Jon
Preferred Member
Cash: $ 50.02
Posts: 193
Joined: 13 Apr 2005
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| Trucking sector hitting some potholes |
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Just three weeks ago YRCW’s CEO was on the tube extolling the strength of the economy. Thursday the company slashed its Q1 earnings forecast citing rising costs and volume declines for the reduction. This is just the latest case in point as to why you cannot trust what CEO’s are saying about their business or the economy. When the economy was recovering in late 2002 and early 2003, CEO’s were very pessimistic. They did not turn positive until the second year of the expansion. They are slow to turn bullish, and they are late in seeing or at least admitting to slowdowns.
For example, the housing CEO’s were super bullish in 2005 even as the housing market was sliding. They smugly answered questions about a slowdown by claiming demand demographics that would last for the next 10 years. Anyone listening who has been around for a downturn before had to laugh. They knew this was walking, talking BS. Sure enough that bullishness was suddenly cut short as TOL slashed its projections not once but twice this quarter and other such as KBH are starting to do the same. Even real estate agents and their perpetual rose colored glasses are noting the slowdown and doing so on national television. Another example: MSFT’s Ballmer as discussed this week. He said it was important that Vista was released this year, that MSFT was the best innovator in the world, that MSFT had the best management, etc. Two days later Vista is pushed back to 2007 and a management shakeup is announced. Golly, who saw that one coming? Not the CEO’s.
Trucking is a leading indicator. Actual business, that is, not the CEO views. YRCW said volumes were low and blamed retailers overbuying during the holidays and then pushing back orders this quarter. Retail sales, however, have held up and January was a huge month. Warm weather supposedly kept the buyers going through the rest of Q1. Yet YRCW business is struggling. ABFS reported strong results at the end of January, but it has languished lower since, trading below its 50 day EMA. Other truckers are looking decent overall, however, so it remains to be seen if this trend continues. It is definitely not something to brush off given all of the other indications of economic slowing and given that this is a leading indication versus employment.
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