We are seeing skyrocketing transportation costs ramping inflation as monetary madness goes parabolic.

Skyrocketing Transportation Costs
June 28 (
King World News) – 
Peter Boockvar: 
As a holder of FedEx for clients and myself, I went thru the earnings call and here are some quotes with respect to labor costs, a key component to the question of ‘transitory’ or not and when more capacity will come on line in the context of skyrocketing transportation costs, which also gets to the ‘transitory’ question. 

From COO Raj Subramaniam:

The inability to hire team members, particularly package handlers, has driven wage rates higher and creates inefficiency in our networks as we use overtime to cover open shifts and route volume around known constraints.”

From CMO Brie Carere:

“Global air cargo capacity remained down 10% y/o/y as of April, mainly due to the reduction in passenger belly capacity. We expect air cargo capacity to remain constrained through at least the 1st half of calendar year 2022. Recovery will be slow, potentially episodic, and a full recovery is not anticipated until 2024. We believe a favorable pricing internationally should continue through fiscal year 2022.”

Skyrocketing Shipping Costs
Here is a chart of the Drewry Hong Kong to LA container rate per 40 ft box, up 6x where it was pre Covid.

Hong Kong To LA Container Rates Skyrocket 6X!

This cost gets rolled into every single item that gets shipped. This is more than just a post Covid phenomenon where a lot of passenger planes that carry cargo were grounded. We’ve seen major consolidation in the global container shipping market over the past 3-4 years that gives the surviving operators pricing power.

Here is a chart of the US Dry Van Market Demand index from Truckstop.com. While off its spike peak in February, it is up 5x from before Covid.

Trucking Costs Remain 5X Higher Than Pre-Covid

Thanks to the tariff induced manufacturing recession that began in mid 2018, we saw a slew of truck company bankruptcies in 2019 where a lot of capacity came out of the market and was also a set up for the price jump…

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Housing Struggles
To my point that monetary policy is impotent in that sense that it is actually hurting the most interest rate sensitive sector of the US economy, that being housing because it ran it too hot, Redfin said this on Friday:

“The housing market continues to cool as mortgage rates tick up above 3% for the 1st time in 10 weeks. The Redfin Homebuyer Demand Index – a measure of requests for home tours and other home buying services from Redfin agents – has fallen below 2020 levels for the 1st time this year…As a result of declining sales, the active supply of homes for sale has crept up 5% from the 2021 low in mid March. However, home prices are still rising, homes are selling in fewer days than ever and more homes than ever are selling above list price. These indicators will take longer to reflect a slowdown since they are based on homes that went under contract a month or two ago.”

Why is this? “Some homebuyers are pausing or abandoning their plans to buy because homes in their area have gotten too expensive” said the Redfin chief economist. 

In every FOMC statement since the Fed began exploding the size of their balance sheet higher beginning again last year they’ve included this rationale, “These asset purchases help foster smooth market functioning…” Looking at these daily overnight repo numbers, it is clearly apparent now that QE has resulted in major market disfunction.

Monetary Madness Continues As Overnight Repos Go Parabolic!

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