I love it on Wells $treet when a story doesn’t fit the prevailing narrative. Even when I helped propagate that narrative. (For the record, I never had anything to do with the Hunter Biden laptop story, the Trump-Russia collusion story, or declared Elizabeth Holmes a genius —thank God.)

But during the glut of ships clogging the ports of Los Angeles and Long Beach in the fall of 2021, I was told by those along the port that a big reason shipping containers littered the docks was because warehouses up the road were full.

So I reported that for CNBC as part of a team of reporters following the journey of a Care Bear from China to the U.S.:

Well, the CEO of a publicly-traded company that leases warehouse space reached out to me afterwards to say that while space was indeed tight, his warehouses still had room. He said the problem with the supply chain wasn’t his fault. It was a combination of many factors, including a labor shortage and issues facing truckers. So I visited one of the warehouses to look for myself. He was right.

Here I am with that report:

Bottom line — trade is complex. There’s a million moving parts. Complexity makes it easier for someone to exploit the system and jack up prices (like the mystery around California’s pain at the pump).

Last year, parts of the supply chain began moving to the east coast, and a new narrative emerged.

Importers were tired of waiting offshore in SoCal. They were already paying ocean freight rates ten times normal — as high as $20,000 per standard container. Why get stuck for days off the west coast when you could just pay a bit more and go to Houston or New York?

“We flushed $4.5 million down the drain on out-of-control freight rates,” Jay Foreman told me last week. He’s the CEO of Basic Fun!, the company that sells Care Bears. “That money went right out of the American economy and into the hands of offshore freight lines — it just evaporated.”

Jay redirected 30% more containers than normal away from the west coast in 2022 to avoid the logistics chaos, but he wasn’t the only one. By summer, the ports of New York/New Jersey overtook LA/Long Beach as the top destination. In September, total standard containers moving through Los Angeles dropped 16%, but they jumped 21% in New York.

“Cargo Shift to US East Coast May Be Permanent Loss to Pacific Ports,” declared Bloomberg in November.

The west coast has promised to fight back. “We're going to go after every pound of freight,” Gene Seroka, executive director of the Port of Los Angeles, vowed on Thursday. “We've got to up our game on service, making sure that this gateway is as fluid as our customers need.”

Um, well… maybe he shouldn’t worry, at least not about that. Maybe that’s not the story anymore.

Jay Foreman has already switched back to the west coast, and the Bloomberg story is old news. “Moving stuff to New York and New Jersey was a bit of a head fake,” he tells me. “By the time the goods got there, everyone else also had that bright idea. The port was overloaded. More than L.A. Typical overreaction.”

Now he’s paying the lowest ocean freight rates he’s ever seen — $1,500 per standard container. Getting docked and unloaded in Southern California is back to being super fast.

So what’s the new narrative? Now it’s your fault. You’ve stopped buying. “Inventory levels remain high across the United States,” says Gene, the port director. As the supply chain is straightening itself out, port numbers have dropped on both coasts, in part due to lack of demand. Inflation is finally slowing down America’s never-ending spending spree (or so we’re told).

Jay says the pace of his orders has collapsed. “They’re even lower and slower than the financial crisis.”

Whoa.

He says that even though shipping rates have plummeted, it’s still really expensive to store inventory in the U.S. “Some of us are taking chances and building in China and holding it there,” he tells me.

There are other issues impacting ocean-bound trade right now. West coast ports still haven’t reached an agreement with dockworkers, and if history is any guide, that won’t go well. China is opening up, and Covid is having a field day, especially as factory workers go home for the Lunar New Year. “I'm hearing that factories are going to be closed for longer than normal,” Gene says. “Instead of a seven-to-10-day break, we may see as long as three to four weeks.”

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Meantime, here’s a potential trend to watch. A few companies have started experimenting with “near-shoring” in Mexico, where you may not need ships at all!

“You've got your buyers who are thinking, ‘I'd better set up an insurance policy just in case something happens over[in China],’” says Raine Mahdi, founder of Zipfox, a startup which connects manufacturers with factories in Mexico.

But switching to Mexico is not for every industry. It’s also not for every company — one manager told me he doesn’t want to visit a factory in an armored car.

China has spent decades developing “capacity and capability for producing everything you can imagine,” Mahdi says. Mexico isn’t there yet. He says you probably wouldn’t build high-tech electronics south of the border, but “clothing and machinery and building parts and those things, you can do in Mexico just as well as you can in China.” For example, he says Walmart is now making some uniforms in Mexico. “Many people, if they're not moving all production to Mexico, they're at least starting to do these small test runs.”

Squawk on the Street @SquawkStreet

Reporting from L.A., @janewells dives into the battle over port authority: NY/NJ overtook the west coast as the best coast for shipping. Still, she notes that shipping container volume dropped YoY for both coasts in the last few months.

All of this is to say that following the money around the globe is complicated. Most stories aren’t simple, which makes it difficult for a reporter to explain it all in 90 seconds (but they keep paying me!).

But there’s one troubling “fact” that everyone agrees on at the moment in an economy that depends heavily on consumer spending. “It’s all demand right now,” Jay says. “Everybody is waiting for the buyer to wake up.”

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Have you stopped spending as much? Have you changed where you’re putting your discretionary income? Leave a comment. I’d be interested to hear. (I made a vow not to buy anything nonessential this month, and then I bought a shirt.)

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The Supply Chain’s “Head Fake” — and Now…