Global Trade This Week – Episode 131
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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 Global Trade this week. I'm Pete Neto. And I I can't believe it. But you know, Doug's not with us. He's, what was it parole hearing?
Keenan Brugh 0:21
Or? Yeah, so they finally caught him.
Pete Mento 0:25
They finally got him. Yeah, but it's bring your son to work day. So I have Keenan with us. Always, always very exciting for the viewers when Keenan goes gets in the beat chair, and takes over for one of us. So Keenan, welcome to the show. It's nice to see you in front of the camera for a change. How is this going to work? How are you going to make sure that the show is not a train wreck? While you're on it with us?
Keenan Brugh 0:50
The magic of editing post production.
Pete Mento 0:54
All right, that's cool. That's cool. And you've got your finger on the button in case I say something stupid.
Keenan Brugh 0:58
Yep. There's those seven words. I think Carlin said you're not allowed to say so I've got that list, you know, taped up here so well, I think it's great and honest.
Pete Mento 1:05
I have a great t shirt of George Carlin's mug shots I wear sometimes when I go out, and people have randomly stopped me maybe like half a dozen occasions and said who is that? Say? It's George Carlin. George Carlin got arrested. And I tell everyone like the whole story. They wish they never open their mouths.
Keenan Brugh 1:21
They got arrested. I mean, I knew as his comedy.
Pete Mento 1:25
Yep. He, he was told not to say the seven words on stage in his bid, and he did it. And so for that, then wow. cops came up with he was in Texas, and arrested him and he refused to go down. And ACLU got involved, all kinds of people got involved. But I mean, you think about the state of comedy now. Right? What you can what people say, you know, I, I I'm in front of a lot of comedy. I do comedy still. And the idea that just those seven words could have gotten someone arrested. And then before him like Lenny Bruce, I think a couple times a month got got rounded up and thrown in jail. So talk about growth. But anyway, we're not here to talk about Georgie. We're, we're here to tell everyone about the excitement, exciting things that are going on in global trade. And boy, do we have some today? I'm keeping Keenan from first period, but I think today is what AP history. Is that what you've got. Keenan That's right.
Keenan Brugh 2:19
I'm missing it. Yes. Truancy.
Pete Mento 2:21
Yeah, it's okay. All right, you know. So since I opened the Shokin, do you want to do your topic first today?
Keenan Brugh 2:27
Absolutely. Many of you out there have probably noticed, but we're in the middle of winter storms across the US. So along with that comes your normal things like school closures, but for transportation that also impacts road and airplanes. So roads closed down, traffic gets rerouted. Planes get pushed back canceled entirely. I was reading that. As of yesterday, yesterday, I think 2700 flights got delayed 27 flight 2700 flights got canceled. 7000 got delayed. So think about all the people and all the cargo that goes on those. Anecdotally, here in Colorado, I know there's been highway closures and rerouting of people that takes you know something that should take an hour or two is now taking seven or eight. So those sorts of things really add up for us as individuals and then also for trade and transportation as a whole. And it's it's pretty intensive, you know, we've had a slow start. Pete and I were just talking beforehand. This winter has been a little slow, especially for snow enthusiast tried to use the snow on the mountains, it's been a little slow, but now it's coming back with a vengeance. And now all of a sudden we're getting multiple feet of snow, zero degree weather in some places negative 30 degree weather in some places. So yeah, pendulum swung a little bit too far. So winter sports enthusiast can enjoy it if they can, but a lot of us are dealing with kids no longer in school, roads close flights canceled. And all that impacts our personal lives as well as the transportation system. So I know we see a lot of this stuff a cap as we're trying to help companies stay up and running and move things when the normal plants have broken. I don't know if your personal plans and flying have changed or if you're seeing anything on this or just experiencing the bitter cold which I know is your favorite season here.
Pete Mento 4:26
Well, my flights have been just terrorized by the weather. Last week, I flew to Milwaukee. I left on Sunday in the middle of a storm. My first flight was canceled. My second flight was canceled. They rerouted me through Washington, but I ended up having eight hours of flight delays and then I got to Milwaukee at 1am and there wasn't anyone to work the ramp so we sat on the plane for an hour and waited for someone to to get us off the plane so I didn't get to my hotel till two o'clock in the morning and then I had to be up for calls seven it was it was it was pretty brutally so today it's snowing, like, you know, to beat the band out there and I'm flying to Seattle. So I assure you, Keenan, there will, there will be some come up. And today I've had just delay after delay cancellation after Clint cancellation, I cannot remember a winter that has been this bad. Maybe in my career, I've I've yet to have a flight since November that didn't have some kind of delay. And you're right, it wreaks havoc on logistics. Now, I'm not a ground guy, you know, Doug's ground guy. But I know that there are parts of the country that become impassable when when the weather gets bad enough, and they're their main arteries for over the road transportation, and it can cause a lot of delays getting equipment from one place to another, it's a real problem. And then, of course, you know, with with these, this, these weather problems, you have port delays, you have issues getting getting pilots in and out of where they need to go. That's also an issue of harbor pilots that is, so yeah, you know, it's one of those things about our business that people tend to forget is we are susceptible to weather, which is generally out of our control, customers don't care. So it comes it comes up with us trying to find creative solutions for dealing with this. A lot of that is just having a long, wise history of knowing what might work instead.
Keenan Brugh 6:21
Absolutely. And sometimes there are compounding impacts where, you know, sometimes we'll be moving things for airline operators as well as power generation. And so not only is the weather impacting Oh, this transformers now overloaded, because the Texas infrastructure isn't meant for negative weather for this long and all this and now they need new parts. But then you have to get the new parts there, and the roads are all iced up and the planes aren't going. So it just, it can get bad and can escalate quickly. So everyone stay safe out there. Do your best. And let's let's keep things moving as smoothly as we can, as
Pete Mento 6:58
we can. Sure, yeah, yeah, we'll do everything we can. But one more thing I'll say about that kid. If it's not snow, it's typhoons. If it's not typhoons, hurricanes was not hurricanes, it's volcanoes. You know, there always seems to be some environmental event every year that really puts a snare at things. And welcome to winters. That's right. Yeah. Okay. Well, my first topic, you know, for a while now, I've been talking about how I saw a number of dominoes that would fall on each other to, for lack of a better term term, execute what I see as a correction in the global economy, and the first one is evident. So I was I was waiting for, which is a precipitous drop in home sales, followed by a precipitous drop in home values. In the state of Massachusetts as an example, in the Commonwealth Parliament, they get really annoyed in Virginia, and in Massachusetts, there has been a 25% drop in prices, and median home sales for the cost over the same time last year, that's going to be the case for your bigger, more popular places. Austin, Texas is a great example, San Francisco, Los Angeles, you're going to see a significant decrease in the value of medium median home sales, not the top end, you know, where is Where's Johnny Depp buying his next $6 million condo, but in the types of homes that people like us are looking to buy, that's going to be exacerbated by a drop in interest rates. So when those interest rates come, believe it or not, people are going to start to wait, they're gonna see that they're dropping, and they're gonna wait. So it could actually compound on itself. Seeing is how homes are the largest investment class in the United States that individuals are going to own. That's problematic, people are going to wait for interest rates to come down before they put their house up for sale. And it's going to have a knock on effects. That's the first step in what I see as a long range problem that will take about three years to fix in the global economy. And it's happening here now. So I've been saying it was gonna happen. It's happening. What does it have to do a trade real simple, when people are not liquid, when they've ramped up all the credit card debt and other debts that they can ramp up? Consumer spending will drop as well. So we should see this reflected in consumer spending at some point at the end of q2 and the beginning of q3. Not a very good time for that there ever is. But it's going to have a compounding effect.
Keenan Brugh 9:23
Wow, I've definitely been hearing secondhand as friends and people are looking at buying houses or except the market that the rate of sales has dropped precipitously, but it kind of seemed for a while everyone was like, No, it's not going down. I'm still going to hold out and sell this house at the same price. I expect it to even if it takes three times four times as long as normal to sell but now it's actually kind of breaking down 25% is significant for something like a home price. So in major markets that's that's big and you brought up a good point I hadn't thought of but that is interesting about how once people see the rates are going down. They might wait. And then that just further causes prices to go down. So some people in the audience might be happy if they're looking to buy a home, but for a lot of people, and then the overall economy to your point, there's going to be a lot of value and wealth disappearing or the feeling of wealth disappearing, and that will impact consumption. You're absolutely right. Yeah.
Pete Mento 10:22
And what makes matters worse, in my opinion, Keenan is all the people that have bought homes as investments, they're going to find that those investments aren't going to have the same fruit. Second of all, people that have taken loans out against their homes that are going to find that now the value has gone down dramatically. And maybe they're underwater on a home that they were flush on, not even six months ago. Wow. We never seem to learn from this man. We never seem to learn from this.
Keenan Brugh 10:43
Economics is a dismal science, but it's only about it. It's one we have to pay attention to. Absolutely, yeah.
Pete Mento 10:50
So that brings us to halftime game. You want to do the half a it's bring your son to work day. So before I get you into juice box and some Golden Grahams, you you want to tell everybody by halftime?
Keenan Brugh 11:01
Sure. So halftime is brought to you by CAP logistics. We are happy to be here talking about global trade and transportation. And halftime is an opportunity for us to talk about things that maybe sometimes correlate, but are a little bit off the beaten path a little bit more. Many of you may have heard and I'll start off here today, breaking the news that the SEC has approved all of the 11 Bitcoin ETFs or what they're calling etps Exchange Traded products. So Blackrock is now officially in the Bitcoin game, you know, they have about half a billion dollars worth over 11,000 Bitcoin. So they have surpassed Michael sailor and the MicroStrategy type holders. This is a big deal. The price hasn't really moved, it's actually gone down a little bit. This, to me, reminds me of the you know, buy the rumor, sell the news type of situation. So people have been talking about this for a while there was actually even an incident last week, I don't know if you saw this where someone hacked the SEC Twitter account, said the ETFs got approved, and then the price spiked up and some con artists, I don't know where they were from just gonna guess these eastern Europe just because that's where I associate most Random Hacks, but it could be from anywhere. They probably made a lot of money, but then that kind of also like tampered down people's expectations, when a day or two later, they actually did announce that they have been approved. And so on one hand, this is good for Bitcoin, where now there's larger amounts of capital institutional investors, that can now put money into these assets without directly holding them and worrying about custody. So there's a lot more money flow there. However, there's part of the whole ethos of cryptocurrency and Bitcoin specifically, where why would you trust someone else to hold it right? Like if it's not your keys, it's not your crypto. So I understand why people would do something like that. There's tax incentives, you have all sorts of money in institutional ways, and you want to diversify, get exposure and different things. And now there's going to be 11 or more different options for people to do that. So overall, I think it's good for Bitcoin, even if there hasn't been too much price action up right now, people kind of price that in. And then we do have a havening coming up in the spring. So I feel like it was a little bit choppy with volatile volatility over this, but it's not too dramatic up or down. But we probably will see, this is not financial advice. Price increases in this next quarter to as the havening approaches, and there's just less Bitcoin to go around more money chasing after fewer assets. Well, I'm
Pete Mento 13:48
gonna start all of my comments on Bitcoin, as I always do by saying it's stupid. It's a scam. I hope you guys like your beanie babies and your, your tulips. A couple of things I wanted to talk about when I saw this, first of all, the hack. It was all over Twitter that this was a hack. And then someone took a picture from the SEC is website saying the only place to go to for real honest truth, you know, news about what's going on with the SEC is the SEC website. And it's social media like Well, yeah, we did that. And somebody hacked it. You know, you knuckleheads had donkeys. So that that kills me. And then the fact that something you would think would be just Fort Knox for digital security somebody like you said, you know, probably some, some guy in a beanie at a coffee shop somewhere in Odessa, just totally racked the brains of everyone around them. Second of all, the thing I really wanted to mention about these ETFs and all the rest of it is now we have legitimized people's foolish economic decisions again, not investment advice I wish I would have bought Bitcoin was at $1 a pop or whatever it was Are and you know, I'd be a gazillionaire right now. But in the end you know shoulda coulda woulda, I wish I would have bought more baseball cards and you know, 1986 two, but this is, to me, it's another excellent illustration of how crazy the market has gone. There will be some day, man, I hope I live to see it, there will be a come up and some waiting for someone to just jump out digital say surprise, we made it all up. You know, we've got it all where to close it up. And I understand that, you know, it's all in these different digital wallets. And it's so incredibly divested digitally, don't care, something in there is going to screw somebody, but I'm here for it. So I'm here for it. I'm here for
Keenan Brugh 15:40
the bit, the biggest two things I see that could give you what you want are either one quantum computers come out and then the cryptographic security that Bitcoin is based on is just no longer relevant because of orders of magnitude more processing power that then they could institute a 51% attack, right. So if you're, if you control over 50% of the mining capacity, then you can change it and change the ledger of who owns what, and then make make it say whatever you want, and then make money crash it all that sort of stuff. The other thing being the identity of Satoshi Nakamoto, or moving of that original wealth of the founder of Bitcoin and the author of the white paper. There was an interesting event last week, maybe you saw this too, if you were aware of the hack, did you see that someone sent about 1.2 million US dollars worth of bitcoin to Satoshi Nakamoto, one of the largest and wealthiest wallets of Bitcoin in the world. The ideas and I don't know this, for sure, but the rumors are that the CIA or the IRS or some group is trying to fish out the identity of the original Satoshi Nakamoto. And they're probably not going to get him to actually act, but they're going to make them in no longer legal compliance of oh, you received $1.2 million, and you didn't report that or you didn't do whatever. And then they're going to try to like use that as legal justification to maybe try to take over that. I don't think the protocol works that way. But very interesting, mysterious, it's not known who sent $1.2 million to the richest Bitcoin holder in the world, but it's probably some sort of information fishing game.
Pete Mento 17:20
Well, I can't wait to they find out that it was a Chinese government in North Korea. You know, this, this, this idea that there's someone sitting on all this crap, it's just candidate blows me away. It's the latest get rich quick scheme that will, it will end up falling on itself. They will they will find a way. I mean, I believe I believe that either the first or second largest holder of Bitcoin is the US government because of all the seizures.
Keenan Brugh 17:46
Yeah, with the Silk Road type stuff they've sold some, they definitely have a lot. They have a lot more now because they didn't sell it right away, and it's gone up in price since they originally got Ross Ulbricht in jail. But that was also a messy thing. It's an interesting book, if you ever want to read American kingpin was a story of Ross Ulbricht and all that. And apparently, the government officials were very tempted along the way. So there's a lot of corruption and stealing of Bitcoin throughout this whole process of taking down a very illegal black market network there. Yeah, we'll see. You know, I mean, yeah, we all wish we would have bought more back in the day, but who knows, maybe your libertarian streaks might end up appreciating it, where there's a limited amount of it compared to governments and incentives have just printing more and more beyond the 1% 2% inflation that's targeted by central banks. Because we definitely have seen higher inflation than that over the last couple of years in the Western world. And in other countries where there's been worse stability, places like Venezuela, there's been insanely higher inflation. So, it might be something that investors are choosing to use as a hedge, or, you know, just in case
Pete Mento 18:59
can I hold it? Can I put up my hand? Sure, in the event of a complete and total knockdown of the internet, am I able to steal
Keenan Brugh 19:07
and people if the entire internet goes down, you might not be able to trade it for very much. But people can hold little little cards of it and that's that's Oh, some
Pete Mento 19:20
Yeah, the card I'm sure that has inherent value, the same amount the same physical amount of gold in 1950 will still buy you the same size house in 2024.
Keenan Brugh 19:32
So it goes pretty impressive. Pretty impressive. Yeah.
Pete Mento 19:34
I don't have to worry about some digital ledger and some some you know, we need somewhere in St. Petersburg who's running the whole thing. Sorry, dude. Like I it's like the Easter Bunny. I'm glad everybody's is in Santa Claus. Good for you. You know, I'm happy for you. But if I can't put it in a safe not for me, baby. It's just that's just how I am so I've been a big believer in species will continue to be that way. Gold, silver platinum, bring it on baby inflation.
Keenan Brugh 20:02
fan of those two, maybe I'm not old enough, but don't tell me it's not real yet. Let me
Pete Mento 20:09
Your mom and I want to sit down and have a chat with you. See, sometimes parents lie. Anyway, I have to get to my second I live here in New Hampshire. And actually, sadly, this may be the last time I do global trade this week from New Hampshire, I would turn my computer around to have everyone see all the boxes everywhere. But I, I will still legally I believe be a resident of the Granite State. We're working on that. But I will be in Virginia, and very soon here and back in DC. But we have the presidential primary election happening next Tuesday. However, yesterday was the caucus for Iowa. And funniest thing happened. My daughter called me and said, Dad, it's a caucus. My daughter does not care about politics, she does not care at all. And I had I found myself explaining to her what a caucus was. And she said, Well, then, really, what's the difference between that and a primary vote? And I said, Well, they're huge, you know, people, people all come together. And then each individual candidate has a representative who stumps for them, give speeches, answer some questions as best that they can. And then the people in the room cast the straw poll, you know, an independent, anonymous ballot to determine who wins that particular, you know, ticular County. And it's not all that much different in a regular primary vote in the difference being that everyone is present. And that everyone has an opportunity to cast a ballot based on being swayed by the things that are said there. I don't know, in 2024, if anybody swayed by the person who's in the room, I'm sure there are people who are. But it's a interesting thing for someone like me from New Hampshire, a lot of New England still has town meetings. So where I used to live when we had the farm out Mason, there were I think 500 people in the whole town, and we would get together once a month. One man, one woman, one vote. So they would bring something up, the town council would make decisions on what came up for a vote. But then we would vote one man, one woman and it was you know, the purest form is beautiful New England democracy. It also turned into a real monkey circus. Sometimes when people would do and say crazy things. President Trump won the Republican Iowa caucuses really not a shock to anyone. The shock was that DeSantis was able to take number two a very slim margin over Nikki DeSantis, Nikki Haley, and our good friend Vivec rom Swanee has decided that he is leaving the race and did so with the flourishing beautiful love letter to Donald Trump. Well, he did it. So caucuses, man, I mean, that's it's an interesting idea, right? Everyone's there, everyone's present, but you don't see who voted. You get to have some back and forth with the people that are there representing the candidates. And antiquated but in my mind, charming way of looking at democracy.
Keenan Brugh 23:01
So absolutely. It seems like it went off last night and it followed up too closely or stay up. But I know people were worried about the weather. Is that going to keep people from getting out. But people braved the cold and got out there? It looked like? Yeah, yeah. Interesting, where we're in a situation where there's, you know, to dominant people, and then these other kind of smaller people that don't really have a lot of chance, but they're doing it. Maybe people like Vivek, I know, I've heard some people think they've been he's been trying to gun for a VP position. Not sure if that's in Trump's best interest, but it is a way of politicians or business people to get national exposure, even if they don't really get more than a percent or two. But it's an important part of our democracy. And it's happening. So good question by your daughter, I guess people are becoming interested as it's coming up here. And there are differences of, you know, what is the primary? What is the Congress? How does, how does this impact me? Are we going to have Biden again? Are we going to have Trump again? What's going on? Is Trump even allowed to be on there? That'll be an interesting story with Supreme Court type situations. The latest I heard on that was some other state I'm blanking now tried to remove him, and then that got shut down. So I'm not sure if that that campaign has inertia anymore. If you've seen anything like that on the East Coast, and
Pete Mento 24:15
still, trust me, I'm on the East Coast, they'll do it. They'll do human sacrifices, whatever it takes, you know, but the thing I really do love about New Hampshire and the primary and why it's such an interesting thing about being here is if you want to meet anyone that's running, it's really easy. I mean, it's super easy. You can there are almost every night, there's someone who's had a coffee or someone who's announcing they're going to be the diner somewhere, that there's anybody running for anything on practically any party, you're able to meet them face to face. In most instances, you'll get an opportunity to ask them your question. So it's something that I I've kind of taken for granted while I've been here. You know, I I was interested in Tulsi Gabbard had an opportunity to meet me whether she answered questions answered my question. She was very It kind of got it. I remember being younger, and having dinner with my parents, and then on the other side of the restaurant was Walter Mondale. And, you know, it's just it's one of these things where I don't see that happening in a big state like California or Texas, but it does happen here. And it's an and we're really awful voters in New Hampshire, you know, we're very much like Iowa, you know, we want to see the candidates, we want to actually get in touch with them. And then your comment about the weather in Iowa, you need to always remember, these people are farmers, and farmers are going to stubbornly get in their car, and they're going to drive or they've got to go, whether it be damn, there's work to be done. It's really endearing thing about the Midwest. So anyway, that was halftime, from your friends at CAP logistics to learn more, check them out at cap logistics.com. And with that, we'll go on to our final two topics, which are in a strange way intertwined.
Keenan Brugh 25:48
Yeah. So they're both kind of connected here. I guess I could go first since I did the first one last time, but recently started reading The Economist again. And story. I know, I know. Yeah, took a took a little break there. But back to reading it. One story that caught my eye was the new era of global sea power. So obviously, and you'll get into more with the Middle East and the Red Sea, but around the world from China and Taiwan, different situations, there's kind of a new era of what ocean power looks like, you know, even with protectionist, government activities around the world is still been mostly open trade and free trade and international trade has been happening and the oceans are a major part of that, yes, we see some on airplanes, but the vast majority of weight goes by boat. And you definitely need to have safe areas in order to do that. Some interesting things I saw in this article that I hadn't quite considered before. We've been seeing, you know, UAVs, flying and having that asymmetric type of guerrilla warfare where maybe some Houthis can send a $300 drone, and then America needs to send a $2 billion dollar missile to knock it down. And like, How sustainable is that gonna last? You know, it's very asymmetric. But there's also these uncrewed surface vehicles to kind of thinking about, just like a drone boat, that may be explosive, or have some other intelligence gathering or armaments of some sort on there. And how that's a really different ballgame compared to international ocean rules that were really designed for ships with a captain. And there's all these rules on and you know, better than I do, what maritime law says you have to do to save people and all these, what I've been reading is that doesn't quite affect unmanned vehicles the same way like the laws just never really thought about this. And technology's been outpacing the laws very quickly. So we're in kind of a new world era, and some of the old things that haven't been used as much are now being used. And then there's also this need or strategic advantage to have some of these newer things. Also wanted to give a shout out to Japan, and they're new I think it's Thai gay class submarine yet Thai gay class. It's really awesome looking submarine. It's a diesel electric. So while America does have probably the best submarines with nuclear power problem, yes, we do. My second favorite one would be Japan's having this diesel electric where they can operate quietly, and it's like new design. So I'll probably find a video to throw in here of Japan's new badass submarines.
But in the meantime, yes, an interesting overall just new era where whether it's the Middle East or China and Taiwan, the oceans are going to be pretty key for major conflicts and or trade using trade as a part of the conflicts where I mean if China decides to not just land invade Taiwan, but they were to, you know, do a severe blockade. It's a little tougher to fight against and you need you need a navy to do that. And so in countries are investing in their navies, thinking about their navies if they haven't been investing in them. It's a big deal. So I kind of threw a lot out there. It's kind of a general topic, but it's on the mind of the Economist. It's on my mind this morning, and I'd love to hear your take on it
Pete Mento 29:59
all. always on my mind. First of all shout out to my college roommate, who is no longer serving in the Navy. He retired after a very wonderful career. But he was actually a plank owner, which means he was one of the first sailors on board the maiden voyages of the USS lagoon, which if you've been following the news that is one of the destroyers that's been out there keeping mariners safe. So I wanted to mention that specifically, very proud of him and his service very proud of the lagoon and the sailors that are on it now. This topic is right when you go to Merchant Marine Academy, you end up getting inundated with information about this. We had a college professor named Dean Mayhew. He wasn't a dean. That was his first name. Dean may eventually become a dean, but Dean Mayhew we call him bucho and Bucko taught naval history and maritime history at the Academy. And you did not sleep in his class, he was captivating, the guy would come to class dressed up as an admiral from the 18th century, he was absolutely bateau. But he was wonderful. And one of the first lessons that really stuck with me was a great white fleet. So I had to look it up on Google real quick here, but Teddy Roosevelt in 1907 1906, I believe, sent out a flotilla of America's new Navy, beautiful white ships, you know, these gorgeous ships and all the support behind them. It's 14,000 sailors that covered like 43,000 nautical miles just going around the world saying, we have a saltwater Navy and we intend to protect commerce. So America not only can produce products, American can only consume products we can protect the exportation, importation of our trade, and it was a, it was a defining moment for us as a country. The second part of that is i i implore any listener of the show, to put an hour and a half of your week aside, go on Apple TV, and watch Greyhound Greyhound is a film that's done by Tom Hanks. It came out a few years ago. And it is a absolutely thrilling, nonstop edgier seat film about a convoy going from the US to Great Britain during World War Two. And Tom Hanks as part of the US Navy and their escorts dealing with the German U boat threat. U boats submarines are, are the terror of the seas at times of war. And it's an incredible film that shows just how many men lost their lives. Crossing the ocean as a matter of per capita, no one died more than US Merchant Marine, not the Marine Corps, not the army, not the air for No one, absolutely no one. And unlike those people in those services, it was quite common for someone to get back on those ships seven or eight or nine times after being sunk over and over and over again, another fabulous film, steel boats Iron Men goes into the firsthand accounts of these men that crossed the ocean and we're sunk over and over again, the ability for a nation to project naval power, first and foremost sticks us in a position where we can take one of our aircraft carriers a technology that has yet to be yet to be duplicated by any of our enemies. Sure they have catapults, but they're not like ours, then they're unable to take off the heavy aircraft with long water range that we have, and allow us to really just rain hell on anybody that we're not real happy with. But the ability for us to keep these lanes safe. And to ensure that cargo can move from place to place is being put in question right now by a lot of maritime experts. Yes, it's totally asymmetrical, and it's warfare, a $2,000. Drone against a $2 million missile? Well, you're talking about millions of dollars of cargo and the assurance to the market that that cargo is safe, you really can't overcome the importance of it. There's a new class of vessels that's coming out that is mostly run by wire, lots of missiles in the back and they just wait to attack based off of very high technology, weapon systems that people are wondering, is this a movement towards a more drone like fleet somewhere in the future? I would say that as long as there are threats at sea, there will be sailors as long as their sailors, American sailors, there will be safety at sea and that's a that's patriotic and of course it's a little bit of my hubris, but at the same time, don't screw with the US Navy. And a lot of the world is learning that right now. So I mean, my topic we'll get into this in a minute, but you know what you bring up Keenan is so important. The Chinese have built a hell of a navy, but it's mostly for dealing with Taiwan and for close to short deployments. They don't have much of a Bluewater Navy and most of what they've got has been sent to the Middle East. And they haven't really been involved in executing any sort of defense of traffic. We'll see if that changes as more Chinese ships go by. We had another attack an hour ago, unfortunately, so it's just not stopping. It's not ending and it's going to take strong navies from around the world to ensure the safety of our commerce agency. Oh and one more thing I'll say the head of the nuclear engineering program at electric boat is also one of my classmates Richard slack. There is an A sub that goes out of there without his okay and We don't maybe have the best submarines in the world, no one comes even close. That's why I don't worry too much about the Chinese navy because they would just be sunk in watery graves in about 20 minutes. Granted,
Keenan Brugh 35:13
I misspoke, we do have the best. And I think more so than maybe the last couple of decades, submarines are going to become more important as Yes, our aircraft carriers are impressive, but you can see them, people don't know where our submarines are. And that's a strategic advantage that we have that not many other nations have, I think, you know, some Australia's or some countries are working with a couple other producers, but nothing like what the US has, and submarines are a big part of it. So thank you for your insights there. And yeah, get all charged up about
Pete Mento 35:45
it. But the you know, the final topic for this week is really hand in hand with that, and that is marine casualty insurance, there was a report that came out and she Captain yesterday that it was really a fraction of the value. And now it's one 2% At this point. So it's getting to be where it is financially uncomfortable, to move for war risk, in that particular part of the area. And as insurers become less and less comfortable with allowing people to move in, that's when people that are committing these acts are going to when so when there's really nothing that the Navy can do, there's nothing that that a government can do to really bring comfort to ship owners into the merchant mariners on board that they've got a safe passage. And then the ship owners themselves saying not only am I going to deal with loss of life, these very important mariners, I might lose my ship. And I may not be able to afford the correct insurance to deal with it. This is a real turning point, when you continue to see that insurance escalate based on the number of attacks, it's math man, the more attacks that happen, the more ships that are subject to him, the more where missile sneaks through and actually does do some damage, the more likely it's going to be the insurance are going to say we're just not going to insure your vessels anymore. We talked about this a few months ago, when this first started happening when when the Red Sea was at risk and the Houthis. Were at risk. And and now you know you've got Hezbollah in Lebanon, they'll be able to actually attack on both sides. And that's a terrifying thought. So I am, you know, I said I saw this impacting during our premonition show, I'm going to stick by that. I think that if these attacks continue, and we're unable to get our arms around it, you may see the insurance company saying we're simply just not going to insure your vessels anymore.
Keenan Brugh 37:28
Correct me if I'm wrong. There are some merchant ships still going through, but not nearly as many like the charts I've been seeing. There's a lot of ships going around Africa. And that has inherent costs, as you guys have discussed already with time and fuel. But they're not doing that for no reason. They've been making those individual risk calculations. And it makes sense that that would be reflected in the insurance availability and prices of that insurance. And yeah, I mean, even if it is asymmetrical one Navy's way stronger than these little drones or missiles, a couple percentage points on a lot of goods adds up. And that risk of a catastrophic, complete loss is driving driving those costs going up. So yeah, really interesting. I don't see. I don't know what the future holds for this, but it is definitely a happening. Yeah,
Pete Mento 38:23
I can't stress enough how important Twitter has been to me, honestly, these past couple of weeks where so many people, you know, folks that comment on maritime issues have been showing us vessels that are going through explaining how the Flint Hills are working, talking about see strategy to keep these people safe. It's been a real education for me and I, I went to see I've been on ships, and I can tell you that there's there's enough going wrong, you don't need somebody shooting on top of it. So that that definitely skews the calculus towards do not want to get on the water pretty quick. And yeah. You mentioned how there's a lot of vessels going around the Cape spends more time, and it costs more. The thing I keep saying whenever I talk to folks is it really hasn't affected capacity yet. I think when it impacts capacity, then the prices will be even higher. But so far they've been able to keep capacity in line when people want. It's just been an increase in costs because of operations and fuel, which is good for the carriers in the end.
Keenan Brugh 39:22
I'm sure it's something we'll definitely be continuing to watch as the week's go by here.
Pete Mento 39:28
And I listen. Well, you know, before you sign us out, I just you know, I really hope the court went well today for Doug. I hope everything worked out. We're kidding, Doug. Doug is on assignment he's working today. He's I don't know if he's in California or not. But he was unable to join us today. But
Keenan Brugh 39:42
what would have been the weather there's been a lot of snow and ice he was planning on this morning. So it might have been some unintended weather results actually. Wow.
Pete Mento 39:52
We're looking forward to having him back. So and I'm sad to say that it will no longer be a live for your die pod asked. I guess I have to figure out what the motto of Virginia is probably something like, wear your pink shorts and drink champagne. I'll figure it out. I don't know. Okay,
Keenan Brugh 40:08
Virginia. Sounds nice though. And I'm sure you'll bring some of that new culture along with it. So sorry to hear about all the moving boxes. Godspeed. Good luck. You got this even if it is a winter storm out there. So
Pete Mento 40:22
Keenan, I'm a job creator. So I hire people to do this.
Keenan Brugh 40:25
There we go. There we go. I'm not economy depends on it. Yeah,
Pete Mento 40:28
absolutely. We'll take us out, buddy. All right.
Keenan Brugh 40:31
Well, thanks for having me. Join here today. And thanks to all of you listening and stay in tune keeping up to date with global trade this week. Brought to you by CAP logistics. I am Keenan signing off here with Pete Minto. Have a great day and a great week.
Pete Mento 40:45
Please see ya.
Transcribed by https://otter.ai