ignore the reasons to actually manage safety. And the industry was set up to exploit this lack of regulation. And so, no, I don't know. I see a massive change. And look, I know you've taught to be up to CSA. I've talked to the DOD as well. And members of Congress, they're all thinking we need tighter regulations when you get rid of bad actors. And I think this is by the way, it's a Democrat and Republican issue except in some fringe parts of the Democratic

49:33Party where they're so far to the left than the general sort of census where they want every, you know, no regulations for immigration. I think the majority of Americans and our lawmakers realize that we need to have some control of whom's driving our trucks particularly when it comes to safety. No, exactly. And this is where to me it comes back to you see the behavior during Blitz week. You see how the average age of trucks on the road, you know, all the old, a lot of the old equipment gets taken offline. You see a lot of the four higher owner operators and the fleets with two to six trucks. They start setting out. That is a perfect example of this. You know what I would argue? For example, FMCSA needs to do more unannounced blitzes, but they need to reverse how they've done them in the past. Previously, they would target maintenance. That's not the thing you target with an unannounced blitz because you need to give folks warning, so they fixed the stuff ahead of time. So, you know, you need more unannounced blitzes for speeding,

50:35you need more unannounced blitzes for HOS compliance and things of that sort. And to me, that's where, again, it comes back to regulatory capacity is really what we're talking about. And I think that is where we're all united in saying there needs to be a lot more regulatory capacity for this industry because the changes in the production technology that we've seen with the ability of brokers to now be, you know, 20 to 30 percent of, you know, shippers routing guides. Now means that we have this super long tail of very small carriers, which all of my research has shown are shockingly less compliant and less safe than your mega carriers. Hey, man, I can't, we're making history here, ladies and gentlemen. Jason Miller and I agree on something. And it's on record. We appreciate that. So, Dr. Miller, great to see you. Can always a pleasure. Getting reliable capacity can be complicated. Let Arxo make it simple. As the third largest provider of broker transportation in North America,

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55:03October 27th and 28th. The signal. Chattanooga, Tennessee. We'll see you there. Register now at live.fratewaves.com. All right. We're going to move it down to our next guest. He is Chattanooga native, Rush Belldhacker. He's living in Tampa. He left us in Chattanooga. Rush, walk into freightways today. Yeah. Hey. Good afternoon. Thanks for having me. You know, UTC, Mox. It's football season. I don't know. You still follow the Mox down there. Oh, yeah. I've got to follow the Mox. I have to dig for him deep on ESPN Plus. But yeah, we still follow the hometown team. You know, time free press has great coverage of the Mox. If you ever need to pick it up. So as I'll shut out to my other side hustle, we'll welcome, Rush. Let's talk a little about tabby. So you guys are in the price and RFP business. Tell us a little bit about really what tabby is, what you're seeing right now in the market. Yeah. So tabby, we define ourselves as a rate management system. So we're mostly known for automating spot portal bidding for brokers

56:05on some of the larger shippers. But the product's grown a lot in recent years. So there is an RFP tool. We do have an email plug into automaker email quoting. There's several tools on the platform. But what it allows people to do is actually capture all of their spot coding activity, not just their wins. So they can make educated discipline decisions around their spot data instead of just shooting from the hip and their spot pricing behavior. And you had a great data points. A partner with Sonar, which is amazing with that guidance on spot rates too. And I will tell you that I ran a group of people who all they did was acquire freight via load boards and having that data to see what you bid yesterday, what you won, what you didn't win when you bid yesterday. Your own history is in many cases one of the richest things you can use there in addition to market rates and benchmarking. So I think that's a hugely important part of your tool. Yeah, absolutely. And I was a long time broker. I did it for about 16 years.

57:06Our pricing adjustments are just shooting from the hip everywhere. You know, it might have been a large broker or a small broker. But now our customers are actually really able to dial in where they have opportunity. It'd be a lot more strategic and how they're acquiring that freight. So what exactly are you guys seeing right now in the market in terms of how or brokers bidding on freight? What's the, what are you, what are you seeing in terms of market activity? So we actually have an index, the the Tavi pricing pressure index. And the main part of that is a scale from zero to 100 with zero meaning that brokers and carriers have all the pricing power and 100 meaning that shippers have all the pricing power. Right now we're firmly out of 36. And this does take into consideration a lot of factors. Volume, margin, awarded margin, bid margin. And so 36 is good. It is broker-favor territory. It is significantly up from where it would have been this time last year. But we've seen that come up seven points over the last month.

58:06And talking to different brokerage leaders across the industry over the last months. What I'm hearing is that they're still winning spot volumes at a significant rate with good margins. But it's nowhere near what it was three months ago. And so I think we're seeing a little bit of normalization in the market out there. Especially in spot where people were just kind of throwing money at loads and winning whatever they wanted here around the time of that market shift earlier this year. So, Rich, I want to make sure I understand what this index means. So, 0 to 100, if I am a, so put it perspective from a carrier or buyer sales, if I have capacity, do I want the index higher or lower? So, if you have capacity, you want it lower. A zero would be perfect for you. It means you're setting the rates and there's nothing anybody can really do about it. So, I have all the pricing power if I have capacity at a zero. And if a seller of capacity, I want it, or if I'm a buyer of capacity, I want it at 100, right?

59:14Correct. Correct. That would mean you're very much setting the rates. So, it's very similar to the SONAR pricing power index, but reverse. Like, we're sitting at a, in-verse. We're sitting at a 70 right now. Oh, it's like, we can't buy, almost math. For the pricing power index, which is same thing, right? Showing broker secures have more leverage than shippers, but ours is also a false. It's an inverse. Yes. I mean, I guess rush a lot of what you build and sort of the thinking is that this is really a floor broker product, something that they can use to really transact in the market on a daily basis. Is that the best way to think of it? Exactly. It's just kind of understanding where the spot market is today. We have the benefit of having over 1 and a half million spot loads flow through our system every month. So, it's just an aggregate of that data, you know, at what markets were those loads submitted at, at what markup were those quotes one at, and just kind of piecing all of that together. So, it's free. You can find it on our website. But yeah, it's something that we released monthly, and it should give you a pretty good

1:00:16gauge of where the market was and where the market's going. So, did you leave UTC and heard the freight market and ask us America, was this your first job out of school? Yeah, 2010. It was hired by Access America Transport. I knew nothing about what it was that we did to make money for the first two months that I worked there. And then I finally pulled somebody into a room and it was like, do carriers pay us to find them loads or how does this all work? And once it was explained to me, it kind of took off. So, I was one of the early guys in that office and I mean, what a lucky place to be in 2010. Well, what a great lineage of all of the guys in that business, young 30-somethings that were just going at slinging some freight. That at least got a great interview on Frick Kaviar talking about how they were growing very similar to TQL. But I remember Access America being in shadowing a native. In fact, having a lot of folks that just told me where from here to express direct went to Access America or part of the story of Access America here in shadow, but what a great business.

1:01:21And I look, I know those guys, a lot of them are my friends that were part of that business. And it's interesting because I don't think you guys knew what you were actually, not that you didn't know what you were doing. I don't think you were like a part of. You guys were just slinging some freight. I had no idea. I thought that doubling in revenue every year was just something that business did. Like, this is what business in America looks like. So, the first year I'm there, I think we did around 35, 40 million. The next year was 100. The next year was 250. The next year on pace for 500. And I'm like, yeah, this is normal. Yeah, I'm 24 with like 25 people reporting to me. This happens in every business in America. So, you know, once the access days were over, you kind of got to like appreciate what you're actually a part of. I was so young at the time. I didn't really understand it. I just knew I loved my job and I found, I mean, just a great place. And I think it's set, yeah, is that the value system that I have today about how I approach work and how I treat people, I couldn't have worked for better people than Ronald Chad and Ted and still stay close with them to this day. It was all like a culture.

1:02:22And what's interesting about it, I was talking, so Ted Aileen, I've known Ted for gosh, 20 years now. And it was interesting because when I first started freightways, he looked at me. This is just, and I don't mean to pick on Ted, but I'm going into this as a friend. He said to me, he goes, the brokers care about the economy. And the reason I point that out was it just so much has changed about in those days, you just had to have great culture. And if you could hire people, there wasn't a lot of talk about the quote-unquote freight market. It was mostly like, what's higher, great people, let's give the, put the right culture, the right incentives, and these people will run. There wasn't a lot of the consternations in the mid-2000s and tens about how's the freight market. It just wasn't very transparent. A lot of people didn't even think freightways was needed because there was no real conversation about what the freight market is. It changed so much over the last 10 years. Yeah, I completely agree. And I remember being on the floor one day, and there was this shipment that I'd paid the same on every day for months. I think it was like $16,000 or $1,700.

1:03:24And then one day I came in and it was like $2,800. It's like, what is going on? So you know, you take a loss on it, you're taking a loss on all the loads that you have. And then you start realizing you need to quote higher, then you start making more money. You're like, oh, this is great. And so life becomes good. Christmas presents get a little bigger. And then the market flips and everything changes. And that's when I started realizing that everybody around me was starting to pay attention to the economy. Like, what's going on at the freight market? Why does this happen? And so, you know, as we've gotten better data on the market in large part to your organization, I walk into Broker's floors today and I'll have conversations with people who are six months about, hey, what's the market going to flip? I mean, for the last three years, it was all anybody talked about like, when are we getting out of this, this trench? So yeah, I mean, it's a topic of conversation across Broker's floors every one of America today. And it wasn't that way in 2010. We just, yeah, hopefully less prior an error now than what's happening. Well, let's get started. Because the market has, the market, the freight market, if you were,

1:04:24you were at Yosk's Cross. And we talked about the freight economy constantly. But I think Brokers would such a high for growth industry that if you had a good culture and you could hire people like Rush at a school and you put them in there, you gave them incentives and said, go, and you just took the, the freight bro culture, but that adrenaline of feeling like you were a part of something was really all it took in those days because there was so much market share being gained. And I'm simplifying it, but that's really this formula for, I mean, it's changed. It's so different. I was in an office in Birmingham last week with a 26-year-old. He's inside of our product and is looking at that in analytics every day and then making changes to his pricing rules on enterprise customers based off of them and having conversations with me about how I forecast the next few months going. So he knows what to do. It's just to completely different than what we were doing. And I think it's, I think it's really cool to have that depth of conversation with the 26-year-old. The talent in the industry now, you know, there's so much

1:05:28further ahead than where we were at that age. And a lot of it is just the knowledge and resources available to them. So yeah, I mean, that was a really cool conversation, but like I have conversations like that almost daily with these mid-20s guys. Yeah, it's awesome. I love it. They're interested in the Margaret Park. When I first started Freightwaves, the editor of the Wall Street Journal Logistics Report, Paul Page, is 2016 said to me, and I forget it, great rates just aren't that volatile. Why would you guys need to exist? And I'm like, I was forward. This is, you know, I have respect for Paul. He's been doing, you know, writing about the industry for decades. But this was, I don't think people realized, unless you were in it, just how volatile the market was. Freightbrokers were really, you know, really sort of coming of age in the period in Russian, your career, 2010 to 2020 was really the sort of coming of age of Freightbroker. Maybe COVID was the eclipse of all that or the climax of it in terms of momentum.

1:06:33But I mean, you were at Metaphora, you saw a lot of insider brokers. Who are the ones that are winning? The ones that are winning right now are the ones that are extremely disciplined, disciplined in their pricing approach. And that starts with understanding their data and analytics. And then implementing a strategy that it's adopted organization-wide. So what we see with a lot of brokers that can't clear that first hurdle of understanding their data and analytics is they're still chasing volume like they should have several years ago. And when they're making adjustments, it's from the hip. They don't know what's going on. The ones that are winning are looking at their win rates on their large customers by lane. They're setting up capacity strategies based off where the largest opportunity is. And they're not chasing freight that doesn't pencil out for them. They're only pursuing profitable freight and they're being very strategic about it. And how how educated are shippers on the market? Because the other thing that I remember 10 years ago, even a couple of years ago, a lot of shippers were just not aware of the market dynamics or the

1:07:33state of freight. They're like that change as well where shippers are now much more intoned with market conditions. If you talk to my dad 20 years ago and say we shut the market conditions, we don't want the driver shortage. It was part of the narrative of convincing shippers. They're going to run out of capacity because shippers were not aware of how the market is. That's change as well, Rush. Oh yeah, completely. We've been in this capacity-led crunch for a while now. But shippers feel it a little bit later than brokers do. And a lot of that's because of contract rates. The not-so-secret, secret of contract rates are that the contracts aren't really enforceable. And the only reason that you honor them is to not lose your business. So brokers and carriers will hold out as long as possible to not give back loads or not reject tenders. So when the shippers start seeing those tender rejections that y'all have made a really big deal and they're such a good data point, it's just it's after whatever flip has happened. So I was a BPS strategy at a

1:08:40broker down in Scottsdale until January of this year, but early January is talking to a shipper and they're like, oh no, this is a new normal. It's never going to change. And you know, I tried to tell them otherwise, but it's just that they haven't seen it yet. They haven't gotten the pushback from their providers. So they're starting to see it now and they're starting to pay attention a little bit more now. But you know, it's three to four months delay before they start seeing enough rejections on the widen of scale that affects their business. I agree. I think shippers, and then I think they started seeing it, but they didn't want to believe it for a little while as well. Or hadn't been through it before, so they didn't really understand it. I think that's it. I think I remember all of the sort of noise we'll call it on social media, the back and forth arguments between folks that were, hey, this is a permanent shift or a fundamental shift in the market to a number of shippers and even brokers that were sort of like, hey, this is just weather. This just went to weather. It's all going to pass. But a lot of it is recency bias. I mean, a lot of it is just the fact that to your point, Rush, a lot of these shippers have never seen a

1:09:42carrier's market or where carriers have leverage. I think that bias is such a good point. And that's why, and I used to always talk about that when I was repracing that our operators had this massive recency bias on the last one they covered or what this week looks like. And when you're thinking about contract pricing or longer term pricing and those customer relationships, having data like this really helps put that recency bias into perspective. Yeah. So Rush, what do we see in the second half? How are you guys feel about the second half? We're going to have a strong peak. What are your expectations? Well, on the shippers side, one point I want to make, and I think why it's hitting them so hard right now is that a demand-driven increase in pricing versus a capacity-driven increase in pricing looks very same on a rate chart, but it looks very different on their P&L. When times are good and things are booming for them, they can absorb this increase in cost a lot better than they can right now. Their volumes have an increase at all, but their prices have to know fault of their own. So that's why I think you're hearing a lot more from them

1:10:43than you have in the past. It's a great point. It also explains why they don't believe it because normally when they see rate inflation, their core business would also be increasing. They would see more orders and like, yes, the course rates are going up because my order flows up. But if they're not seeing the activity, the increase in demand, then it feels a little bit like disbelief. It feels like a lot of, to them felt like noise. But again, that's why we have the data to talk through it. Well, I think capacity-driven shifts catch brokers more off guard than demand as well. Why is that? With the demand driven ones, you kind of see it come. And you're kind of hearing the signals and you're seeing more volume come to you. You're bidding on more things. The capacity driven ones, it's, I'm quoting about the same amount of freight as I've always quoted, but I'm like just making larger margins on there because you're about the same percentage. So it just, the demand driven ones, you have a lot more opportunities to make money. You have a lot

1:11:46more trucks that you can book and these capacity ones are just a little different because that volume is not there. There's the same amount of loads I'm covering and it's happened to be making more on them if that makes sense. At least on the spot loads, on the contract loads, they're getting, I mean, they're getting absolutely whipped. All right, Rush. Appreciate coming out. I do have one last question. Really important. Greatest freight city in the country. It's Chattanooga, Tennessee. It's not even close. Chicago, Chicago tried to make a good run at it and there's some very talented brokers there, but Chattanooga is number one. I will say, though, the Birmingham brokerages, while they're nowhere near Chattanooga or Chicago, very sophisticated, very good businesses. A lot of them in the steel business, right? A lot of those guys come out of the flatbed steel, which makes sense. I mean, Birmingham's a steel town. Yeah, yeah. Thanks for having me on, guys. At SIA, it's a yes, isn't just an answer. It's how we're built. A way of working shaped by our people, our nationwide network, and over a century of know-how that keeps freight and business moving. From coast to coast and across borders, our full-service freight and logistics services turn yes into real solutions

1:12:51for real business challenges. Deadlines change, conditions shift. SIA is ready for it all. For every customer, every day, it's a yes. 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 line is safe. And the world moving from one cab to a global network, billions of miles, trillions of data points, everyone making your operation better.

1:13:54And we never build it alone. FAMSAR. Built with operators. Over 50 speakers. Four events across three 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. Seven 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

1:14:59else. 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 27th and 28th. The signal. Chadanuga, Tennessee. We'll see you there. Register now at live.fraithwaves.com. We have Laxham Ocutan, who is the co-founder of the Economic Cycle Research Institute. I'm here to talk about the global industrial cycle. Welcome to the show. Thanks for being here. Oh, thank you for having me. Thanks a lot for having me. Interesting conversation there, I must say. Well, we have, unfortunately, we have every day. Unfortunately, every day. It's funny when we started freight waves, everyone's like, you know, freight supply chains are boring. How do you create a business?

1:16:02A media and data business on supply chains. It seems boring. But dude, it is far from boring. There's a lot. You know, I won't name names, but I used to work at a place in my summer job. When I was a kid and, you know, there are some guys who knew a guy and deliveries were happening. And I feel a little bit of a story that you're talking about here. And it's as old as, I guess, shipping has been around. It's just, but it happens in new ways as the technology changes. Right? Well, it's now far more sophisticated because a lot of it has been perpetrated overseas. You know, the cybercriminals, if you know, you know, it used to be the Nigerian scam. You know, we always get notification that you will, you know, there's a hundred million dollars from a print Nigerian prince. But now it's, it's, it's, and they're because of AI, there's so much more effective is like you're just, you know, it's just a matter of time before you will have it be exposed. I mean, that's the, the reality. No, it's not an arms race. But like you said, law enforcement is pretty good. I've,

1:17:04I've been on that end of it too and seen what they've done. And they're, they're, they're in their fighting. So, uh, well, they're not as good as they should be. And I, and I don't think it's their fault. We had the, we had a, a frog conference a couple of months ago. We had the FBI and federal government and FBI. Uh, and look, the reality is they don't have the resources to go after all of these crimes. And that's on you. The volume is big. Yeah, I agree on that. Yeah, absolutely. But anyway, it's, uh, so we're just going to talk about the economy. It's like about something a little bit more, a little bit more interesting, but, but certainly, maybe not as depressing as fraud and the fact that stuff keeps piling up. So, we talk about business coming in the door. That's what we want to talk about. More or less. So, what are you seeing right now that sort of top of mind? Well, you know, I was, I was really excited to talk with you because, um, in looking at the macro economy, um, kind of the backbone, the bell weather, cyclical component, which is where we do a lot of interesting research is, uh, on the industrial sector, the goods sector. Um, so, so trade and moving

1:18:11things around, moving goods, either wherever they are on the supply chain, you know, they could be early on goods, middle of the supply chain or, or right at the end before you give it to the consumer. That's all super cyclical. And depending on where you are in the supply chain, the cycle gets a little bigger or a little, a little softer. And right now, uh, you're still in, uh, this upturn that we called, uh, almost, uh, two years ago, it's been kind of moving to the upside. So, you've had a little bit of the wind digger back. Uh, I think that's starting to get a little old now. And using that, uh, you think the recovery is actually slowing down? Well, I think it's, it's, uh, it's time to, uh, in the words I was, uh, we sometimes look for quotes of notable figures. And JFK once said, uh, the time to repair the roof is when the sun is shining.

1:19:12And so I would say, there's nothing right here so far so good. Um, but there are clouds on the horizon, a slowdown, uh, in, in, in, um, industrial activity, uh, both in the US and globally, because these are kind of linked up cycles internationally, um, is on the horizon. So, it's a slowdown. It's not the end of the world. Uh, it could be annoying if you were anticipating more demand growth to accelerate. It's probably not going to do that. It's going to top out. And it's, it's even more annoying when prices for like just running your business haven't gone, haven't eased yet. Those are still sticky into the upside. So if, if your demand growth is slowing a bit and your prices of, of delivering your business are still sticky, your margins get squeezed, uh, nobody likes that. Uh, I think we have to prepare for that, uh, uh, in, in the coming quarters.

1:20:19So what, what do you guys do differently than other macro forecasters? It seems like your index, uh, moves ahead of the PMI is a leading indicator of some of those you called the upturn, you know, significantly before it happened. So how do you look at this differently? What are, what are the things you're taking into account? Great question. And I, and I just want to full disclosure, right? We're, what, what actually economic cycle research into do, what we do is, is, is, you know, I, I, I work with a lot of people on Wall Street. I have friends who are on Wall Street, but we're not really Wall Street people. Uh, we're not Wall Street research in that sense. We're, um, an older, I would say a three generations old now at this point. I'm the third generation of researchers who look at cycles, um, kind of the upswings and the downswings in business. And, and that's different from how a lot of macro forecasters you, you might hear about, um, forecast,

1:21:22uh, in, in their models, I, I, a lot of what they do in very sophisticated ways, including with AI and all these things, is they extrapolate trends. So if something has been happening for, uh, a bunch of days or weeks or months, the forecast is it'll keep happening. Now, often that's a perfectly fine forecast, unless you're at a cycle turning point when it's a really bad forecast and can hurt you. And so that's where we step it is every once in a while we raise our hand and we say, uh, we're, we're near a cycle turning point. And what I'm sharing today is that, yeah, I think that there's, this, this growth that's been running up for well over a year, almost two years, stopping out and it's going to decelerate. You'll still be growing, but you'll decelerate. And these indicators you asked about, um, they have very, uh, we have so many leading indexes and, and they're, they're quite interesting. I've been tracking them for decades now. And, uh, the global

1:22:26industrial growth long leading index, which we affectionately call the giggly. Uh, this leads global industrial activity by almost a year. So that we watch how that's doing. And if we see it turning down and it has, um, then we look at our shorter leading indicators to see if they're starting to turn down and they start, they are starting to. And those indicators actually lead things like the purchasing managers index or the PMI and a lot of industry people will follow where the PMI is. And if the PMI comes in a little weaker, they go, uh, oh, maybe something's happening. And for us, if the PMI comes in a little weaker, we say, ah, that's confirming what we thought was going to happen. So now we know it's here. We have, we have a lot of conviction in any decisions that we might want to be a part of, which could be, you know, basic business management

1:23:32can, uh, decisions you would take, uh, to navigate a slowdown, uh, like we're describing. So it's not the end of the world. It's, but it's something that you can, you can navigate. So I'd love for you to tell us what you're saying right now and more specifically. You've got these indicators that tell us the global economy is slowing, the industrial economy is slowing. What, what is the stuff that you're actually seeing? Well, right now, okay, so the global industrial growth long leading index went down. Then our leading manufacturing index is globally. That started to ease. Coming to the US, the leading manufacturing index for the manufacturing sector of the US has started to ease still growing, but it's starting to ease. It was growing quite nicely uh, until a couple of months ago. Um, and that anticipates the PMIs, which will, in, in our telling,

1:24:33starts at how about and ease. So you might see a headline in, in the fall, uh, that says, oh, the PMIs have come down a little bit. Uh, maybe that means there's some easing. Uh, having listened to this program, you could say, ah, that, that, that echo you guys said, uh, this might happen, and now it's here. Everybody else is seeing. Let me. So, so here's what we see. I mean, the freight cycle is sort of its own cycle. It really was a dog. It was an athlete dog. I would use a more, uh, direct verb if I wasn't on serious XM, but it was absolutely a dog up until November this year, starting, or last year, it's starting to recover. We're starting to recover the real volume data. So the US industrial goods market was, was, was, was pretty, was been pretty abysmal up until November of last year. It seems counter what you're seeing is counter to what we are currently seeing. So where it seems to be a pretty discontent. That is connected. That the disconnect happens

1:25:40at every turning point. That's, that's actually the most interesting time is the disconnect that you're talking about, right? Because it, I really am talking about time. A, a long leader is seeing something on the horizon. A short leader sees it halfway closer. The coincident data, like you're describing right now, what you, you're what the industry is feeling right now is coincident. That's what's happening right outside your window. That's not forward looking. But, but I, I, I don't know that I agree with you. And may, I mean, like I'm not, you do this. No, I agree with you. But it's not. My, my point is that that freight cycles, you know, if you follow Dowl theory, but freight cycles lead the broader economy. We've seen a widening of, uh, in the PMI, we've seen widening of the sectors that are seeing the impact. The railroads are, you know, April was the, I mean, this past month was the second largest rail freight index since 2008.

1:26:43I just, I hear what you're saying, but we, we were in such an abysmal market. I did, this is going to roll over. Again, I'm talking to domestic, you have to tell me where I'm wrong. No, no, no. So, okay. So one of the things you just added in, which I just want to, it's not a bad thing. It's, it's part of reality is the magnitude of the cycle, right? So you were saying it was very abysmal and we've had this, we've finally recovered and it's finally gotten back to a better reading. Okay. I think that's what you said roughly. Well, I just, I mean, look at the volume data and it's broadening. Like it was started off a couple of months ago or you can go back to November and it was seem to be very concentrated and we'll call data center and defense related production areas of the economy. Since then, it's broad, it's, you know, at least the data suggests that the, which is great if it's broadening. But, but I mean, look, it's going to be disappointing news to anybody if you're right. And I'm like, I have no,

1:27:47have no reason to suggest that you aren't correct. But this would be devastating news for anybody and freight because we've only been enjoying this for, you know, eight months now. Well, I forget who said this, somebody smarter than me, but to be forewarned is to be forearmed, right? And to navigate this, I want to clarify something. I'm not talking about a collapse, right? I agree with you. Biums are up. They're healthier. They're broader. That's great. Those are no dispute there at all. Okay. What I'm saying is that the recovery, the pace of the recovery is going to ease and you're going to have a deceleration in the growth. Okay. So it doesn't mean you're not still growing. But isn't that normal when you're in the bottom, you're naturally going to, you know, as you go, as you see the significant rebound, the pace in the momentum naturally slows. Is that, is that what we're hearing? Well, naturally in the sense that it eventually turns down,

1:28:50right? So you, let's say for argument's sake, I think this is roughly true. Half of all slowdowns turn into kind of harder slowdowns. I'm not predicting that. But that's why you have to be wary of slowdowns. You have to pay attention to them. The other component and I'm shifting gears here a little bit, but you've got volumes, which are at higher levels and the pace of increase is slowing. That's what we've talked about so far. The prices, right, that you're paying for doing your business or staying up and there's sticky a bit. Yeah. Okay. So that combo of slower growth in the business while prices stay sticky, that's just a little tougher. The business has to be a little more powerful. Is that a little more powerful? The stock inflation, the relook in its valuation is what you're warning about. In the industry specifically, I think that you have to be looking in that direction. You have to say, what would I do under the circumstances to navigate it

1:29:52and not get hurt? I think that's a healthy thing to do. I also believe that some of that international activity slows a bit. And so people who are exposed to that component of it, this is not only happening in the US, it's also happening abroad. And the third kind of business management component of this, I just want to throw on the table, happy to discuss any angles or dive deeper into any pieces of this, it's just that rates, interest rates, probably just don't ease that much, right? I know there's hope that there could be some calming down in interest rates. It feels like they're going to stay here or edge higher. And that's also part of the cost of managing the business. Yeah, for sure. How much does the energy, we've been tracking the crack

1:30:56spread? I know Julie is obsessed with this crack spread thing, undecil, and with what's happening in Russia with these refinaries, we've had multiple guests talk about the just the price of diesel and what it's doing to the economy. Is that what's really, you think, contributing, obviously, interest rates are higher, but ultimately the industrial sector needs energy. Is that what I wanted with the big triggers of this slowdown you're referring to? I don't think it's the trigger. No, because the the the antecedence, the things that we're starting this slowdown happened before those events. So those events may, you know, make it worse, but they're not the cause of it. And so even if, so let's say everything just disappeared and everything was fine, it doesn't mean that the slowdown would would go away. What is the cost? It's very natural for there to be cycles, by the way, right? So so the global cycle goes up and down. That's,

1:31:58it doesn't mean something's wrong or something's bad. It's just that's the way it actually is. Sorry. No, so what so what is the cost? What is actually indicating this turn and slowdown for you? For growth? Yeah, if you're saying that you think that the growth is going to to slow right and begin to turn downwards, what is it that you think is the cause? What is it that you're seeing that indicates that? Well, so now we're getting a little bit into leading indexes, right? Where there's it's it's very different than the way Wall Street would forecast. They might say there was a negative shock and therefore there's a slowdown. That's not how leading indexes work. The way leading indexes work is you have let's say five or six big drivers of the economy. It could be pent up demand, it could be productivity gains, profits growth, it could be interest rates, inventories. These are all big drivers of growth, each one of these individually. The leading

1:33:01indexes combine all of those together objectively without an opinion. It's not like I have a I know someone who told me something secret. It's just that they're very objective and objectively they decelerated. It's very natural for that to happen in a capitalist economy. This is normal and this all began peaking in our longer leading indicators almost a year ago and and it's been coming down and the shorter leading indicators are following following soon. Now what are the causes so to speak? It could be higher interest rates. It could be demand has a lot of pent up demand earlier has been met. It could be there was some over purchasing earlier. These are all potential stories that we could fit to events after the fact. That's typically how these things are described. But the actual kind of risk moment or divergence I would say between the leading indexes and what you see

1:34:07on the ground outside your window. That's a really interesting moment because to take a little bit of defensive posture in that moment when the sun is shining like repairing the roof when the sun is shining. If you take a little bit of that if you do that then it's actually very cheap to do it. You can make some adjustments in your business plans under nice circumstances where it doesn't. How much of this if we're saying this is a year ago then tariffs. Is it a tariff issue that's called? No, it doesn't look to be. Yeah that's what you the questions you're asking right from the freight and supply chain vantage point. Right. That's where you're what our audience cares about. Okay I got to tell you the same questions when I'm dealing with asset managers being like is it stock, bonds, private equity what are my buying all these things all over the place. They're asking the same thing and what's very interesting and it's the opportunity in fact is that the cyclical dynamics turned before the tariffs before the

1:35:13war before harm moves. Those are all headlines that are very difficult to look away from and it's very natural to draw a straight line from them to activity but what I've learned in my entire professional career is that the business cycle is bigger than that and that's what's happening here. The cyclical we just have a nice run. I mean maybe it wasn't enough. You know you would have liked a better run. You were pointing out that we just were recovering from these bigger these earlier depths but the cycle doesn't care right it's just like hey I'm topping out here and it was a dog. It was an absolute dog. You're not like dogs. We want this great surge to continue your spoil in the party here. No no no. But it's not as the party's going to end the police are on the way. This is not good. I'm not going that far. I'm saying hey if you

1:36:14play it cool and you don't mess up you can have a second check. Turn the music down. We'll hide the news. Police are on the way. Keep it quiet. You have to quiet get together. Inviter neighbors over for a drink so they don't call. Yes we know what's happening. And here's we got to go. Appreciate you coming. Yes. Thank you so much. Definitely. You're watching. Yeah. Getting reliable capacity can be complicated. Let Arxo make it simple. As the third largest provider of broker transportation in North America, Arxo has the scale, resources and expertise to help you tackle any shipping challenge. From a last minute spot load to a managed transportation solution from LTL to Intermodal, from trained logistics experts to AI powered freight automations. Arxo has you covered from the first mile to the last mile. Start shipping on easy mode with Arxo and get a smart solution to move your freight. Learn more at arxo.com slash capacity.

1:37:32The 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 line safe and the world moving from one cab to a global network. Billions of miles. Trillions of data points. Everyone making your operation better.

1:38:34And we never build it alone. Sam 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, four events across three 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. Seven 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,

1:39:37the 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. 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 28th. The signal, Chattanooga, Tennessee. We'll see you there. Register now at live.fratewaves.com. Our next guest, we have Paul and Joshi. He is the Chief Strategy Officer of E2Open. We're just talking about grade. Not as, you know, not as wholesome perhaps as Jolly Parton. Paul, welcome to freightways today. Great to be on. Thank you, Julie. Thank you, Craig. Well, glad to have you. Obviously, trade has been in the, I mean, really for the last 10 years,

1:40:40but certainly under Donald Trump, it is getting a lot more attention. And no bigger, called storyline to the USMCA re-negotiations that may never happen. Or re-negotiations that, you know, that Donald Trump wants to happen. But this conflict between Canada and the United States is sort of playing out with a lot of aggressiveness on both sides of the border. Tell us a little bit of what your observations are. No, 100%. I think there's a lot of fostering, you know, on both sides around this, primarily around the redesign of, you know, what the continental spliching just looked like in North America, right? And, you know, historically, our countries and our trade and our manufacturing industries have been very well connected. They got, that those connections got accelerated way back, you know, when US and Canada negotiated the first treaty back in 1989, which then transitioned over to NAFTA with the inclusion of Mexico and then transitioned over the USMCA. You know, these treaties are designed to be in place for an extended period of time that

1:41:42gives the industries and the supply chains, as well as, you know, the logistics infrastructure time to settle down and think about things and build the infrastructure and the law in the capital. That is really under question right now, right? It is, it is really how, how this evolves and different industries are reacting different ways. And the challenge really here is every single one of these industries that has started off as being national industries have transitioned into more like continental industries where borders have become more porous primarily because of, you know, treaties like NAFTA and USMCA. And I think the back-group of the last couple of weeks of back-and-forth between US and Canada is really front-end centred with, you know, the ratification of USMCA or re-ratification of USMCA that has been declined this year. Well, Paul, I, you know, I don't know this is a surprise Donald Trump did, however, when the original USMCA was negotiated declared the best trade deal ever. And now, you know, on the campaign trail, he came out pretty much against USMCA

1:42:49said it needed to be renegotiated. So, and then if you follow the whole story of Canada 51st state, a lot of the antagonism of the American president against the Canadian against Canada in general, did we box Canada in where really they don't have a choice? I mean, it's a democracy, it's a proud nation. It's always felt a little bit, you talked to a Canadian and if you choose them as an American, it's sort of like accusing someone from Fort Worth that they're from Dallas. I live there, so I know all about that. But it is, it is in some ways an insult to Canadians because they feel like it undermines their own sort of national pride. Should we use surprise by any of this tough taking place? You know, there's a lot of narrative and a lot of, you know, rhetoric around a lot of these things, right? So if you, if there is, there is, and a lot of it is driven by the politics and politics, digior, and you rightly pointed out things change over a period of time and they have changed, you know, even during President Trump's first term, then the intermediate break in

1:43:53the middle and now the second term, right? And things have changed between the campaign, stump speeches versus what happens when, you know, the president got into office and actually put something in place. But at the end of the day, you're absolutely right, you know, every one of us belong to a nation and we are extremely proud to be a part of that nation. And we look for, you know, you talked about Dallas and Portwood, we are absolutely proud about, you know, the cities that we belong to, let alone our nation. So, you know, the rhetoric around, you know, painting things people into a corner and questioning that they're, they're, you know, what they identify with is always going to be a negative connotation. But I would, I would essentially say, look, there's, there's a political dimension, there's a rhetoric dimension to that, but the fundamentals of how products and services get to market in both sides, both sides of the border, fundamentally is dependent on that rhetoric and we are seeing the impact of that on both sides. So, I think you guys are absolutely both right when it comes to posturing and I don't know if you

1:44:56saw the recent post running to rename Lake Ontario. I saw the whole thing. Or Lake America. Yeah. But to your point, shifting to really this uncertainty and this trade deal, what should people be considering? What can they learn from previous tariff shifts? Is it still too soon and unknown to actually think about your sourcing and or is it something that people should be doing now? Well, I always say you should be prepared for the worst and I think that's really what, people need to do and are actually doing and they're, I mean, our industries and our supply chains have done it in the past. You go all the way back to the liberation date, the tariffs that were imposed, the amount of goods that were pre-positioned into country, especially the US, was enormous. It was pre-positioned because people wanted to bring in as much as you could while you could before the previous tariff kicked in. I think some of that stuff is already

1:46:00going to have already happening now and we'll continue to have. We also got to realize that the fundamental changes are on sourcing rules are much more difficult to unwind and change real time. Our industry, I mean, you look at the US Canada Mexico, the entire supply chain network has evolved to this particular point in time over the last 30 years of a very, very stable period of commerce activity that was driven by relatively stable tariffs, very highly negotiated and understood rules and regulations, which essentially led, pre-pring after led three different nations and three different sets of industries for those three nations to all become one. You look at the automotive industry in North America, you see the concentration of engines and transmissions in the Midwest and the Ontario region. You look at some of the components that are coming from Mexico. You look at the number of times the borders across six or seven times on certain components

1:47:01to get cars assembled that pretty much are sold all over all over US Canada and Mexico. That would not have happened. The kind of supply chain wiring and the infrastructure that has been put in place would not have happened if there were no tariffs or at least a stable period of understanding what the tariffs were. I think that's really the challenge that people and our industries are going through and I just use automotive as an example, but every single industry you look at agriculture, you look at energy, you look at medical devices, high tech, all of them are going through that to really understand what does that stable supply chain for the last 30 years mean in this new dynamic environment that is primarily driven by treaties like USMC and after being upturned. So sourcing rules will take definitely longer time. Shot term, people will move inventory over as soon as possible on either side of the border to react to it and at least have some runway to run the factories and the retail shops as far as long as you can.

1:48:02So that's actually exactly what I was going to ask you referenced auto and then make brief reference to other specific industries that you think will and probably need to reconsider their sourcing strategies. Can you speak a little bit more to that? We know auto is going to have a huge impact. You mentioned energy. What else? Automotive energy, you look at agriculture. You know, all of us use USMC as an example. Mexico is a very big consumer of corn, wheat, soy, pork, dairy from the US and then US is a massive importer of fresh fruit and produce from Mexico. Classic abacados, tomatoes, berries, peppers and things like that. And what that has resulted in is both sides of the border now have a shelf that is always available. The seasonal fruits don't tend to be seasonal. They're available throughout the year. And that is really a function of how our supply chains are wired. And I'm just not just talking

1:49:02about US and Mexico, whether it's a tremendous amount of collaboration. But stuff that cannot come from Mexico are sourced from South America or Europe are always available on our shelves. So we've kind of moved away from the fact that, hey, cherries are not in season because somewhere someplace in the world cherries are in season that we can afford to bring in and put it on our shelves and all of us enjoy that. So that's really the nature of how we need to, how things have evolved. The same thing applies for electronics and appliances. We are used to actually having a flat panel TV and every one of our rooms and possibly even changing it every once in a while when we feel that it's not fast enough or the resolution is not sharp enough. All that is possible. And we can afford that because these supply chains are because a lot of these appliances are produced either south of the border or in other parts of the world where it is economical for us for the product to be produced and for us to actually consume it at a price point that we can afford. These are all rewiring of the supply chains that need to happen and sourcing rules become really important as you

1:50:05talked about but sourcing rules can't change overnight. They have to have fundamental infrastructure in place, product design have to be in place, suppliers need to be wedded, you know, all those things need to be understood. And most importantly, the logistics infrastructure needs to be in place to move something that was not supposed to move from that region at scale and speed that was not designed for because it was not thought about in the supply chain design originally. Yeah, I mean, coal chain has certainly impacted our ability to move produce around the world to really drive a lot of that. I am interested, obviously, agricultural products have been historically probably the most tariff products, the ones that always sort of get people excited because there's a lot of national pride, farmers in every country around the world. They're more fundamental than farming, but it does strut me that a lot of the products that we consume from Canada are, you know, things like petrochemicals, oil, energy, as well as metals

1:51:06and minis, the commodity complex that actually are primary parts of our consumption. And if you're going to have globalization, I mean, so if you're going to have reindustrialization, you have to have those raw materials. I understand the political argument. I know a lot of this plays into the base, the drum drum space, it also matches his fundamental belief, but how do we truly bring industrialization without Canada's commodity sector? You're absolutely right. And if you actually go back in time even before NAFTA came into picture, you know, the energy sector between US and Mexico, US and Canada has been very, very tight. You look at the, and it's not just the energy sector, the metals and mining sector has also been very tight. We share, you know, common infrastructure on pipelines, we share common infrastructure on refining capacity. And even in patches, we share our electric grid and some parts of the country, you know, North and South and the border, the collaboration and, you know, the continuation of supply chains have been extremely tight, you know,

1:52:12for decades, spanning back all the way, all the way back into the 60s and 70s. And that's the reason why I think on both sides of the border field that this is something that is not necessarily needed in terms of the, in terms of the broader rhetoric. And coming back to your point, I think, at the end of the day, you know, I strongly believe that if you, if you actually bring manufacturing back into a country, let's just put, you know, forget US, any country that decides, hey, I want to bring manufacturing back. You got to realize that the raw materials and ingredients may not be available in your country. So while you may bring the final production in, while you might bring the second level of production in, you might bring the third level of production in, the raw materials, the eventual raw materials that you need, the ingredients that you need may not be available in your country. And you pointed out to the right example, right? If you're going to look for Coco, to make chocolates in the US, well, US doesn't have, it's not a paid-to-producer of Coco. So where do you go to get Coco to actually produce chocolates? You can produce chocolates, but eventually the supply chain has to go to the origin, the point where you get the raw material. And that's really the

1:53:15nature of how supply chains are. So at the end of the day, these things need to settle down to a point where you understand how much of that supply chain actually operates within your borders, how much of it you rely on others, just because of the natural constraints of how, you know, raw materials and ingredients are distributed around the world. And then what do you actually settle down on supply chains? And if you take a step back and think about what has happened in the continental North America, that's exactly what has happened. When you lower down barriers to participation that are not themselves in the water, you end up with the free capital economy deciding what is the best way to make that happen. And yes, there are tweaks and, you know, oversights that we need to put in place to make sure people are not, you know, causing harm as a part of that capitalist thing. And we've done that a few times with NAFTA evolving into USMCA and USMCA for the evolving. But fundamentally, you need to be able to have some form of a stable infrastructure, stable policy infrastructure, stable logistics infrastructure, and more importantly, a stable consumer infrastructure

1:54:18to be able to produce what you need to produce in the most efficient manner. Upon, I know Coco is one of those coffee bananas or typically the foods that are commonly. There's other foods that are also on that. Let's check some exotic fruits that just don't grow naturally here. Is there anything else that's, I mean, manufacturing goods are obviously really important. When we talk about China specifically, we're talking about, kind of called rare earth minerals and some of the really critical things that go into these modern supply chains. But is it related to Canada specifically or Mexico? Is there anything specific that is just not, we're not able to source here? Maybe there's a cost to get it, but is there anything that we're just sort of out that we can't get without Canada or Mexico? You know, there is always going to be sources of supply that is available to us. If it's not within region, we can always, you know, partner with somebody, some country, some, some, you know, friendly nation that we decide we want to establish it, we do it. So there are

1:55:18alternatives for most things. At the end of the day, it comes, the question really is at what cost? And how long does it take us to establish those relationships? And once those relationships are established, how long and how extended is the supply chain in terms of lead times? Right? And how stable is that source of supply? Those are the, those are the things that are our industries, are companies that operate need. One, they need to understand can I source it from there? And if there is an advantage, is my country going to help me figure out the source of supply? If the answer is yes, is it actually going to have a fair relationship with that particular country that allows me to produce stuff in my country? If the answer is yes, is it a stable source of supply? Am I getting it at the right price point? And then most importantly, once it established, how quickly can I move it? If my supply chain relies on some material that needs to be here within two days, and my alternative source of supply is actually two months away, then I have to rewire my supply chain. I have to rewire

1:56:18my entire production, possibly even redesign how I store and how much I store and how much safety stuff I keep. And that is really the practical nature of supply chains. So for the most things that we're looking for, there will be an alternative. The question is at what cost? And how stable is that source? And then how long is the lead time for anybody that wants to utilize that source? I mean, it feels like narrow contact, but I think that's the framework in which we need to start thinking about some of these things in order to make sure that we're having the right trade up between all tentatives. But it feels like it, I know this isn't the primary, but it does feel like the conversation about national security, rebuilding manufacturing, we have to have it here in the U.S. when we have an adversary or rival, depends on how you define China. Having exposure of our critical supply chains, our materials in a country that is a rival feels like a, you know, if you study history, you know, that doesn't end well. But it strikes me that if that obviously isn't the primary arching sort of motivation of the

1:57:23administration, but if we are going to bring reindustriation, we have to have our neighbors in Canada and Mexico support that effort. And like, you know, during the election when this was all happening, I was arguing the look, I think tariffs on China make sense from a national security standpoint because you need to incentivize companies to bring back and reindustrialize. But when you can't add Mexico to the mix, you sort of get lost in that. I 100% agree. I think when we're not, I mean, any nation cannot be alone in terms of its, you know, destiny. It controls its destiny, but cannot be alone, you know, leading the thing, you need friends. We all need friends, right? We need friends as individuals, we need friends as as nations. And I think that's really the nature of it. We also need to recognize that we need certain things that are very critical to our national security that should be in our control. And even though, even if it is not within our borders, we need to make sure it is within our control or influence with the group that we consider our friends, right? Because like I used Coco as an

1:58:28example, but that's exactly what it is. Fast forward, you know, this hypothetically just say chocolate is a source of national security for us. If we don't have friends that actually produce Coco for us and we can source it, you know, in a predictable manner, in a secure manner from them, then we cannot rely on it. And our country doesn't allow us to grow Coco at the speed and scale that we want. Then, you know, we need to have those nations. And that's where the treaties come in. And that's really, if you think about going back to history, that's exactly how nations have competed. They've competed alone, but they've competed with friends that are helping them along. And that's really, I think, in many ways, the rewiring of it. Our exposure to China, exposure to nations is extremely high when it comes to national security. But I think we've not done enough about it over the last 50, 20, 30, 50 years or so, because we've let some of that manufacturing go away. We've let it go away primarily because we dealt with it from a cost perspective, economies of scale perspective. We've talked about it purely from a capitalist mindset

1:59:30standpoint, the national security then come in until it needed to come in. And now we are now we're talking about rewiring it, which is fine. You know, at the end of the day, we've gone through a very stable period of globalization. And there is a time and place for the globalization, a level of globalization to reset and recalibrate. And that's probably what we're going through right now. I would argue whether these tires are the right way to do it. And that's an argument that can be made, but that also leads into a different kind of rhetoric. But the recalibration needs to constantly happen, needs to constantly re-evaluate it. And the results of that need to be put in place. And sometimes these recalibration needs time. But that's the nature of globalization and evolution of our global framework around trade and commerce. Yeah, it does feel, you know, I was born in 1979. We've had this sort of charm to life, you study history, you know, it's not, this is an unusual or has been an unusual time in history. But it does, you know, like I can make this argument,

2:00:32had made this argument that we did outsource so much. I mean, like Chinese are incredibly thoughtful, 50 years planning, highly strategic. And what they were doing, you can't blame them, but we've also allowed ourselves, we've exposed ourselves due to, like if I'm running a company, I've said this to people who have argued this that it blaming corporate America and CEOs, I'm going to respond to the same set of incentives. They had a fiduciary obligation to their seat to their, to their investors to look for short term gains and ultimately it comes down to cost. They did what they had to do. The problem is that we now have this massive exposure. We realize that we learned it during COVID that we can be, I wouldn't say held hostage, but we can be incredibly vulnerable and isolated by not having these products. And so I don't know that there's an alternative power to really encouraging businesses to look at the Americas, then some type of restricted trade or tariffs. You almost have to have some negative incentive. But it strikes

2:01:38me that counting Canada and Mexico in all of the Americas out is just flawed policy. I definitely, I mean, again, you've got to be amongst friends, right? And we've been friends for some period of time. So there has to be a legit reason for us to say, look, I want to unfriend you, kind of going back to our social media days. But I kind of want to react to what you just said, right? You talked about 50 years planning that China has in place. I mean, the system and the infrastructure and the governance model that they have allows them to do that, right? But it also comes with a negative side effect, you know, in terms of how you can question the level of freedom that the individuals have within China, right? There are pros and cons of that system. And I think to your point, absolutely, if you're going to incentivize our free, the free market capitalistic societies are always going to incentivize on short-term gains and long-term strategies. I think the long-term strategies have to be bolstered by national policies that allow the right national

2:02:42security level infrastructure to be retained within the countries. I think that's the balance we need to strike. And for us to actually have the national security level in guidance established by the government, we need to have a sustained way in which that policy and that point of view is retained every four years in our system. It's good that it allows us to recalibrate our democracy, allows us to recalibrate the thing. But there has to be a continuity of purpose as a nation that has to transcend these red and blue lines that we establish for ourselves. And that is really, I think, what is needed. Well, I, I thousand percent, but I would argue that the AI data center build out is the, and look, that's private enterprise deployments, the largest capital investment in global history, the amount of capital that's going into this infrastructure. But then we get an envisage, something that China doesn't have to suffer from. We get an envisage that's going to block it. That's the fear is this great, no pun intended, train of AI data center

2:03:43build out of re electrification, natural gas distribution could be, I don't think it gets stopped, but it could be stalled out. I mean, in your home state, a very business friendly state, let's put a moratorium on new AI data centers without some end review. We know what happened with all the reviews when you put reviews in place. It just means slow. That's the stuff that scares me, Paul, and it really concerns me is we could lose the technology race, the innovation race, the greatest capital X expenditure investment in world history could be lost because of an imbiism. I 100 percent agree. And I think some of these things have to be put on a fast track to, you know, around, just exactly. There has to be some, some sort of a evaluation that needs to happen, but it cannot have this same speed of evaluation as with every other thing that gets evaluated moment, you say, put a moratorium on, I'm going to look at it. So I think that's exactly what I meant, right? From a national defense standpoint, you've got to say, look, this is, we

2:04:43are in a race here, and if you believe that this is the right thing for us as a nation, then let's fast track this, especially when there is no government money coming in, it's our private enterprise that is actually doing it. We have to be able to think about it. It's the same thing. I mean, we talk about electric cars. The way to, the way to actually, you know, when the battle in electric cars is not to put tariffs on imports coming in, is to actually invest in electric infrastructure that we need in this country. Like, I mean, you go out, out of the US, and you look at every single electric car, and you look at co-components coming in, and you look at whether the best most advanced electric car is not going to be an American-built car. No, B-Y-D. I mean, these cars, if you say these cars, Julie, on social media, these, just like, really insanely cool cars. I want one. I'm an American. I will buy an American car. However, I also like cold technology, and I will buy whatever is the cost. So Chinese are doing, they're leapfrogging. Humanoid robots coming out of China. Look at that. I mean, how far back are we in terms of, in terms of that? I mean, these are some of the fundamental things we cannot be

2:05:46questioning some of these things. I mean, these are things of the future, how they will evolve, and most importantly, they are not the final place or final thing that we need. What is really important is the journey and the experience to get to some of those innovations, and that is the piece that we're missing in this mode and with this questioning a lot of things. I mean, look at what happened in the nuclear. It was a great example of the lack of education, the ignorance of people, the fear. AI data center is the new version of nuclear. Like, there's this nimbyism. It's going to take on my water. It's going to draw my electricity bills. And look, I don't think the AI data companies have done a very good job. I don't think Sam Altman is the face of AI doing a huge service to the AI industry when you talk about eliminating jobs and cybersecurity going away, anthropics whole thing. Hey, we've learned how to crack it. I get some of that's marketing. I just don't think it does a service to their own goals to build out these AI data centers when you talk about job-able action. Inding is a 5% chance of ending humanity. Come on now.

2:06:52Anyways, Paul, go ahead. Well, sorry, just just one last point. I will also argue that if if if if if you know cyber security is important and some of our models have been able to crack it, the same technology can be used by this to crack our our security. Oh, 1000%. But I do think there's a investment in that is super important. You need to get to the bottom of it. And that's how the academic think about it. It's not that you say no to everything. It's like you've got to go up computer to ask a question why and how why and how and how until you get to the bottom of it. And that's really where research and innovation comes in. Well, there is an opportunity. I think this is a federal I mean like we talked a lot of it. We've been critiquing the administration. They they seem to have the right idea on AI data centers electrification, energy production, energy build out. So we should give them credit in terms of Donald Trump and acted the Defense Production Act, which is building out energy infrastructure. By the way, has gotten very little attention compared to what it should do because that build out will have remarkable outcomes. I was talking to somebody involved in AI data centers said look a lot of the

2:07:54stuff is going to go on to federal land. Like we're going to see federal because they can do this. They don't have to deal with the states. They don't have to deal with the NIMBYism. And a lot of it is in the name of of national defense is what happened in Memphis with Elon Musk's data center. Blind spots cost them of fleets costliest collisions. Simpsara'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.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's class R&D. To keep the operation sharp.

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