Global Trade This Week – Episode 214
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Unknown Speaker 0:00
Brugh, you're watching global trade this week with Pete mento and Doug Draper,
Doug Draper 0:07
all right. Hey everybody. It's time for another edition of global trade this week, coming to you every single week. And my name is Doug Draper, I'm one of the CO hosts. I'm rolling with you out in the great city of Fresno, California this week. And my co host and partner in crime is literally on the other end of the United States. Pete mento, what's going on? Buddy? Hey, buddy,
Pete Mento 0:31
I'm I'm in Spartanburg, South Carolina right now. It's like that. It's like Twin Cities, right? Greenville, Spartanburg. I'm in Spartanburg right now. Okay, so Germany last week, good show. Boys. Norway. Next week I'll be in Oslo, but I will be able to do the show.
Doug Draper 0:51
Good, very good. Well, let's just jump into it, right? I know we got to give the audience what they want, which is global trade. So why don't you kick us off with your first topic.
Pete Mento 1:02
Yeah, man. So this is something that I've been spending way too much of my personal time looking into Doug. So I think I've mentioned this before. I live in Northern Virginia, and in Northern Virginia, we have just an incredible amount of these giant data farms, you know, these huge data centers, and they take up hundreds of acres where I live. It's incredible. And they're building more, and this infrastructure is being built for the great AI boom that we're all waiting for. So, you know, I start going down this, this rabbit hole. And First things first, the power bills where I live have gone up almost 80% over the course of the past two years, 80% because there's only so much energy that can come to this part of the state. Most of it's being taken up by the data centers, and that's why you're seeing this rush by all these big AI companies to, you know, Co Op nuclear power plants and do whatever they can to get their own electricity. But we're only at the infancy of this thing, like we're at the very beginning. The other thing I've been looking at is its place in the total marketplace. So about 40% 40% of the growth in stocks is because of AI 40% and it's a huge bubble. The thing is, is we haven't really, we've proven the concept. We haven't made it work yet, but so we have this huge bubble, this, this, this financial bubble associated with the technology that's not even really fully implemented, which, you know, people are into the ground floor. It's causing a incredible shock to the cost of electricity all over the country. And while that's going on, there's a push towards, you know, greener, more, more more veering environmental issues, and it's doing everything it can to try to maintain that. But you've also got stories of people like in Memphis, who are saying that their wells are running dry, there's just not enough water that the air quality is going down. So the there's this quintessential, you know, human issue we've got right now of where is this growth really pushing us and what's going to happen with it? I don't think that we fully understand the impact it's going to have on the overall economy. And the last thing I'll point out is that a recent study that came out from the government has told us that this will probably eliminate in the next 20 years, 100 million jobs, 100 million jobs. And you know, when the car came, we're all like, ah, you know, people got to take care of the cars. I got to build the cards. Great. So, yeah, you don't have to be taking care of horses anymore. They'll be, there'll be anything for it when the internet came, people gotta, they gotta figure out ways that no, 90% of this industry that might actually be conservative, maybe more than that, is based on the elimination of human jobs. And I don't think that we're really looking at it clearly. This all presupposes that it works, though,
Doug Draper 4:04
yeah, well, first of all, the power situation, right? I had read some articles that in and around those data centers, the power consumption is off the chart. And your comment, about 80% rate increase is a testament to that, right? And they are building data centers all over the place. And the magnificent if you look at the Magnificent Seven, and you look at where their gross trajectory is in the investment happening 100% of it, but I shouldn't say 100% the vast majority of it, with all of those big seven, is AI related, and AI focused, right? And a lot of it, to your point, is a little bit, little bit on hype, right? I mean, it's, we're going to lose 100 million jobs over the course of 30 years. Okay, like, that's a big number. It's a long distance. It's kind of scary, but I think it's still hard to figure out where are those coming from. I. What are those specific jobs? That's a huge number. 100 million you can say, oh, it's all clerical, it's all this, it's all that, right? It's still so new, and it moves so fast. It meaning artificial intelligence and their applications, it's hard to project that far out to say how this is going to impact us, and we're still trying to figure out how it impacts us, right? I was at, if you've heard of manifest, that trade show that goes on, big trade show, it's kind of one of those places that you kind of need to be there. Last year, I was having a conversation. I probably had this conversation multiple times. Somebody would talk to me, and they'd explain how, through AI, their company is integrating and doing this and doing that, and taking this data and spinning that out, and I would genuinely be listening as intently as I could to understand what their company did, and I still didn't really understand, like, dumb it down, so I'm a third grader and explain. You know, they're still passionate about what their company does. I'm not going to be a jerk about it, but, but there's so much ambiguity and all this application and what's going to happen and everything else. And this is, you know, sidebar from global trade, but all relevant numbers are staggering. They're shocking, they're scary. But to your point, Pete, we're still trying to figure out how this all comes together. But back to your original point is there's going to be more power and more power and more power needed. You know,
Pete Mento 6:25
time to start building new plants. Doug,
Doug Draper 6:28
Oh, I love it. Yes. I mean, that's a whole nother conversation, and we have spoken about this on this show months ago, right? And I think it's pretty creative how you know those big seven are saying we'll just do our own power generation. I hope it can move fast enough to make an impact, because at some point there's going to be all these data centers that are up and running that spent billions of dollars and switching the power, the location differently. That's out of my, you know, my level of expertise, but it, it is an evolving situation that everybody's speculating on
Pete Mento 7:04
for the foreseeable future. But anyway, bring us to your top bud.
Doug Draper 7:10
Alright, so I saw an article that popped up, and I was trying to find it when I was doing a little prep for the show, and I couldn't, was one of those deals like, that's an awesome article. I'm going to remember where I put this link so I could reference it, and I can't remember where it is, but the gist of it is that China's next economic frontier, in looking at this data, is Africa, right? And so I was that's basically what the article was about with, with the void of the United States in other parts of the world and and contracting back to United States and getting their paws out of different parts of the world, there is a void that needs to be filled, and China is doing a very good job of that, filling the void that is the continent of Africa, right? So I was just looking at the investment that they're doing there. I didn't realize this Pete, but there's a zero tariff agreement with 53 countries in Africa, and the statistics I read it was 98% of taxable products are, you know, part of that. So almost anything that's produced in, into or consumed by Africa is basically zero tariff. Automakers, they're coming in, and they're doing like CO manufacturing and also new plants in South Africa. So you got cars, and China has been very transparent about that's one of their growth markets, then you have railroads. There is $5 billion of investment in Keenan. That loan was changed from US dollars to the to the yen, Chinese. So they changed the way that the loan is manufactured by the currency that, in and of itself, is interesting to me. They're pulling away from from the US, dollar hydro plants in Nigeria. Mining is big in the Congo, and I think the other place was Malawi of all. I mean, talk about a third that is the definition of a third world country. And we're signing agreements for mining. So you got mining related to lithium and all the parts that you need to develop battery technology. You got car manufacturing going down there. So they are building and financing and managing infrastructure like nobody's business. And I don't think America is realizing the grass that they're going to have on the continent of Africa in the foreseeable future. I don't know what those implications are going to be long term, but it's something to take note of. And I don't think the average American, maybe not definitely doesn't know, and they may not care or understand, but in. It is from from our show and global trade. It was shocking to me to understand how much investment is going on with China into the continent of Africa.
Pete Mento 10:10
The numbers are staggering. So the amount of investment that's currently earmarked for the Belt and Road Initiative is over $1.3 trillion and the Chinese have already spent well in excess of over 500 million at this point. And, you know, there's get a group of people that are, I'm not gonna say conspiracy theorists, because that's not what they are, but folks that look at the geopolitical side of things and conflict, and one of the biggest conflicts that they they're concerned with, they got a whole like, you know, tiers of ones that are more likely versus ones that are more devastating. Is what happens in some of these Chinese countries. Well, places where China's made massive investments, if one of these African countries says, Yeah, we're we're not doing this, we're not doing this. We're taking your investment and we're going to own it. So that gives China the ability to send down private contractors to deal with the problem. And I think we know what I mean when I say deal with the problem, and then it allows China to have troops there. And you know what, protecting their investments, just like we did with the Suez Canal, like we do with the Panama Canal, like we've done all over the world. So it's a it's a situation that when you begin to put the dominoes all together, and they begin to topple, one on top of each other, it goes in a couple of directions. One, it's a destabilization of the world's economy, moving it more towards that, that sphere of Chinese influence. And second of all, it opens up all kinds of opportunity for terrible conflict, and China having to maintain what they've never done before, which is be a colonizing nation, which, in effect, is what they're doing. So this is a there are people who spend their whole lives looking at this academically from just one small, little niche of it. And you know, Doug, what you've done is you've, you've, you've scratched the surface of what will be the prevailing thing that we'll be talking about 100 years from now, China's investment in Africa and what, what was made of it?
Doug Draper 12:05
Yeah, yeah. Managing conflicts as a result of trade was something I had not thought about. But you know what? It puts more you know, it puts them in a stronger position to fill the void that's being left by our country as we contract all over the world, which is really
Pete Mento 12:23
scary. It is. It is scary. We'll be dead Doug. We'll be our grandkids. Thing to worry about, yeah,
Doug Draper 12:32
for sure. So good, good. All right, It is halftime. That's where Pete and I get to talk about whatever we want to and that's brought to you by CAP logistics. Can't thank those guys enough for putting us on the show every single week regardless of where we are in the world. My sphere of influence is California and Colorado, and you're a global entity. So I thank cap for making it happen regardless of where we are. I'll let it rip, man, I did that intro, so you tell me what's on your halftime? Yeah, I
Pete Mento 13:01
didn't have a chance to fill the guys in on halftime, but I'm going to be an almost entirely for the month of October, Halloween focused, spooky season focused off times for the next few weeks. So for this one, Doug, it's called Trick or treat. Trick or treat. Now, in my in my adult life, it's always been treats. I had one very unfortunate incident where I moved into my new home in Rockport, Massachusetts on Halloween night. Rockport, Massachusetts is one of the last places where kids really do get down to some mischief. So everything from shaving creams in the back of my moving truck, it was, it was a whole ordeal. It was a whole ordeal. But my question really to you is, were you always a treater, or were you a tricker? Because Doug, I was very much a tricker, so I very much enjoyed, probably more than I ever should have, pranking people on Halloween. I was the commander of the TP battalion. I would totally toilet paper someone's home, raw eggs throwing other kids. You know, in Texas, guys would have, they would have a brown paper sack from the grocery store they do their treating with, and we put, like, pumpkins on it, stuff. I would regularly sneak up behind them and put a bunch of ice in their bag, so as it melted, it broke on the bottom, and all their candy went everywhere. I was a terror on Halloween. So Doug, were you a tricker or a treater, or a little bit of both?
Doug Draper 14:35
I was probably more of a tricker, right? You get a bunch of high school kids in Wichita, Kansas, lots of mischief to be handled or to be had. Maybe not so much up in Massachusetts. But yeah, there were things I was thinking while you were talking. Do I want to mention this one story,
Pete Mento 14:54
the statute of limitations isn't quite over yet?
Doug Draper 14:57
I was like, I don't think so. I mean the. It like they were bad, they were bad and yeah, and at the time, it was like, that's awesome. That's what we did. And, you know, it was inappropriate and borderline unsafe. So I would say more trick than treat. Now, you know, you got kids, and you're out there and walking around with them, definitely more treat now, but back in the day, baby, it was all about the trick.
Pete Mento 15:24
Yeah, I was a pumpkin smashing scumbag when I was a kid. And I don't know why I was so angry about crap, but it just it made me giggle to do awful things on Halloween night. Yeah, so what you got for everybody?
Doug Draper 15:39
All right? Well, I'm taking a different spin. Pete, I wanted to and I thought of you. So a couple of weeks ago, I went and visited my daughter in Portland. Maine, Portland. Maine, amazing. I had never been there before my life. I know you've been there a lot. I was blown away by how amazing that town was. Now it was like 75 and sunny. It hadn't gotten cold. It was an aberration of what the weather should have been. But it was amazing, like I went there. I was, like, transported to a different place I'd never been. Had some great times with my daughter and and we did a boat ride on Sunday night. So we did a tour of all the islands. And I just was very reflective in that moment. Pete, so reflective as i i had my friend chat, GPT help us out with a little poem that helps everybody understand that you got to stop for a minute understand what's important and really appreciate things in life. So Pete, is it okay if I read this poem real quick?
Pete Mento 16:43
Don I don't think I've ever had more anticipation for a moment on global trade this week, and all the years we've done it. Then you reading to me a poem generated by artificial intelligence?
Doug Draper 16:54
Yeah. Thank you very much. So I'm going to be looking down and I'm going to be reading this thing, but, and it's not that long, I'll be quick about right? So anyway, There once was a fellow named gibberty Joe who hurried and worried wherever he'd go. He fretted and fumed. He dashed to and fro till a wise little turtle said, Joe, take it slow. Turn off your buzz, blinking, bleeping old phone. Stop scrolling and tapping. Just be on your own. Be Where Your boots are lost in the air the moment you're in is the treasure that's there. Look up in the sky, let the wind brush your face. Notice small wonders in each little space, the flowers, the birds, the laughter You hear life is now not the worry you fear. So anyway, there's another couple stanzas, but I wanted to just stop right there. Right there. Anyway, it sounds kind of goofy, but I'll tell you what Portland kind of made me appreciate family, friends, and when you saw the beauty of that place on the boat, looking back towards the coast and seeing the things and living those experiences, I am a believer in Maine, and it really helped me calm down. And as my daughter says, Be Where Your boots are, and be present in the moments that you have like that.
Pete Mento 18:07
Are you going to retire to Maine with me now? Doug, are you? Are you buying in?
Doug Draper 18:15
I don't know yet. After all that hype, I don't know yet, but the guy that was on the boat, he was, he's like, this is the North Atlantic. It gets cold as hell around here, you know? And whatever the voice was so, and he was basically saying, like, hey, tourists, enjoy it while you can, because this place is cold as shit, so get out, right?
Pete Mento 18:37
I think it's no different than where you live now, as far as cold goes, the big difference is they don't get nearly as much snow as you get. You'd have to get away from the coast. Maine is about as close to heaven. And I hated it when I was there. Couldn't stand it, and I look for every opportunity to go back. Really is a special place. But yeah, Doug, I don't know it's very sensitive side of you, the the AI poet that is Doug Draper, you're gonna show up with like a gente scarf next time, you know, maybe, maybe a cup of cappuccino, like, you'll be like the guy and so, I married an ax murderer. You know, Michael Myers, when he was Myers, yes, yeah. Woman, woman, I wonder if Keenan is seen. So, I married an ax murderer. This could be one of those things where we'll decide if he's too young to remember that movie. Yeah, yeah,
Doug Draper 19:26
for sure. So good. All right, I think what who goes next? Me, yeah.
Pete Mento 19:32
So shocking numbers coming out of both the World Trade Organization and a lot of other organizations about where they see the growth of global trade and when, before the tariff started, we were expecting, you know, three and a half percent total global trade growth, which is about where it's consistently been for some time now that the economy is really so integrated, well, that number has dropped dramatically to half a percent point five, half a percent, and they're saying that there are other external. Forces that could make that number even worse. So we could be looking at, you know, close to no growth globally, not just country to country, but globally, that there won't be growth when you look at every nation that's currently trading internationally, that is terrifying, the reasons they gave for that, of course, the main driver was the tariffs and America's insular attitude towards protectionism, and fear that other nations will see this as an opportunity to do the same, that other countries might decide to start implementing tariffs of their own in order to protect local industry, and, you know, raise their own money through doing this. So Doug, you know, global trade has been my, it's our it's our careers 30 plus years. You know, this is what we have done our whole career, is to enjoy the greased wheels of the rails of international trade and to help people do whatever they can to get on that train and, you know, find the connections that they need to get where it needs to be and to make it happen. But at the twilight of our careers, my friend, is it possible that we've written out the whole thing, that this idea of a truly unified world looking for ways to ship things from place to place is coming to an abrupt end? It's possible. Doug, what do you think?
Doug Draper 21:14
I don't know, but that statement between my poem and that that we just need, we just need to haul our asses to Maine and smoke cigars on the porch. We might need
Pete Mento 21:24
to go chop some wood, but, yeah, haul some watchers out of the bay. That's That's heavy.
Doug Draper 21:32
I don't know predictions, and you and I have done predict a prediction show before a couple of times, predictions always seem to be negative, right? They're always like doom and gloom, and you better be prepared for this. And even if you look at some of the domestic predictions on logistics and supply chain, they're all about negative trends or things we're in we're in deep trouble. So I'm going to take a different approach and say that, you know, we kind of what's my point on this one? Pete it I'm I don't want to stop believing, like Journey says, right, don't stop believing. I think there's some positive that come out of it. I'm going to, I'm going to channel, channel my inner Dr Seuss on my poem, but it's, yeah, I think there's too much negative going on. And the one piece that I would kind of disagree with you, to some degree, is that there is a void that is happening all over the world because of our retraction into the global economy. There's a lot of smart people that don't live in the United States, and there's a lot of smart leaders out there, of countries that are going to take advantage of that void. We just don't know exactly how that's going to happen. There's plenty of people that you know base their careers on it, but things move so gosh darn fast right now, but the void will be filled. And if there's enough players to our point about Africa, I think that could really swing the pendulum a little bit on that. So I think that people are not going to replicate countries are not going to replicate what we're doing. I think they're going to take advantage of take advantage of the voids and fill them and put us in a in a weaker position, not related to global trade, which could relate to the last thing that you said, is it, you know, is it kind of doom and gloom?
Unknown Speaker 23:14
But anyway,
Doug Draper 23:16
we'll find out. We'll find out from the porch smoking cigars in Maine,
Pete Mento 23:21
damn right, buddy. Go to Brugh harbor next time you love it even more
Doug Draper 23:25
than Portland. Yeah, actually, I that's where I honeymooned. Was Bar Harbor, okay, yeah, some bet they weren't called Airbnbs back then they were called bed and breakfasts, and that's where we stayed. I can't remember exactly where, but yes, bahaba, good place.
Pete Mento 23:40
You'll be you'll be welcome in my guest house anytime.
Doug Draper 23:43
Doug, thank you, yeah, as long as it's not an outhouse and a true guest house, I think I'm good. No, you'll be good. All right, my final topic beats a little more light, if you will, and it speaks to Amazon and their logistics network and how they are truly becoming a logistics provider, not a sellers on a marketplace and selling commodities that they happen to use some of their own services to make the deliveries, but the gig driver concept that they've created internally for themselves, delivering their own stuff. Right? It's gotten to the point where they're now pitching that to the businesses and companies. Now I know that it's been happening a little bit, but you have FedEx, you got ups, and then you have all these super regional players and these couriers that are out there and and for the larger volume clients, they're kind of doing a mix and match of all three, and utilizing AI technology to figure out who's the best carrier to go up to Brugh harbor Maine. But there's been a couple of press releases with a few companies. Bark Box, which is a subscription based, obviously, for pets that they have gone full on delivery with Amazon and the gig drivers that they have. So they've abandoned all of those things, put all their eggs in one baskets, and Amazon's making the delivery. There's another company called Quick quick co Bark Box does. Bark Box does about 12 million shipments a year.
Unknown Speaker 25:12
Quick code is about
Doug Draper 25:16
3 million. So it's big time players in the marketplace. But Amazon, like anything else is gobbling that up. They've developed, they've tested and developed the network by servicing their own business model, and now they're actively selling it. And I know some people listening may be like, yeah, they've been doing that for a while, but I think we're going to see it more and more, and I think you're going to see a lot of press releases where big companies are going to abandon the big two and flip it all the way over to Amazon as their sole delivery solution.
Pete Mento 25:47
Yeah, you know, Doug history repeats itself. Time is a flat circle. And there was a time in this country when oil and steel and railroads were basically owned by the same people, you know, they wanted to move their their oil from place to place, so they built railroads, and they owned that infrastructure until such a time as the government got involved and said, you can't have control of so much the world. Now, when it comes to small parcel carriers, you know, we like to think there aren't that many, but there are, there are, and there's also companies that use them as their their providers for even more intricate service. The company I work for as an example, we have express services, and we use a number of different types of couriers. We solve them in order to, you know, congregate all this cargo together and then use our size to try to get the best price possible that they can't get for themselves. We're not the only one other companies that do that. And moreover, you have airlines right now that that will probably at some point openly compete for cargo with Amazon. And at what point have they become so big? Because time is a flat circle done. At what point have they become so big that the government says you control too damn much. And I think as much as I welcome our new, you know, prime overlords, I'm all for it. Man, I love the simplicity of my life right now with Amazon, at what point does the government say this has become too much control for one company? And I think that when you start deciding you're going to own the rails. You're not just going to be a big player in them, you're going to own the rails. I think they're going to start to get a lot of attention that they weren't quite betting for PAL and I think that this might be when they start problems for themselves and start questions for themselves, that American people and people around the world are going to start asking questions about how much
Doug Draper 27:39
is too much valid. I love, and we've used this in the past, owning the rails, right? We saw that a little bit during covid, yeah, during covid When? And it's the same people that we're talking about, right? Amazon, Walmart, where they would just charter their own vessels and say, We don't have time to mess with anybody else. We need to control our destiny and own the rails. So I think that is the key statement that you made in response to that to my topic. But yeah, I don't know when that is. Is it next month, next year, next decade? I don't know, but it's going to come to the table as a discussion point at some time.
Pete Mento 28:17
And to be clear, Doug, like, there's a part of me that loves it. There's a part of me that's like, Oh, we're tired of dealing you. We'll just run our own ships and planes. We'll just do our own customs. And we're so big that even if we fumble a little bit, we'll probably still end up doing it cheaper and better than you. But you know, whatever good luck with everything, we're just going to handle it ourselves. There's a part of me that really likes that, that attitude, but there's also the practical side of me that knows that there is a runway for that, and at some point it does run out. Yeah, good, all right. Well, that's going to do it for Doug and I and Keenan back there with his levers and his juice boxes for global trade this week, we want to thank all of you, as always, for listening and watching. We'll be back next week. It'll be another international show. I'll be in Norway, so at least my beard will make it seem like I fit in. But we thank all of you for watching and subscribing and telling your friends and remember if it's happening in global trade, talking about it right here on global trade
Doug Draper 29:18
this week. Excellent. All right. You Brugh.
Transcribed by https://otter.ai