Global Trade This Week – Episode 168
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Keenan Brugh 0:00
Doug, you're watching global trade this week with Pete mento and Doug Draper.
Doug Draper 0:09
Hello everyone, and welcome to another edition of global trade this week. I am one of your co hosts, Doug Draper, and Mr. Pete mento is on assignment, not really sure where he is. So we're bringing in our mega producer to fill in in this slot, and it's going to be an awesome show. So Keenan, first of all, thanks for filling in. Man, I know you're double duty. You got one hand working the board, and the other half of your of your brain is going to rock it here on some topics. So I want to thank you for filling in. Appreciate
Keenan Brugh 0:41
it. It's always fun. I get to learn each week, hearing you and Pete discuss these topics, and it's an extra learning experience, getting to do a little bit of research and sharing myself. So thanks for having me.
Doug Draper 0:53
Yeah, yeah. Well, it looks like it's going to be a pretty good show. We have four awesome topics, and since I introed, then we'll let you run with your first one. Man. So So drop it. Let's get this show started.
Keenan Brugh 1:06
Yeah, kicking off here. I saw the news and wanted to share the headline number that the port of us, Los Angeles, is coming up on $1 trillion in imports, which is a huge number, hard to fathom, a trillion. You know, we've had a few companies now the, you know, Apple and Microsoft and others hit these sorts of crazy large numbers. But now we're, we're hitting that in dollars of imports. And you know, this is kind of coming after what seems to be the resolved pay issues on the Gulf and Atlantic coast, though there are still outstanding issues on automation. Seems to be a busier peak season has kind of led up to this surge on the West Coast, specifically Los Angeles. So I know you're spending more time out in California than ever. Are you kind of feeling this? Are you seeing this? Are you surprised by this? What are your first takes that were coming up on a trillion dollars, which is, you know, pretty good growth from from last year, and it looks like it's going to keep going. First thoughts, impressions, yeah.
Doug Draper 2:14
First of all, it's awesome, right? So a couple of things that it's awesome in the sense that the buying power the American public is not waning, right? As far as the confidence level, I shouldn't say buying power, but the confidence level, so from a state of the economy, that's awesome. The other piece is, yeah, you know, commentary that I'll get into some feedback, the concept of a trillion was, like unfathomable. Years ago, I remember that, you know, to be a billionaire or talking valuations of billions, regardless, company was just like astronomical. And now unicorn status with companies like billion is just thrown around like it's $5 bills now, and I think that it's going to be that way with trillion before we know it. But, yeah, I would say Keenan two things. Number one, good on you. American logisticians, right? I think that people listened to what was happening. And what I mean by that is the Suez Canal, Panama Canal, with the water situation down there and the drought and how ships were moving through slowly, and then the fact that everybody redirected during the potential port strike, that that left a pretty clean slate for for LA. And, you know, it was open for business, and and Pete and I earlier this year, was like, hey, LA's back baby, bring them through. There. They have the infrastructure they have for the port, as well as the the connectivity with warehouses for cross dock. Drayage company set up. I mean, it's just built like a machine to make it happen. So when things red diverted during COVID, and people were able to get back. So I said, Good on you for the logisticians, because they kind of came up with a plan B, right? They navigated and understood the nuances of the ports, the ebbs and flows of our industry. And so the fact that LA is just killing it right now, I think it's great. I think it speaks volumes to to our industry and the people leading it. Last comment on that Pete is that we're going to see how good the planning people are in the organization, because let's listen to see what the news stories are in q1 and if it's like, oh my god, there's not enough inventory, that's a red flag, or, oh my gosh, there's way too much inventory, that's red flag. So I think the logisticians got through it good on you. And we'll see what the planning and forecasting team is like, because their time is, is, is coming up here in q1 so I love it. I think it's great.
Keenan Brugh 4:47
Absolutely, yeah, just kind of in closing, wrapping up. I think it kind of speaks to what you and Pete were discussing recently about maybe some lessons had been learned from the COVID era where some of these planners, while it's not an easy job, they are. Were taking it a little more proactively and trying to, you know, avoid a potential strike on the East Coast. It did happen a few days. It wasn't catastrophic in weeks or months and ongoing, but some of these people were prepared and were moving already to the West Coast ahead of time. So encouraging to see, yeah, we'll see how, uh, January and everything rolls around.
Doug Draper 5:19
Yeah. Yeah. Very cool. So, all right, well, my first topic is one that pops up and down, especially with, you know, the freight forwarding community is specific to forward air, right with the Omni logistics acquisition, acquisition, gosh, I think it was 18 months ago. Now, it's been a roller coaster ride over there with leadership changes on the C suite and trying to integrate those two companies. And I didn't realize this Pete, but I think, or I don't think, but I know forward air at the last minute, was trying to back out like I think this may be a bad, a bad, a bad call. So here we are. Fast forward into q3 at one or q4 2024, and it sounds like there's some investment bankers that are getting together to see what they can do to sell this thing and and move on. I know there's been a lot of pressure from some big stakeholders in the organization to kind of say, All right, let's just shut it down, boys, and shut it down in the sense of the current operating environment, not shutting the company down, and let's look for a buyer. So you and I were talking just before this, Keenan, I'm trying to figure out who is going to buy the company, right? And I'll tell you who I think is a strong contender. But here's the deal with forward air, for those that you don't know, it was a agnostic line haul service provider, primarily to the freight forwarding industry, right? So, if you had something that needed to get from, say, Denver to Nashville, Tennessee, and it needed kind of an expedited ground service, forward air was your was your guys. You know, when I was at the at the forwarding side of my career, they only serviced, they were a service. They sold services to service providers. They didn't go out and target direct consumers. So if I'm afraid forward and I'm working with whomever or another LTL company that needs something expedited, I could go to forward air. I would have trust that I could tender my freight to these guys, and they wouldn't poach the freight, because there was other freight from other customers right when they bought. So there was a comfort level in their core base with selling a service to service providers, which is a good a good business model, in my opinion, when they bought Omni be like, Whoa, hold on a second. These are going direct to consumers, and my product is going to be on your dock, and are you going to poach my customers? So I think that was the perception whether that's real or not. I think the perception of the lack of the agnostic, I'm just serving service providers. I think that was a big, a big paradigm shift that people weren't used to. So my point is, like, who, what company out there is similar in service offering, because that's the group that's going to re establish the credibility with forward air. That's the group that's going to enable the forwarders and the other service providers to tend to freight the forward air without fear of their accounts being poked and the one group that comes to mind is it's called ATSG air transportation services group, and this team has some origins and legacy business with airborne Express, which is how I started my career. I think there's lots of synergies, right? I know that they are primarily air services, right? They charter or lease jets and fleets. And there's their headquarter in Wilmington, Ohio, which is where everyone expresses hub used to be back in the day, but they don't provide services direct to customers, and they're getting into fleet management and airport cargo. Handling and things of that nature. So integrating a middle mile carrier that's agnostic, that's providing services to service providers that they don't currently have. You know, Pete and I, this will be the last thing I say Keenan on this topic. So Pete and I are always about forward thinking, and we try to call our shots. Maybe I'm off base here, but I think you'll hear that company's name in some of the conversations about what's forward air going to do. And I said that was the last thing. This is the last thing Pete, when I was looking at who some of the leadership was last night, like, oh my god, I recognize a couple of names back from the airborne days. And I was in my mid 20s when I got started that and so it was quite a long ago, got my start at airborne. I'm like, Oh, my God, these are, like legacy ABX air, which was the company that provided the air freight services to airborne Express. So anyway, I think it's going to be a viable group that would take an acquisition. Yeah.
Keenan Brugh 10:00
Very interesting. You know, occasionally we'll see some companies split off, you know, a forwarding division, or some sub mode of transportation. Though, I feel like overall we've been seeing a bigger trend of more acquisitions or merging or growing. So sometimes companies right size or reallocate. But it feels like the overall trend is kind of getting bigger and chunking up. And, yeah, very interesting about some of these niche roles within it. And are they going to start going after, you know, and customers? Are they going to lose that trust? Are they totally changing their models? Are they still going to try to go after other service providers and kind of be that service provider, service provider? Yeah, very interesting to watch. And yeah, to your point about who exactly else would kind of fill that role or be a competitor, we were just looking up on Zoom info beforehand. And yeah, you seemed more familiar with some of these competitors that Zoom info listed as similar companies, and didn't sound like they were all that similar. So it's kind of interesting when a unique model or unique company is changing its position a little bit, and, yeah, is that going to change the landscape more so than just an average company out there, of which there may be hundreds of the same model?
Doug Draper 11:08
Yeah, yeah, that'll be fun, fun to watch. So gar Keenan, so this is one of my favorite times of the show, and we're here already, I think, like the 11 minute mark. So we're hounding this show right now, but it's half time, Keenan, it's brought to us by your company. Thank you very much cap logistics. So we encourage all our listeners to check out cap logistics for their service offerings. We really appreciate it. And you're a multi talented individual, Keenan, so I appreciate that with hosting, pushing the buttons and pulling the levers. So thanks for that. All right, let's see. Why don't you go first on your halftime, and then we'll keep the cadence going with the show. Yeah, absolutely.
Keenan Brugh 11:51
It seems like we have a similar theme for halftime involving some college students. My college students were famous from years ago. So this headline story is Philip Zimbardo, the psychologist behind the Stanford Prison Experiment, dies at age 91 so although the Stanford Prison experiments, so Stanford University and zimbardo's name is very much associated with this landmark study back in the day about the effect of social pressure or environments. You know, half the students were guards, half of them were prisoners or those sorts of things. And starts off peaceful, but then people kind of start abusing the power dynamics and all those sorts of things. Besides that one yet insightful type of study on how genocides or various other atrocities could be committed, and understanding the psychological forces of oh, well, everyone around me is doing it and all that. He was also a great psychology professor. I remember when I was in high school taking AP Psychology courses, we had a little TV that got wheeled in with some VHS tapes, and on it was, uh, Philip Zimbardo, I don't know. Might have been like the Principles of Psychology, some sort of college level intro AP class, but from high schoolers and they talked about all sorts of psychology, he was obviously very passionate about the overall field, not just the sadistic type of stuff from 1971 although that is what he's most famous for. And maybe some of those cautionary tales catch our attention because they are the most dangerous and maybe insightful about, oh, maybe there's a little bit of that latent potential in me, if I was in a weird, you know, prison guard experiment type scenario, how would I act? Makes you think also just lets you learn a little bit more about people. But Professor Philip Zimbardo has passed away at the age of 91 and his contributions, both with the Prison Experiment and other teachings of psychology, will be remembered.
Doug Draper 13:48
Yeah, I can't remember the name of but I think they did a movie, or they might have about that. I think it was more than a doc. Maybe it was a documentary. I don't know. I remember seeing it, but it's one of those deals when I was at University of Kansas in Frazier Hall. And if anybody knows, KU and it's an iconic building on campus with two flags on the top. It looks very majestic. And if you if you go inside, it's very sterile. It's like a 1960s building with polished cinder block walls, you know. And I remember being in there one of my psychology classes, learning about him, and like, wow, this kind of blew my mind as far as, what is this? What psychology is about. I kind of like this. I have visions of being in a polished cinder block room in Frazier Hall in Lawrence, Kansas, learning about him. So you brought back some positive and negative memories there. So well, hey, man, here's mine. It's again college students. So this, I love this, right? There was a competition about counter drone Tech. Uh, as you know, it's basically like, you know, unmanned drones and all this other kind of stuff. It does more than deliver pizzas in your packages, but it's widely used in military use. And so there was a competition to say, Who out there can develop technology that can take drones down if it becomes a threat to the United States or just in general, let's come up with some cool technology. Let's sell it to the world and and provide anti drones. So everybody knows how I feel about drones. So I got super excited about this, so I'm going to read to you, Boeing. I mean, there were big companies. I mean, anybody could enter Pete you, or, I'm sorry, Keenan you, and I could enter this thing. And so this is Boeing's entry, right? It is the compact laser weapon system. Of course, there's an acronym for that supports a range of counter uncrewed aerial systems. Of course, there's an acronym for that. And and they went out so all this stuff. And it was like some laser that would zap it and blow it up from from, you know, miles away. And then here comes these college kids, right? And they came up basically with a speaker that they kind of strapped on to, like an industrial fan that you would see, like in a warehouse that's, you know, really large and kind of at a slight angle, and they use sound waves to basically take drones in mass and just drop them, like something you'd see out of a Star Trek movie or something like that. But literally, right? I mean, I'm just thinking, here's Boeing compact laser weapon system and counter uncrewed aerial systems. And here's a bunch of college kids like, dude, grab dad speaker. Let's plaster it on here. Crank some motley crew or something, yeah, and just drop these things out of the sky. So
Keenan Brugh 17:00
interesting. Yeah, you have me curious. I want to look that up, or send me the article. Are they removing like, the air pressure so, like, they just drop, like, it's no, they no longer have like, the pressure to push down on. Or, I'm curious how that actually works.
Doug Draper 17:14
Pete, I'm a sale, or I'm just kind of Keenan. I'm so sorry. I'll
Keenan Brugh 17:18
be an honorary Pete today. Okay? Compliment.
Doug Draper 17:20
I apologize. So I'm a sales guy, so I read enough of the article to get what I wanted out of it, which was blowing drones up. So I don't know that. And to so that's one and the number two, when I was playing around, but there was a pay wall that really got into the meat and potatoes. And I'm like, I'm not gotcha trying to jump this paywall. So I will send you the information, and you can do a deeper dive and maybe put something in the in the show notes, or whatever. But yeah, yeah, I was just kind of the surface level story. I got so excited about, about a competition to blow drums up out of the sky, but good questions that I don't have answers to. Yeah, I like the
Keenan Brugh 18:02
the overall premise, too. Of you know, Boeing and some of the world's best scientists and budgets all thinking a certain way, and it's high tech and effective. But I like that there could be some dynamic, Game Changing type idea, whether it's Motley Crue or some other technical wave form being pushed out of a speaker that just removes the air underneath their wings kind of reminds me of not a big sailor. Pete would maybe have heard of this. And maybe there's a term I know if you're in the Caribbean, you have to be careful if you start seeing a bunch of like bubbles and air moving up, you've got to get your boat away from those air bubbles. Because of a bunch of air bubbles start leaking up from the bottom of the ocean, it'll reduce the buoyancy of the water, and the boat could just sink down until there's no longer air bubbles, and then you're just swallowed by the ocean. So I'm imagining something kind of like that, but in air, yeah, please send me the link. I'll have to dive in and figure out how to defend my home against the onslaught of drones that are inevitably coming.
Doug Draper 19:00
That's great. Well, to your point, that's why they do this kind of stuff, right? Is they find creativity in the masses, and don't have to spend gazillions of dollars and five acronyms that you have to sift through to understand it. So absolutely good. All right. Well, Keenan, thank you, and thank cap logistics for helping us out with half time. It's much, much appreciated. So let's keep this thing rolling go into our second half. So what's your second second topic? Yeah,
Keenan Brugh 19:27
so for the second topic, got the story from the economist why the West faces new inflation fears. So over the last couple several years, America and Europe have been similar in their economic positions and kind of moving in lockstep, both experiencing some inflation. Now we're coming to a point where America central bankers aren't celebrating but they're like behind closed doors, maybe celebrating the fact that the sharpest rise in borrowing costs the rates have. Appeared to help slow down inflation, which had been very high, without fully causing a recession or a sharp job a sharp rise in joblessness. We still have some inflation here in America, but it's seemingly under control, according to central bankers and other experts, whereas on the other side of the Atlantic, and in Europe, inflation's a little bit lower, but the economy is a little more cool than they would have wanted it. Maybe they acted as aggressively as America did, but they didn't have as much growth or as much inflation. So while it's still, you know, somewhat good, there may be cooling in their economy compared to America, and so now we're going to have some kind of different pressures and actions here ahead of us as we're choosing what to do going on. And you know, maybe it seemed like we had similar issues with inflation over the last couple years, but as this article describes and matches with, what I remember hearing over the last couple of years, Europe has been much more impacted by the energy costs of Russia invading Ukraine and then whoever it was blowing up the Nord Stream two pipeline, taking away the more cheap and affordable energy from Russia into Germany and other European states. So they're now facing, okay, we don't have cheap energy, we've pulled back on inflation, but now, like, are we growing? You don't want inflation too low, and you definitely don't want major recessions or deflation and shrinking of the economy. So just thought it was interesting. Different countries do have different situations, whether it's labor force issues or energy issues that all kind of add up towards what is it that we need to be doing as an economy? And sometimes different groups have similar interests, and now it seems like Europe and America might be having a little bit of a divergent split of our economy still growing. We still have people strong. Job market still growth, but Europe may be having a little bit harder time in the next couple years. Does any of that resonate with you, or things you've heard, things you're curious about?
Doug Draper 22:10
Yeah, it's a good point, good observation, right? And I'm sure that there's some trepidation, really, everybody was thrown into the same chaos, right with inflation. And this is just kind of a an example of how people are emerging differently, each country and region, although we are all thrown into this big basket of of money, costing more and inflationary concerns. You know, in America, you get one guy, Jerome Powell, comes out, drops the interest rate a little bit, and thank goodness. And everybody wants to gobble up and consume, consume, consume. That's how America comes out of it is like one guy says one thing, and there's a couple of good trends, and everybody flips the switch where other parts of the world, because of external forces, like you said, energy being a big one, are just emerging differently. Maybe there's a little more trepidation and doing things a little bit more calculated and careful. But I think as the US keeps driving forward, and I think that what you spoke about on your first topic, Keenan, about pushing a trillion dollars through the port, I think everybody will get there, just moving a little slower, depending on what region of the world that you're in. So it'll be interesting to see, have they, have they peaked out? And is it stagnant? And is that mindset going as far as the European mindset is being more careful, slowly to emerge, or is all of a sudden, that could have pivot as quickly as it did here in the US. So I think that's a story that's to be continued, for sure.
Keenan Brugh 23:52
I think you're right, kind of in closing, you're reminding me this sort of touches on a topic you and Pete covered two weeks ago about the consumer confidence in Europe. Maybe this is kind of exploring some of those underlying reasons why the European consumer is not as confident as it seems like. The American consumer is still pretty exuberant, optimistic about growth, and so therefore they're spending and like a lot of these issues in economics, there's a little bit of the chicken or the egg type thing. You know, Europeans may be rightly cautious because of energy costs and different issues, slower growth type of deals. But then, you know, sometimes the irrational exuberance of Americans or a country in our position where we're still spending and doing things kind of creates then more economic opportunity. Companies are created, jobs are created, spending. People buy things, and those people need to make things. So economics is an always interesting field to me. It's a science, but it's also kind of one of those soft sciences where it depends on politics, it depends on psychology, beyond just the physics of how things should.
Doug Draper 25:00
Work, yeah, irrational exuberance. I love that, right? I think that describes America many fashion. So, speaking of exuberance, Keenan, I'm rolling in my my last one. And we've talked about this, and I'm sure you've read about it, is Saudi Arabia's Neom city, right? Which is this Giga project. And I think the line, maybe people have heard about that where, literally, it's a building. I think it's a mile long. Maybe it's more, I don't Is it a mile? Do you know? Are you familiar with I
Keenan Brugh 25:36
think they originally had a longer line. They may have shortened it, maybe, maybe
Doug Draper 25:40
not. I'm thinking about maybe it was like insane, like 60 miles. Anyway, check, going from one mile to 60 miles? Yeah, I did a lot of research on this one. Keenan. So anyway, it's this massive project going on there, and I'll make a comment about Pete's company here in a second. But this project, whether it's the Giga project with developing a city, or whether it's the specific building that they're developing, and I think it's way more than a mile now that I'm second guessing my comment, but that whole project is consuming 20% or 1/5 of the world steel, and it is just gobbling up and so if You think about on basic terms, like, when they're building something, you need an infrastructure. You need the bones of the building, right? That's the steel. And I was just thinking that as time progresses, and if this continues to happen, you know it, talk about trillions. This is where this thing is going, right? The next step is, what's the next step in building, and all of the consumables and the thing so steel. 20% of the world steel is being consumed now. What's the next building materials that will be needed to facilitate this project? So my point here is, I think that there is going to be a strain on building materials if this project continues to move forward, as Saudi Arabia has, has committed. And so it'll be interesting this ripple effect of what is consumed when building massive structures, because this is the biggest project ever in the history of the world, to this caliber, right? So it'll be interesting to see. And then we spoke about this, but DSV and neon project, DSV is the official logistics partner, right? And it's like a, it's a partnership where, where Neom is a 51% owner and DSP is a 49% owner. So talk about a logistics challenge, excitement, opportunity. You know, I think DSB put themselves in a good position to align here. If this project continues to maintain, I just don't know if it is viable, you know, this thing. So I would encourage people to check out Neo the line and learn more about it's just fascinating with what's going on out there, and it's designed that Saudi Arabia needs to come up with a second option, as you know, beyond energy and oil and petroleum. So anyway, in your research, just in the last three minutes or Keenan, I am so sorry, what is the length of the line?
Keenan Brugh 28:17
Yeah. So the original plan was to build 110 mile long line way off by 2030 but you may be closer now that has that ambition has since been scaled back, at least with the timeline where they're now planning on finishing 3.1 miles by 2030 but they still want to do all 170 kilometers, or the full 110 miles. But that timeline has been pushed back to 2045, and so this kind of is an example of unlike the auto industry, or maybe skyscraper construction type things, where around the world. Demand goes up and down in different types of growth patterns and reacting to prices and different things like that. This is much more centrally decided where it is kind of the royal family of Saudi Arabia making this happen. And to your point, they are trying to reinvest the large sums of money they've received from oil and Saudi Aramco and that whole oil industry, and they are investing it in other clean energy projects, both on the generation side. And I think a lot of this line has to do with different sustainability aspects in construction, right? So there, there's probably solar and things like that involved. But how can they do cool passive air conditioning or water filtrations? I think they are investing in some of this next generation type stuff. So while it is probably very expensive, and plans have dramatically changed from 110 miles down to 3.5 at least by a 2030 timeline to. Is a unique role for projects like this, with a well funded, visionary type group making the decision they're not just building this because they only need places for people to live, this is a little bit more aspirational of how could people live. So hopefully some cool technologies and things are created, developed, produced, that then are able to impact the sustainability of people living elsewhere, not just in the desert with the line, but yeah, a lot of steel, a lot of concrete, I imagine, lot of lot of resources required for something on this scale.
Doug Draper 30:36
Yeah, yeah, for sure. And you make a good point with the sustainability practices, not only during the building, but then how the facility and the line is is maintained in the energy consumptions, because it will be a lot. It's kind of hot Saudi Arabia, if you didn't know that, Keenan,
Keenan Brugh 30:55
very hot. Also, I think they're trying to, you know, increase the density of population while also having, like, a certain quality of life to all of that. So it'd be interesting if they figure out some cool stuff along with this project. Absolutely.
Doug Draper 31:09
Yeah, good deal. Cool. Well, we come to the end. Keenan, thank you for for jumping in. And I think it was a pretty good show. We did a great job with lots of different topics that kind of flowed together a little bit. And kudos to college kids and the Stanford Prison Experiment. So we may do this again. Keenan, to have you involved running the show, so we shall see. And I want to thank everybody for listening and joining us this week on global trade always comment. We appreciate your comments. Good, bad, indifference. We'd love to hear from you so Keenan, have a good one, my friend. Thanks for joining global trade this week.
Keenan Brugh 31:51
Thank you. Have a good one, and we'll see you next week.
Unknown Speaker 31:53
All right, take care. You.
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