Global Trade This Week – Episode 235
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Keenan Brugh 0:00
Doug, you're watching global trade this week with Pete mento and Doug Draper,
Doug Draper 0:07
hello and welcome to another edition of global trade this week. My name is Doug Draper. I am one of your hosts for this weekly show. My partner in crime and other hosts is Mr. Pete mento, who comes to us from our nation's capital? Mr. Pete, what's going on? Brother, how you doing? It's been a challenging day, but I'm I'm getting through it. Yes, we always have a little dialog before the show, and I could tell you're a little fired up today, little little antsy. I have not had more than a 15 minute opening in my schedule, from seven in the morning till seven at night in about three weeks. Doug.
Pete Mento 0:46
So I'm getting I'm not sleeping very well, so it's just been a lot. Ah, well, global trade happens, and you're in the thick of it, and we got to talk about it. So we'll start with that, and we'll just cut and get into the show. So what do you got for your first topic? So to avoid politics, because we do that here, we're just going to talk about economic impact of the current geopolitical crisis in the Gulf.
Doug Draper 1:12
Last week, something terrible happened. So Israel,
Pete Mento 1:18
apparently, with the assistance of the United States, will find out. Eventually, decided to bomb LNG infrastructure in Qatar. When they did that, they took out about 20% of the world's LNG resources, 20% now, not to be outdone, no part means Iran hit Israel. Hit Iran. Iran hit Qatar. Get that straight. So we're desperately approaching around 30% of the world's LNG supplies, and the markets have, of course, gone back to no one's talking about it's going to take seven to 10 years to rebuild it, and it's going to cost around 77 $0 billion dollars to rebuild it. So we are going to have a deficit for a very long time. The US is probably going to be able to manage that for themselves, because of our overabundance of LNG in this country, but Europe and India are going to suffer greatly as will to a degree. China people are downplaying this like it's not a big deal. You're not looking at the follow on effects of this. When LNG becomes more expensive, any type of technology that can run in alternatives to LNG, gasoline, oil, electricity, they're going to be the one that you move to. Well, that's going to drive up the prices of other things. We are slowly approaching. And every day it gets a little bit faster, a full on global energy crisis, the impacts of which, financially, will be many folds times worse than covid. And we are not looking at this directly. Think we're all waiting for something magical to happen. You can open the streets and form moves all you want. It's not going to replace the LNG that's gone much of manufacturing capacity in Europe, particularly in places like Germany, runs on LNG, and they get it from two places, Russia and the Middle East, so we don't have the LNG to export. This is bad Doug and again, avoiding politics economically, I get up every morning while I'm doing my work, while in between calls, I'm watching Bloomberg every every week, and I'm not seeing it on the financial coverage in a way that I believe it deserves. This strike does have an immediate impact. It's going to have a long term, possibly a decade's worth of impact to global manufacturing capacity and the cost of exported goods. It's not being talked about enough. This is a crisis.
Doug Draper 3:49
Hey, this is so I have a commentary, but more of a question for you. So whenever you shout over the show notes like do the little leg work, is that they said the US has got plenty, and the US will benefit from this with with exporting and higher prices. So this is a win for the United States. Why do you say
Pete Mento 4:08
no, right now? We're not putting a sanction on the export of energy. We will. We're gonna need here, because we've just taken out capacity for not just oil, but LNG, China's done a very good job of converting things like coal into fossil fuel energy, where they're converting it into fuels they don't need it as bad as we will. We will just siphon off our domestic capacity. No, Doug, it's
Doug Draper 4:33
not going to work that way, all right. Good. Well, not good. Good. That you clarified my comments, but yeah, that was the one thing that popped in my head when you shot him over was like, Okay, well, maybe this is a win for the US. But to your point, you know, we're going to hoard it like anything else. When there is scarcity, we're going to hoard what we have make sure that we can survive. So I can understand that as well.
Pete Mento 4:57
Think about how angry you must be if you're a ship. Shipping company that owns LNG powered vessels that just increase their operating costs and the scarcity of it changes where you'd be picking it up in the first place. Doug, this is going to be a crisis. Yeah.
Doug Draper 5:14
Well, thanks for bringing me down on this Monday of gold trade this week.
Pete Mento 5:19
Right up front, buddy, right
Doug Draper 5:21
up front? Yeah, well, we're going to come back to more of a global trade perspective, because we're going to tag team a topic, but I want to do that after our halftime, so I'm going to jump in and ask you a couple questions related to some domestic logistics and delivery that came up last week, right? So, Pete, imagine that you and I decided to purchase a national delivery service company, right? But in order to grow it, we're capped at how much money we can borrow to grow the business, right? Infrastructure. Hey, we need more trucks here. We need to realign this or that, but we can't. We're limited on the amount of money we could borrow. We can't raise our prices unless a third party allows us to do so. And oh, by the way, we have to deliver our our not our products, but to make delivery for other people's products. We're mandated on when we can do that, and we have to do it seven days a week. And, oh, by the way, 71% of the routes that we're going to buy lose money. And we have a storefront operation, Pete, and 58% of those storefronts lose money. So I'm not sure that I would be interested in buying that company, but that's basically what our United States Postal Services as of today, and it may be a reflection of a quasi government entity that has always been kind of promoted as the way things to work. But basically the the Steiner, who is the Postmaster General, he basically said that we're going to run out of cash and we're going to be unable to deliver, we're going to be unable to pay employees. We're going to be unable to pay vendors within 12 months, unless Congress tax right? And the biggest thing there is the debt cap capital. I didn't really understand that until I read this article, but basically there's a law on there that says the post office can only borrow up to $15 billion to fund improvements and efficiencies, and that needs to be raised in order for things to be fixed. So first and foremost, I know that's a priority, is Steiner has indicated that that number needs to be in the 30 to 40 billion. That doesn't mean we're going to borrow that amount of money, or the post office is going to borrow that amount. It just needs to have that cap raised in order to be efficient. And it's, it's, it's really a little scary. I was thinking, Pete, you can't cut your way to sustained profitability, right? We're talking about redo this, make things more efficient, lay off certain amount of drivers, and that may work to some point. I think that was the mission for many, many years when DeJoy was there. But I like David Steiner, he was the CFO and CEO of waste management, right? That's asset heavy, right? Just like the post office, he was on the board at FedEx, which he no longer is. So he understands logistics and supply chain, so he's the right guy to kind of peel the onion back and say, we got a major problem. I don't know if anybody said it that bluntly in the past, but normally I bash the post office. And I wouldn't even say bash Pete. I think I would just shine the light on some you bash. So I'm not here to here to bash it. I'm here to say, oh my god, that really struck me, that we could be in a really bad spot as far as domestic delivery the post office. And as Amazon continues to realign their supply network and pulling things away from the post office and doing things more in house, FedEx is giving more business to the post office and redoing their contract, and it's just this constant evolution and movement of, how are we going to make this thing successful? But it struck me as something that we need to talk about here today. All right, Doug, first of all,
Pete Mento 9:18
was there some point in time when you were a little boy, like, I don't know, five or six, and the postman, like, kicked your dog or or stole your ice cream cone, or, like, what, what is there some deep seated historical reason why you have such distaste for the Postal Service?
Doug Draper 9:34
No, they're really, it's just looking at how the it just, I'm just some dude from Kansas, right? And I read these headlines, and I'm like, Are you kidding me, right? Like, I can make better, better decisions with that. And I like Steiner, because he's calling it out. He's like, we're we're not trying to sugarcoat this anymore. So to answer your question of mailman never kicked my dog. I did have a mailbox that was out by the street that you put the flag up, right? I didn't have it where they. I had the mail slot on my front door, so maybe the distance that if there was any shenanigans going on with the postal carrier I never saw, and maybe there was a squabble with the dog that I had growing up, but and maybe I blocked it out Pete, but nothing comes out to me that would be that
Pete Mento 10:16
we have to have the Postal Service for the reason you just brought up. We have to have a price controlled alternative to profit driven transportation companies that is available for people who do not want to enter into the morass of the UPS, DHL, FedEx, Amazon and Alibaba debate. There has to be some sort of a valve make me the Postmaster General. Day number one, we no longer accept bulk mail. Sorry, but we're going to quadruple the price of it. If you want to send people a flyer about your mattress sale, whatever that's going to get thrown away as soon as the bail box is opened or used as kindling for the fireplace. We're going to charge you 510, 15 times what we charge you now. So you might want to rethink that marketing calculus number two, we're going to a two day a week model of delivery. Mail gets delivered on Tuesdays and Thursdays. Tip, pick it up anytime you want at the postal office, but that's when it gets delivered Tuesdays and Thursdays. And as far as your your your mathematics, it's it's the government. Man, they're not going to let this thing fall apart. The union's too big. They're going to find more money. Money isn't real. I keep trying to explain this to people. It's not real. We'll just
Pete Mento 11:32
create more of it.
Pete Mento 11:35
So, Doug, I'm not ready to quite take a nail and slam it into the coffin of us, Postal Service. I have more faith in them and more faith in the in the need for it in our society than ever before. It's going to be fine. Now, other than my driver's license and a couple of credit cards, over the past five years, I have not received a meaningful piece of mail.
Doug Draper 11:56
Well, what if you need a mattress and it's over President's Day weekend, that's when I need that flyer fee.
Pete Mento 12:02
There's this thing that you carry everywhere called the phone Doug. And you can go ahead and you can open that up, and if they paid Google advertising, the ones local to you will pop up. This is a marketing style that is, you know, unless you remember war bonds and having your coffee rationed. I don't really think that you need to continue to market it this
Doug Draper 12:26
way? All right? Well, we got a good second half, but let's jump into halftime right now. It's brought to us by CAP logistics to do a heck of a good job to put this show on every single week we appreciate Keenan and the team at CAP logistics, so check them out@caplogistics.com
Pete Mento 12:41
Pete, halftime. What do you got? So my, my, my Instagram may be the most boring old man Instagram ever. Here's what my algorithm sends me, Bulldogs. Get a lot of Bulldogs, violent tackles and rugby. I get a lot of rugby clips, the sports teams I follow occasionally, stuff about really good rock music from the 70s and 80s and now alternative living environments. So the kids these days don't have any money, apparently, or they're, they're, they're, they're hesitant to spend it, so they're looking for ways to have a piece of legitimate property that they can live in and do so at the lowest amount possible. So I have all these things on my Instagram, about 28 year olds buying all kinds of things and living in them. Number one, boats. They're buying sailboats. They're buying old motor boats. They're spending less than $100,000 on them. They have no intention of ever leaving the dock. It's just a comfortable, relatively self sustaining lifestyle that's also inexpensive to keep up getting space in a marina somewhere in nowhere, in nowhere. Maine is pretty inexpensive. It doesn't cost a lot to operate them. Number two, long term rentals of log cabins, log cabins that have limited energy, so the heat is done by wood. They all go out and buy Skylink, or whatever the hell it is, Starlink from Elon Musk, and they run off of relatively small footprint for electricity. There are kids out there buying yurts. Why you yurts? Like, like, Attila the Hun lived in right and living in yurts and the last two, I guess shouldn't surprise me buying old Winnebagos and trailers. I'm very proud of the fact that I am only one generation out of a trailer park. I'm never going back. But the fact that housing has got so expensive that people are considering trailer homes, which have gotten nicer over time, I will admit, is a real step back so. Doug, my question is, could you live in any of these alternative environments? No. Next topic, no, absolutely not. I very. Easily could. I could, very easily live on a boat. I wouldn't have no problem with that whatsoever. No, I'd be very comfortable with that the idea of living in a yurt or a tent or a motor home or or, you know, a container home. No, I could probably handle a log cabin for a while. I think I would start to whine and complain like a old lady once it got cold and I had to keep the heat up with a fire. But I'm, I'm a, I'm a pretty easy guy to keep happy. You know, I need the internet and to be left to hell alone. So that would work out well for me. So just know, huh, flat out, you need a home.
Doug Draper 15:37
I need a home. I need a place to go home and relax. And maybe that's just because I'm getting older, right? That is, but living in a resort town, what you describe that is all over. Even, you know, Steamboat Springs, Vale Aspen. Think of all the mountain towns out in Utah or whatever, I'm sure the mountain towns back east as well, and beach towns. I mean, there are people that literally live in a van down by the river, or yurts, I mean. And the funny thing, Pete, to your point is, so there's this one gal. So I work in a co working space most of the time here in Steamboat, and this gal would come in, and I don't know exactly what she did, but she would come in and do her thing. And I saw her at the gym here in town, and she works behind the front desks. You know, she's probably late 20s, early 30s, and we were talking once, and I'm like, so where do you live in town? And she said, I literally, well, she didn't say. She said, Oh, I live, I live in a van. I'm like, what really, you live in a van? She said, Yeah, I had to drive down to Denver the other day because my heater kicked off and I made my tools, and she was messing around with her tool kit and everything else. And my point there is, like, I never would have thought that, you know, she's got a real, you know, I don't want to say real job, but I just just said real job. She's in there communicating with people. She's got a laptop, you know, she's working all day long. She's got a second job, which most people do up here, and she told me she lives in the van. And immediately I didn't go very far. Like, okay, obviously, you shower here at the gym, right? So there's kind of all that kind of thing related. But like, when you want to go home and just like, watch TV and relax and everything else, I don't know how you do that in a van, but it struck me that when you were talking about this topic, there's people I interact with every single day here in my hometown of steamboat that actually live in yurts and vans and no boats up here, but everything else
Pete Mento 17:34
I know someone who's 25 years old, she's well educated, she has a Mercedes Benz Sprinter van that She lives in. And I asked her the same question, how do you shower? She said, I have a 24 hour fitness membership, or whatever planet fitness. I get up every morning, I work out, I take a shower, I go to work, and I come, I come back. And she said, Poppy is a clam. Doug, happy as a clam. She makes enough money where she very well could, but she said, Why would I? I'm just saving my money. I don't want to rent
Doug Draper 18:06
right now. Different generation, my friend, I have difficulty aligning with that, but that's why we're all bald guys who say, Get off my yard all the time. Indeed, we do. Yeah, all right, what you got? Yeah, my halftime. I'll keep this one short, but it's March Madness, NCAA. Some people are like, what is that? I've never heard of it. Some people don't care, but there are certainly people to get into it. And I would imagine my Kansas upbringing and going to school at the University of Kansas, albeit they lost yesterday. I think that's part of it, but I think it's a phenomenal time of year. I love the fact that there's upsets, there's passion, there's school tradition, there's funny, human interest, stories that come out of it. I don't know if you saw the thing about the swim team at Miami University in Ohio, where they kind of had some national I think CBS, because that's where the March Madness is. Did a whole thing about they decided to show up in their speedos and stand behind the goals when people were shooting free throws for a distraction. And it really caught it went viral, so to speak, you know, and it's interesting. So I love March Madness. I I'm in pools. I don't really bet any money. I'm not a gambler, but it's fun to see. I love the environment the first week. By far and away, is so much fun. When I lived down in Denver, there was a guy next to me that he had a carriage house on his garage, and he called it the fortress. And there would be 20 people that would come over, and he'd bring up four TVs so we could see all of it. It was a drunk fest, frying turkeys in the backyard, just going to town. It was great. I love March Madness. The games are awesome, and all the things that come with it. Big fan, and I'm glad that it's happening right now.
Pete Mento 19:56
So basketball is a sport for people who can't skate. You. Get that settled right up front of all of the major sports. I care the least about basketball. I would sooner watch golf than I would watch basketball.
Doug Draper 20:10
Yep, yep. Now, all that being
Pete Mento 20:13
said, I would 100% go to Vegas and bet the first weekend. Because it's just Matt. It's madness, like they say, it's much anything could happen, you know, but the idea of sitting in front of my 85 inch plasma screen TV and watching college basketball, no, I would care about the results. I would not watch the games. I think that college sports have no place in academia, which we've talked about in the past. I think that if you want to have a feeder team for your leagues or for the Olympics, set it up on the outside. Universities are for learning. They are not for this horseshit. And I don't want to hear about how, you know, at the end of the game the other day, over the news today, Elon University got like, 14,000 campus requests, or whatever, or, or what's the other one high point? Right? Because they explained how at High Point they have the fuselage of a private jet. So you can learn how to speak to someone when you're a Jet. You know what? I need you to fuck all the way off with that, right? If you, if you expect me to pay for tuition for my daughter to learn how to talk to someone in a private jet, it's just a different environment. Get over it. It's horse shit. Universities are going to die because of the way that they're doing this. They're too expensive, they're generally pointless, and they become a four year sleepover to watch sports on your parents dime. I'm not okay with it, and I know I'm saying to somebody with Kansas this basketball shit super important to you, but they have absolutely positively no place in academia. And if every single NCAA sport was canceled tomorrow, you'd see a smarter, more successful America.
Doug Draper 21:50
Totally 100% disagree, and we're going to go down a wormhole that is for a whole nother show. Go ahead. That would be Pete is wrong, related to student athletes, that's the name of the show, best universities in the world, IIT, right?
Pete Mento 22:09
Cambridge, Oxford, Harvard, Yale Princeton. Are these powerhouse athletic schools? No, they are not. They are not. They have club sports. You want to go run around the field with your buddies? Okay, we can set that up for you. You're here to learn. They have no place in modern society, none. Wow.
Doug Draper 22:30
Well, like, like I told our audience, you're a little feisty today. So and I can understand
Pete Mento 22:35
you could ask me on a day when I'm in the best mood I've ever been in, this is a very unpopular opinion. I understand that I don't care. Having taught in universities, gone to some of the best schools on the planet, I can tell you, it is a worthless endeavor that brings no value to the university.
Doug Draper 22:53
We got to move office that was brought to us halftime by
Doug Draper 23:04
up this topic, yes, as a dad of a former college athlete, I have strongly, strongly disagree.
Pete Mento 23:10
Do you want, do you want scholarship to play rugby at University of Tennessee? Guess what? No, he could have played men's league. Would have done much better, and I'm not quite sure he learned how to read at the University of Tennessee. So no pointless, worthless, utter fucking horseshit. Get rid of all
Doug Draper 23:27
of it. I haven't heard you drop 2f bombs on the show in quite a long time. So this is a passion. I know,
Pete Mento 23:33
I know everyone disagrees with me. I don't care. Doug, I don't care. Yeah, awesome. All right,
Doug Draper 23:38
so we're gonna jump to the second half. It's one topic. We're going to tag team it. I'll jump in first. And I saw that over the weekend there was a China, China development forum that took place, right? And the China China leaders were out there. And if you want to dumb it down, Pete, they pretty much said, China's open for business. We want more foreign companies investing here. We're going to give you incentives. We're going to treat you as if you're a Chinese company. Yes, we're going to import more. We know there's an extreme deficit that's over a trillion dollars. We understand we need balance. We want to buy more for you. Please invest in our country and our our economic growth, and we are open for business, and they're essentially pitching themselves as kind of the global business leader in a stable environment, right? And we we talk about it in comparison to what's going on, right? And I think that they're positioning themselves kind of for the long game. That's what China's good at, is they specialize in the long game. Companies hate uncertainty and.
Doug Draper 25:00
Predictability. That's the word I'm looking for. So companies hate uncertainty. Supply chains need predictability, and we got none of that right now. So people are looking for a port in the storm, who can give me stability, and China's raising their hand saying, we are right here, and we're going to be your partner. And it, it jives with what we've talked about in the past, is that this is a global like the name of the show, trade world. And while we're moving in one direction, China's moving another and expanding their reach into other parts of the world, and we're starting to see some of the implications. But anyway, China is like, Hey guys, we're here. We're open for business. We're the best thing since sliced bread, and let's engage, and let's make this thing happen. So it caught my attention. What was your takeaway of the Chinese development forum that happened over the weekend? It's a great PR play. That's the first
Pete Mento 25:56
real takeaway, Doug, it's a great PR play. I understand, right? They're under tremendous pressure from around the world to buy more non domestic goods. Got it. You're talking about things that companies hate. Here's three big ones, right? Having our IP stolen, pretty big one, right? Like just blindly, shamelessly stealing our ideas, claiming them as your own, mass producing them and selling them to the world. Number one. Number two, they really can't stand when you make it impossible to take your money out of their country. So if you make money in China, you can't export that. It's very complicated to manage transfer pricing with China. So yeah, hey, hey, bring it over here. Sell it. You're going to have to keep it in RMB, or you're not going to get that money back. And then, number three, political upheaval, the Chinese government is in a very precarious place right now, and what it looks like over the next 20 years is deeply in question. The idea that China is economically stable may be the funniest thing I've heard since who's on first, it is not, it is it is a house of cards with a with a with a box fan pointed at it, so we just got to turn it up to that next level. It's all going to fall apart. It's a PR move. It's probably not a very good one. But my caveat to all that the China of when you and I were in our 20s is not the China of when you and I are in our 50s, and when we're long dead, I'm sure it will look entirely different as well for companies that are considering what they're going to be in 5060, 100 years. Yeah, make a deeper investment. But if the last year has taught us anything, it's that America's political whims can be very devastating, and it wouldn't take much, like, I don't know, invading Taiwan to wreck that stability, to continue to push on the Philippines and the Sea of Japan, to mess with that predictability. So I'm not giving that advice, and people do ask me that question all the time. I'm saying you need to go with market economies in the West, like Mexico, like India, where you've got a better chance of suing people and winning if they did do something wrong, and a much better chance of getting your money out of it if doing business with the Chinese now for 35 years, ish, even longer than that, I can tell you that there is always a degree of danger in that relationship because of the lack of support that one will Get from the centralized government.
Doug Draper 28:21
Well, people still buy timeshares. They do so in the world is going to buy into the to the media coverage that you made mention of,
Pete Mento 28:33
yeah, people do buy time shares. Have you ever gone to one of those high pressure time sales things where they're I haven't. I thought about doing it just to see how much of a prick I could be. Doug, when they they say, come for the weekend. Come ski here, you've got to sit through a one hour, 90 minute sales pitch like, oh, bring that to me. Bring that to me. Because I will, I will open up, you know, grok or or, or chat, GPT, and I will go over the mathematics of what you're proposing in every instance you will lose.
Doug Draper 29:01
Yeah, well, see how they're interchangeable. You could be talking about China right now, but we're actually talking about timeshares. And I do have a funny story that I'm not going to share with the audience, because I've made a commitment to my wife about that, and we'll have to talk about that at
Pete Mento 29:16
a given time. I think I talked about this in the show once when I was trying to re up my American Airlines admirals lounge, and they tried to sell me a credit card. And I was just like, whipping out percentage tables and explaining how much it would actually cost to do it all. And the guy was just like, Brugh, like, hey, you know, an uninformed customer is the easiest sell. So what do you want
Doug Draper 29:40
me to tell you? Man, yeah, are we talking China or timeshares, both, okay,
Pete Mento 29:46
and airline credit cards, yeah, all three of them wrapped up into one, buddy, yeah.
Doug Draper 29:51
All right, that's it, man, I'll let you bring us all right.
Pete Mento 29:53
So how's that for spirited discussion on global trade this week, clearly, I have touched a nerve with Doug, not only. Week, or should we not talk about the post office, unless they want him to pop off, but do not bring up NCAA sports. He will get very angry. But hey, it's halftime. We talk about whatever we want at halftime, but usually the show is about global trade. We want to thank all of you for taking the time to listen and watch us every week, sharing it with your friends and subscribing that does matter to us, so please do and if we're talking about anything on the show, it's about global trade. If it's happening in global trade, we'll talk about it on global trade this week. Thanks. Doug, all right. Pete, check.
Transcribed by https://otter.ai