Global Trade This Week – January 10th, 2023
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Keenan Brugh 0:00
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Pete Mento 0:09
Hello, everyone, and welcome to another bone tingling exciting episode of global trade this week. I'm Pete mento. And I am joined yet again by our backup quarterback. Kenan, you're probably wondering why we continue to subject you to this. It's it's simply because we have grown to love and value occasionally, Keaton's insights, that, you know, it's like any good organization, you've got to bring, you've got to bring the next generation of of professionals up. You got to give them an opportunity to shine in the hopes that when your opportunity your time in the sun has passed, that they have that chance as well. So you know, whenever one of us is sidelined with injury next man up. That's just how it is. And I think I think Doug is where he's like he's in the in the Amazon right now.
Keenan Brugh 1:15
Yeah, somewhere down the rainforests street. That's about right. Well, I'll double check with the next week, but I think I think that's right. Yeah. Thanks for the opportunity. Fine.
Pete Mento 1:25
Oh, you're very lucky in it. Yeah. And nothing makes me happier than trading barbs are the kind of upset that there's no, there's no Bitcoin opportunities. No Bitcoin story for us this week. Yeah, I
Keenan Brugh 1:37
thought about putting some stuff in there. But it's a little forcing it. We'll get there. We'll get there. Well, the latest meme on that. Latest memes on that I've seen are that eggs are the new Bitcoin with the price of eggs going up around the country? Well,
Pete Mento 1:51
it's funny you mentioned that, because I'm old and out of the loop. Keenan, I'd say two weekends ago, I went to the grocery store. And I have my little list. Because I I can't be sent to grocery store without a list. And on that list. And will you have chickens, so it's not quite you know, it's easier for you. But I went to the grocery store and there were no eggs. No eggs. So when I go to the grocery store, and there isn't something I was sent to get, I sent him I sent a picture of the empty shelves to prove that I'm not just full of shit. So I sent a picture of that AMI and hasten to say hey, listen, there's no there's no eggs. And I don't I don't even think during the pandemic. I ever went to the grocery store and didn't see x buddy. Nope,
Keenan Brugh 2:42
it's a kind of wild surprise to hear.
Pete Mento 2:47
Go every year chickens lay.
Keenan Brugh 2:50
So it does slow down in the winter. But I get about four or five a day. So more than I consume a day so I usually have enough to have stocks if we ended up making a bunch for people or give some away to friends and neighbors so feels good. Having that in stock but yeah, interesting to hear us had empty shelves as well. I know Colorado was experiencing empty egg shelves. Part of that I heard Colorado passed a law about they have to be free range and so it's kind of didn't know if that was just specifically close to Colorado type of issue. But seems like even the regular run of the mill dozen eggs are are hard to find and get more expensive.
Pete Mento 3:30
This is New Hampshire. Okay, we don't have rules. You buy your 15 year old a pistol for his birthday.
Keenan Brugh 3:38
You know, so. So I'm surprised that the egg stocks just aren't there demand supply mismatch.
Pete Mento 3:45
But you know, what was strange buddy is I actually I had to stop myself from hoarding. Hmm, I really thought about it. I was sitting there looking at this shelf of eggs and I really didn't think to myself, Should I just get four dozen? But then I thought what am I gonna do with four dozen eggs? It's just, I mean,
Keenan Brugh 4:04
we will get into this later on in another topic, but I thought the same thing during the pandemic when a barrel of oil was temporarily negative price. It's like oh, man, I should just stock up on this. Where am I gonna put it? Who am I gonna get it off to this isn't a practical plan at all. Same thing with shelf life.
Pete Mento 4:23
Yeah, well, you have you have you've won the toss and elected to receive. So it's right chance was the first topic this week, buddy.
Keenan Brugh 4:32
Awesome. So kicking off here with some new data from the US Census Bureau. Canada is still the top US trading partner and ahead of Mexico. Mexico and Canada are both pretty close right now. 62 point 4 billion and for Mexico as of November and 63.4 as of November for Canada, so doing a lot of trade with our neighbors to the north and south. It looks like they're growing at pretty hell The clips 6% 5% respectively. You know, it's beating out China on that. And it's just interesting to see some of the factors going on around that. On the good news, our trade deficit is at a low right now, just with us. Consumer spending a little less importing a little less still exporting. Lots of industries are still trading and doing their things. It seems like a lot of auto parts and trucks and buses are a big driver of it. Also, something interesting, along with this story, and along with some of the stories you've been talking about recently, is that China is building their first I don't know first, first, but announces a first plant in Mexico, this Chinese manufacturer, Noah EyeTech. And they make a lot of automation manufacturing equipment bought by companies like GM, which is also looking to expand their Mexico plant for Evie production, and used by companies like Tesla. And it also sounds like Tesla is just on the verge of announcing to build a factory in Nuevo Leone. So interesting to see, as everyone experienced the last couple years supply chain disruption, prices got really expensive. Even now as there's way more capacity on ocean and aircraft availability. There are moves now some of these supply chain investments, capital investments, take a while there are moves to do the short of nearshoring that you hear people talk about, I've heard people talk about it for a long time. But looks like we're actually seeing some movement on that. So any thoughts on Canada being number one temporarily, Mexico's right on their their tail two and any of that trend on nearshoring, or anything around our trade deficit, even?
Pete Mento 6:41
Lots and lots of thoughts. So the the movement of a lot of companies to Mexico has been, it's just been happening for a long time. And big swaths of that have come from first of all fear of the theft of intellectual property. So being able to control the assertion of intellectual property into production in Mexico prior to export to the US, makes less sense. And then second of all, of course, labor has just always been very inexpensive in Mexico. It always has been and continues to be even now, with the change in the global platforms of how so much such exporting has been happening in other countries like China, there's been an increase in a race of race towards trying to become more technical, export, economy, Mexico just hasn't really happened yet. And I'd also say that a lot of that automation that you're seeing, that's happening down there, we're beginning to see people build automation in Mexico for export around the world. So it's fascinating to me, while the Canadian side, Canada has always been a major part of the United States because of energy. And I think that America was importing a lot of energy because of the lack of Russian energy exports. But it wasn't just that you had a lot of cars being brought to the United States. For the pandemic, a lot of car parts for manufacturing here, and those were artificially inflated. But the same goes for produce. Same goes for wood and lumber building materials. And that's slowing down. So many American companies were told what directors were telling their CEOs and major shareholders, we don't want to be in this position, again, where we find ourselves unable to produce products unable to keep our supply chains going. Because we were we were just too dependent on Asian supply chains. You got to have some balance here. So I think we're just going to continue to see an investment in the US MCA countries, I think you're going to see a continued investment in that supply chain. When I'm worried about Keenan and I feel like I just this is a broken record out of me. We need a stronger logistics infrastructure in order to make this some more compelling argument. It's the congestion is still so terrible. The roads, the rail railways, the ports just aren't good enough through their, somebody's to put the money into it. What I'm worried about is that it's going to end up being the Chinese. And now the Chinese are going to have a choke point at the ports, the airports and railways. It's not going to matter who's managing the production who can't get products in and out. Interesting. So
Keenan Brugh 9:19
in addition to them building factories in Mexico, maybe we'll see some of the things like we've seen with Chinese investment in African ports and that type of logistics infrastructure. We could be seeing some of that huh. Oh, to keep an eye out. Interesting.
Pete Mento 9:33
No worries me. Yeah, so that takes me to my first my very first topic, I have not had a job since my first job when I was PETA panel Pina when I did not have a non compete, so one of the just standard things in this business is in a lot of businesses, you know, we're not special, but certainly in logistics, and the service industry is forcing people in client service sales and people in executive roles to sign a non compete, and a slug a non poach agreement, where for a period of time you're unable to go after your existing clientele, you need to go after some of your colleagues for a period of time, whether it's 12 months, or 24 months. And for somebody like me, who's fortunate enough to go from consulting to logistics, it's not so bad, because I can go from selling customs services, like customs entries and logistics, to going into consulting, where I can sell finance and tax stuff. And so you know, it's not so terrible. But for most people in our industry, it can really be a financial burden. So you go to work for someone you worked there for 10 or 15 years, you build an incredible book of business. And then for the next two years, let's say you can't contact anyone that you worked with, and you could find yourself being sued, you could find yourself on the wrong end of a subpoena on the wrong end of a cease and desist because you contacted a former customer client. Before it turns out that this is in a court case, now that it looks like it's gonna go to Supreme Court. And it's starting to look like it's going to win, where it's considered to be unconstitutional to force someone to have to adhere to a non compete, because the individual has a right to make a living. For our industry. This is, this is a fascinating change. Because I can only speak for logistics, I'm sure. There are other businesses that are a lot like ours. But a salesperson who has been with a company for 10 or 15 years, their relationships, a lot of their relationships could easily be ported to another company. And they can create bidding wars, where someone like me is an example who has a deep, long standing decades long relationships with people could end up being swayed away to another company, on the hopes that that individual would be able to bring their critical book of business with them someplace else. And there's nothing anyone could do about it. So I wonder what that's going to mean. And I wonder what it's going to mean for the corporations, that for individual companies, who now don't have any way of trying to maintain that business for a number of years, while someone goes from place to place? I don't know. It's an interesting topic. And I'll be just personally because I signed a non compete when it came to work here. You know, what's going on here, Doug had to sign one as well. We both just recently changed jobs. So it's gonna it's going to have big ramifications for our business.
Keenan Brugh 12:49
It does seem like that's been a pretty industry standard, as well as in some other industries. I don't know the ins and outs. But there are definitely tech company type non compete situations and lawsuits and long with that. It's interesting, I want to keep an eye on follow this case, as it goes to the Supreme Court, because you're right, that would have a pretty large impact. In the near term, potentially good for workers with relationships. Maybe pay goes up a little bit. Another thought that comes to mind is our company's going to shift their strategies and move away from sort of an account, executive account based management sales system and go more for incentivizing people to bring on new customers, but then you're no longer the one talking to that customer that's operations that someone else and try to change up the sales organization a little bit if this is going to be a new change.
Pete Mento 13:42
Yeah, it's always important to have multiple people and multiple levels engaged with the client. And that's that's the corporation's detriment when you don't do that. So hopefully this will get people thinking more intelligently about how they relate to their clients.
Unknown Speaker 13:57
Alright, sorry. Yeah, we'll definitely watch it.
Pete Mento 13:59
We get to halftime which is Doug's favorite part and he's not here so I can say it is not part of the show. Halftime brought to you by people put on our show cap logistics if people have kept logistics to learn more you can learn more about them at cap logistics.com We thank them for funding the show this week and every week if you are a frequent listener, frequent watcher if you watch it on YouTube listener if you listen to it on the podcast, please do check us out check out cap logistics at cap logistics.com They pay Keenan salary, and they do simple life up in the mountains without energy or electricity or running water. Eating pine tar and and embark
Keenan Brugh 14:42
drinking, investing my income and chickens and chicken feed.
Pete Mento 14:46
That's right. Hey, listen, man, the hands come so you know, so that yes, please check them out a cap logistics.com So kina you can go first What do you have this week for for us?
Keenan Brugh 14:58
Speaking of the end Coming, I am prepared for halftime this week with a story about an incoming comet that has not been nearby in our solar system for about 50,000 years. So that's a lot of history where we were in Stone Age type civilizations back 50,000 years ago. But I'm always someone who likes to watch, you know, cool Moon eclipses and different things going on. And I never know about them ahead of time enough. So I want to do my public service announcement duty to all of you, listeners and watchers that check it out this month, kind of coming up throughout January and into February, we're going to be seeing green colored comment, it should be visible with the naked eye, but especially if you have a telescope or a set of binoculars. And you know, as an armchair astronomer, I like to watch this stuff. It's enjoyable, I like to use it as a reason to learn what's going on. One of the things that I think scientists have been incorporating more and more now, we used to think comments were what was called the ice rocky theory, something more eloquent than that, but it was just like a big ice thing. And it would heat up with the sun. And that's why it would melt and make its tail seems to be more common or recent understandings now that we've had some missions land on some comments and different things, they seem to be more rocky, there's not a lot of ice on them from what we've seen. And so the tails are ions like plasma discharges, as something that's been hanging out really far away from the Sun picks up the charge of being way out there. And as it comes in close, that charge differential kind of makes it glow, and it throws off those ions. So it's not melting ice. It's electrical charge difference, you know, as you move a magnet next to a copper coil, right, there's electrical phenomenon there. It's similar with a comet hanging out in deep space coming closer to our sun. There's some electromagnetic forces there, which is also cool to learn about and visualize when you see a bright green object in the sky.
Pete Mento 17:04
Yeah, so this is coming for me on this show. Keenan god, you're a nerd.
Unknown Speaker 17:10
True. As soon as you sent this sort of the term geek less derogatory.
Pete Mento 17:15
Okay, amen. I love it. I do love it. And I'll be looking at it too. But what the first thing I thought of was what sort of, you know, dystopian awful thing? Does this? Is it? Is it a is it actually just this comet that's going to change course all of a sudden? And it kind of this vampires on it? Or is it going to radiate? Like what sort of awful thing Walking Dead, right like the brain eaters. So you know, as soon as I saw green con that coming, I just I went straight to arm again, I got pretty excited. This just seems like a kind of book. Speaking of geeks, comic book plot come to life I was, I was pretty fired up.
Keenan Brugh 17:59
Speaking geeks, and etymology, the term disaster literally means in Latin bad star. And so you know, in times past, when we didn't have as much scientific understanding of space, there would be a lot of oh, we have this comment, it's a bad omen, people are gonna die, or we're gonna win this battle, those sorts of things. Not expecting any big fireworks, though, if you were to get out there. I know a lot of people have been watching the Netflix Graham Hancock, ancient Apocalypse type ideas. And so I don't think this comment would have been associated with the Younger Dryas about 12,000 years ago, but that's kind of their theory is that there is this 12,000 or more type cycle of a comment where it's not the main comment that hits us but maybe parts of the comment that had broken off and maybe that hit a bunch of glaciers and melted it all rapidly and changed things from the Ice Age to the the type of climate we know and love here. So, you know, maybe it's entirely possible as Joe Rogan might say,
Pete Mento 19:00
Yeah, true. Juicy, a lot more fun stuff than that back in the day. So I just thought and I were having a conversation yesterday. It's funny, you said disaster. And you talked about the etymology, but I, I really love this, this trend now to say misinformation. And I'm challenging everyone to say stop. Nope. No, lie. It's a lie. variegation is a lie. I call it a lie. Oh, it's just misinformation. No, it's not. It's a trick. fuckery most foul. It's a lie. It's it's it's counter espionage. It's just it's a lie. We're gonna call it what it is. It's it's horse pucky. So let's just get down to saying the truth. Okay. Oh, well, this this person using this information isn't if it's not right, and it's wrong. If you're saying things that are wrong, you do it on purpose. Then you're lying. That's a lie and Liar liar pants. So Oh, my halftime is a little more because it's a little more bubbly. I've been looking a lot at the fashion the kids today were Kenan, someone needs to tell him that we dressed that way the 1980s It Looks stupid and looks stupid today. So I wish Doug were here to whip out a picture of him and his Ronnie James Dio three quarter Sleeve Baseball shirt. With his acid washed jeans and his Adidas high tops with his laces on done. I guarantee you he had clothes like that. It has velcro wallet. They this trend that everybody has to dress like we dressed back then, is ridiculous. So I don't understand. I saw some kids on some TV new show the other day that were skiing in New Hampshire. And they were dressed in throwback 80s gear. But they were standing next to kids in today's snowboarding gear. It didn't look that different. Kind of look like they were dressed like my friends and I dressed when we would go skiing in the 1980s. And somebody needs to tell them that our drugs weren't as strong. Our music was much better. But we at least had the sense not to dress that way man to somebody to sit these kids down. And it's my generation. It's my it's all the Gen Xers we need to sit our kids down and say to them, Whirlpool newspaper smack them on the nose is saying no, no. Because so that's that's my halftime today, Keenan Simmons got to sit these kids down. Good
Keenan Brugh 21:43
luck. If you could break through to them. It may be sort of rebellious. If you don't want them to, they may do it even more. And that's funny. You mentioned the ski outfits because there's usually you know, some spring parties at the end of the year gay per day type things where everyone does dress up and a lot of it has historically kind of gone back at style. But now it's just going to be gay per day all day every day. The horse snowboarding season. Hmm,
Pete Mento 22:09
what the thinking is like I'm not gonna say generally but usually the the younger ladies are going to look better, right? So those outfits look pretty darn good on the ladies in the 80s. But just take a random sample. Just take a random sample of what young men look like in between 1983 and 1988. One word is going to come to mind on screwable Okay, every single one of us and here you are all running around like you used to look real super cute if you're a girl back in the 80s but the guy's we looked stupid. mullets and you know, skin tight jeans with with our, with our Reeboks on and just dumb dumb. So why are we doing this to ourselves? You're just you're making it, you're making it hard. You're making it really difficult. Save yourself,
Keenan Brugh 23:06
they'd be better off if they listen to your wisdom. They might not in the spirit of rebellion. But to use some of the kids lingo these days. If you want to break through to them in their own language. You could call their outfit shoe ghee, or cringe. That would be the insults does. You're
Pete Mento 23:24
just dumb, stupid. Kids.
Keenan Brugh 23:31
Yeah, second topic was a little bit of a surprise to me. And I don't know if I know the whole story. But China is signaling a surge in oil demand with a 20% increase in refiner oil output quotas, import quotas. And so you know, from the little I've been watching a stay somewhat up to date on geopolitics or international economics. China's not been in a great spot lately, you know, they've been having a lot of troubles. So it's been interesting to see that while we've had some oil prices come down a little bit lately, now we're in winter and that somewhat to be expected, but it's been kind of a rough time for oil prices. Generally, we are going into maybe slowdown recession type stuff more and more this year than we've already seen. But it looks like China is expecting to need more oil. So without knowing all the details. I think this is another sign of what was already kind of on the horizon that we're going to be seeing higher oil prices this year. Have you been following this any closer, or what are your initial takes on this type of news?
Pete Mento 24:35
I have been watching it, there's a few things that are a little bit counterintuitive. So number one is kind of has been getting more and more engaged in the refining process. That's got something to do with it. So there will be higher desires to purchase raw material for refine and then export. So I think that's got something to do with it. Second of all, they're purchasing with the intent to see an upswing In the Chinese belief that the economy is going to get better faster than just about any other economy in the world, they're, they're betting on it. So if you if you look at, as an example, their, their initial response to their real estate, they're just gonna let it fall. And hopefully we'll come back. If you're looking at their whole geopolitical answer towards their relationship, the United States starting to cool down or warm up a little bit. They're banking on a faster recovery, and they see their opportunity to resell hold, and manage a little bit better than everyone else's. There's also some arguments that Russia only has so much they can sell. They have not been able to live up to borders as well as people thought that they could. So no, there's going to be consumption men, and it may not be what people thought thought it could be. So there could be something more nefarious with overloaded capacity overloaded purchasing, which could be stockpiling for a possible military use, or folks that are concerned that China is purchasing significant portions of this for a possible. I mean, you could do the math, right? Is it something for a Taiwanese invasion? Could it be for military expansion West, you can let your mind roam, I am not nearly paranoid enough to spend the time to search the quarters of the web to worry about it. But at a time when people are worried about energy, maybe that's the direction this is going. So stay tuned for something like that. And it could very well be exactly what is happening.
Keenan Brugh 26:31
Very interesting insights. I hadn't been following the growing refining industry in China, but it makes sense for what they do with up valuing that into all sorts of other products. But then, yeah, whether for actual skirmishes or invasion or the ability to bluff or negotiate as if they are ready to do such a thing. I hope we don't see large scale conflicts, obviously, though, it's good to keep an eye on don't necessarily need to be paranoid to try to keep tabs of the risks and potentials out there. Being
Pete Mento 27:03
prepared for it's being part of it. Right? That's right. Yeah. Right. So last topic, this one got my attention. People are when they're building their building down in certain parts of the world. In this, this takes a little bit of imagination. They're actually building below ground in particular for warehousing. So all over the world, and places where real estate is actually quite expensive, and where the ground is amenable to it. Why not build down below. So imagine a parking garage, right? When the parking garages, particularly in urban spaces, will go well below the surface of the city. Same thing can be done for ecommerce warehouses, the same thing can be done for warehouses period. So there's a new idea out there that we should be building below ground. And there's been a lot of advancements to architectural technology and two building technology that apparently allowed us to be easier than before. The hard part is understanding whether or not you're digging in a place, and whether or not you're building in a place right off the bat, that probably is going to give you the results that you want right off the start. But honestly, keep in the places where our business thrives, is most of its already been built up. Most of it. There's already vast, expansive, multi million square foot facilities. So the idea of being able to build below that. That's interesting. And I'll be fascinated to see what happens next with it.
Keenan Brugh 28:35
Especially in the areas where you're closer to a lot of people, right, I imagine these warehouses are probably going to want to be closer to areas of distribution and where it's coming in where it's going out. Because you could have something out in the middle of nowhere and build above. But if you're going to be doing a lot of throughput, you might want to be closer to the action. And there's high prices of real estate. So going underground could be interesting. Have you seen any specific Tech with it? Is it just better ground penetrating radar? How are we able to do this so much better than we would have 2030 years ago?
Pete Mento 29:08
The Inexpensiveness of building in tunneling it's just got excavating has gotten cheaper. And I think that has a lot to do with the tunnel work that get all the lawns doing. So I'll be watching this one pretty closely. I also want to know more about the how the law works because you want really did I mean, he said, Who says I can't dig underneath this? Who says I can't build a warehouse underneath your warehouse if it's deep enough. When does this get weird man like, when can someone just build a 25 million square foot warehouse underneath the city and don't doesn't have to ask permission if he was there first.
Keenan Brugh 29:41
So whole new meaning to the phrase undercutting the competition. Yeah. Hey, oh, or if you're
Pete Mento 29:47
a fan of of late 90s movies. I drink your milkshake, right? That's right. You know he he drilled underneath everybody else's land and took all their oil. Well, what if you were able to build it? Tire storage facilities for E commerce under other people's. It's a fascinating question. I'm sure it's not cheap enough now where it's going to be a concern, but at some point it will be.
Keenan Brugh 30:09
Yeah. Interesting. You know, a lot of property rights have ownership of the airways above them to a certain degree. And I wonder if that could apply below a building to a certain degree. You know, just like with the FAA, overriding that, and the planes allowed to go over your property, maybe something like a regulated transportation system, boring style tunnel may be allowed, but interesting to see that we might be seeing more underground facilities, also beneficial if there is an end of the world disaster. So also good news there.
Pete Mento 30:43
Yeah. With the comment coming, right. Yeah, bring your chickens.
Unknown Speaker 30:48
That's right. That's right.
Pete Mento 30:52
All right. Well, I brought us in so you bring us out, buddy.
Keenan Brugh 30:54
Awesome. Well, I feel like we had some great topics today. Thank you for the insightful and engaging discussion, as always, and thank you to our listeners for tuning in on your favorite podcast app or here on YouTube in video form. Thanks for joining us, and we'll be back again next week to cover more global trade this week. Thanks, Pete. See you next