Global Trade This Week – Episode 233
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Keenan Brugh 0:00
Doug, you're watching global trade this week with Pete mento and Doug Draper, hello
Doug Draper 0:06
and welcome to another edition of global trade this week. We come to you every single week to talk global trade. My name is Doug Draper, I am only one of the hosts of the show. The hostess with the most is on the other end of the coast. All of that rhymes. My friend is Mr. Pete mento. How's it going?
Pete Mento 0:25
It's good when you say, when you say, I am Doug Draper, I'm kind of expecting, you know, hey, I'm Odora, whenever you say that. So it's a lot of fun for me, Doug, I'm okay. I'm on my couch right now, everybody, because I have re injured my high ankle sprain, much like you know, because I am a world class athlete, much like a cornerback in the NFL, I've reinjured it, so I'm wearing my walking boot and keeping it elevated, and I do apologize for the
Doug Draper 0:55
angle that we have right now. Yeah. Well, tell me, how did you reinjure it? Running through the airport, working out,
Pete Mento 1:02
which should be enough to tell all of you, right, Stop, just stop. When you're past 50, just, just go ahead and start to slide into oblivion. You're probably better off, I
Doug Draper 1:12
don't know, man, once you get there. My son swim coach gave him some advice, and said the best way to stay in shape when you get older is to never get out of shape. And so just kind of
Pete Mento 1:23
sounds like some real bro science. I bet he's that. He's the kind of guy that you know has a lot of form fitting Under Armor shirts and just called bit, bit, bit got my gum bit like, I'm sure this guy's a real fun time. Yeah, Michelob. Michelob Ultra at the local bar during football games. Get him on the phone with me. I want to chat with him about his quality life.
Doug Draper 1:45
I think you're describing your people back in Boston.
Pete Mento 1:49
No, my people back in Boston drink Guinness with James and backs and we'll punch you in the mouth for saying something about a Boston sports team. These are not my people, yeah.
Doug Draper 1:58
All right. Cool. Well, our people. Pete, this is a transition. Are the ones that listen to the show and are always interested to see what we have to say about global trade. So let's get this thing started. Your topic one, yeah, man.
Pete Mento 2:09
Topic One, I got back from TPM last week, which was a wonderful success. So and then I started looking at my calendar. I have all of these things to go to last week I couldn't go to icpa same week as TPM, got NCB, FFA you know, it's all these giant conferences. And for you and I, because we're in client facing roles, we go to a lot of them, you know, manifest now has become massive. We talked about that the icpa, aaei, right? They're just, they're huge. Our industry has this culture of conferences where they seem to be getting longer every year. There are people at TPM that showed up the Wednesday before and had meetings leading up. Everyone was there early on the weekend for golf tournaments and other networking stuff. So really, you know, I'm I'm not sure I'm going to keep going to all TPM will never miss because it is so impactful and so important. And when I can't get to icpa, I will, but so many of these really are boondoggles. You know, I don't know what's happening there. If you are selling, are there really more people buying than sitting there and presenting their case? I don't know. Doug, like I'm I'm starting to question the conference culture, around logistics.
Doug Draper 3:24
It's funny, you bring that up because I was having conversations with folks after manifest, and obviously the social media, and you saw it all on LinkedIn. You know, you get a picture, and I've done this in the past. I will admit you do a picture, I will be attending. Come and see me, or click here for a meeting. And you go to these things, and the old school, you could walk the floor, have okay conversations with people that are at booths and in the hallways and everything else in it, and you'd walk away and you're like, I'm I was okay. Now, especially with manifest, and maybe TPM, I've not been to that show, is you have to pay to get access right? And you got to have a big company. It seems like, Hey, I talked to you for a few minutes on the phone, but on the floor. But if you really want to have a meaningful conversation with me, my company is hosting a private dinner in the back room of some upscale restaurant where you're going to drop 15 grand and do an invite only type of thing. And I went to a couple of those a few, a few years ago at manifest. But I guess for a smaller type of company like myself, an inland star, to pay to answer your question, you have to have exclusivity in these in these trade shows now, and you have to pay to create that exclusivity to get access to the people that you want. The concept of, hey, I'm just going to walk around and bump into a C level person at a company that I want to talk to. That's not as prevalent now as it was back in the day. And then the social media that surrounds the shows to show to show that you were there, or were at the concert that was put on, or the breakfast, or whatever. So it's, it's a production, and you got to have your act together if you want to have a meaningful 72 hours at a show like that.
Pete Mento 5:08
Yeah, man, so much of I bet there were probably as many people that were not laminate holding, attendees that were outside of TPM as there were in it, because you've got a few key people that you want inside the show. You want to be there for everything. And then you have all the folks that are selling at night, that are at all these, I mean, the parties. It was one night I went to six different spots, wow, right? We're there for 2030, minutes. And then pop, pop, pop, go to all of them. The social scene of it is really big. And if you're selling, it's important, because there are decision makers in those rooms. But, man, you come back from TPM exhausted. Icpa, same thing. I come back exhausted. But I don't know if the I think we're gonna have to be more selective about where we go. You know, it's hard to knowing all the bcos that are at TPM to say no to that. But it's not cheap. It's not a cheap endeavor to go to all these things. I'm lucky I get asked to speak at them, so I usually get a free ticket, but if I didn't, I don't think I go to any of them. Well, if you ever get any friends Doug, I don't like any. I was about to
Doug Draper 6:13
say, if you ever get invited to a conference to speak and they don't give you a ticket, then I would think that's a conference you don't want to speak at. Probably not, or
Pete Mento 6:22
they asked me to pay, like the guys at Rio, you know, Pete, if you stroke us a check for 10 grand, you get a speaking spot. I charge $30,000 for a speech. So you want to give me 20 grand and I'll show up.
Doug Draper 6:33
Yeah, love it. Love it. All right, hey, I'm going to jump in. We're going to talk a little shop about trying to think of a funny, funny term, so let's just say the straight that powers the world right? Everybody's been seeing about the Strait of Hormuz and how it's at a complete stop, and obviously all the news programs you see is, what's that mean at the gas pump, and what's that mean for diesel and everything else. But I wanted folks to understand that petrochemicals come from oil as well. And if you take a step back and really understand what does that mean, right? It means medical equipment, food packaging, clothing, right? Fibers like nylon and polyester have base ingredients around petrochemicals, tires, lubricants, electronic components. I mean, my whole point is that it affects a lot more than the gas pump. That's that's flashy, and that makes a good story on the nightly news. But these are the things that I I believe, if this continues right, it's a blip, and we can absorb some of it. But if this thing continues, and we're talking about blockage of the strait for another in another week or two weeks, it's going to start impacting the stuff that you and I buy that has nothing to do with putting gas in your pump, right? The other piece of it is fertilizers come from that region, and they need energy to process food, and a lot of packaging clam shells and things that you see with your berries in it, right that you'd buy at the grocery store. So the oil shock impacts more than the gas pump, and I think that we're going to see those dominoes start to hit us as far as the consumer goes in the near term, right? It doesn't happen all at once, but you're going to see the oil spikes, then the shipping fuel, then the freight cost and the manufacturing inputs, and then consumer prices are going to follow, right? So it's interesting, and I heard somebody actually Pete, if you are you familiar with that show called land man? Love it, yeah. So I saw something on online where there was a quote from Billy Bob Thornton about the price of a barrel of oil and what happens if it goes too high or too low, and the sweet spot in in that clip said it's $78 a barrel. So that's just enough. It's not too much. And so he said that's when things run efficiently and the world is in harmony when it's at $78 a barrel. So we'll see how that goes. Oil touches and petrochemicals touch a lot more than just moving cars and trucks and planes. You
Pete Mento 9:27
brought up the whole point about fibers, right? We take for granted all the plastic in our lives, and it's everywhere, and that is an that's an outlier from petroleum and the supply chain in of itself, from production all the way to delivery, relies on on fossil fuels, and the streets of Hormuz being closed, and the inability for that causes a shock to the rest of the system. Yes, America has energy, absolutely. So does Russia, right, and we're able to move it around. But for the rest of the world, the inputs that end up getting into things, they just simply they're not going to have access to what they need. You. Let's just be fair about this. The longer this goes on, Doug, the bigger problem it's going to be for every increase in $10 in oil price per barrel, you get around 10 cents per gallon on on gasoline in about four to six weeks after that through the petroleum refinement process. So it's going to be a little while, but we're going to definitely feel
Doug Draper 10:18
that shock. Yeah, that's interesting. All right. Well, two topics down in a very short order, brings us to halftime. It's brought to us by friends at CAP logistics. Keenan and his team put this thing on every single week, and we greatly appreciate that. So check them out at cap logistics.com. All right. Pete, what's your halftime for this week?
Pete Mento 10:37
So, scientists in Australia,
Doug Draper 10:40
I love the intro,
Pete Mento 10:43
200,000 neurons from the brain, and built a computer with them, and then they taught it how to play the first shooter game called Doom, and it's good at it. So this is important for a bunch of reasons. One, replacing silicone chips as the means of a processor and using human material. It's renewable, right? It's just as efficient. It uses a lot less energy, so it uses about a 10th of the energy of of what we're using now. So this could be a way to overcome it. But second of all, the philosophical discussions, have we created consciousness? Have we created a brain? And therefore, do we know what it's feeling, what it's doing? I don't know. Is this, like, the the, you know, Johnny got its gun, the movie that the Metallica, one song, you know, is based off of and darkness, oh, I can't see, like we're just, we've created this consciousness. It's that thinks it's in a castle somewhere in Germany fighting Nazis. What does it mean? But it's that next frontier, I think, which is most important for what computing is going to be. If it truly is as efficient as simple to do and as low drag on cost, we're going to start looking at processing being something that's done through an organic material, through human, you know, biological material. I think that's incredible. But I think the philosophical side of it is something you don't want to think about too much if you've been eating
Doug Draper 12:09
mushrooms for breakfast. Yeah, that's interesting. It's a pretty heavy halftime topic. Pete, I don't know how to digest that one. Straight away, organic matter. Organic matter leading the charge on processing power. That's interesting and definitely gives you pause. I'll have to learn more about that, that study that you referenced, the philosophical one to your point, that is a way longer and more in depth conversation than we have time for here on global trade. So I don't know it's, I not heard about that. It's very interesting. You got Buddy, all right? Well, you've, you've done this for me a couple of times in the last few weeks, and so the audience can kind of get to know Doug Draper. I'm going to flip the script and do a this or that questions to you. I just have 10 of them. We'll go quick, right? And so hopefully our audience will get a little insight into the world and life of Mr. Pete mento. So, all right, you ready? All right, private jet with Taylor Swift, or a VIP box at the Super Bowl with Tom Brady, easy, you control the music on a road trip. Pete, you're sitting shotgun. Are you doing? Bruce Springsteen, or Drake? Was that? Drake? Definitely Drake. Oh, wow. Okay, that is the boss. Doesn't do it for me. Got it all right? You're on a streaming binge this over this weekend, right? It's heavy snow, and you got to stay inside. Are you binging the office or succession office? Again? I would have thought the other interesting, all right, free, luxury for life. Pete, you can get one of these things for the rest of your life, first class flights everywhere, or front row concert tickets to any venue, any show you want to go to.
Pete Mento 14:09
Your tickets. I already get first class everywhere.
Doug Draper 14:12
Okay, all right. You're stuck in a 10 hour flight, another, another flight one. Here you're watching a movie. You can only watch one movie. Are you going to watch Top Gun, Maverick on repeat, or the entire Godfather trilogy? Father? That's kind of what I expected. My friend, vacation, private beach house or cabin in the mountains,
Pete Mento 14:38
cabin in the mountains. Yep,
Doug Draper 14:41
would you rather be the smartest person in the room or the funniest person in the room?
Pete Mento 14:45
Funniest? Yeah, lucky for me, Doug, I'm normally both.
Doug Draper 14:49
You know, I knew when the second I read that, Pete, I'm like, There's a third answer here that I think he's going to pop out dinner with Elon Musk or golf with Tiger Woods. Dinner.
Pete Mento 15:00
Golf sucks. It's a stupid waste of time, and people that create an entire personality around it, they should be beaten with a phone book. No, I would rather. I would rather go back to Mogadishu than have to go golfing for 10 minutes.
Doug Draper 15:16
Okay, at least you're passionate about your comments there. Geez. All right, jam session with Metallica, or in a or calling a game in the booth with Joe Buck.
Pete Mento 15:29
I would punch Joe Buck in the throat. This is hard so to have an opportunity to be in the same space as Joe Buck to tell him exactly what I think about him, that's really hard to turn down. But the musician in me is going to say jam session with Metallica.
Doug Draper 15:43
Okay, all right, here's the last one private movie screening with Tom Hanks or beers at a bar with Matthew McConaughey.
Pete Mento 15:51
McConaughey, are you kidding me? I have a lot of questions for Matthew,
Doug Draper 15:56
yeah, yeah, I would agree that was it. So hopefully our audience got some insight on your answers with this and that. Two of them were surprising to me. Pete, the other ones, I kind of could figure out
Pete Mento 16:09
I hate Joe Buck so much.
Doug Draper 16:11
Yeah, I don't know I like him. We'll leave it at that. I was halftime brought to us by CAP logistics. Cap logistics.com, check them out.
Pete Mento 16:20
All right, everybody, they're way too good to us. Check them out.
Doug Draper 16:24
Yep, yep, yep. All right. Second half, you lead it off. All right, bud.
Pete Mento 16:28
Quick court update. So last Saturday, customs got dragged into the principal's office and asked, Hey, can you guys take care of this for us and get this money back? And they said, no, no, we can't. It's too hard. It's too hard. We need 45 days to build the system, which is hysterical. Those guys couldn't build the platform. They couldn't write down what the system would be in 45 days. And then where's the money going to come from? It? The government's doing everything they can to slow this down and make it impossible. Here's what I want to know. When does Treasury get called in and they see you guys got the money? They're like, No, we don't have billions of dollars just sitting around. Why not? We just gave you the money. Where'd it go? You guys got a gambling problem? We don't know about what's going on here. Is your dog sick? I don't want someone to have Treasury say on the record, we will pay whatever we're asked to pay timely, and we're setting the money aside for it right now so that we don't spend on anything else and do anything stupid, but God, I'm telling you, they're getting called back in tomorrow. Customs is and they're going to be asked. So the past week, what have you accomplished? I couldn't get my homework done. I had chores. It's going to be the same thing all over again, until someone forces their feet to the fire. The White House will instruct DHS to instruct customs. Who just, I mean, they're stuck in the middle of all this. Drag their feet.
Doug Draper 17:43
They're just gonna drag their feet. Yeah, well, you've been very clear timeline everything on LinkedIn, with your posts and your your speeches, I'm sure. But yeah, they're just gonna kick the can. What's the incentive? Right? What's there is none. There's a
Pete Mento 18:00
the only incentive is it, it limits the amount of of interest that's being paid. They're going to pay, just a question
Doug Draper 18:09
of when. Well, hopefully it's this calendar year. Let's hope so. Yeah, yeah. Cool. All right. Well, hey, here's my my last one is related to emergency surcharges, and I call it the pricing the crisis pricing machine. I had to read that here because I I like that one, the crisis pricing machine. I'm talking specifically with ocean freight right now, but I think we'll see it if the fuel situation continues that we spoke about earlier, right? So, you know, shipping used to be the price was based on like distance and weight. Now it's more about managing risk and volatility, right? And so when there's volatility, some of which we've never seen before, it's super easy for a steamship line to look at a contract and say, Oh, look at Section five, 5d that basically talks about force majeure. And sorry, the base rates may still apply, but we're tacking on this $800 per container fee for this, or, you know, $1,000 for that, and what, what are you going to do? So I was thinking, you know, is the spot market better or the contract market better for this year? Initially, I was thinking, 60% contract, 40% spot, you can play around with the benefit as being a sell a buyer's market. And I'm kind of thinking it doesn't really matter at this point, when you're talking about the pricing, the crisis pricing machine is they're going to get you one way or another, right? Some of it could be valid. Some of it could not be valid. But it's kind of like, what are you going to do? It's in the contract. It says on things that we can no longer control, contract rules get paused and the fees get paid. So I think we're going to see some of that. I think we've already seen it with I think it was MSC that I saw, but it's going to come down the road and again, the longer this, this goes on with, with the straight being blocked and nobody moving through it, you're going to see crisis pricing kicking in, and I think it will, it will roll off into a domestic feat. So folks that listen to the show that are more into the domestic market, we're going to see some of that. If this thing holds on for a couple of weeks,
Pete Mento 20:32
agree, they're going to monetize the crisis. God bless the ocean carriers. Right at TPM, everyone was talking about how there wasn't any fight left in them. But then these surcharges, it's like, okay, so if you're geographically near the war zone, what is that like? If you can see any part of the Middle East on your on your map, I guess you're I don't know, but these surcharges are ridiculous, and there's a reason for it, right? Insurance is going to go through the roof. But is it really on these voyages, if you're not in an active war zone, should you really be paying all this? I think this is one of those things I push back on pretty hard. One of these carriers is going to is going to end up taking a taking a knife to that price. And whoever does first is going to get more of the volume, and it's going to be a crappy year for ocean frame. So I think this is one of those ones, dear co host, that they're going to end up eating their cream corn on eventually. Interesting.
Doug Draper 21:25
I guess I would disagree. Mean, they have the ability to do it. Why wouldn't they do it? They could play the card.
Pete Mento 21:30
Doug, you could be right, but generally, I don't agree with you, and you say you're right. So it's, you know, agree to disagree here, buddy on that one. Alright, good, good. Well, that brings us to the end of the show. We want to thank our great friends at CAP logistics for always supporting us. We want to thank all the listeners and viewers who support this show. We don't get paid for this, and cap logistics takes a huge risk by letting an idiot like me talk about whatever they want every week on this show. So please do check out their their their website, caplogistics.com want to thank all of you for passing the show on to your friends. Please continue to do that. Continue to do that. If it's happening global trade, we talk about it next week on global trade this week. Thanks, buddy. All right. You, bud. You.
Transcribed by https://otter.ai