The headlines all over are trying to trick us into believing that everything is just fine and that we are working through all the bottlenecks in our supply chains. Well of course they are. We are tailing off the influx of the Christmas buying season. Yet, the facts tell us we are not yet in a good spot right now. My youngest daughter is very unhappy right now because two weeks ago Victoria’s Secret announced that they would be down 50% in selections for the Holiday season. I was informed by Landsend, that I cannot buy Bay Cities logo wear because they don’t have enough Santa’s Helpers to get the product out in time and that their transportation routes are delayed. However, for extra charges, I could gamble on express mail and maybe the goods would arrive for Christmas. Instead, anything I ordered today I would not see until mid-January. Now, this is hitting home!
Let’s look at the statistics for the two ports in LA. The news would have you believe that things are wonderful. Sorry to pour reality on the make-believe world of Hollywood, but here are the realities of our two ports as of November 22nd:
- 91 ships at anchor
- 16 ships arriving
- 76,237 containers on hand
- 26,275 containers 9 days and over (this is in the wrong direction)
This is slightly good news as two weeks ago we were at 111 ships at anchor. The 26,275 containers sitting there for over nine days is a huge problem. Black Friday is in three days. No cans no inventory! We are seeing this in our packout centers. We are shipping displays without product and our Clients have to fill at the store. I bet ya the farm this won’t be reported in the news!
So, what drove this explosion of freight stacked up at the ports and in warehouses all around the US? Simple, pent-up demand and smart forward-thinking by buyers that anticipated that this would be a huge Christmas season. They needed to buy early to get products ready for online and on-shelf sales. In addition, those that attended our “Winning at Retail” were undoubtedly informed, the Ugly American would be coming out from underneath the rocks to invade retail centers around the US. The heroes and champions of Covid, women, will be hunting fiercely as they have been taking on a lot. She has come out in full treasure hunt mode to hit retail hard. She wants a night on the town and is in full shop attack.
What does the future look like? Chinese New Year is in February and this will hit the brakes in the Asian ports. The massive Christmas season will have come and gone, and ports on both sides of the world will be able to work on cleaning up backlogs and congestion. Freight rates are settling and actually coming down a bit. I wonder if this is normal for this time of the year, as the big explosion of Christmas passes by so does the demand for ships at this time? In our business, machinery manufactures and surrounding secondary suppliers are our 1 -2 years still.
Changes to the consumer here and abroad will be the key to what happens next. In the US, the service sector is on fire, but it can’t find people to man the decks. In the restaurant business, lunches are being eliminated due to the inability to find people. One small chain here in LA is short 1,500 people. How can you make that work? I feel that this will drive our hunter into the stores, as she now is still stuck at home cooking for that lazy family, and thirsts to get out and hunt both online and on the shelf. Sorry ladies, but the undergarments at Vic's are going to be in short supply. We will also see some great deals coming from goods not making it to market in time. There is a ton of cash in our system for the hunt to continue all the way through next year, and our hunter will continue to make her way to the mall.
A big concern is our knuckleheads in Washington can’t grasp the understanding of how inflation is created and how it is kept in control. The wonderful Build Back Better folly will crush our GDP by a cool ½ percent due to its effects on inflation and the curtailing of our hunters. Remember the word transitory? Labor, transportation, fuel, and real costs of housing will NOT go away with these bozos. Let’s take the most recent example of blunder. Mr. Biden announced today that he is releasing 50,000,000 barrels of oil out of the federal reserves. Let’s look under the hood of that bold, brash, inflation curbing mistic. Actually, he is releasing 32,000,000 barrels for this month and the remaining 28,000,000 will be released over the next few months. First, do you think for one hot minute the folks at the gas stations are going to lower gas prices as we all flock to Grandma’s for Thanksgiving? Let’s also look at the consumption of gas. We blow through close to 20,000,000 barrels of oil a day. This is once again a small step in a crucial bout of missteps by Mr. Biden that have driven oil prices up in the US. Oil producers that are flush with cash will not invest a dollar in the extraction of oil in their fields because of the quick reversals of policies towards the extraction of oil. Thus, oil will be very costly going forward. He even begged the Saudis and Russia to pump more oil abroad to reduce oil after he closed the valves in the US. I still think our Covid heroes will be back out shopping on shelves and online for the foreseeable future.
My biggest concern isn’t the blunders of our politicians, but more so the continued threat of Covid here and around the world. This pesky virus has legs and one good outbreak could put a stop to growth. If we look at our maritime workers, many have not stepped on land for over a year. Bloomberg reported on a dead Captain not coming to shore after 6 months due to Covid. This will be around the world for a few years. To me, this is our biggest threat to our livelihood.
We all should be thankful for being Americans and having the freedoms we still enjoy today. We invented and produced vaccines that can curtail and halt this pesky virus. We are a very strong country, and we are coming out of the rocks to a different world and a new day. We should be thankful for that and we are the strongest consumers on the planet today. We are the innovators of the world and we have been very fortunate to be Americans. With that, I must say Happy Thanksgiving!