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By Alan Adler of FreightWaves

Preliminary Class 8 truck orders posted their third-highest number in history in November, continuing a stunning comeback from pandemic-depressed bookings earlier in the year.

Preliminary net North American Class 8 orders in November were 51,900 units, up 33% from October and 197% higher than November a year ago, ACT Research reported. FTR Transportation Intelligence pegged net orders slightly higher at 52,600.

“The pandemic-impacted economy continues to play into the hands of trucking,” said Kenny Vieth, ACT president and senior analyst. “With freight rates surging to record levels the past three months and carrier profits certain to follow, orders accelerated in November.”

Run rate recovers

Class 8 orders on a running basis for the past 12 months stand at 250,000 units, FTR said. Predictions as recently as April called for less than half that number.

“The Class 8 market is trying to rebalance after suffering through woeful order numbers early in the pandemic,” said Don Ake, FTR vice president of commercial vehicles. 

“Fleets are still trying to catch up with the jump in freight volumes resulting from the economic restart and the generous stimulus money which is being spent predominantly on consumer goods and food,” Ake said. “This will only intensify if there is a second round of payouts.”

The volume reflects several large fleets placing all their orders for 2021 to lock up build slots, which they perceive could be in short supply next year, FTR said. FTR expects orders to slow in the next several months as large fleets wrap up seasonal orders. The ordering surge is restoring the backlog of trucks waiting to be built, which fell to a three-year low in September.

“The huge November orders mean that [the fourth quarter] will be a fabulous one, regardless of what comes in for December, and that portends well for the expected increase in production early next year,” Ake said.

Vieth said ACT’s axiom about new truck orders is borne out in the November numbers: When carriers make money, they buy, or at least order, new equipment.

Both FTR and ACT will publish final orders in mid-December. Changes are typically plus or minus 3%.

Sparks flew on CNBC Friday morning as “Squawk Box” host and NYT Dealbook editor Andrew Ross Sorkin and fixed-income correspondent Rick Santelli – who provoked a media firestorm earlier this year for (only half-seriously) suggesting that people should just infect themselves with COVID-19 and get it over with – got into one of the most heated screamfests we’ve seen in a while.

It all started with a pre-jobs report discussion of the worsening employment picture for America’s retail workers, before things quickly took a turn for the dramatic.

“Why are those people any less safe in a restaurant with plexiglass…I think it’s really sad, when we look at the services sector…that particular dynamic should be studied more,” Santelli posited. “You can’t tell me that shutting down…which is certainly the easiest answer…is the only answer”.

A clearly galled Sorkin then launched into a patronizing diatribe about the differences between big box retailers, restaurants and churches, and why Santelli was doing viewers a “disservice” by disregarding the science”

“The difference between a big box retailer, and a restaurant – or frankly, a church – are so different it’s unbelievable,” Sorkin insisted.

An incredulous Santelli shot back: “500 people in a Lowes aren’t any safer than 150 people in a restaurant that holds 600…and I live in an area with a lot of restaurants that have fought back…and they’re open”

After some more screaming back and forth, Sorkin accused Santelli of avocating for people to go “packing into restaurants”, which is not what he said.

Santelli interjected: “I think our viewers are smart enough to make those decisions on their own!”

Sorkin continued to insist that he was merely trying to educate viewers about “the science” of COVID-19. Then CNBC economics correspondent Steve Liesman joined in, smugly asking “how’s that working out for you, Rick?”

“Just fine,” Santelli replied, before trying to explain that while he feels for every family that has lost a loved one to COVID-19, that simply exploring alternatives that might help keep everybody safe while also protecting small businesses and workers would be a wise move.

Before he could continue, Becky Quick jumped in to stop the fight, politely asking her three male colleagues to drop it, positing that they could shout at each other all morning and still wouldn’t get anywhere.

Later on in the morning, CNBC hastily went into damage control mode, deploying Jim Cramer, who frequently talks about how COVID has impacted his restaurant business, to calmly explain why people should continue to wear masks.

Though we must say: We’d really enjoy hearing Sorkin explain how Big Box stores are “completely different” from restaurants and churches. All three can be found in interchangeable strip malls across the country.

And at least as far as masks are concerned, research has painted what is in reality a pretty fraught picture.

A massive Danish study on mask usage found no statistically significant difference in coronavirus infection rates between mask-wearers and non-mask-wearers. In fact, according to the data, mask usage may actually increase the likelihood of infection. https://t.co/ijUy8hfNTY pic.twitter.com/gYDtA8ac0p

— Sean Davis (@seanmdav) November 18, 2020

Watch the slugfest in its entirety below:

Despite the market never caring much about consistent profits from Tesla to begin with (the company has been anointed with a more than $500 billion market cap and is trading with a trailing P/E of more than 1000x) it appears that Elon Musk is attempting to shift his company’s focus back to profitability and cost savings. 

Perhaps Musk has realized that selling EV credits to turn a profit isn’t a long-term solution to profitability. The market, meanwhile, has been enamored with Tesla’s ability to turn “consistent” profits somehow, while mysterious option buyers in the name have added fuel to Tesla’s stock price over the last year.

Now, it looks like Musk understands that the rubber is going to have to hit the profitability road for real at some point. 

At a time like this, when our stock is reaching new highs, it may seem as though spending carefully is not as important. This is definitely not true.

When looking at our actual profitability, it is very low at around 1% for the past year. Investors are giving us a lot of credit for future profits, but if, at any point, they conclude that’s not going to happen, our stock will immediately get crushed like a soufflé under a sledgehammer!

Imagine that – small margins in the auto industry. Who would have thought? Musk also urged spending cuts: 

Much more important, in order to make our cars affordable, we have to get smarter about how we spend money. This a tough Game of Pennies — requiring thousands of good ideas to improve part cost, a factory process or simply the design, while increasing quality and capabilities. A great idea would be on that saves $5, but the vast majority are 50 cents here or 20 cents there.

It’s hilarious that Musk is begging for small cost cuts when the cars that are currently rolling off the line at Tesla are already being subjected to horrifying quality reviews. For example, Consumer Reports decided to not “recommend” the company’s Model S and panned the company’s Model Y “due to a decline in their reliability” last month. 

Model S ratings dropped due to issues with its suspension – the very same issue Tesla claims China “wrongfully” made it recall vehicles for overseas last month. The Model Y suffered from “hardware and paint problems,” according to CNBC. 

Previously, Consumer Reports had named the Model S its top rated vehicle ever in 2015. It’s amazing what can happen, though, when you actually drive a few of them off the lot and put some miles on them for a couple of years. Those 20 or 50 cent cost cuts that Musk is urging wind up catching up to you. 

We have already documented numerous Model 3 quality control issues, including the vehicle’s bumper falling off “more than expected”. We’re not sure exactly how expected it should be that a bumper should randomly fall off of a car at any given time, but we digress. 

Our friends over at InsideEVs released a scathing piece over the summer about Tesla’s Model 3, noting that the car’s bumper has a tendency to fall off at a rate that is “more widespread than expected”.

The blog shared three different horror stories of bumpers flying off that were sent to it after they posted their first article about a Model 3 bumper flying off. In all three cases, the owners were told by Tesla that the repairs would not be covered.

Regardless, it appears that nearly a half decade after Tesla has started producing cars Musk is starting to realize what a capital intensive business it is. Even more important, with all types of “tricks” to goose the stock running out, Musk may be realizing that the company’s valuation could be heading for a cold hard reality check at some point in the near future.

We can’t wait to see that first 2021 earnings report…

By Matt Taibbi, via SubStack

Whether it’s CNBC telling us what issues mattered to the young in the presidential election, or Yahoo! Finance telling us the big winners in the 2020 election were “young people and student voters,” or Forbes telling us “young people with student loan debt have a harder time reaching financial milestones,” the student loan controversy is almost universally presented as a “youth” issue.

This is the first of many deceptions baked into coverage of one of the more misunderstood and misreported issues of our time. Student loans matter to older people, too. In fact, that’s the problem. They matter far too much, to too many older people.

“People that are 45 years and older, that’s where the student loan problem is a real issue,” says “Chris,” who took out his first loan in 1981. “Because those are the people that normally would have the highest balances.”

Now 59, Chris asks to tell his story under a pseudonym, to protect the service industry career he’s built in part with the hope of someday escaping his student debt.

“In the realm I’m in now, I don’t really advertise the fact that I owe $236,000,” he sighs.

It’s often argued that forgiving student debt would unfairly punish other groups, particularly those who “did the right thing” and paid off their loans. In truth, political changes have already punished plenty of student loan holders. Chris is a prime example.

He grew up in the Midwest, and began studying philosophy and political science at Southwest Missouri State (now called Missouri State) in 1980. He began paying for his undergrad studies upfront, a decision that would have fateful consequences. He entered school just as Americans were electing Ronald Reagan, who wanted to dramatically re-order federal spending priorities. Among his first acts: raising the interest rates for some federally-guaranteed student loans from 7% to 9%.

“What’s really ironic,” Chris says, “is that if I hadn’t paid cash the first year and a half that I was in college, my loans would have gotten locked in at a much lower rate.”

Paying the Reagan rate instead of the pre-Reagan rate was Chris’s first political misfortune. The second kicked in years later, in the mid-eighties, by which time he’d transferred to the University of Missouri-Columbia, graduated with a B.A., entered and completed a grad program there, and moved on to Joe Biden’s Alma Mater at Syracuse law. He left graduate school owing $14,000, and left law school with a total balance of $79,000.

He thought he’d be graduating with a law degree, and expected to be able to make his payments. Part of his calculation involved the fact that student loan interest was once tax-deductible, much like mortgage interest. But the Tax Reform Act of 1986 began a see-sawing journey for the student loan deduction, essentially eliminating it as a personal deduction for a time.

“I looked at education as a capital expenditure,” Chris says. “Part of my strategy was, is that the interest would always be tax-deductible. So that would at least give me a little bit of a [cushion] in making my payments, because, I would have that tax deduction.”

After they changed the law, “It was like, ‘Wow, this is going to be difficult, this is going to be interesting.’”

The loan system we have now is predicated on a few key assumptions, all unrealistic. One is that people graduating with higher education degrees will be immediately employable in their chosen fields. Even with the sort of professional credential that once meant nearly guaranteed income in America, like a law degree, this is no longer true. Job markets tighten, economies hit recessions or worse (in the years after the 2008 financial crisis, for instance, the number of law school grads still looking for jobs a year after graduation nearly tripled, from 4.1% to 11.2%), and technological or cultural changes can lower the value of degrees.

The other assumption is that people with higher degrees will stay in their fields, and avoid accidents, illnesses, personal problems, and other detours. In the nineties, Chris became disenchanted with the law, and went through a “riveting” divorce that hit him with a slew of unexpected costs (including, ironically, legal fees). He missed a few payments, and then began missing them altogether, beginning a period of years when he paid nothing at all — in part because he was underemployed after leaving his law practice, and in part because he just handled his loans “in a cavalier, stupid way.”

“I’ll take ownership of the fact that my stupidity bought me a [ton] of interest and penalties,” he says now.

In 2002, Chris got a middle-level job with one of the world’s larger service-industry companies. His first position paid him $28,000 a year, but he didn’t see much of that money. In 2004, his wages began to be garnished. A single federal lender can garnish up to 15% of “disposable” pay, i.e. what’s left over after mandatory withholdings. If there is more than one lender, they may garnish a maximum of 25% of wages.

Chris’s pay was garnished at 15% from 2004-2011, and at 25% from 2011 on. He paid, but didn’t gain ground, thanks to another painful quirk of the system, involving the order of obligation.

“They apply your penalties first, then your interest, then your principal,” he says. “So really they’re guaranteeing that you’re never going to pay down your loans.”

Into his second decade of garnishment, Chris was paying pure penalties, fees, and interest, not touching a dollar of principal. Although the government had since re-introduced some student loan interest deductions, these were capped at $2500 per year. “At the height of my garnishment, I was paying $900 every two weeks,” he says.

Career advancement didn’t particularly help his cause, as raises just meant he was able to pay more in fees and interest on an inalterably enormous core debt. Through 2020, when student loan obligations were halted due to the coronavirus, he paid $190,000 on an original debt of $79,000. His current balance? The aforementioned $236,000.

Politicians when they talk about student debt usually talk in terms of amounts owed, but the dirty secret is the American system is about streams, not sums. The tension in this game is between borrowers trying to chop their debt into finite, conquerable amounts, and lenders who are incentivized to make the balance irrelevant, turning people into vehicles for delivering the highest possible monthly bill, without the real possibility of repayment.

Having some business experience, Chris tried multiple times to renegotiate his debt with the company that ultimately ended up servicing his debt after all of his loans were consolidated. No dice. As he advanced in age, his appeals began to contain a mixture of desperation and amazement, as he realized how completely disincentivized his lenders were to compromise.

“I’ve even used the argument, ‘Look, you know, I’m 59 years old right now, my life expectancy is 15 more years. At this rate, you’re not going to get very much.’” He pauses. “I told them, ‘I’m probably going to retire in nine years. And my income is going to go down.’ And their response is, ‘So?’”

Like a lot of student loan holders, Chris no longer expects that he will ever pay off his loans, or even begin touching the principal. He’s heard the stories of people having their Social Security payments garnished and wonders if that is in his future. While he understands that the reaction of some hearing his story will be that he brought his problems on himself, he has now paid two and a half times his initial balance, and is scheduled to pay it at least five times over, if he doesn’t die first. Even accounting for his “stupidity,” he figures, “I paid my student loans.”

Chris’s experience is by no means unusual, something he feels politicians either fail to understand, or consciously ignore.

“Whether it’s Elizabeth Warren, or Biden, or even Trump — whoever — when they talk about student loans, they throw around numbers like $10,000, or $20,000, or $50,000,” he says. “Those numbers are basically applicable for people that have really low amounts of student loans. And it doesn’t take into account loans that are in a distressed condition.”

Chris made mistakes, but as he’s noticed, so have other types of borrowers. “It doesn’t appear that we seem to hesitate much in giving money to Ford or Chrysler, or a collection of banks,” he says, citing bankruptcies, bailouts, and other programs.

“They have tools,” he says, “the individual does not.”

Bad news is bad news this morning… for now.

Stocks are weaker after the ugly jobs data…

And bonds are betting battered…

The dollar is unchanged for now and gold is choppy but holding modest gains.