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Anil Saini Saini Express Inc. Pooja Trucking

Hauling the Nation: The Crucial Role of Trucking and Intermodal Drayage in the US Economy | Anil Saini

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In the vast expanse of the United States, where commerce stretches from coast to coast and heartland to metropolis, a silent but mighty force keeps the nation’s economic engine humming. The American trucking industry, often operating behind the scenes, is the unsung hero of modern commerce. Anil Saini, CEO and owner of intermodal drayage companies Saini Express Inc. and Pooja Trucking, knows how trucks are the connective tissue binding together the diverse tapestry of American industries and regions.

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China To Relax Their Internal Migration Rules To Kickstart Their Economy 

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China is moving to relax its rules on internal migration to make it easier for people to settle into smaller cities in an attempt to increase their ailing economy and provide growth, according to a government announcement this week. 

The ministry of public security (MPS) announced plans to lower the standard for receiving an urban hukou, their household registration. Beijing, specifically, wants local governments to cancel hukou restrictions in cities that have less than 3 million people, as well as relax the restrictions for cities with 3-5 million residents, according to the MPS.

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Cities with a larger population, more than 5 million people, will also be encouraged to relax their hukou quotas, to ideally allow more people to receive the highly prized urban registration documents. 

China’s national development and reform commission, which oversees economic and social policy, first announced these plans back in 2019, however, it’s not clear how many cities have actually adopted the rules. 

One of the main goals of relaxing these registrations is to encourage rural migrants to move into cities to aid the urban economy. One-third of the total working population in China, around 292 million people, are rural migrants that are working in China’s growing metropolitans.

However, these population groups don’t have proper access to public education, healthcare, and other social benefits, leading many of them to leave their families and return to villages themselves. Without urban hukou, many rural migrants are forced to pay more for social services, and are even banned from buying property in the city. 

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The hukou system also deters migrants from spending money and moving into cities long-term, which economists in China claim have impacted its growth. 

“To the extent that there is a spare capacity of workers in the rural areas to draw upon and go and work in the urban areas, easing the registration requirements may help at the margins … but I don’t think it’s really going to alleviate labor supply problems,” said George Magnus, a research associate at the University of Oxford’s center in China. 

In the second quarter of 2023, when compared to 2022, China’s economy grew by 6.3%, which was below expectations, and marked a .8% increase in the first three months of the year. 

Part of this decrease is due to the decreasing workforce in China. The number of individuals working who are aged 16 to 59 declined by more than 40 million between 2019 and 2022. 

Central Bankers Around The World Claim The Fight Against Inflation Will Continue To Get Worse

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Central bankers from all over the world are claiming that the fight against high inflation rates will only continue to get more “serious and painful” if certain rates remain how they are currently.

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Economists Worried About The Current State Of Commercial Real Estate 

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Economists are currently worried about the state of the $20 trillion commercial real estate industry. Ever since the beginning of the Covid-19 pandemic, office and retail property values have fallen due to lower occupancy rates, and the shift to working from home and rise in online retail. 

According to Goldman Sachs economists, about 80% of all bank loans for commercial properties are coming from regional banks; smaller banks have had more pressure to liquidate properties as time goes on and the properties don’t show a lot of interest. 

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“I do think you will see banks pull back on commercial real estate commitments more rapidly in a world [where] they’re more focused on liquidity, and I do think that is going to be something that will be important to watch over the coming months and quarters,”  wrote Goldman Sachs Research’s Richard Ramsden, reported by CNN.

Xander Snyder is a senior commercial real estate economist at First American who recently spoke to the media about the current state of the commercial real estate market and its potential threats to the economy. 

“Price growth is slowing and for some asset classes it’s starting to decline. Office properties have been more challenged than others for obvious reasons.”

“Now private lending to the industry is starting to slow as well — bank lending was beginning to dry up over a month before the Silicon Valley Bank failure even happened. Credit was getting scarce for all commercial real estate and a fresh bank failure on top of that only exacerbates that trend,” Snyder explained. 

“A lot of people hear commercial real estate and they think it’s all the same thing and the trends are they’re all the same but they’re not. The underlying fundamentals of multifamily and industrial assets remain relatively stable on a national level.”

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Snyder then explained exactly why commercial real estate ended up in the position it’s in today after the trends it saw within the past few years: 

“As credit becomes scarcer and more expensive, it’s hard to know exactly what buildings are worth. You get this gap opening up between sellers and buyers: Sellers want to get late 2021 prices and buyers are saying ‘we don’t know what things are worth so we’ll give you this lowball offer.’ That was already happening and the result of that price differential was bringing deal activity down.

It’s different for office and retail properties. There’s been a fundamental shift in how we use office space and that has changed demand. That’s something you should have your eye on, especially as low-interest office loans come due.

We’re running into a situation where office-owners have to refinance at a higher rate and only 50% of the building is being used. That doesn’t translate to good cash flow metrics for the lender,” he explained. 

According to The National Association for Business Economists’ (NABE) most recent survey, published this Monday, a majority of economists are predicting a recession to occur this year as inflation rates will likely remain above 4%.

“Panelists generally agree on the outlook for inflation and the consequences of rate hikes from the Federal Reserve. More than seven in ten panelists believe that growth in the consumer price index (CPI) will remain above 4% through the end of 2023, and more than two-thirds are not confident that the Fed will be able to bring inflation down to its 2% goal within the next two years without inducing a recession,” said NABE Policy Survey Chair Mervin Jebaraj.

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Tesla Vehicles Are Becoming Cheaper, What This Means For The Company 

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Tesla has recently cut their prices on some of their top-selling models, including the Model Y SUV and Model 3, by up to 20% across the US and Europe. The changes were revealed on Tesla’s website last Thursday. 

While the vehicles are still relatively expensive, the drop is significant when compared to its previous premium pricing. Many are speculating that these decreases are a sign of Tesla backing away from the months they spend gradually raising the prices of the electric vehicles. 

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Tesla has also experienced the impact of the economy in recent months, missing market estimates for sales last year, shifting its market capitalization from $1 trillion to less than $400 billion, according to reports from Business Insider.

Company owner Elon Musk has recently bought and taken over the popular social media platform Twitter, where he’s made it clear that rising interest rates in general have been taking a toll on the electric vehicle company. 

“Fed needs to cut interest rates immediately, they are massively maplifting the probability of a severe recession,” Musk tweeted in November. 

Interest rate increases have had a major impact on the costs of financing Tesla vehicles, making it even more difficult for consumers to become a Tesla owner. 

Dan Ives, senior equity research analyst at Wedbush Securities, said “it’s no secret that demand for Tesla is starting to see some cracks as a global slowdown of the economy that started in 2022 continues into 2023.”

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“A softening demand for the global EV market is a bigger driver of price cuts than interest rate hikes. When it comes to demand, backlog orders have come down significantly for Tesla, making price cuts is a good way to increase the immediate- and medium-term sales pipeline,” said Simon Moores, CEO of Benchmark Mineral Intelligence, a price reporting agency for the EV supply chain, to Insider. 

Traditional automakers have also entered the electric vehicle market, providing cheaper alternatives to Tesla, which has dominated the EV market since its launch. 

According to data from an Experian report, from January to September 2022, Tesla accounted for 65.4% of new electric vehicle registrations in the US. This percentage marks a significant decrease from the two previous years: 68.2% in 2021 and 79.4% in 2020. 

The cuts to Tesla pricing will likely welcome more consumers to purchase the vehicles. Ives stated that he estimated the price cuts could definitely increase demand by around 12-15% globally in 2023. 

“This is a clear shot across the bow at European automakers and US stalwarts (GM and Ford) that Tesla is not going to play nice in the sandbox with an EV price war now underway,” he said.

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The Top 1% Gained Twice As Much New Wealth As The Rest Of The World Within Two Years

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Over the past two years, the world’s wealthiest individuals have acquired twice as much new wealth as the rest of the world, according to Oxfam’s annual inequality report.

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Goldman Sachs Gearing Up To Lay Off Up To 3,200 Employees This Week 

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According to reports from an individual involved in Goldman Sachs, the company will be laying off up to 3,200 employees this week as a means of saving on costs. 

The source who spoke with CNN stated that more than a third of the projected layoffs will come from the firm’s trading and banking units. These cuts are a result of uncertain economic and market conditions, as Goldman Sachs has recently been feeling the impacts of a decrease in global dealmaking. Many companies are leaning away from mergers and raised capital with the firm. 

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As reported by Bloomberg, hiring for roles in other departments will continue into the new year, and a new class of analysts are also expected to start working for the firm later this year. 

At the end of the third quarter Goldman Sachs reported having around 49,100 employees after adding thousands of positions during their recovery from the pandemic; which many financial markets have also done. 

Overall, the Federal Reserve and other major banking firms have begun to raise their borrowing costs as a means of combating inflation rates throughout the nation. 

Many companies are working on saving money by any means necessary to prepare for a possible recession that would occur as a result of rising interest rates. The rate of mergers and acquisitions have overall been on the decline as well. 

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Goldman Sachs is one of the most well known firms that’s involved in these mergers and acquisitions as well. So with the recent decline in transactional activity, the firm experienced a 12% drop in revenue in the third quarter of 2022 when compared to one year ago. 

Investment banking revenue overall has decreased by 57% yearly, according to reports. 

This past October Goldman Sachs announced part of its plan to streamline operations by combining their trading and investment banking divisions, as well as combining its digital consumer bank, known as Marcus, with its wealth management sector. 

Reports indicate that shares of Goldman Sachs were up less than 1% in premarket trading as of this week. 

Goldman Sachs isn’t the only massive company planning on implementing layoffs in their 2023 plans. Amazon stated earlier this month that they plan on laying off more than 18,000 employees while Morgan Stanely have already begun layoffs in the new year.

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Real Estate Experts And Data Show Market Is Gradually Slowing Down

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According to recent housing reports, the current real estate market in the US is slowing down gradually due to inflated home prices and high interest rates.

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Mortgage Rates Hit a 20-Year High of 6.92%

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According to Freddie Mac, mortgage rates reached a 20-year high last week due to rising interest rates, now at a whopping 6.92%. The Federal Reserve is continuing its aggressive monetary policy to squash surging inflation, sending shockwaves throughout the housing market.

The federal funds rate is projected to reach 4.4% by the end of 2022. Russia’s invasion of Ukraine, supply chain issues and record low interest rates during the pandemic led to unprecedented inflation, prompting the Fed’s policy initiative.

While the Fed continues to wrangle with inflation, the housing market is especially feeling the pinch of higher interest rates. The S&P 500 and the New York Stock Exchange also fell 20% from this time last year as a result of these rate hikes. The declines have continued for several weeks.

Despite the Fed’s efforts, the consumer price index has not significantly budged. The index rose to 8.2% in September, far from the Fed’s eventual target of 2%.

For the last 15 years, mortgage rates in the U.S. have been relatively low. Thirty-year fixed mortgage rates were notably low during the previous two years, hovering between 2.5% and 3.5% between 2020 and early 2022.

However, mortgage rates spiked in recent weeks. As of Oct. 13, the thirty-year mortgage rate is at a two-decade high of 6.92%. The fifteen-year rate is at 6.09%.

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Freddie Mac’s chief economist Sam Khater released a statement regarding the rates.

“Rates resumed their record-setting climb this week, with the 30-year fixed-rate mortgage reaching its highest level since April 2002. We continue to see a tale of two economies in the data: strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously. The next several months will undoubtedly be important for the economy and the housing market.”

The Fed has been clear about its plan to continue increasing the federal funds rate until prices begin to level out. Mortgage rates tend to rise alongside the federal funds rate.

In September, the chairman of the Fed, Jerome Powell, said there is no way to avoid the rising unemployment and slowing growth that will follow the Fed’s current monetary policy. The consequences of out-of-control interest rates may be even more disastrous for the economy than necessary rising interest rates. The Fed estimates unemployment will climb to 4.4% in 2023 and 2024, up from the current rate of 3.5%.

“We have to get inflation behind us. I wish there were a painless way to do that. There isn’t.”

Some experts are taken aback by how quickly mortgage rates are rising. Economist Matthew Speakman from Zillow told ABC News that “few could have predicted exactly how far and how fast they have risen.”

“There’s not a lot of incentive for rates to come down dramatically in the near-term, but that doesn’t necessarily mean they’re going to keep running away at this pace.”

The relationship between homebuyer behavior and rising mortgage rates is complicated. In general, higher mortgage rates reduce demand, which drives down the prices of homes. Real estate prices are falling, but not as rapidly as expected, in the face of the skyrocketing mortgage rates.

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Daryl Fairweather, an economist at Redfin, spoke on the complexity of the current housing market.

“It’s like a standoff between buyers and sellers. Buyers can’t afford higher prices, and sellers don’t want to sell for lower prices.”

Recession worries, rising inflation and high-interest rates have made things appear bleak, but many experts believe mortgage rates will not continue to skyrocket. Lawrence Yun, the chief economist at the National Association of Realtors, predicts that rates will hover around the resistance point of 7%.

“We don’t want to see a bursting out of that second resistance and going up, because you’re talking about 8.5% mortgage rates, something that we clearly do not want to see. The 7% interest rate could be the new normal.”

In July, Yun released a statement predicting that higher mortgage rates will persist as long as the high inflation rate persists.

“If consumer price inflation continues to rise, then mortgage rates will move higher. Rates will stabilize only when signs of peak inflation appear. If inflation is contained, then mortgage rates may even decline somewhat.”

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US Home Prices Decline at Fastest Pace Since 2008 Financial Crisis

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We are in the middle of the most significant two-month drop in home prices since shortly after the collapse of the Lehman Brothers in September 2008. Prices have been declining at the fastest pace since the Great Recession, prompting some experts to believe we are entering a housing market correction.

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