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Originally Posted by MCBuggyCo
Thanks for listing the changes over the years. I have only been expediting since October so it is very educational to see how things were compared to how they are now. Could you please now give us a look 5 years into the future?  |
Looking five years into the future, there is bad news and good news. The good news, for Diane and me personally, is we will be in fat city. Provided that we suffer no health or accident setbacks, we expect to build financial assets at a greater rate than we did in the previous five years.
That is because in our first three years, roughly 40% of the gross revenue we generated went to fleet owners. Now that 40% goes to us. Instead of financing our next truck and paying interest on a truck loan, we are saving money toward paying cash for our next truck and earning interest on the savings. We are also benefiting and will continue to benefit from certain fuel-economy improvements we have made.
(Note to newbies: Do not take this as a recommendation to buy a truck starting out. I continue to maintain that starting in a fleet owner's truck is the better way.)
The bad news is general economic conditions and industry conditions are not as favorable today as they were five years ago.
In
a post on 9/2/07, I said, "On August 31, top-level economic policy makers attended a symposium in Jackson Hole, Wyoming. I have been reading the full texts of speeches given there. They leave me with no doubt that a recession is coming, and it could be severe."
Well, one year later, the credit crisis that has since happened, and that experts said would go away, has not gone away. Contrary to certain optimistic experts speaking today, I believe that the credit crisis has only just begun.
Now cut off from the previously easy-credit home-equity loans and rising home values, many consumers are using credit cards to stay afloat. But with banks needing to firm up their balance sheets, that source of credit will tighten too.
Mortgage defaults and foreclosures will increase, home values will continue to decline, and credit card rules will be tightened as banks struggle to get out from under bad consumer debt. That will tighten consumer spending, which will hurt business, which will prompt layoffs, which will further reduce consumer spending ... and so it will go until the credit excesses of the past are wrung out of the system.
Optimists will point to the occasional bright spot as this major economic snowball rolls along for the next year or two or three. While the bright spots will certainly be there, they will be the exception, not the rule.
I'm keeping my eye on the snowball. The snowball will eventually melt away, but not before a whole lot of people, including some very smart financial experts, are crushed under its weight.
We will soon see the FDIC closing and bailing out more banks. And we may even see the taxpayers bailing out the FDIC.
When the Federal Reserve Bank stepped in to keep Bear Stearns from totally collapsing, do you remember the assurances Bear Stearns officials gave, just days before, about its financial strength? When the FDIC seized the failed IndyMac Bank, do you remember bank officials saying, just days before, how strong IndyMac was? As the bloom came off the rose at Fannie Mae and Freddie Mac and their stocks declined over 80% in value, and as the federal government positions itself to rescue those companies, do you hear today Fannie and Freddie officals talk about how strong their companies are? Do you believe them?
The IndyMac Bank failure -- the second-largest bank failure in U.S. History -- took $4 - $8 billion out of the FDIC's $52 billion asset pool. The FDIC will try to recover that by raising the fees it charges healthy banks, which will strain those banks further. When asked how strong the FDIC is, FDIC officials offer assurances. Do you believe them?
I don't. With my eye on the snowball, those assurances provide more concern than relief.
Again, the credit crisis has not gone away. It is only just beginning. Until the credit crisis resolves itself, general economic conditions and industry conditions will not be as good as they were in the last five years.
Expediters who embrace a debt-free lifestyle and have well-considered business plans have less to fear from the snowball than those who do not.
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