Q&A – Rail Mixed Signals

By | September 1, 2020

FTR joined the Midwest Association of Rail Shippers to host a joint webinar at the end of August titled, Mixed Signals: Making Sense of What the Economy and the Freight Markets are Telling Us (click for the replay). Following the webinar, we brought the panelists back together to answer attendee questions and discuss some of the issues that are affecting the rail markets.

Listen to the full discussion on the State of Freight Podcast or read below for the fully transcribed Q&A.

Table of Contents:

  • Q1: Lumber Demand
  • Q2: West Coast Ports & Intermodal
  • Q3: What is Equilibrium in Transportation?
  • Q4: Precision Scheduled Railroading
  • Q5: Scrap vs Store Decision Making in Car Supply
  • Q6: Car Build Numbers & Fleet Size
  • Q7: Election Expectations

DISCLAIMER: This text was automatically transcribed from an audio recording and may include typographic, grammatical, and contextual errors that differ from the speaker’s intention.

QUESTION 1: Lumber Demand

Stefan Loeb: The one question that hit me and actually we had a couple follow up folks in the rail industry, we all started kind of chatting. Todd, after your presentation, you did a really good job bifurcating the intermodal recovery and rail versus the industrial or industrial products segment. And you actually touched on the lumber and building products area. But what we thought was so interesting in the last three or four weeks, with no sign of slowing down, we are getting inundated as a rail industry on lumber requests and buildings. So the question that I had and then a couple of other people at MARS kind of shared and discussed with me is that when was that data or are we starting to see a lumber recovery? Because it sure feels like it in the industry, the requests for center beams and other things that seems to show that the economy is starting to build again, at least on the home front.

Todd Tranausky: Yeah, so that’s a great question. Definitely the economic data, if you look at Stard’s, if you look at parmit’s definitely the housing market’s coming alive, as you would expect. Mortgage rates are at record lows. The boys are working home more. They need more space. They want new houses, bigger houses, all of those things. However, when you look at the rail data when you look at the lumber and wood, it’s really not doing anything other than moving seasonally. Now, could that change? Is that likely to change? Possibly, given where things are now. There are a lot of cars put in storage during the pandemic. There were a lot of cars put in stores before the pandemic as the railroads went into going to railroading operating mode. And they tried to really cut down the size of their asset basis on rail cars, on train crews, on really everything. And those cars don’t just come out of storage immediately. There’s a lag and so it’s going to take some time for the carriers. If there is that demand for them to react. They can’t just get those cars where they need where they’re needed immediately. There’s going to be a process in terms of how many cars they want to bring out, how sustainable they view it and how quickly they can get those railcars from where they are to where they’re needed.

Eric Starks: Yeah, this is Eric, so it is a bit surprising to see that they’re having a hard time getting get in the cars in the sense that we know that there are plenty of cars in the market, that it’s that there’s not something fundamentally that is change with supply on that. So it’s one of those things that the underlying pressure continues to be to be there. And it’s very possible that it is the basis of the question could be based upon the different mills. So it may not be all the way through the whole system. So this something we’re going to I think we’re going to really have to pay close attention to, because housing is definitely one area where we’d love to see the market kind of pick up. And we do know that a lot of the consumers are going out to the Home Depots, the Lowe’s, Menards, all of these different things and buying up the lumber and trying to do things. Since everybody sitting around at home and they start seeing all these projects that they haven’t touched forever, I know I have.

Stefan Loeb: Yeah, exactly. Anecdotally, you know, again, you just look at the Watco network and you just see tremendous demand from our sawmills for these products. And, you know, it’s interesting because, again, that’s to me why I think as a global pandemic, it has had the most micro impacts where maybe lumber in big economic data shows no real recovery. But then on a short line in the Midwest, it serves a lumber producer and we can’t get enough center beams to meet the demand. And I just wonder, guys like that, that’s been a fleet that was dead for how many years? I think when I got in the industry center beams were dying and stored. And so I think I wonder I’ll ask it. How much do you think that impacts it, too? Is the fact that this was a car type that was hurt for so long, did that have any impact on this?

Todd Tranausky: Well, I’ll tell you what I think. I think it means that those cars that are in storage, you know, they may have sat for a good long while and they may need to have mechanical inspections. They may need to have work done to them before they’re just put back in the system. It may not be as simple as pull the car out of storage and bring it back. They may have to go to a shop first and do some work to get that car ready.  There were a ton of cars built, as you say, back in the early 2000s, mid 2000s to meet the housing boom before the Great Recession. But those cars are still around, by and large. They’re young enough that they’re still there. They just may not be in serviceable condition immediately.

Eric Starks: I agree, if we see it over the last five years, you know, that means that there’s enough cars there. So that’s not an issue and we’re just not seeing a large scrapping of these cars. So that’s not the fundamental problem right now.

QUESTION 2: West Coast Ports & Intermodal

Stefan Loeb:  Switching gears to the intermodal side, there was a good question talking about some of the congestion seen in the Chicago market for intermodal. But instead of being that specific, there’s been a lot of news since actually our presentation virtual conference last week about issues on the West Coast, too. So even since your presentation, there’s been a bunch of news items that you want to care to comment on. The current state of intermodal and LA and the congestion there and vis-a-vis how it affects the North American network?

Todd Tranausky: Yeah, certainly. I mean, out west, there’s sort of been the epicenter of the congestion out in Southern California. There have been a lot of issues out there, particularly around get the railroads to be able to have the crews necessary to move the freight. And there was definitely some anecdotal discussion when we go when we talk to carriers about, you know, the $600 extra unemployment benefit being an impediment to bringing train crews back, to getting them to come off of furlough, to come back to work and move freight. And it’s something that we’ve definitely seen and going into the peak season, it is something that is concerning. You know, we don’t expect a huge dramatic peak season, but we expect volumes to follow those seasonal patterns. So from that standpoint, volumes are going to be higher than they are today. Volumes, you’re going to see the seasonal peak that you typically see in railroads are going to have to find a way to be able to cope with that and have the resources in place to be able to do that.

Stefan Loeb: How much do you think we had a lot of new ports come online and then a tremendous supply chain interruption here with COVID, is there anything to the fact that maybe the shippers are going back to old reliable Port of LA Long Beach is kind of the industry stalwart? Is there any of that or is this just, like you said, just kind of the trend of more volumes at the end of the year for Christmas rush?

Todd Tranausky: Well, there definitely is some of that going on. If you look at the market share changed, you know, the pandemic has taken what was the trend of the West Coast losing market share in the East Coast gaining market share that’s been going on for some time and reversed. You know, people are more and more using the West Coast ports, in part because they’re no longer using the Pacific Northwest ports as much as they were, and also because the Southern California ports are the quickest way to get those volumes to market. That is the quickest way you avoid 10 to 15 days of additional transit time using the low water option of the East Coast. You have an abundant amount of transload capacity near the ports that allow you if you want to transload that freight into a domestic box and move it directly to your distribution center on the domestic container. And so folks are definitely using LA Long Beach in a way that they haven’t in the years and quarters prior.

Eric Starks: Yeah, Todd, you took the words right out of my mouth. I was actually thinking about that, because of the  timing of getting it through, it’s still faster. Even if it’s a slower getting it through the port, it’s still a faster move, getting it to the end. And what are the things that we’re seeing and we talked about this the other day, is that with the low stockpile of imageries for the retail market, there is a push to get those back or move them through the system faster. Because before, you know, if your inventory was fine, you had enough sitting around and you could slow steam it around to the East Coast, no big deal. And now you’re like, that’s just really not desirable for the moment. Now, will we go back that way? I think so. I think we’ll get to a point where you have inventories kind of right size. There’s less pressure in the system. Then you can kind of start diversifying where you move your stuff, which port you use.

QUESTION 3: What is Equilibrium in Transportation?

Stefan Loeb: Now, that’s all interesting feedback there, you know, one of the things that the question talked about with congestion in Chicago, I think was inferring what I’ve talked a bunch about at your conference and with you guys offline all the time, which is railroads have gotten very good at kind of rightsizing. But, you know, the problem is, and I’ve said this before, so these are Stefan’s words, the railroads can never reach equilibrium, though, because what’s equilibrium in transportation that doesn’t exist? I don’t think actually there’s probably a law of physics that shows that. But, you know, you guys look at this industry all the time. How do you tell or how do you help your customers or MARS folks figure this out in with the railroads, pressure on shareholders to always be right? How that impacts things like what we’re seeing on the West Coast, what do you look for and what should our membership be looking for going forward on this to see if it gets better or worse?

Eric Starks: So I’ll take a stab at this. Todd, I’m sure you’ll want to jump in. So the whole thing always comes down to freight in the system, right? The economy is always going up or going down or flatlined or whatever that looks like. And it’s never completely stagnant. It was very fascinating when we were seeing coming out of the Great Recession, we saw the economy, GDP sitting about two percent. And what happened, we had kind of stability for the first time in a while. There was and I think everybody thought, oh, we need three and a half percent GDP to continue to grow. And we’ve realized, oh, two percent is actually great. It’s predictable. We’re not creating overcapacity. We’re not doing you’re not doing crazy things. So in an environment that we’re in right now, when you have big swings in the freight market, it is nearly impossible to see equilibrium. And so one of the things we’re really paying attention to is as the freight markets come back up, is there enough equipment there to support that infrastructure? Because that’s one part of the equation. And then the other part is, are the railroads positioned to move that freight through the system efficiently. And efficiently isn’t even the right word. It’s predictably. Is there predictability and consistency. And that’s really, really one of the things that’s helpful. And finally, then, we need to try to understand, can they right size the overall fleet of the cars to make sure you don’t have too much in the system so that you’re overly congested, yet you have enough cars in storage that when things do heat up, you can quickly get them out. You know, they’re not sitting at the far back and you have to move everything out of the way so you can get to it. Stuff like that. So we’re totally paying attention to that. Todd, I can tell you want to jump in, so give it a go.

Todd Tranausky: Yeah, I mean, what the metrics I look at the car loadings metrics, I look at the service metrics and I look at the right metrics because really we’ve always seen in railroading as volumes come back, service goes down. I mean, that’s been happening ever since the dawn of railroading. But the question is to what level does service deteriorate? Do you get a situation like we’re in now where we went up very, very high during the pandemic and yes, we’re coming down, but we’re still settling out above the ten year average at very strong levels on an overall basis? Now, there are certainly some pockets like we talked about with Intermodal in the LA basin. There are pockets of things that aren’t a network wide. All carrier basis service is at a pretty good level and the railroads have an incentive in a relative world. And with the pressure they get from Wall Street to keep capacity below demand because that drives their ability to get pricing and their ability to get rate going forward. However, they have to be careful because you want to keep the service at a certain level, because ultimately that service product is what’s going to drive your market share, your volumes and your pricing ability over the longer term. And that’s the thing I’ve said, if I said it was a million times, you know, shippers are always willing to pay for service. You know, the absolute level of the right is not necessarily as important as the predictability that Eric was talking about when you shipped by rail, even if it’s intermodal, even if it’s a couple of days longer than truck, so long as it’s always two days longer than truck, I can build my supply chain around that. Where I get into trouble and where the term years ago was about substitute service and trucker is not one to use intermodal. It was substitute service for their shippers. Because it wasn’t as good, because some days it would be two days longer, some days it’d be five days longer, sometimes it’d be 14 days longer. Those are the things that drive supply chain folks nuts, that drive shippers nuts because you can’t plan how much inventory you need. You can’t plan your distribution facilities out. So for me, I look at the balance of carloads, of service, and of rates to try and figure out where is that? Where is that unicorn that everybody can get along with the railroads can provide the predictability and shippers can know that, OK, I might pay a little bit more to move it by rail, but I’m going to get it when they can actually deliver it.

QUESTION 4: Precision Scheduled Railroading

Eric Starks: So let me ask a question, Stefan. You can even jump in and love to get your thought on this, because the whole intention of  PSR, Precision Scheduled Railroading, was to create an environment where you had that predictability and that that consistency. Is that actually happening and that shippers feel like there is more predictability now than there was, let’s say, two or three years ago?

Stefan Loeb: Yeah. So you’re going to accuse me of dodging this question for a little bit. I’m not trying to. The thing is, you and I think a lot of folks have done a good job about this. To answer any question about PSR, you have to look at it, of which railroad you’re talking about and when are you talking about it. And so, again, you look at PSR today, there are a few railroads that are past PSR. I mean, they’re in a way you know, a lot of folks have written about this. It’s kind of they call it the post Hunter Harrison, right. It’s going back and trying to build the relationships with the shippers and using that highly efficient network. And then there are those railroads that are still essentially going through it. And then there’s one that kind of never has. And so it’s a tough question to answer. But the way I would say it is we have seen as both one of the largest short line holding companies and also a large rail shipper in that almost half or more of our 90 terminals have rail. We see a situation where service is good. It’s what I call it, consistent truck. No, I mean, Todd’s spot on with the issues with truck that we compete with all the time. But it’s good. And generally we have found ways through our partnerships with the class ones to do things like pre blocking and all sorts of little tricks that fit into their network that really accentuates their hook and haul fewer yarding events. All the things that Hunter used to harp on that gets a negative connotation. We’ve been able to blend our first mile last mile into a really good solution for our customers. So I would say in that sense, it’s been very good. Now, having said that, though, Eric, for the last six months, it’s because volume fell off a cliff for class once. So they have a lot more room, you know.

Eric Starks: No, really. It dropped, oh, my God. What happened?

Stefan Loeb: It’s what Todd was talking about. I thought that I fall asleep during that presentation now. So that’s how I would answer that. The service is very good by eliminating yard events in general, I think is is pretty good. We have seen instances where we struggle in lanes now because certain cars have to take an elongated route around. But in general, it’s been a good thing if you’re flexible and if you’re willing to figure out how we as the first mile, last mile fit into that total supply chain with what the big railroads are doing.

Eric Starks: That makes sense. Todd thoughts on any of that.

Todd Tranausky: No, I think that makes a lot of sense.

Eric Starks: Beautiful.

QUESTION 5: Scrap vs Store Decision Making in Car Supply

Stefan Loeb: One thing I wanted to hop back to, Eric, is one of the things you looked at and you made a comment about car supply and we had a really good conversation about the amount of stored cars out there. And there are some questions that Todd answered specifically to the industries. But one of the things that people ask about a lot, so I’ll ask the generic question, how do car owners view that scrap versus store decision, but then more intrinsically now to COVID, does that change at all or do you see it changing at all?

Eric Starks: Yeah, so I’ll jump in here first. I don’t think it changes because of COVID. I think the underlying dynamics that they make the decision on is still there. But COVID change in the sense of we saw a change in the amount of freight in in the system. And so it has been very clear, for example, if you go with coal cars, you know, that we were already seeing a a decline, a secular decline in that particular market. And so that has not gone away. In effect, this kind of accelerated it even more. So you’re just you have more cars sitting there. So ultimately, the part of the decision making is what is the price of scrap? Can I get for it? What is my cost of sending it into a yard and having it sit there? And, you know, those are to do the big and how old is it? Right? What’s the residual value on this? And a lot of cases, you know, most of these cars that we’re talking about have really no residual value other than scrap. So I think it’s getting to the point where they finally just say, OK, the scrap price may or may not come up, whatever that is, let’s just start getting rid of some of these cars. But I don’t see them there yet. And so we are typically the cycles have always been it’s always fascinating. Scrap prices typically have always led to typically have led a recovery, not always typically led a recovery in the in the grand scheme of things. So what happens? Scrap prices go up and then they start scrapping cars. And the next thing you know, freight goes up and they go, huh? I needed those cars. What’s going on? So I don’t see that happening this time because of the type of cars we’re talking about scraping. Todd?

Todd Tranausky: Yeah, no, I mean, you think about the two biggest car types that our people talk about and people come to us and ask this question a lot. You know, the two biggest car types are the open-top hoppers that are aluminum sided for coal and the small cube covered hoppers. And they’re two of the worst utilized fleets out there. If you look at utilization by car type, they are two of the leaders, as everybody would expect, between coal and sand. Now, as Eric said, scrap has always led recovery. So you would expect to see the price of scrap come up as the economy recovers. As we get into the back half of this year and in 2021, you would expect  to come out of it. That scrap price will come up. Now, that will allow some of those older cars, particularly those open-top hoppers for coal that have one use and one use only. You know, those cars are now they were predominantly built between 1995 and 2007. So they are right in that 15 to 20, 25 year window where if you get a little bit of an uplift in the scrap price, you know, they are now economical to take off the books because coal is not coming back. It was in a structural decline before the pandemic. The pandemic in a lot of ways accelerated that decline because the market shares that coal loses this year, that it wasn’t expected to lose, it’s not market share. It’s suddenly going to regain in 2021,2022, and beyond. Natural gas remains inexpensive. Renewables remain more and more accessible to parts of the grid, particularly in those grid regions where coal is well entrenched like Texas. So you have more of these threats to coal that aren’t going away and could in fact cause some of the planned retirements that are on the books for 2023,2024,2025 get moved up because they find they just don’t need those units. And so those cars, you could see those move off the books. The cars that’s going to be harder to scrap those small cubes covered hoppers. They’re just so young. You know, there are 5 to 7 year old cars, and it’s just a very large write off for a lot of those owners to scrap those cars. And so those cars are going to be in the fleet. They’re going to be a drag on utilization. And the industry is going to have to find a way to do something with those cars, convert them to other services, do something with them, because the drilling sand market, you know, had issues before the pandemic as locally sourced brown sand made inroads into the drilling fields. And now with crude prices fairly stable at $40, $45 a barrel, drilling has come down. Even if drilling comes back at $55 or $60  a barrel, which is our expectation of where you would see drilling come back. You’re not necessarily going to see that come back with higher cost white sand. And so the small cubed covered hoppers, that’s the fleet that it’s young enough that it’s not really a candidate for scrapping. And what do we do with those cars?

Eric Starks: So there’s a there’s another car type that I’ve been trying to better understand some of the pressure, because when we look at the tank car market and we look at what is happening, we’ve got a decent number of large general-purpose cars for mainly for crude. You got better petroleum. You’ve got so and you’ve got some ethanol. So you’ve got these cars out there. And we’ve seen the fundamental demand drop for crude production in general. And when we got into the pandemic at the early part, we’re like, oh my gosh, all these cars are going to just be completely sitting idle. And they, in essence, were at first. And then what happened? Oil prices went negative. They’d like we have no more places to store their store that wherever they can. So they use some of those cars for that storage. Now, that has that dynamic has changed. So trying to understand the correct size for that fleet right now, I think is somewhat difficult. And I think we were going through the process of saying, am I going to need these cars in the future? And I think the general thought process is yes, because the North America market is such a big player now within crude production. But there’s just a lot of question marks there, because if you see fundamental demand for the globe can remain weak for an extended period of time, it makes it much harder to kind of invest in that equipment and hold on to it. So, I am kind of curious how that one plays out. Plus, then we have the issue with regulations coming up. And so they’re going to have to decide what do they do with these cars anyways.

Stefan Loeb: Yeah, I just an anecdote from my perspective, Eric, on the tank car side, I think what we’ve learned, especially when you see things like, you know, the pipeline not getting approval, and so then crude by rail fires up again in a certain lane. I think we are going to see some sort of spot market moves for a while now. I can’t tell you what that looks like or where it’s even going to go. But as a railroad and shipper terminal operator, that’s good for us because we know there are plenty of cars out there. Now, the problem is, if you own the cars, you just don’t know, again what the right size is.

QUESTION 6: Car Build Numbers & Fleet Size

So that leads me into a kind of a follow-up question about rail cars. And it just fascinates me. And I’m going to draw the line between builders and owners. The fleet from a shipper perspective, a railroad short line railroad perspective for me is obviously their cars out there in storage. If we ever have a customer that needs cars are available, we get them leased. And it’s been that way for quite some time. I still shake my head at how big these car build numbers are, however, and I just don’t see all that the headwinds that you talked about and the types of cars that these are being built, help to educate me and MARS on what’s going on there, please. It’s a fascinating topic to discuss, I think.

Todd Tranausky: It certainly is. And when the pandemic broke, we pulled our forecast for build down dramatically for 2020, figuring that between the market being what it is, COVID-19 restrictions around production facilities, social distancing and production facilities, that we were going to see the build come down dramatically. And what happened in the second quarter, they built every car they had. You know, they ran flat out and the build for second quarter blew our expectations flat out of the water. And now we expect to see that occur again in third quarter. We expect them to keep those rates up. The problem is the orders have pretty well dried up when you think about where utilization is, when you think of the market itself as you said, if you want cars, you can get them leased. You can find a secondary piece of equipment and not have to go place a new build order. And so that has a reckoning here, we think, in 2021. In the latest quarter, we moved our 2020 expectation back up into the low 30s to account for the stronger build rates. But our 2021 number didn’t move much because we just, we wonder where the orders are going to come from. Most of the cars in the back half of the day follow the two car types, their tanks, and their covered hoppers, and those are both highly dependent on the energy sector. There isn’t a lot of diversification out there among the car types and with where the carload markets are and where we forecast the cartload markets to be. We don’t see carload growth in 2020 and we see it growing slowly in 2021. So there is a question of in those general merchandise car types in the box cars, the gondolas, the flat cars, where do the orders come from? And that is sort of what we’re looking at in the 2021 is who’s going to order these cars? We think once we get out to 2022, two there will be enough of a freight recovery to support some additional ordering, some additional building. But between here and there is a long way and it’s all in those two main car types.

Eric Starks: Let me let me make a couple points to that. That jump off of this one is on the build rates in the second quarter. It is really fascinating because we saw the heavy truck market. So when the power units, those trucks, they dropped off production-wise, it came down. It did exactly what we thought it was going to do. But what’s really fascinating, though, is trailers over the road, trailers continued to produce. And so it’s a very similar environment for the rail car market as it is for the trailer market. And so and we actually saw orders fall off there, but they’ve started to pick up four trailers a little bit again. What’s different here is exactly what Todd said. We are, in essence, only in a handful of car types where we’re seeing some level of activity. And one of the areas, because if we look at the covered hoppers, let’s go with that first. One, we’re definitely starting to see chemical demand picking up again. That’s good. So you’re going to see plastic pellets. But then the second is we saw zero change in the behavior for grain cars. The grain market has been either right near or dead on its five-year average and it did not deviate. Every other commodity had a major change and it deviated. So the demand, the underlying demand for that particular car did not change based upon the freight market. And that is really interesting. And then finally, when you go look at the tanks, you have a large number of backlogs still there. So they’re going to continue to build. So to the broader point is our expectation is that things are going to start moving lower as we go forward. That’s just too much capacity out there for most of the cars.

Stefan Loeb: Yeah, I go back to when I first got into the industry. Right in 2002, which was, I believe the lowest year, may have been 2001, I can’t remember. But we were talking like I think it was like 8,000 deliveries or something like that. And not to say it would ever go back there, but I just we haven’t had one of those in a while. And it is just interesting to see the order numbers. And I really appreciate both your color around that. It’s interesting.

QUESTION 7: Election Expectations

I feel like I’m to open Pandora’s box here. But the last question I had, and I just find it fascinating because of COVID and everything else, everybody loves to talk about elections in election years and no one in freight is talking about what’s going on. And I know we want to be very careful about this, as is polarizes our world is. But talk to us about what we should be looking for just as we approach this election, because most of the time, the economy just kind of goes on pause while we wait at this time. Is that happening here? What are your thoughts? I’m just interested to hear your thoughts without, again, opening up Pandora’s box.

Todd Tranausky: Yeah, no, absolutely. And we definitely before COVID-19 came in, business investment had already sort of come to the sidelines. When you think of the US economy falling into two broad buckets of consumer and business investment, it already pulled to the side. You know, they were already, with all the uncertainty around the election, pulling out, waiting to see what would happen. And then COVID hit and now we’re coming out of COVID, businesses aren’t going to necessarily get in there and spend again until they have clarity, until they at least have the rough outline of what the rules of the game are going to be. And until you have clarity, you know, you’re not going to know that because the two administrations are going to have vastly different rules of the road for business and for freight in general. And so once you have that resolution, you can at least without knowing exactly what’s going to get passed, you know what the broad strokes are going to be, what the points of emphasis are going to be for those particular administrations. One of the things we haven’t seen in 2020 that was talked about a lot and really talked about, you know, for all of the Trump administration was an infrastructure bill, and that is something was up for renewal this year. It hasn’t gotten done. It’s not going to get done this year. There just aren’t the legislative days to get something like that done. Do you think about where we are? Congress doesn’t come back until after Labor Day. They have about three weeks. There’s a lot of talk about another stimulus package, another stimulus program. What that looks like. The House has various investigations ongoing. Congress is going to go out in October to campaign before the election when they come back to them in a lame-duck session. So you’re not going to get it done this year. So that means you’re not going to see an infrastructure bill until at least the first or second quarter of 2021. By the time that money gets flowing, it’s going to be the back half of 2021. Now that has implications for the freight market. You know, when you think about the aggregates market when you think about some of those, you know, those freight specific sectors that could benefit from that, that need a benefit. If you look at stone, sand, and gravel, you’ve got crushed stone in there for aggregates. You’ve got drilling sand in there. You’ve got all of those things that have taken a hit. You know, there’s not going to be any relief for those sorts of sectors until at least, you know, the mid to late next year. And that means that’s going to be a headwind for freight movement. You know, if you’re in those businesses, if you’re looking for volume growth, you know, there’s no help from the federal government because you’re not going to get anything this year. You’re not going to get anything probably too well in the next year, at least before something gets done.

Eric Starks: Yes, this is and Todd, I would agree 100 percent on those items. There is the likelihood that we see an infrastructure bill is very, very low. I mean, there’s just not enough money in the pot, given what we’re seeing. The only time I see an infrastructure bill coming into play is if the economy continues to sour and be problematic and they are starting to look at ways to get people back employed and trying to turn things around. And so that’s the only way I see that that happening, at least in the next several, several years. And I will reiterate what Todd said about businesses want predictability. And the one thing that the current administration has said, and they are very proud of this, is that that they don’t want the predictability like they like keeping everybody on their toes. From a business perspective, it’s very hard to put a plan together in that. And that’s I think that’s one of the key differences between the two different potential administrations, is I think Biden is trying and wanting to be able to telegraph where he wants to go and stuff. And I think a lot of people have different opinions on that. But in general, those are kind of fundamental things. Now, you can have structural differences in what the policy looks like. And I think that they’re very different. They’re dramatically different. So in the short term, I don’t think you see a noticeable difference whoever wins in what the freight market looks like because I think COVID is the overriding emphasis right now. I think that can drive it. And in the global markets are already doing their things. I think too much is already kind of happening that can’t materially change that. But I think as you move into the first part of next year, depending on how the administration is there, how they decide to telegraph what that looks like, and if businesses feel like, oh, I can work in that environment, I think that will be a big, big deal. And so, yeah, then when you look at the amount of debt we have, I think that they had to go do some of the things that they did personally. But the longer-term, structurally, how do you get yourself out of the amount of debt that’s there? Either you’ve got to come up with a really aggressive plan to deal with that, or you better hope to heck that you got an economy that’s growing really, really fast. And I don’t think the fundamentals are there for that type of growth to get you out of that hole. But we’ll just have to see. I mean, this is my concern right now, too, is that we’re on the edge of things could be really, really bad here. If something doesn’t if it doesn’t get taken, we don’t get things under control relatively soon just because of some of the employment situation that we’re seeing. And it’s not just the standard blue-collar worker, you know, that’s kind of sitting off to the side, it’s pervasive throughout. It said it had all the service sectors. It’s now moving itself up through the corporations. It’s not just the low wage worker that we were talking about before. You know, this could have some real implications. And then finally, the other one, too, is the money that’s going in for unemployment benefits, right now, most of the states, over 40 the states have gotten on board on that. And, you know, you’re getting three hundred dollars in benefit. But by the time most of them get them approved and through, it’ll be a one-time payment out and then they’re done. So it’s like the money is already pretty much spent for the most part. So we’ll just kind of have to see how this all plays out. And I mean, this is really to talk about the political arena and a lot of cases here. And that’s very unpredictable. And I honestly, I don’t see Congress coming up with a compromise in September to deal with some of the issues that we that we’re looking at. So I think everybody kicks the  can until after the election. And it’s unclear what the heck they’ll do after the election then to so. I think there’s a lot of question marks here.

Todd Tranausky: And I’ll tell you, I think this lame-duck, a lot of people in Washington, lame-ducks have to go one way or the other. They’re either super PAC sessions or nothing gets done. This tends toward to get nothing done lame-duck, particularly if there’s a change in control that the two sides do not like each other. They would have no impetus to compromise on anything at that point. And I think this is a lame-duck where if you’re counting on getting something done in the lame-duck, count on it not getting done.

Eric Starks: But you know, what’s really fascinating, though, is that on some of the bigger ticket items that they were talking about, like payroll protection plan, PPP, some of the unemployment benefits and stuff, I think most everybody in Congress was on a similar page by and large, but they still couldn’t get through. So and some of those things, if you believe that they needed to structurally be there and they’re not going to happen until, you know, if and when any type of thing happens after January of next year, that’s basically too late if those things really need to happen. And that’s where one of the things is, you know, there’s a robust debate about that right now. I believe that they need to be putting some money into this and making sure that small businesses don’t go under and that you have people have money in their pocket to pay for things that they are needing from a necessity standpoint. Because I just think that we’re very close to the edge right now. And but if you look at some things in transportation, look at trucking doesn’t feel that way. It doesn’t feel close to the edge. But you got other things in different parts of the service sectors that it feels close to the edge. And so there is a huge disconnect fundamentally in the way this economy is behaving. And not everybody is seeing it the same way that. There you go.

Stefan Loeb: Very thoughtful discussion around all of that. I believe looking through the list, all of the questions specifically brought up are answered. So at this point, I will throw it back to you guys. And if we want to talk more great or if we want to wrap up, that’s fine, too. I’ll leave it up to you.

Eric Starks: You know, I could always talk.

Stefan Loeb: I think that’s true. We don’t have to do a handshake on this podcast.

Eric Starks: Oh, OK. So thank you. So that was the one thing we did not get a chance to bring up is. So we have our secret handshake, right?

Stefan Loeb: Yes.

Eric Starks: So and just to remind people what the secret handshake is because we’re keeping it secret among ourselves. We’re not letting the rest of the world. Exactly. It is slap, slap, tap. Right, forearm bump, forearm bump and then before we to do the hulk. And then we changed it to the lean back. What? So in this COVID world now, we’re not doing this. slap, slap, tap. We can’t touch each other. So we can just walk up to each other, throw our hands back and go, whoa, whoa. So it still works.

Stefan Loeb: There we go. You know, that is a hell of a way to end this podcast. Again, we really appreciate FTR time efforts, all the knowledge passed to MARS and all the folks on here. So, again, I want to thank both Todd and Eric. Thank you very much. And again, this is Stefan Loeb, President of MARS, and appreciate everyone attending both last week session and listening to the podcast today. Thanks very much.

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