Global Trade This Week – Episode 262
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Pete Mento 0:01
You're watching Global Trade this week with Pete Mento and Doug Draper.
Doug Draper 0:10
Greetings, everyone, and welcome to another edition of Global Trade this week. My name is Doug Draper. I am one of your hosts. I am in a secluded bunker somewhere in the metro area of Denver, Colorado, and my co-host, mr. Pete Mento, is dressed up and obviously someplace very important. Pete, where are you, and how are you doing, my friend?
Pete Mento 0:32
I'm great, man. I'm in Madison, Wisconsin. I gave a speech today for the University of Wisconsin's Technology Innovation Conference, and that was great. Well attended, depressing topic. I would like to have some fun stuff to talk about, Doug. Like some happy ha ha. I just don't have a lot of that these days. But it was a great speech, and I always love coming back to Madison. It's a fun town.
Doug Draper 0:52
Yeah, yeah. Moving from Houston here and walk off stage and what? Did you run for Houston and then
Pete Mento 0:59
Chicago? Oh,
Doug Draper 1:01
nice, nice, nice. Yeah, I was going to say we're talking over each other a little bit. I apologize; it could be my internet here in the bunker. But my my question is: as you walked off stage, did you throw the mic and then turn the corner and sit in the lobby that you're in now? No,
Pete Mento 1:16
it was a bit of a walk. I had to go to the conference hotel to find a quiet place to sit, but I would like one time to just do like a do like a P Diddy or Rockham and just throw the mic down and break it when I walk off a stage. I think that'd be a lot of fun. Yeah, actually get to see Rockham in New Orleans in a couple of weeks, Doug. My friend Hector, friend of the show, who's coming with me as well, and that's what I do now. I go see hip hop acts from the '80s when I couldn't go. That's my that's my thing now.
Doug Draper 1:49
Love it, love it. All right, let's get this show started because I know you're on a time frame and appreciate you doing it from the lobby. So, what's your first topic?
Pete Mento 1:59
This whole show and our media relationship, if you will, started because of COVID. You and I got on a podcast that you were doing, and we spoke about COVID. And I I made this big pronouncement that it's probably going to shut down the entire economy. We had a wonderful conversation. It's it's really the origin story of the of the Doug and Peach show, and I don't know if you've been following the news, but there was a pneumonic, not bubonic, pneumonic plague, lab leak that happened in Siberia over the course of the past couple of weeks. And the difference between this and what we talked about before is just the instance of death. If if you're not immediately treated with antibiotics, it has like a 90% effective kill rate. The good news is it's in a very small part of the world where there's not a lot of people traveling anywhere, let alone to the United States. The bad news is is that Russia is not being very forthcoming about what's going on. So when you read the news I read, God knows it's some pretty paranoid, weird stuff, man. It's starting to get people riled up again about another pandemic. I don't think that that's going to be what this causes, but it wouldn't take a whole lot of information to end up in the hands of the Europeans to do exactly that. So, I'm watching this one, Doug. The White House had an emergency meeting yesterday to discuss this. Apparently, they call them people from Europe as well. Nothing, no information about that is forthcoming. I don't know what happened, but if it's bad enough for the White House to have an emergency meeting, it lends some credibility to theory. So I do worry, but I don't worry so much, and I think another lockdown is going to happen. Doug,
Doug Draper 3:34
yeah, yeah. I appreciate you summarizing the origin story of of our of our show here, I'm very proud of that episode, and so grateful that you decided to jump on and talk about that years ago. Just literally, I came from an event this morning that I was a, I just listened to speakers, right? I wasn't involved, and on the radio, it basically said talked about this and said that there was a very young scientist, I believe, that was involved with it that just died, and they were talking about she didn't get the antibiotics and and everything else. But yeah, if this thing jumps, so to speak, into Europe, then I think there may start being a little a little pandemonium, and it'll be interesting, you know. I I I may say this incorrectly, Pete, but it's like everybody's got 99 problems, but when you don't have your health, you have one problem, right? True. And so all the all the chaos in the world could immediately come to a halt if something like this happens, and it's a little scary, and and we'll see. Hopefully, you're right, and that it's very controlled, and in a unpopulated area of Russia.
Pete Mento 4:50
Do you have any idea how happy I'd be to be in lockdown in the French Quarter of New Orleans for the next year? That would be the best. That would be the best. I'd be so happy.
Doug Draper 5:00
Yeah, you know, in Colorado, whenever during the pandemic, when they announced that all weed stores and liquor stores were closed, people lost their minds, and I think that that happened for a total of like 18 hours. So, yeah, that would be the ideal place to go because I don't think they would turn off any of those devices,
Pete Mento 5:23
then they they they said they were essential. After that, I've got to believe. I mean, it is Colorado.
Doug Draper 5:29
Yeah, yeah, yeah. Cool. All right. Well, my yep, my first one is related to China, and I would think that, gosh, at least one topic every week is China-related. But the one thing I wanted to call out is I think they are quietly becoming a monster trading partner with Persian Gulf, specifically Saudi Arabia and the UAE, kind of the top dogs in that region. And it's not just about them buying oil. It's about them dropping investments in AI data centers, robo taxis of all things, and light manufacturing. Lenovo, the computer laptop computer company, is starting to set up operations over there, And even China, I believe this is correct, Pete. China reached out to Iran and asked them to limit the Houthi attacks in the region, so they could maintain some flow of oil. And the interesting thing that I thought on that one, Pete, is that type of phone call usually comes from America, right? And so I think there's some additional influence there. Additionally, Saudi Arabia and I don't understand all the nuances of all this, but they just announced a $3 per barrel cut on the November. I'm looking at this November selling prices to Asian buyers, right? And they raised their prices. They raised the price of oil they're selling into the northeast part or northwest part of Europe by $2. So they lowered the oil that they're selling to Asia by $3 a barrel. They increased Northwest Europe by $2, and they left the U.S. flat. Right, so this comes down to me saying that people are working an America Plus strategy. You and I have talked about this in the past with the tariffs out of China that it's a China Plus strategy related to sourcing and manufacturing, and I think other countries are now coming to the point where we need America Plus strategy with our trading partners, and it should be interesting. And don't forget the UAE bailed out of OPEC earlier this year. I think it was May, April, or May of this year. So that could be a wild card that we could see coming up, but anyway, caught my attention. Wanted to bring it to the show. I don't know what's your take on all that.
Pete Mento 8:07
Very much is. There's clearly a new relationship dawning between China and the Middle East that has to do about energy. They're beginning to see the utility and buying from them rather than Russia, and the complications that come with trade from the rest of the world because of it. This idea of a discount just for Asia, I guess, is it's not novel. They've done this before for other regions, but such a deep discount. $3 is a lot of money. That certainly should be getting our attention. But it shows that China is looking at a long-term problem, and that Saudi Arabia is too. I think that this is the type of admittance by both countries that we're seeing in the streets and foreign moves, it's not going to get fixed anytime soon. I think this is going to be a much longer slog than anyone realized when this whole thing kicked off.
Doug Draper 8:50
Yep, valid point. Well, I wanted to thank Cap Logistics for hosting this show every single week, and they hosted me at the event this morning. That's why I'm down here in Denver, Colorado. So I want to thank Cap Logistics for all they do every single week. And that brings us to halftime. So we can talk about whatever we want. Pete, I'm sure you have a good one today.
Pete Mento 9:17
Yeah, I generally have something that's driving me crazy. So this week has to do with the holidays. We talk a lot about holidays. I just want to make it clear for all of our listeners that Halloween is at the end of this month. There is no other holiday to be preparing for until that time. After that holiday, there is another very important holiday called Thanksgiving. There is no other holiday to prepare for until that time. Christmas starts the day after Thanksgiving. I don't want to see your Christmas tree up in October. I'm sick and tired of going to places and seeing crap up in August for Christmas. It just drives me nuts, Doug. It's like the the desire for us to have things in front of us to consume is so important to the glory of our company, and I understand that. I get it. I get it. But for God. Sakes, can we just have one holiday at a time? It makes me nuts, and I don't know why. It's a completely irrational way to feel. What do I care? Honestly, I don't know. It just makes me crazy when I take my daughter into Hobby Lobby or something, and I'm just surrounded by Santa Clauses in August. I just, I just feel like that's wrong, and it makes me nuts. Who's buying this crap, Doug? Who's buying it? Who is preparing this early for the holidays? I don't know. I think I have a life vastly different to mine.
Doug Draper 10:29
Yeah, I like the mindset of one holiday at a time. That's that's a good one. So Pete, being down here in Denver, there was an event this past Saturday called the Taco Bell 50K, right? 50K is, yeah, 31 miles, all right. And this event started in Denver. It's gone on to some other cities, but basically, here's the rules to the Taco Bell 50k. Number one, you have to stop by 10 Taco Bells during your run. Number two, you have to consume Taco Bell food in nine of the 10 Taco Bells that you visit. Number three, you're required to eat a Crunchwrap Supreme within the first four Taco Bells that you visit, and you're required to eat a Burrito Supreme in the last six that you that you deliver. Drinks don't count. However, there is a Baja Blast challenge within the race that if you can consume two liters of Baja Blast, you get a little extra kicker at the end. If you throw up at any time during the race, you're disqualified. There were 700 people that signed up for this race, and 60% of them finish. So, what do you think of that? And how crazy is it that people would even try to do this event? I
Pete Mento 12:13
am all at the same time disgusted and amazed, Doug. Like, I think it's incredible the the strength of human will to be able to eat that while running, and people that didn't throw up throughout. I mean that that that's impressive. At the same time, I'm revolted at the concept. I mean, hey, Taco Bell's fabulous. Don't that's not the problem here. Just the idea of consuming that much and running that much. What type of a devious mind came up with this. I mean, there's got to be somebody in marketing who's like, you know, what we'll do? We'll get people to run really, really far and eat our food along the way. That sounds great. What happens if they get sick? Oh, they're out. No, no, no. You got to be a tough guy. You got to muscle through it. You got to gut through it. You got to get there. It's just, it's just the way it is, man. You know. And then there are people who are like, you know, we should do this. Like, how did you train? Did you did you start off by like running 10 miles and then stopping at four Taco Bells? And did you do it every day for six months to get ready for this? Like, so many questions, Doug. Is there a video we can watch of people prepping? There must be somewhere. And I'd like to meet the person who won. I bet they weigh like a bucko five, probably like a lady. We're a bucko five and just got it, gutted through all of it. I'd love to see who the winner was.
Doug Draper 13:29
Yeah, yeah. Well, I'm sure there's videos to be had out there, but anyway, I heard that on my drive down yesterday as well. So anyway, that's halftime. Brought to us by Cap Logistics. Namaste, my brothers. Thanks for making it happen, Pete. What's your second topic for today?
Pete Mento 13:48
This second topic is is rage bait for Doug. That's all it is. It's rage bait. It's rage bait. So drones are now an important part of transportation. Sorry, buddy. It's happening. It's happening in ways that that we knew were going to happen. Like there's an excellent video that DSV put out today of them delivering critical just-in-time parts to an offshore oil platform somewhere in the North Sea. It's really cool video. So if you have a chance to see it, I think it's on their LinkedIn page. It it shows from takeoff to delivery, and it was a very long flight. They do a speed speed laps so they can show you the whole the whole flight. But it went incredibly well. You now have companies like Walmart that are delivering same day by drones. Ah, how you like that? And then now you have real cargo. You have sizable amounts of cargo, mostly military that's being delivered by drones. Military logistics is always a forward bellwether of what will happen with the rest of the industry, Doug. You're not going to like this, buddy. But electric drones, drones that run on batteries, are going to slowly start replacing deliveries via truck. I'm telling you, it's going to happen. I hope we're both still alive to watch it. But this isn't going to be a long-term thing, buddy. In the next couple of years, even you, even you, Doug Draper, are going to have something delivered to me via drone, even if it means I have to buy it and have it delivered to you myself.
Doug Draper 15:13
Yes, yeah. I don't know. Did you see the drone footage where an Amazon package was dropped on a dog, and that dog had to go to the to the vet, right? So those are the things that catch my attention, and there, you know, catastrophes like wildfires or getting supplies in emergencies. I'm coming around on that. I see the value. I think it's good, but delivering your Big Mac and dropping packages on animals is not something that I want to be privy to. So I probably won't be ordering anything that's delivered by a drone. Plus, I live in the middle of nowhere, so I don't think drones are coming to my area Anytime soon,
Pete Mento 16:02
you live in the middle of nowhere. That's a perfect place for drone deliveries. It's a straight shot from Denver to you in a straight line, rather than going over mountains. And yes, Doug, I have heard that people's dogs have been hurt. But how many times a year is a human being killed by a delivery truck? Right? How many times is a major thoroughfare destroyed for cars to drive through because a truck exploded or caught fire or took out a railing on a bridge, I think we see something happening here, buddy, and it warms my heart. It warms my little tiny black heart to hear that you're becoming a drone truther.
Doug Draper 16:37
It makes me very happy, Doug. Not 100% believer quite yet, but we'll do what we can do. So
Pete Mento 16:45
I'll take my W's. All right, my friend.
Doug Draper 16:47
Yep, yep, yep, yep. So, well, hey, I had a different topic that was queued up, and then there was an announcement yesterday that I said I have to pivot, and that is C. H. Robinson is going to be acquiring RXO sometime in the first half of 2027 for around $5 billion. It's going to turn CH Robinson, from what I read in the article, to a 25 billion dollar juggernaut. So I'm going to cover this in four things. One, why did this happen? In my opinion, scale and density, like any other large acquisition, and apparently RXO does quite a bit of final mile delivery, so CH Robinson will beef up their capacities in that fashion. The other pieces, they say it's going to be a $300 million annual savings through synergies, the two companies. That pretty much means HR and accounting people are getting fired, right? Maybe some sales people are going to get squeezed, unfortunately. And I do believe that CH Robinson has done a pretty good job on integrating AI into their platforms, so I think that we're going to see a lot of that. What does that mean for big brokers? I think it means go big or get squeezed out. I think this is not the first large acquisition we're going to see, so 2027 could be interesting for the small brokers. Pete niches make riches, so if you're a small broker, you better find a sweet spot in something that's very niche or niche to keep the relationships going and being able to pivot and provide you know real heavy customer service focused shipments, and then as far as customers go, this is my last point: more capabilities, better pricing. Yes, yes, less choice. Yes, it's kind of the same thing is going on with the rail and and the rail merger that's been talking about, but my last comment on this, Pete, is if there's a $300 million savings, who gets that money? Is that shareholders, or is it going to go back to the customers? And I would think it's primarily going to be shareholders. $299 million will go to shareholders, and the 1 million will be evenly distributed between the 10s of 1000s of customers that C.H. Robinson has.
Pete Mento 19:28
I want to believe that decreased operating costs will find a way to make them have lower prices, which means that they'll be more likely to capture business. So customers will share in that. But I mean, businesses do what they do for shareholder value. Let's not joke with ourselves, but shareholder value means growing business. It means continuing to grow, continuing to find new money. So I think it'd be a combination of both. I don't think it's going to be 1% I think I think it'll be more. I'm not quite that cynical, but you know, CH Robinson has been very proud in the press of their adoption of artificial intelligence. They've been talking about it constantly. Their CEO-it's almost like a like a speech impediment. You can't go three sentences without saying AI. And hey, good for them. You know, whenever you have a business of scale, which C. H. Robinson certainly is, that has relatively low margins, which unfortunately truck brokerage is becoming, and it is one of repetitive business, which a lot of it is, it makes sense to automate it. So if they're able to do that realistically and do it in a way that's not going to burn down the business through unsafe practices, I think this is an excellent case study for what the rest of them could end up looking like. I get it, Doug. I think I understand why they did it, and I'll be interested to see how it works out for them, how this all plays out. But being a strong, God, I don't want to say hater. Really don't like the machines, man. I really don't like them, and the fact that they're being so-it's appropriating so much of our business right now. I get it. I understand the business case. It just feels soulless to me, and in a business that is so full of soul and relationships, and maybe that piece of the business is starting to pass us by, Doug. Maybe it's not. Maybe it's not for guys like you and I anymore. Maybe it's time that we admitted once and for all that this is becoming bigger than us, and that we're dinosaurs, just like the guys that went out for six Scotch lunches at the strip club that were selling freight back in the 1960s. We don't work that way. We never have, but this might be the new reality of how business works in transportation.
Doug Draper 21:27
Yeah, yeah, I I hear you there, my friend. Yeah, my my uncle was named Don Draper, and he had the same mentality in his advertising culture. Advertising business,
Pete Mento 21:42
yeah.
Doug Draper 21:43
In the ad business,
Pete Mento 21:45
yeah, yeah. Well, that's going to do it for this week for us at Global Trade. This week, we want to thank everyone back at Cap Logistics for their unwavering support of the show. We want to thank all of you that have been with us from day one, back when Doug and I were talking about COVID, and we thought we would happen there. For all of you that share the show. Tell people to watch it. We do appreciate it. And as we say every week, if it's happening in Global Trade, we'll be back to talk about it on Global Trade this week. Be good, buddy.
Doug Draper 22:11
All right. Travel safe, my friend.