|Dow||+28.23 to 18,047.58|
|S&P 500||+3.35 to 2,100.34|
|Nasdaq||+5.43 to 4,899.27|
|10-YR Yield||+0.124 to 2.145%|
|Gold||-$18.80 to $1,208.30|
|Crude Oil||+$0.36 to $53.14|
The shipping containers are stacked up, row after row, on the docks in Los Angeles.
The number of ships sitting at anchor offshore is growing by the day — so much so that Long Beach looks more like a floating parking lot than one of the nation’s premier ports.
And from small to large businesses, from trucking firms to the nation’s leading retailers, the costs are mounting fast. We’re talking about the potential for several billions of dollars in added expenses and lost productivity before all is said and done.
It’s the great port dispute of 2014-15, and it’s so bad that President Obama is sending Labor Secretary Tom Perez to California today to try and mediate a solution.
|Wal-Mart warned that the slowdown at the ports of Los Angeles and Long Beach will increase logistics challenges.|
So what’s behind this dispute? Workers represented by the International Longshore and Warehouse Union want a better contract than the one that expired last June. But port owners represented by the Pacific Maritime Association claim workers are purposefully slowing the pace of work in bad faith, and are refusing to pay overtime and holiday wages as a result.
The result is that some 29 ports up and down the west coast are operating at much reduced levels of efficiency. Cargoes aren’t getting offloaded from ships as quickly. Then when they are offloaded, they’re piling up on shore rather than making their way rapidly to waiting truck beds or rail cars.
In fact, this is the worst port dispute since 2002. That fight cost the shipping and logistics industries an estimated $15.6 billion. Just a few examples of the spreading pain:
* Honda Motor (HMC, Weiss Ratings: C+) is going to curtail auto production at plants in Ohio, Indiana, and Canada. The culprit? Parts shortages caused by the port dispute.
* Toyota (TM, Weiss Ratings: B+) and Nissan (NSANY, Weiss Ratings: B) are among carmakers being forced to fly in parts, rather than send them by sea. That raises costs dramatically, eating into profit.
* Jeans maker Levi Strauss said it may not have certain products on the store shelves in time for spring, while Wal-Mart (WMT, Weiss Ratings: B+) warned of increased logistics challenges. The National Retail Federation says a full worker lockout could cost the economy as much as $1.9 billion per day.
|“The National Retail Federation says a full worker lockout could cost the economy as much as $1.9 billion per day.”|
We’ve seen the Dow Jones Transportation Average stall out since November, even as other major stock indices have made marginal new highs. It’s hard to draw a definitive cause-and-effect relationship there. But it’s worth noting the divergence, and pointing out that widespread labor slowdowns and shipping snafus certainly won’t do the sector any favors!
So take a minute and weigh in here. Is this a major economic crisis brewing? Or will the sides be able to work this out without significant economic losses? Do you generally support management’s stance, or do you think dockworkers have legitimate gripes that need to be addressed? Let me know over at the Money and Markets website!
|Our Readers Speak|
Should we be optimistic about stocks, with the averages hitting or nearing new highs? Will autos continue to “drive” those kinds of gains? And what about electric cars — are they really as revolutionary as some are claiming? Those are the kinds of questions on your mind over at the website this weekend.
Reader Holygeezer said the environmental costs of a quest for growth aren’t being appreciated enough. His take:
“The stock market is reaching new highs. Meanwhile runaway environmental collapse is happening at the hands of unfettered capitalism. Just keep on acting like endless growth can actually work out. Grab those profits like they mean something. In the coming years all the so-called wealth will not mean a damn thing. It’s nothing but an insane fool’s errand chasing wealth at the cost of life itself.”
Reader John W. and Reader Jim indirectly raised the same issue, in the context of battery-powered cars like those manufactured by Tesla. John said: “Everyone talks about the great mileage it gets, that recharging is faster, and how more recharging stations are coming on line. All of this is great … but the one nagging question that I have never heard is, ‘How much does that electricity that you put into the car cost?’ It is not free. What’s the cost of the recharge?”
Jim responded by saying: “It’s also relevant to ask what fuel is being used to generate the electricity and how much of it per kilowatt. One of the nastiest things on the planet is a used battery. What happens to it and the poisonous waste inside it?
“Also, what changes to our infrastructure would be required for us all to drive one? This needs to be considered before we decide how clean it really is and whether or not it is practical on a massive scale.”
Great thoughts, guys. You’re absolutely right that the juice coming out of those recharging hoses has to come from somewhere — from burning coal or natural gas, or other sources such as nuclear power plants. So both the industry and consumers are going to have to sort out the benefits and drawbacks to fossil-fueled and battery-powered vehicles, and figure out which make the most sense going forward.
Finally, when it comes to paying for cars, Reader Ted T. weighed in with the following observation on auto financing:
“The one thing everyone talks about is the subprime problem. Our dealership sells about 25 percent of our cars subprime. The finance companies are getting much more money down than they did in the recession five years ago. Also, the finance companies are putting the customers into low-priced, new cars.”
The gist of Ted’s comments seems to be that subprime car financing isn’t as much of a problem now as subprime home financing was several years ago. Do you agree? Or do you think we need to be more concerned? Weigh in over at the website, using this link!
|Other Developments of the Day|
An oil train transporting almost 110 tankers of crude derailed and exploded in West Virginia. The CSX train was carrying oil from North Dakota to Yorktown, Virginia, and it’s not the first to experience problems. That’s why the government is mulling a program to require upgrades to the U.S. oil tanker fleet.
The immigration fight is heating up, with a Texas district judge issuing an injunction against President Obama’s plan to relax deportations for up to 5 million immigrants. Several states sued, saying the costs of the immigration program were too onerous. The Supreme Court may ultimately need to weigh in.
That cease fire in Ukraine? It’s looking a bit shaky today, thanks to ongoing fighting between Pro-Russian rebels and Ukrainian forces. The main area of contention is Debaltseve, an important rail hub in the country’s east.
Are you ready to drive an “iCar”? You may someday have the chance, according to reports suggesting that Apple (AAPL, Weiss Ratings: A+) is working on producing an electric vehicle. No word on when such a car would hit the market, but it would compete with battery-powered cars produced by a host of other companies from Tesla Motors (TSLA, Weiss Ratings: D+) to General Motors (GM, Weiss Ratings: B).
Feel free to comment on these or any other stories you came across during the long holiday weekend at the website.
Until next time,