To The Moon

My investing muse - UAW strike, US Freight, Panama Canal

UAW Strike News

The United Auto Workers union on Friday sent another 5,600 members out on strike at General Motors and Chrysler-parent Stellantis, widening the impact of its work stoppage and extending it to parts-distribution centers that supply dealershipsNEWS: Canada's Unifor auto workers union is set to go on strike against Ford tonight for the first time in 32 years. This will be a total strike. All 5,600 Ford workers in Canada will go on strike. This means Ford would face strikes in the US & Canada at the same time. Unifor's contract with Ford ends tonight at 11:59 PM ET.NBC News > General Motors idles another auto plant, sending 2,000 workers home as UAW strike deepens

For every 1 worker on strike, there will be about 5-6 non-auto workers who will be affected. This includes supply chain (transportation, warehouse), suppliers, partners, etc.

At the same time, those who are on UAW strike will be receiving a limited payout during this time. Do not forget that Ford laid off 600 non-striking workers in Michigan about a few days ago. Some of these partners/suppliers have tight cash flow and can be deadly with the current interest rate. If their supply chain is compromised, more jobs can be lost and businesses may fold eventually. For those living paycheck to paycheck (61% in the USA), this may force them to turn to credit. This cannot be well.

If the union insists on its stand, some of these plants may end up in operating losses and are forced to shut down eventually.

Panama Canal

This is reported by Open Democracy pertaining to the Panama Canal drought.

Panama Canal drought: Rolling ecological crisis is raising prices everywhere. Climate change and El Niño are causing global shortages of everything from Barbie dolls to natural gasFloods in the Balkans and North Africa have killed thousands, wildfires have raged across much of the Mediterranean, India’s rice crop has been hit by drought and Canada’s wheat harvests by floods. Meanwhile, in Central America, the driest weather in decades is menacing one of the most important transport arteries on earth.A massive 40% of the world’s cargo passes through the Panama Canal, which ties together the two great oceans in the eastern and western hemispheres.

This is one event that will have an impact on the global supply chain.

Here are some specific examples of the savings brought by the Panama Canal as per Google Bard:

A ship traveling from New York City to Los Angeles can save up to 15 days of sailing time by using the Panama Canal.

The average cost of transporting a container from New York City to Los Angeles is about $2,000 cheaper using the Panama Canal.

The Panama Canal saves the global economy about $8 billion per year in shipping costs.

The Panama Canal reduces global greenhouse gas emissions by about 16 million tons per year.

The Panama Canal is a vital part of the global transportation system, and it plays a major role in reducing the cost of goods and protecting the environment.

US freight

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FreightWave > The imbalance of import & export-led to an increase in exporting "empty containers" from the USA. Only 39% of export containers leaving the USA are laden with cargo. Is this not a concern?

More than 60% of the containers leaving US ports are empty. This needs to be done as there are greater demand for containers out of the USA. Ideally, each container should be carrying cargo so that there is revenue generated for the shipping lines. However, there are non-revenue trips. Do you think that the shipping lines will allow these costs to be borne by the shipping lines themselves?

Conclusion

Inflation is here to stay, higher and longer. From the data trend, the current interest rates are unable to bring inflation under control. Thus, there are more rate hikes expected and the Fed pivot has been pushed back further. For the Fed, they are guided by the inflation, GDP and unemployment data. Yet the oil prices, gasoline prices and the supply chain and union issues form causes for the rise of inflationary pressures.

Let us continue to be prudent and consider some hedging for our portfolios.

@TigerStars

$S&P 500(.SPX)$

$General Motors(GM)$

$Ford(F)$