Global Trade This Week – Episode 226
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Doug Draper 0:00
You're watching global trade this week with Pete mento and Doug Draper, All right, welcome everybody to another edition of global trade this week. My name is Doug Draper. I'm one of your hosts, but this is a two host show. My partner in crime is joining us from the great city of New Orleans, Louisiana. Mr. Pete, mentor, what's
Pete Mento 0:27
going on, brother? Well, first of all, we really need to address the fact that you have finally turned into a South Park character. After all of these years in Colorado, you finally got your South Park, your South Park had on. I couldn't be prouder. I'm glad that you finally just steered right into it, you know, I'm really proud of you.
Doug Draper 0:48
Yeah, well, it's, it's cold here in Steamboat, and usually, because I'm in this co working space, and they have these little private phone booths, you know, you can reserve them, and everything's booked, so I'm in this room called the cave, and it is dark, as you can see right there, and it is extremely cold. I am freezing right now, so the show must go on. So it doesn't matter where we're doing it. I'm a little chilly, but we're going to make global trade happen.
Pete Mento 1:19
You know, Doug, it's, it's the fact that you're willing to sacrifice your body for the team. I think that really, really touches me deep inside my heart. Three times size is too small. Thanks, man. I really appreciate that.
Doug Draper 1:30
Yeah, yeah. Way before we jump into this, I gotta give a quick shout out to Uncle Mike in Kansas. Now, my son's girlfriend visited a couple of weeks ago, and she said, hey, my my uncle listens to your show. He's listened to probably 20 episodes. And I was kind of like, really, that's Thank you very much. That's awesome. I like, what does he do? He's a banker in the Kansas City area, but he listens to the show. And being out of industry, so to speak, and making the effort to sit down at least 20 times to listen to our banter, I had to give Uncle Mike a shout out. So, Uncle Mike, thanks for listening to my friend. I appreciate it. Shout out, Uncle Mike. Uncle Mike, Uncle Mike. So good. Well, Uncle Mike comes on to listen to the show, not necessarily us bantering. So I think we get this party started.
Pete Mento 2:27
Yeah, buddy. So Topic number one key, air freight, DSV. Now the new rankings have come out of the largest I guess we call them what, non, non asset carriers, right? And DSV, because of their acquisition recently of Keenan of nakurnago, oh my gosh, what a Freudian slip of DB Shanker is now number one. They are the largest by weight carrier for air freight. A couple of comments on this. The first is that this is kind of the point when you make a major global acquisition, is to come out of it on the other side with more volume, more opportunity. And volume, of course, drives your ability to get lower rates. So there's been a lot of chatter about whether or not that particular acquisition was maybe the best decision. There are a number of media outlets for our industry, and it feels like some of them have it out for DSP. And I'll just say it. It seems like they wake up every morning looking for something negative to write. Here's something I'd like to see positively spoken about them. And I've said it before on the showman, I've got nothing but love in my heart for that company, for all the companies I've worked for in the past, and I wish them nothing but success. But here's a situation where, you know, growth on the on the paper looks wonderful. Now, what do we do with it? You and I have talked over and over again about acquisitions, whether it's rail, you know, over the road, you name it, bud and gaining it is great on paper. It looks good. But now, what do you do with that new growth? Are you going to be able to get the kind of space that you need at the kind of prices you need to continue that growth and to further it. So it's nice to take the win, nice to get the W on this and the attaboy, but it's what they look like a year from now, when they've had this opportunity, and how they use this to try to find some way to leverage growth. That's what I'm going to be looking at. The second thing Doug, that I think, is important, is at the past year, because the change in de minimis, it wasn't as important in the eyes of market watchers as it is now. But air freight, when you have things like prolonged conflicts all around the world, becomes very important for the defense and the military, and then also the fact that we have so much going on with the AI world, and building all of these data centers between the actual infrastructure for it, as well as just moving the things that they need outside of infrastructure, air freight, is a tremendously important part of this. So I don't see that necessarily having a bad year. Next year, I think they're probably going to see a lot more volume out in the marketplace. Does DSV do to take this opportunity and run with it?
Doug Draper 5:05
Yeah, it was funny that when you when you talked about this topic, I saw a post on LinkedIn. I can't remember who it was from, but it broke down, you know, the top 10. So I dove in a little bit to the article. And, yeah, the growth was explosive, 64% I think was the number six, mid low 60s, but the organic growth was a wasn't even flat. It was a little bit down, right? So the acquisition really, really popped it. But to your point, the what's going to happen in the next year? The one thing I read it, and you can correct me if I'm wrong, is you were just there a lot of direct gate, you know, international gateway charters, which, to me, really speaks to the E commerce world the fast fashion. And even though the de minimis is no longer at our disposal, I still think that the concept of air freighting goods over and then dropping it into a domestic network is going to continue to grow. And I think, yes, we may be having an angle. I'm sure there's lots of other clients, or, excuse me, customers, excuse me, service providers that are providing air freight, that have the same mind mindset. DSP, there's a lot of good companies out there, but I think it'll be interesting to see what happens with the consumer and the fast fashion, as I would say, and the expedited air freight to get it to the US and drop it into a domestic delivery carrier. So I'll be curious to see what happens in the next year. You got a big pop because of the acquisition. And then the next piece is looking at, you know, two through 10 on that list that you mentioned, are there going to be other acquisitions and mergers in there? It was interesting to see a couple of Chinese freight forwarders that some people may not be familiar with, name wise, but for the majority you know as the usual suspects on that list. So my whole point is, I think there's going to be more acquisitions or partnerships to consolidate air freight on on these cargo ships that are going to be more gateway market charter type services,
Pete Mento 7:09
I agree. And I think, you know, the fast fashion world, just the fashion world, they're moving high profitability, rather expensive, delicate stuff, pharmaceuticals, medical devices, electronics, consumer electronics, these are all things that generally have that opportunity to ride on air freight. So as that continues to grow, and apparently, our never ending piggy like consumerism grows with it, I think that there's going to be more and more opportunity again. You're right, Doug, it's what they do with this organically moving forward.
Doug Draper 7:39
Well, we talk about air freight. So my first topic is related to ocean freight and container shipping rates that jumped pretty substantially enough to catch the market's attention, about 16% in the first couple of weeks in January. Now that wouldn't necessarily play a direct result of demand. It was more pushing through, you know, increases in Gris and things of that nature. But is it the art of the bluff, right? Maybe that's not the right term. Is it a posturing position where steamship line said, here's a here's an increase? You kind of knew it was coming. It's going to be it's going to bump the market. But is it a position, you know, I was thinking kind of like those professional gamblers that you see on ESPN, where they're sitting there with their sunglasses and they're very calm and they're trying to see what everybody else is doing. So are they kind of testing the pricing power that they have? And is it an opportunistic play, see what's going to happen in the future, and you're going to be a TMP. So I'm interested to see how that transpires. You're going to be a speaker there. But I still think that the smart move, and this is just Doug Draper's perspective, right, being in industry for a while, that the spot market is going to be very advantageous this year because of the volatility, right? Don't lock yourself in play the end play the long game, because if you decide to position some of your business or more of your business in the spot market, you're going to get burned on a couple of the ebbs and flows of the nature of the season? I think the long game is, if you want to participate in the spot market, you're going to be better off long term. And then my specific point to this is, are the steamship lines and the carriers kind of seeing what's out there? How far can they push it? Hey, here's an increase. It happened real quickly in 2026 let's see how let's see how the market responds to kind of posture, what they're going to do more long term. And it's right before EMP. So I think that has some some timing involved with it as well, but it caught my attention. I wanted to bring it up here on the show. I don't know if you see that. What's your take on it?
Pete Mento 10:01
Well, I couldn't agree more. It's important to also comment that we don't give advice here. So you you do what you're going to do, but you know, a couple of guys later in life that have been this industry a long time. There are things that you can see on the horizon, but again, ever since covid started Doug, these guys always get their money one way or the other, one way or the other. You know, they always seem to find a way to win. And it's going to be a really fascinating TPM this year. Can't wait to hear what the rates are. I can't wait to hear what people are thinking. And unlike a lot of places I go, we're talking about, you know, how to stop bad things from happening at icpa and that kind of stuff. TPM is very much now in the moment. Oh, my God, that rate just dropped, or Walmart just agreed to their contract, right? So it's going to be very real time getting to see exactly how it impacts it. So that will be fun. And I know we'll do the we'll do the show that week, so I'll tell people what I'm hearing. Yeah, it's gonna be a wild year for ocean freight. Man, yeah, for sure.
Doug Draper 11:01
All right. Well, that brings us to halftime. We kind of rambled, or we kind of rocketed through those first topics. And of course, halftime is brought to us by CAP logistics. They also bring the show every single week, and we can't thank them enough for continuing to support us. So go check them out at cap logistics.com. So Pete, I'll let you go first on your halftime.
Pete Mento 11:20
Alright, we're doing in and out this week, in or out this week. Doug, are you in or are you out? You ready? Fire away, Thursday night, Thursday night, football in or out in. College athletes getting paid in or out in Oh. NFL quarterbacks over 40 out. Wow, okay, pitch clocks in, baseball in or out, love it in, artificial turf in or out,
Doug Draper 11:52
probably out.
Pete Mento 11:53
Okay, now we're gonna move over to pop culture real quick. Okay, reboots of classic movies in or out, out streaming services replacing cable for sports.
Doug Draper 12:07
It's gonna happen. Sorry, I can't make any comment. It's going to happen, but I'm out
Pete Mento 12:15
tick tock in Instagram as entertainment in or out in, okay, award shows like the Oscars and the Golden Globes in or out out. Okay, vinyl in or out.
Doug Draper 12:31
Like records. Yeah, you're gonna, you're thank goodness we're not face to face, because you would throw something at me based on this answer, but I'm out.
Pete Mento 12:40
You're such god, okay, fine. Rock and roll is dead in or out.
Doug Draper 12:47
That is not a true statement. So I'm out,
Pete Mento 12:50
cover bands in or out. Love them in, okay, live music festivals in or out, mid, okay, craft, craft beer in or out. Energy drinks in, I like them. Oh, okay, that's interesting. Brunch in or out. I'm out, okay, and a couple more QR code menus. When you go to the bar and they've got a QR code so they're giving you in or out, way out, no way, cashless venues in or out, out. Group texts,
Doug Draper 13:36
I'm in, I'm in a lot of them,
Pete Mento 13:39
okay, stretching before anything physical.
Doug Draper 13:47
I don't really do it enough, but I'm kind of in. You probably should naps in or out. Say naps, oh, 100% out,
Pete Mento 13:58
going to bed before 10 o'clock in. Oh. Okay, well, that's it for this week's in or out. You went through a lot of them Doug, and as you already are well aware, we disagreed on many of them. So yeah, I'm not I'm just not going to get into how wrong you are about a few of them. But vinyl is, from an audio perspective far superior a listening experience. Because first of all, you listen to both sides of the record. How dare you? Doug Draper, how dare you what?
Doug Draper 14:29
All right, before I head into mine, obviously the vinyl I know that got your hair up on your on your beard there. What was another one that was surprising to you?
Pete Mento 14:40
It pissed me off, if I'm being honest, and then the QR code menus, that's something that never I turn into grandpa Simpson. As soon as I see one, I'm like, Oh, for God's sakes, I can take my phone out. I got to make things bigger and smaller. I got to deal with this crap. You know, I get it. It's hard to find good help. But for God's sakes, give me a piece of paper to read.
Doug Draper 15:00
Yeah, that's why. I mean, the fact that you and I both wear glasses, I'm the same way. We fight over the menu. I'm like, no, just with my wife. Just go to the appetizers. I can't find it. It's at the top. It's always at the top of the menu. Go, I can't find it. Make it bigger. I mean, there's a whole conflict there when we sit down with the QR code. So, absolutely out outstanding.
Pete Mento 15:23
Doug, outstanding. All right, I know you've got a pretty sensitive topic. You've got a lot to say this week about something, so you go ahead and bring us your
Doug Draper 15:30
halftime, buddy, yeah, well, the halftime was an HVAC system or a boiler system, and that seems so bizarre, but I'm in the middle of it. Pete, my home in Steamboat Springs, Colorado in the middle of January, has not had heat or hot water since Thursday evening. Oh, my God. And why? Because we have a boiler, and it went out. And I didn't know anything about boilers, other than it was this thing in this back room of my house. And I could go down a rabbit hole on this, but I was shocked. Pete, shocked at how expensive boilers are. I'm not going to go into the whole thing on that, but was shocked, and it's not an HVAC system, so I started using chat GPT, and I'm like, why are they so expensive? So HVAC system, and it makes sense, it's sheet metal, it's air flow and and, you know, coils, basically, right? So that's pretty cheap. A boiler, you know, is this compressed engineering piece of equipment that needs to be fine tuned, at least the people that are installing it yesterday and today. So I should have heat and warm water by the end of the day. It's it's an engineering piece of equipment versus H back, just moving air. And so I'm a little scared. Here's it on when it's all going to be over, but Pete, when I hear the word boiler, I'm thinking of like a 2000 pound cast iron ball in the middle of my house. My boiler weighs less than 100 pounds. It's up on a wall, and it looks like some piece of equipment that could run a, you know, some sort of AI, yeah, like a computer network, right? So I'm going to get a tutorial this afternoon how to use it, and my only question is like, where's the shutdown button and what's the phone number I call if something happens. So it's got a warranty beyond belief, and it's supposed to be up and running. But, yeah, I was kind of blown away with the cost of a boiler, the technology around the boiler and how boilers are no longer 2000 pound, you know, pieces of equipment, of cast iron in the corner in your room. So it's come a long way, and I'm excited to have warmth. That's part of the reason I've just been perpetually cold like for the last four and a half days. It's horrible.
Pete Mento 18:13
Doug, I feel sorry for you, buddy. Like I said when we were talking before the show, it's 50 degrees in New Orleans. You think that I was on Hoth right now from Empire, people are walking around like it's never been this cold before. I, you know, I lived on the farm in New Hampshire when we had the farm up there, and we had three boilers. So we had one that was oil, it's very expensive to run, and then a backup to it so that it was also oil. But it was just in case that one broke down. And then, when the house was originally built in the 1970s there was a wood fired boiler, which is a 6000 square foot brick house right the middle of nowhere. And the idea was, got plenty of wood, so if anything went to hell. And just on a lark, one time, friends of mine and I figured out how to make it work. The amount of wood required to get that thing to actually heat just a couple of rooms. It was like an Amazonian deforestation to get that thing going. You know, you talk about the changes in HVAC and all the rest of it. I tell whenever I meet, like a young guy, saying, I think I want to go to the academy. I want to be an engineer, like, if you thought about being an HVAC tech, because boiling water, making a, you know, a turbine, where it's similar stuff, and it probably pays better in your home every night, these cats that come in and do plumbing, they do HVAC, work electricity. You know, electricians, highly skilled professionals, takes a long time to get good at it. But when you are, oh, my god, like when they said we're going to come bring heat and hot water to your home in the dead of winter and steamboat, you're like, Yeah, okay, here's what's gonna cost you. Like, that really sucks, but I don't care. My wife and I are gonna die if we don't get this fixed so I get it.
Doug Draper 19:49
Brother, yeah, we probably paid a premium. But the lead installer, there's three guys there doing it. It's three guys two full days, and the lead guy. Is named Nacho, so I highly doubt Nacho will watch the show, but if, for some crazy reason, he does good on you, brother, I appreciate you taking care of me.
Pete Mento 20:09
You probably just bought Nacho a summer home, you know, with what went down there?
Doug Draper 20:13
Yeah, cool. Well, that was halftime, a long one. And appreciate our listeners. So cap logistics.com. Check them out. We wouldn't be here without those guys. All right, second half. Pete, what's your second topic?
Pete Mento 20:28
All right, Friday came and went and the court made no decision with regards, or they published no decision or opinion with regards to the tariffs that were put earlier in the year. Last year, we had a bit of a surprise today. The court has said that tomorrow is an opinion day. We weren't expecting one for two weeks now, this is so strange. I talked to a bunch of attorneys this morning. Earlier this morning, they said it is highly irregular, highly irregular, that the court publishes an opinion on the same day that they do oral arguments. That would be tomorrow. They are doing both. So not to get our hopes up, but it is possible, most people who are watching the court believe that the decision has already been made, that they took their votes last week. They know where it's going to go, that it's going to go towards the way of the importer. The big question now is, what's that going to mean? Are we ever going to see any money back out of all this? What will the administrative process look like? So good news tomorrow we have another opportunity. I know we don't time stamp it, but too bad it's 135 on the 13th of January. So we'll see what tomorrow is like. With regards to that opinion day, it might be a big deal, but if it is, you're talking about upwards of $300 billion flowing back into the economy. And people aren't thinking this through. They're not thinking it all the way through. There's going to be companies who take that money in refunds, buy back stock, ones that are in a position to give back customers and suppliers part of that money, ones that will reinvest it into infrastructure. That is a tremendous amount of money. Doug, that's been in a in an involuntary savings account at the Treasury in Washington, DC, for the past eight months. So tomorrow, I'll be watching it pretty closely. I'm not I'm not hopeful that we get a decision tomorrow, but I will get down on my knees and pray to the baby Jesus. Allah Ricky Bobby, that something does come out tomorrow for everybody.
Doug Draper 22:26
Yeah, one thing that I'm going to put my tin foil hat on right now. Piece Excellent. And I noticed again, I mentioned that there's a lot of daily articles get pushed my way that helped generate topics for the show. And one came across, which was, what are all the earning reports coming out this week? And I'm like, let's see. Is there a topic there for global trade? What companies are announcing earnings that would have relevance to an opinion on the Supreme Court? And the thing that caught my attention, Pete, I'm just going to throw out names and you tell me what the common industry is that are all reporting. Q for earnings reports this week. JP, Morgan Bank, Bank of New York, Bank of America, Citigroup, wells, Fargo, Goldman, Sachs, Morgan, Stanley, BlackRock. PNC, financial, M and T Bank, State Street. Yeah. So my take is, are they positioning, slowing down or speeding up this opinion, and is it coincidence that it's the same week of all of the q4 financials for those banks, because all of them, whether they are investing in a company that has, you know, a lot of import activity, or whether they're financing or whatever. I just found it very interesting that all of those companies I just rattled off in the financial industry are reporting the same week that the opinion is supposed to be happening. So that that's my only comment. I had to bring it up, because there is a plethora of big time banks and financial institutions that are are doing earnings releases this week.
Pete Mento 24:07
Well, it would be pretty fascinating. But I mean, all that pre work before the release of their earnings has been going on for a long time, so I don't know how much they put into it, but you want to talk about a wicked coincidence. That is a wicked coincidence, that those things are happening at the same time, and I don't know I, I like to believe what people tell me, with regards to the court, me, I, I've been kicking around a lot of lawyers that focus just almost entirely on the Supreme Court, and one of the things I've come away with is, is that they're, they're, they're their own little world. They really don't care about what's going on outside of it. They can't because of the things that they're talking about. And, you know, I would be shocked if, if one but it's not completely outside the realm of possibility. Doug, it's not completely outside the realm of possibility. You know, we'll we'll see. All I can tell you is, if these refunds. Are something that we are able to pursue. My life is going to devolve into a giant pudding of dung for the next two years, recovering this money for people and fighting with the government, which, you know, I love to do more than practically anything else. So we'll see. Yeah, yeah, interesting, right? Brother, take us home. All right.
Doug Draper 25:16
This one's a little not light hearted, but it's not as in depth as the three topics we just went over. I don't know if you saw but Denmark, the national postal service delivered its last traditional letter on the 31st of December. I think technically it was the 30th of December. 400 years of mail service in Denmark, no moss, no moss, right? The Postal Service, the national postal service, is not going out of business. They're just focusing on parcels. And there's private companies that are already out there that play in Denmark that are going to be handling the traditional letter. So you can still hand write a letter to your buddies at DSB, and it'll get to them, but it's going to be through a private company. And the two things there that I, that I that I read about, is, number one, those private companies in Denmark are going to say, hey, we're going to deliver it to this post office, right? You got to pick it up. We're not taking it to the final mile. Or if you do, you're going to pay a premium. So the other thing I looked about, what about inbound mail consolidators? Right? There's a lot of those in our industry with air freight, those will still operate, but again, they're going to go through the private companies to make those deliveries. So my take is, I think it's more of a signal of what's to come, not necessarily an outlier. And it'll be really interesting to see the reaction if there is any related to the country of Denmark no longer offering water services and having it go all private. So I don't know it caught my attention. I think it's, it's a signal of what's what's to come. I don't know how soon that's going to happen here in the United States, but I bet you're going to see other European Union countries move in the same direction.
Pete Mento 27:11
So Doug, I thought a lot about this when I saw it yesterday, and the first thing that came to mind was, when was the last time Christmas cards is an exception. You got a letter from somebody I don't remember? Yeah, I don't I don't remember. My little mailbox at my building is full of flyers and junk mail, occasionally something from my insurance company, but it really has become a receptacle for things that are immediately moved into the trash can or recycling. It's not, it's not what it used to be, as opposed to the daily trip to the mailbox prior to email was, it was part of the daily routine, and it was an important one, because it's where your bills were and where communications from all over the world would come to you, because phones were still very expensive. The move again, the Doug Draper, what's the word? I'm looking for analogy, 500 guys in a room with a little green visors on and they're adding machines making the decision. You know, there was a lot of math that went into this, and it makes me wonder what the cost of next year's Christmas cards in a country like Denmark will be, what that's going to mean for that whole tradition? I understand that the world is changing. It just makes me a little sad and hollow to think that this part of something I grew up with will no longer be so important. I know that you, you cheer on the death of the American Postal System. I know it's, it's on your vision board. You know, like, like kids in the 80s had division board next year, Lamborghini picture, the end of the Postal Service. I don't think that we're quite there yet. I think that when you look at the infrastructure of the two particular places and their importance, they're not quite the same. Also, something I thought of was mail in ballots, right? You have a lot of ballots that come to people in homes in America to say that the Postal Service, if you want it, you got to come pick it up. That doesn't seem very likely. I'm sure there'll be carve outs out there for things like governmental communications, but yeah, man, I mean, you can't, you can't ignore it if it's happening in a country the size and the economic importance of Denmark, can happen in Canada, in the US next, we don't know. But what a depressing topic to end my show with today. Well, I know it doesn't make your show ending depressing. You're probably like, oh yeah, hey To hell with the Postal Service, but for me, it's makes me very sad.
Doug Draper 29:34
Well, well, I better get a handwritten thank you note from Bob's boilers after I dropped all the coin in the last 72 hours on those guys, great company. Bob, spoilers. Nacho, Primo. I'm very excited, but I really hope they send me a handwritten thank you.
Pete Mento 29:51
No, they ought to yeah for that kind of way, they'll definitely send you a bill or receive that money.
Doug Draper 29:56
Oh, it's happened. Yeah, that's going
Pete Mento 29:58
to do it for us this week. In global trade this week, we want to thank again, our absolutely just unwavering sponsor at CAP logistics for always being here for us, giving us the resources and the ability to bring the show to you. We want to thank all of you, our listeners, those of you that passed the podcast or the video on to your friends, it does help more and more people to see it. Doug and I honestly just do this for our own personal self edification. We really don't care if anyone listens to it. We need an outlet every week to complain. We want to thank Keenan for all the work that he supposedly does in producing the show. And again, thank you. And as we always say, if it's happening in global trade, we talking about next week at global trade this week, take it easy, buddy. Stay right. Good luck in the Big Easy. Thanks, bud. You.
Transcribed by https://otter.ai