By Jami Jones
When talking about the economy, forget Newton’s Law. You know the one about for every action, there’s an equal and opposite reaction.
In economic terms, that would be considered a V-shaped recovery, which is when economy goes down fast and comes back fast.
That’s not happening here. Period.
What is happening is a slow trudge out of an economic recession because in order for the economy to fully recover, there are some problems that still have to be solved.
Case in point is the stock market.
It’s common to link our climb out of the recession with stock market indexes. The ups and downs of stock prices through May and June were a clear message that, in terms of a full economic recovery, as a nation we’re not there yet.
And the value of stocks is one of the problems that need to be fixed before those indexes can be an accurate reflection of the business world’s improved economic health.
In mid-May, Fortune Magazine’s Shawn Tully made an ominous prediction – that the 1987 stock market crash could very well happen again in 2010.
Those strong words can cause a lot of panic, unless you understand what he was really saying.
This recession didn’t happen because of any one reason. It wasn’t just gimmick loans. It wasn’t just bad investments by banks. It was many things.
One of those things was overvalued stocks. There are a lot of ways analysts decide the true value of stocks. Rather than get into the details of all of the different methods, the bottom line is that there is a consensus that stocks are trading for more than they are really worth and that cannot go on forever.
“I have felt since last November that the markets had risen too far too quickly and we were destined for a correction,” Steve Freidell, senior vice president of DeWaay Financial Network, told Land Line.
Initially, Freidell anticipated that the correction would happen in March of this year, but he later moved his prediction to May.
“So far I think I am correct, and I believe the drop we are experiencing now will get worse before it gets better. I think we could see the Dow drop to 8,000 – maybe a little lower than that,” Freidell said.
Once stocks hit that level, he sees that potentially as a good time for investors to get back into the stock market.
That still won’t mean the U.S. economy will be back on easy street. Freidell predicts continuing “roller coaster” rides on the stock market throughout the continued recovery.
Look around all you want, but no one is predicting a fast climb out of the recession – or an easy one.
In fact, Federal Reserve Chairman Ben Bernanke said in mid-June that even though economic recovery is happening, “it won’t feel terrific.”
“The reason it won’t feel terrific is because it’s not going to be fast enough to put back 8 million people who lost their jobs within a few years. It’s going to take a while,” he told CNNMoney.com.
The Fed chief even sidestepped the ultimate question: Is there going to be a double-dip recession? He simply told the online magazine that “nobody knows with any certainty.”
So what do we know?
For things that matter most to trucking, manufacturing is on the rise. Freight levels are climbing. Rates are increasing.
Transcore reported load volume was nearly 25 percent higher in April than in March, more than double the average month-over-month increase for this season. It was so good, in fact, that April’s spot freight volume was the highest in any single month since November of 2005, which was a record year for spot market freight.
As for rates for all that freight, an article in Business Insider contends that trucking rates are “soaring.”
The heads of several logistics companies are quoted as saying rates have recently gone up 10 percent or more in much of the country – and, in some cases, have spiked 20 or even 30 percent.
The president of one of the companies says, “In some markets you can’t even buy a truck.”
OOIDA’s business services department agrees that rates are improving, although that’s pretty much the norm after the slow first-quarter freight season.
“The thing everyone needs to remember is that just because rates are up, that doesn’t keep brokers from taking an even bigger cut off the front end,” OOIDA’s Kip Hough said. “It’s important to negotiate, knowing that rates are increasing and shippers are paying more.”
While freight really isn’t roaring back and money isn’t falling into your pockets, the climb out of the recession is happening.
Donald Broughton, managing director for Avondale Partners LLC, says that rates will continue to improve and at a pretty good pace – even going so far as to say that rates can improve week over week.
But just because rates are better, it still comes down to one fact.
“It’s all about negotiation,” Hough said. “No one is just going to hand you the good rates. You’re going to have to ask for them.”
That’s the on-the-road reality that small-business truckers need to embrace rather than joining the panicked herd every time the stock market hiccups. LL
Staff Writer Reed Black
contributed to this report.