Global Trade This Week – March 27th, 2023
What’s going on in Global Trade this Week? Today Doug Draper of Inland Star Distribution and Trade Geek Pete Mento of Mento LLC cover:
2:27 -New Car Foolishness
14:30 -Drones Actually Have a Purpose within a Warehouse
23:36 -Halftime
35:42 -Red Hands & Shoulder Punches in the Ocean Market
39:52 -Ocean Shipping Reform Act of 2022
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Keenan Brugh 0:00
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Doug Draper 0:10
And today, global trade this week, coming to you live, I am in a hotel room out in Fresno, California. hate my co host out on the Left Coast. Oh, wait, that's where I am out in New Hampshire and ready to rock and roll with the Browns cap and some amazing artwork over his right shoulder.
Pete Mento 0:30
What's going on, man? How you doing? I am. I'm struggling this morning, buddy. I'm
I got it. I got it today to get the show rolling and my computer wasn't working. And it's one of those things where like, if, if I got in my jeep and something wasn't working, I would have all the steps of like, okay, this isn't working. Here's the first thing that I check in. Here's what I do. And this is what I would do to resolve it. Like I understand the systems inside of internal combustion engine, or like how the radios not working like I would understand Doug, what I should be doing. But when a computer's not working, it's like I'm Og the caveman. I'd just I'm not prepared for for so I'm, it's not like my laptop's not working the laptops working, but all my peripheries, peripherals peripherals that I have, like my nice, big, beautiful screen that I bought myself and my nice camera. None of that is working today. So so fire no work. So I'm eating cold meat today. I was late getting the show started. So I apologize, Doug,
Doug Draper 1:39
now that that's all right, Pete. And we always joke about our audience and our pre show banter back and forth conversations that the three of us have are comical to say the least, we should do an outtake show sometime. Casey, you should just press the record button while we're having those conversations. And then we would be blacklisted pretty much from every show that we'd ever put on. So
Pete Mento 2:07
we have we have no customers. Do you do like the B reels, you know, in some of the movies where they show all the bloopers and everything. And I love them. I love the credit scenes. I think those are
Doug Draper 2:19
always at the end. So yeah, alright, man. Excuse me. Let's get this party started on a early early day, early week letter riff.
Pete Mento 2:27
Yeah, I have to refer to my notes in order to do this one right today, buddy. So I follow a lot of different topics. And because they all have to do with trade, a lot of times Doug Ville Bill intersect. So over the weekend, I I follow a guy on Twitter who's fascinating because he's the car sales guy, relatively new account, over COVID. He got a lot of followers. So as you would imagine, car sales guy got a lot of followers. He is anonymous. He apparently is a high performing car salesman somewhere in the United States. He won't even say what part of the country he is in. But he does admit that he is. He's educated in finance, for whatever that means. But he makes us makes a very good living selling cars. So he puts up a lot of interesting facts that he gets from various parts of his industry that he does the most people wouldn't know about. So over the weekend, he gave us this little dandy Doug, and I shared it on LinkedIn, but I'm gonna give you some of the the juicy bits that I save for the show. Right now there are less than 3000 new cars in America for sale under $20,000. And I struggled to think how old I was when I bought my first car that cost more than $20,000. And Doug, this is no word of a lie. I was at least 30 I might have been 35 When I bought my first car that cost more than $20,000. And then the second half of that was and I mentioned this on on LinkedIn back in 1986. When I first started driving, you could have bought five Hugo's for $20,000 You probably need that many for parts for the other. You know for other Hugo's for the parts for the one you intended to drive. Fun fact the Hugo factory was destroyed by NATO by accident on a bombing run. So even if you wanted to Hugo today you couldn't get one. But then 15% of drivers today who bought a car in the last quarter of 2022 So we just got those numbers are paying at least $1,000 There's at least $1,000 a month for their new car. And about 30% of American drivers who are driving a new car are paying between 809 $199 a month for their new car. And he, he credits the the average rate queue for October December 2022, which were the newest numbers that we had to go for. So for near prime, which are a significant number of people. So credit scores between 61 and 666, a new car interest rate now is at 8.12%. At a used car interest rate is at 12.08 prime, which is at 661 to 780, for credit score, new car at 5.8. US cars at 7.83. Super prime, which very few people walk into a car dealership rule 781 to a perfect credit score of 850 4.7 for a new car 5.9. Now if you've got crappy Crap, crap, credit rating, deep subprime 13.4 for a new car 20.6 for a used car. And right now to find a deep subprime mortgage, you're more likely to find a Yugo, than to find a non mortgage, a car car loan at those rates. This has a lot to do with two things we talked about on the show often one is inflation, just cars are very expensive, but because all the things that go into those cars have gotten so expensive. And second is the supply chain of building those cars and car companies knowingly limiting the number of cars that they're putting out there in order to decrease inventory. Because keeping inventory is expensive, which when we talk to people who are not in our industry, they have a hard time grasping that, you're basically putting money on a shelf that you've already spent. And so putting money on that shelf that you've already spent waiting for someone to buy, it is expensive for producers of inventory. So you don't want to extend things that you may have created on a credit term if you don't have to. And that's a very, very difficult thing for folks to understand. With regards to inflation. Another little piece of fun data I wanted to share with people is just how far inflation has gone. Now these numbers are as of Friday, the highest inflation rate in the world still remains Venezuela, at 156%, where it's common to see bank notes in the street as litter. So if you want to have some fun, Kenan, you know, you can go on the Google's or Twitter right now. And it's very easy to find Argentinian and Venezuelan currency as litter in the street like newspaper, Turkey at 55%. And now Poland debt 18%. Now, the United States, of course, everyone knows is it around 6%, six, six to 6.1. That's the government's, the government's numbers to us. And we all know how I feel about the government's numbers. But we we discount a lot of other countries between 6% and there's Wales 156%. The UK is at 10.4%. And that's, that's pretty terrifying, particularly when you see where the where the pound is that Germany at 8.7, Mexico with 7.6. And buddy, buddy, Australia at 7.4. But at the lower end of the scale, you have our very good friends in Canada at 5.2%. Shout out to my my headquarters and yeah, my tropical back. And of course, the last two, which I found were fascinating was Saudi Arabia at three. It's amazing when you have all that gold and oil and cash, and lastly, China at 1%. Why? That's because they're communists and they believe in price controls. So when you control centrally control the costs of practically everything, it's easy to not have inflation. So when your child comes home from college at Spring Break and says well inflation and China's at 1% You can say to them well, everything in China pretty much the price of it is controlled by the state so of course it is a go upstairs and clean up the cat box. It's just It's fascinating. I bet if we went and looked across other products that were so dependent on the supply chain, we would find similar constraints on availability, everything from laptops, honestly, things like high end technology, high end consumer electronics, you know certain types of A medical devices and anything honestly that you don't want to have that expensive inventory on the shelf, if you don't need it, certainly expensive pharmaceutical stock. So this has a lot to do with inflation, it has a lot to do with the cost of inventory sitting on a shelf. It's very much a supply chain issue. But damn it, Doug, what is it?
Doug Draper 10:22
Well, a couple of things on that comment, one, if any college student comes back and understands the concept of inflation in China, then I'm gonna hand over my taxes and let them take care of that. For me, that's,
Pete Mento 10:34
they're gonna comment on it. But I don't know if they're gonna understand it. How about
Doug Draper 10:38
maybe that's true. And the other flip side of that with some personal experience is insurance rates on cars, because the value of a car is so Gosh, darn expensive, have skyrocketed. And my personal experience with that as my daughter, I have a sidebar story on that second, just bought her first car on her own. Are you proud of her for a variety of reasons, not tell you a quick story. But so I went to our insurance guy, and through the car on there and home I got so for cars, we have four cars in our family. Now, for drivers, we're going to change that pretty dramatically. But I was sitting there just crushed, okay, raise the, you know, raise this. For this, I was adjusting my my car insurance like crazy because it's gonna. And my insurance agent said it's simply the fact that you have $80,000 $900,000 cars that are zipping around. And if they crash and break, it's not cheap to fix them. So the insurance piece of it, I think is another another piece. So those are the two things. So here's a quick story. The beauty of this shopI is we can go in any direction we want. So my daughter bought her first car, bought it from a dealership in Kansas City. You went by yourself. And I'm sure that the folks at the car dealership were salivating when a 20 year old girl comes in, they're trying to buy her first car. Long story short, they tried to sell her the undercoating blah, blah, blah and her number. She said, Dad, my number is 14,009 999 15 grand back and forth, brought it back now. She stood up and said I cannot afford to pay more than 15 grand all in and walked out. She got in the car she was borrowing turned on the key started pulling away. And they ran out to try to grab her and said, I think we can make it work. Please come back in and she got her car for $14,999. And she said dad I've never felt better about about being an adult as I did right now. So yeah, anyway, it was crazy. I'm so proud of her for doing that. But anyway, the point of that story in the use cars is that the insurance rates are going up as well because the things are so gosh darn expensive.
Pete Mento 13:01
That's awesome. Well, first of all good for your daughter raised a wiener dog. There are very few feelings that and second of all, you know that dealership still got something over on her because, you know, but hey, any negotiation you walk away feeling like you won is a win, because I don't I don't you want both parties to feel like they came away feeling good. That's That's how it's supposed to feel. And if the you know, one side of the consumer feels like they got a good deal and the person on the other side physical feeling great. But then the Inflation affects everything. And when it affects something that's insured air cargo, ocean cargo over the road, intermodal, it's going to affect insurance rates, and that's going to end up messing with our industry. What's terrifying Doug is the number of our our colleagues, customers, consumers who still look at insurance coverage and go nah, nah, yeah, I'm not going to insure it. Yeah, I'll take my chances. If it breaks, you guys are just going to fix it anyway. No, we're not. We're not well, then I'll sue you. Good luck, because the law is absolutely on our side on this one. Get insurance. It is so affordable. It's not even affordable. It's it's below what's I don't even know what a word below affordable is. It's like ridiculously affordable. And you have a responsibility to your company to get it. So just just caught insure your cargo. Anyway, Doug, what do you got for us? What's your first topic?
Doug Draper 14:32
All right. Well, this first topic
Pete Mento 14:35
is Oh, Doug, when you sent this to me. I told you I was speechless. I didn't even know what to write back. So I'm glad I'm sitting down and uncomfortable. So hold on. I want to take a drink before you do this. But yeah,
Doug Draper 14:47
so this one started. Started as a topic and then I kind of expanded it and took it out. So please lean in more if you don't mind. Um, drones, one of my favorite drones. Yes, yeah. So when I'm going to change my tone for a couple reasons, number one, is there's there's an article about how drones are becoming more popular in warehouses to perform mundane work, primarily, counting inventories. That's my world. That's my jam. So I totally get that and it's becoming, the price is still pretty, pretty, pretty high, but it's coming down like anything else, just like flat screen TVs back in the day. But the efficiencies that you can gain for the mundane work that you have to do to run a successful warehouse operations say, the drone, the application of a drone in a warehouse has found you.
Pete Mento 15:53
Tell people, march 27 2012, they only took him like four years, Doug actually said it. Oh,
Doug Draper 16:01
wow. Let me let me clarify that drones making deliveries are still stupid, that I have decent applications do have value and I think one of them is going to continue to be in the warehouse in a closed environment that can replace improve accuracy, efficiency, and eliminate humans, which ultimately get tired, delayed make errors, the whole nine yards. So I think we're gonna see automation in the drones in warehouses increase. But the reason so here's the expanded version, Pete, which is going to go away from drones. So the company that drew attention to this article with a company that invested into this drone company, which is Maersk. And that got me thinking about a term that you and I use time and again, which is owning the rails. And primarily we spoken about North American companies and I say North American because we're getting into the rail merger that we spoke about a couple weeks ago. Anyway. Maersk, they own the boats, they've invested in aircraft, they've invested in three PL e comm services. Now they're investing in technology and peripherals that are supporting some of the services that they provide. And the last thing I can remember on that Pete is Amazon. He's it's probably a decade ago now bought Kiva, which was a little robotic for their order picking services and that likened to what's going on at Maersk and so you know this because you're in the industry I think we're going to talk about here in a bit but do not sleep on Maersk, they separated they broke, you know their alliances with with MSC we've spoken about that. And I think that they have a pretty targeted and focused strategy. And you keep look, look at what Maersk is doing and will continue to do. And I think that will help you understand the definition of what a global logistics provider is all about. So that's the bigger picture here is that Maersk is starting to own the international rails with air ocean, I'm not sure they're gonna get into rail. But I was blown away when I was traveling to New Jersey last week, for a quick day, and I was blown away at the number of E commerce locations they have across the country and the companies that they've purchased that are focused on that. So drones have application within a building I will I will admit that drones still have no application and are stupid making deliveries to commerce but Maersk don't sleep on mares. You know, kind of like the the NC to a tournament when you say Don't sleep on this team was a seven or eight seed. But anyway, that the story went from drones to owning the rails. So that's my take.
Pete Mento 18:52
First of all, basketball is still a sport for men who can't skate. So I just want to make sure that I point that out. I don't care about the NCAA tournament. I only care if your team is in a duck because it gives me something to root for. That's about it. And second of all, I know I know, I paid attention and they didn't make it. Second of all, Doug, you said it. You said the words. You made it matter to me. This is such a beautiful day for me. I might need to go lay down after the show. It was just so emotionally charged to see you make yourself vulnerable to myself in the audience and admit you were wrong.
Doug Draper 19:35
Hold on. No,
Pete Mento 19:36
no, no, no. You can't walk back. You can't walk it back. It's like we went on a date. You finally told me you loved me. Okay, it's out there. Now. We have to hold my hand when we go to the mall. It's it's real. Okay. It's real. You have to give me a promise ring. This is a real relationship now. Okay. Yeah. You think drones work. Just say it. No, it's okay.
Doug Draper 19:58
You didn't hear me I clearly use the word stupid when I defined drone delivery services, right drones in a warehouse. I get it. I think there's value there. But I'm not walking anything back because I didn't go all the way in. I told you wrongly like you, I didn't tell you that. I love you.
Pete Mento 20:15
I'm sorry. I heard what I heard. I heard what I heard. Next, the idea of local applications proving their worth. And then using that to walk it back is very important. That's how most technology ends up finding a foothold. So we'll see what goes on from there. It takes a lot of money to do that. Maersk has a lot of money, which goes to your last, your last point. As we come back from this just financial free for all, that was the COVID pandemic where consumers and load logistics companies were like, Hey, let's all throw money around like it's 1997. Again, like you know, it was just awesome for everyone. They're gonna they're gonna start to be more pointed and more strategic with the spend every company is. It has been incredible to watch Maersk in particular, really hone in and focus on short term and long term goals and see how they're both aligning, which has been interesting to watch. I still contend, Doug, that the the most fantastical thing to watch is going to be the rising and the leveling off of E commerce juggernauts. All Amazon is all it is, is a supply chain company. All it is, in essence is a final mile three PL that happens to have a platform. And one of these companies is going to figure out how to market a platform. It's going to be FedEx and or UPS. It's going to be Maersk. Maersk is going to buy a failing e commerce platform. And there's going to be one one of these ecommerce platforms that's done quite well for itself is going to find itself in a financial position where either it can't continue to grow, or it fails financially. And someone's going to buy it for pennies on the dollar. And now they're going to find themselves with a fully formed mature ecommerce platform. But they've got the infrastructure. And they're going to be able to compete with an Amazon. Now we're talking now we're talking because they can do all kinds of things to manipulate transportation, and they can do it bingo better. And they are going to get in the cage and they are going to fuck shit up. Now there's no other way to put it. There's no other way to put it. And when that happens, they can pick a region of the world that Amazon's not good at and out Amazon Amazon and it's going to be a bloodbath of because now they're going to have real competition. So Amazon's going to have to get better at things that they're not going to be able to get better at and there are things marketing, dealing with vendors handling trade finance, so they're all going to you know from the outside looking in for me because I'm I'm a diehard spectator of the sport of E commerce. I'm just going to sit back you know, with my with my low calorie weightwatchers popcorn, and I'm just gonna watch all this take notes. It's all it's gonna be awesome. Yeah, Doug, it's gonna be a hell of a time to be alive though.
Doug Draper 23:35
Yeah, well, it's always a help you know? I'm gonna start off with fantastical because I heard you use that word. I don't I don't know if that's a real world or not that is fantastical can pretty much describe halftime which you enter into
Pete Mento 23:51
is paid for by our fantastical to us by
Doug Draper 23:55
our friends at CAP logistic. Yeah, yeah. Fantastically internet out here in Fresno. Yeah, it's a little little spotty. So halftime, calf logistics, transportation logistics cap. logistics.com. That's it. That's all I got on that one. So let's run into halftime. You want to go first? Do you want me to go first on this one?
Pete Mento 24:18
Oh, yeah. Well, now this is where Keenan wishes that he was on because I'm going to talk about Bitcoin. So yeah, hate drones. I hate Bitcoin. And I still hate it and I get to still hate it. Now though, I get to talk about it because I learned something. I've been I've been reading a lot about how Bitcoin has becoming both a hedge in a a harbor of refuge for people who are concerned about both inflation but they're really concerned about banking meltdowns. So as well, you know, we talked last week about the bank and fears around the world and fear of contagion. Don't worry about it, guys. We're just gonna take a few weeks off to stop the spread. That was a joke. The world is looking at Bitcoin as possible place of refuge. I started looking at who holds on to Bitcoin. So where because I don't trust it, I still think I still think that it's a major league government led up operation and you're never going to change my mind on it. Somebody had to have the money and the institutional awareness and the computing power to get this started when they did it's way too big of an idea for it to have been done by individuals. So here's a fun fact. Who are the largest holders of Bitcoin? Do you know who number seven is Doug?
Doug Draper 25:45
Are we doing a countdown Are you just throwing out number seven?
Pete Mento 25:48
Oh, I could give you the who the largest are so
Doug Draper 25:51
so. So my take my so here's, here's my guess some somewhere in the top five. The Van Winkle boss brother Winkle boss
Pete Mento 25:59
is number six. Okay. Yeah, that's number five is micro strategy number four is binance. Number three is grayscale. Number two, is the founder of this concept. Founder, Satoshi Nakamoto. The number one holder of circulating bitcoin is Coinbase. seventh largest holder. The seventh largest holder is the US government. Wow. The seventh largest holder of the US government has acquired these through seizure and criminal cases, including the Silk Road marketplace, the 2016 hack of cryptocurrency by bit fine x, in a case involving James Jong and they're about to have enough that they may actually overcome the Winklevoss twins, because of a number of illegal cases that they're currently trying. And that they have pursued that will that will probably catapult them past the Winklevoss twins, because they have not been combined into the federal government's wallet. Now, I don't know if it matters, because I think without all the pertinent information, I don't know if there's anything they can really do with all of it. But they're, you know, they have billions and billions of dollars in, in Bitcoin. The Chinese government apparently keeps theirs, die sporadically. They don't they don't consolidate all of theirs and work on I would love to know how much the Chinese government has, I would love to know. But again, I think this is a massive, and I'm putting on my tinfoil hat baby is a massive, massive sign up. I think it's a huge, enormous conspiracy that was done by some government or governments in order to either launder money or to turn some digital currency into a conversion for hard currency. be great if it was like North Korea or China. What better way to turn a completely worthless idea into hard currency that can be used to help pump up your your military, I just I don't buy now on the backside of that. It has become very popular again, by people who are worried about a full blown global financial crisis and don't trust their money in the bank and are worried about a bank run. Because this is a bank that you own the bank and you've literally own the safety and security. It's in your wallet. It's in your digital wallet. So there are a lot of people who wouldn't have touched Bitcoin with a 500 foot digital pole who now have money in it that never did or are reinvesting in it that had before. So it's been fascinating to watch. Still think it's total humbug.
Doug Draper 28:59
I was about to say I'm glad you ended with that to keep your your streak alive. But it sure sounded like you were promoting Bitcoin in those last 45 seconds.
Pete Mento 29:08
Trash.
Doug Draper 29:12
Well, Pete, my halftime is a little bit more uplifting, because what's happening on Thursday, America's pastime is back who the major league baseball season kicks off on I guess that's March 30. I was trying to figure out what was the very, very first game that's queued up. I don't know what what it is. We'll put it Kenya and I'll find that out. But the one thing this year, Pete is they're trying to speed up the game. They're trying to do some different things. So the younger generation just doesn't walk away. And so I'm pulling this up. So I don't say these incorrectly. But Thursday's opening day, as I said, so trying to pick up the speed of the game so people aren't just walking away because when I go to Coors Field, I roll in about the second inning. I mean, go drink some beers. And then I'm out of there. Five and a half, six. So anyway, there's a pitching clock, right? So there's no loafing around or screwing around on the mound. So it's 15 seconds to get your act together on the mound. If there's nobody on base, I think there's 20 seconds, it's eight seconds, no, it's 15 seconds. Nobody on base 20 seconds, if they're on base, and then the batter, they can't step out of the batter's box, once they, they can, but they got eight seconds to get their act together in there, too. So it'll be interesting to see who is you know, who's got the stopwatch on this thing, the defensive shifts a little bit, I'm not a baseball guy, big time. But I know that there's the shifts when you have left handed or right handed batters, they're eliminating that. So you can't have a good defensive play based on the tendencies of the batter. This one is interesting Pete bigger bases used to be 15 inches square, now it's 18 inches square. And the key thing there is square. So if you look at the surface area that that thing's going to take up, it's pretty significant. And the whole idea is more stolen bases, more stolen bases move people around, around the horn, which means they're going to be in positions of scoring. And then this one I didn't understand limiting mound disengagements. So I don't know if that's just people pissed about something or whatever that is, but they're going to limit it and limit it's pretty vague. So I don't know if that means it goes from five minutes to two minutes, or whatever. But it's going to increase anger, it's going to increase debate. And all around that's good for baseball. So I think there's gonna be a lot of stories about Major League Baseball this year, there's gonna be a lot of feedback. And it should be interesting. I'm not a big baseball guy, but I'm going to be going to more games this year, which is exactly what they want to happen. So I don't know if you've heard about all these changes, Peter, what your take is on.
Pete Mento 32:00
So Doug, I'm a baseball obsessed American I have in my whole life. My father is from Boston, I spent the formative years of my life in Texas, but as a Red Sox fan, and I was miserable into 2004. I'm a season ticket holder, you know, I still most of my tickets, I'd never go to games. But with all that being said, I'll start from the very beginning, the idea of having a clock. Some people are excited about it. And I am to a degree, but I'm also concerned. So there was a pretty ugly injury that happened in spring training to Justin Turner, the Boston Red Sox. If you if you want to like start your day with a pretty gross image, they show his face immediately after he got it stitched up. Because of the speed of what's going on. Some pitchers are a little rushed. And the Major League Baseball Players Association was worried about this. And sure enough, someone got hit in the face. So he got his upper lip basically ripped off, but it'd be back and ready to play. These guys are pretty tough. But yeah, there's a lot of you know, farting around that goes on and enough. So hopefully, this player safety gets caught up in that. But I agree with you, Doug. These guys spitting and picking their nose and other parts of their bodies, we can get rid of that. And let's get back to two and a half hour games. The the stealing thing, I'm so excited for it, I loved flubbed it when Ricky was going 90 feet like I love it when guys attempt to steal bases. I was a catcher. I love it when a catcher tag somebody out. So the idea that there's going to be more attempts, because the three inches matters so much, because guys are going to try and those those catchers are going to have less time to decide to make the throw, it's going to make a big difference and it is going to get more people out. That's going to be great. This shift I hate to shift, but then I love the shift. But I'm glad it's gone. The problem is is again, freakin Red Sox. They played around with the rules and they found a way to put a shift in over spring break. It's not the same kind and it showed to be somewhat effective. So we'll see what happens there. But mount engagement that's when a pitcher and a catcher and like the rest of the team walks up to the mound to talk to the pitchers like hey man you there's a great there's a great scene in Boulder and when they're like they show up they're talking about like what's a great gift to give somebody for a wedding if you don't know the groom like always find candlesticks, you know, they just basically looking for time to get somebody warmed up or whatever. So the idea here is just slows down the game enough, right? What can we do to get these this movement because games we're turning into these for our affairs and as much as I love going to baseball games, drinking beer, eating peanuts and watching stuff. We have to find a way to make it more TV friendly. Make it a place that people do want to go and yeah, kids. Kids want to watch UFC fights. They want to watch football. Your loved one Should basketball again. And why? Because basketball has turned into a time limited affair, a lot more action, a lot more scoring three points constantly, you know, they want they want to see offense. So let's give it to him. And I'm looking forward looking forward to the season of my absolute trash baseball team sucking the entire season, as it should be for the Red Sox.
Doug Draper 35:26
Well, that was halftime, brought to you by CAP logistics. And we're on the we're on the back half. Yeah, buddy. We're on. I can't think of a baseball analogy. We're on the other side of
Pete Mento 35:36
we're here. We're in the seventh anybody? Yeah. I'm pretty fired up to talk about this one. So, do you remember the game you play with? Like, I don't know, with your buddies, you have your hands like this. And they did their hands like that. And like, you tried to smack them on top of their hands. And if they flinched, you got to punch him in the shoulder whatever. Or were you not a bunch of educated uneducated idiots like my friends and I
Doug Draper 36:03
know but Wichita, Kansas, you can me We love that. Yeah,
Pete Mento 36:07
exactly. So I mean, my friends and I were morons. So we would sit there. And it was something to do on the way to baseball games, or whatever you'd like, sit there with your hands like this, and you try to smack each other. All you flinch and you punch each other. You know, it's like, Oh, forgive me for not wanting to feel pain, but you couldn't wait to like, punch your buddy. And then it was their turn. You know? That's what negotiating freight rates are like now. It's like, okay, wow, this is a real rate, Ningbo to West Coast us $890 Holy crap, I get 10 free days. This is amazing, right? Like I said, and then a week later, it's like, 820. He's like, you get so mad because you flinched, you know. Oh, and then or someone says to you, looks like the President's gonna get involved in West Coast negotiations, we might want to wait on those East Coast rates? I don't know. Think, think they're going to start going down the next week. They start going up again, because someone heard something and they get all angry. It's like, it's like that Lucy pulling the football on? Yeah. With Charlie Brown trying to kick it. It really has. And we said I think it was last week, right? Chaos in the marketplaces, it's actually kind of good for our marketplace. Because that that assumption that there's stability is actually what forwarders want. It's what an vos want, it is not what carriers want. And it's actually not good for people who are buying it, believe it or not, because you want to take advantage of the marketplace. So going back to having 60% Contract 40% spot, it gives you a chance to play those opportunities in the marketplace. So we should all at this point, as consumers of freight, get back to having a portion of what you're going to consume being bought on the spot. And that's really where that was all going to get people ready to think they're going to flinch again.
Doug Draper 38:12
Yeah. Yeah. You know, I don't remember how many shows ago, but it was almost like a day trader down there in the pit. You know, when, when they're out there doing it. But yeah, you know, the days of, hey, I'm a great Nick, one time negotiator. Because for this calendar year, I was successful in negotiating this, right? Well, this doesn't exist anymore, because it is so fluid. And just like you said, 6040, split 5050 Whatever it might be, is it is a ongoing day to day transactional based business. And there is benefit if you know how to work it. And you really understand the market flows or what's going on, on a port by port basis. You can be successful and you can be a hero within your organization. But if you think you're gonna go out there and sign one contract for one year, and go pat yourself on the back and go show your CFO how much money you've saved them, then you are going to get burned. And you don't understand the ocean industry in 2023. So it's a great analogy with the flinching and I love it. And yeah, it's a different world out there. And I was trying to think Pete and I can't I love Wolf of Wall Street. What was the guy's name Belfort?
Pete Mento 39:28
Yeah, what, Gordon? Oh, no, so when I pride
Doug Draper 39:33
ourselves on knowing that stuff, anyway. Belfort will think of it a minute, but the way he manipulated things and and made it beneficial for him. That's the kind of guy you need on your team to go out negotiate these things nowadays. Jordan?
Pete Mento 39:47
Jordan Belfort Yep, Jordan Belfort now,
Doug Draper 39:50
yeah, yeah. So, Pete my last topic kind of goes on, on the ocean freight as well. It's um The ocean, it's related to the ocean shipping Reform Act of 2022. Which if I won't go into the nuances of it, but it was a knee jerk reaction, when it was a carrier market when it was a seller's market, everybody was up in arms about this charge and that charge and how can they do it and blah, blah, blah. And so the government said, well, we'll try to help out and try to regulate an industry that has nothing to do with ownership or control the United States. So there's a rule that's going into effect in April. And it's basically related to having carriers be financially responsible or penalized for unethical illegal charges that may appear on your on your invoice. So the old rule is that you could be liable with a civil penalty, right? Could be maybe liable, like what what does all that mean? Right? It's pretty ambiguous the new rule, in addition to all that basically says, in lieu, in addition to or in lieu of a penalty, the ocean freights liable for a refund. So that's all good. And well, but you know what, let's ask for permission. And, or ask for forgiveness, not not permission. So, you know what, Pete, I just jacked an extra $200 on your ocean freight? And if you recognize it, or ask for a refund, all right, I'll refund you. So 10 15% of those fees are going to be refundable. But is that really determined for bad behavior? I don't know. And I guess if you ask the ocean carriers, are they exhibiting or engaging in bad behavior? Yeah, they may or may not even agree with that in the first place. So the bottom line is the steamship lines still control the narrative, even though it's the spot market that you just said, it ebbs and flows, and it goes up and down port to port, season to season. So I don't know if a reform act is going to really make any impact or changes. And Pete, I'm going to charge you the 200 bucks again, and next week, I might charge you an extra 75. And the next week, whatever it may be, and maybe you'll catch it. And I'm not saying steamship lines are intentionally doing this, or bad actors to any stretch, but it just doesn't have a lot of teeth. It's hard to to validate. It's an American entity that is doing the validation. And I just don't think it's a big enough to turn to have any general impact other than some senators and politicians can raise their hand and say, look at all these cool things we're doing to help the US importer market so I don't know I thought it was interesting that there's some teeth quote, unquote, they're going to be implemented in April. I don't know how much it's really going to affect what we're talking about. I don't think a whole lot and it's definitely not a deterrent for managing the flow of of commerce and, and costing as it comes into to America. So anyway, it's nice to know nothing's really going to happen with it. My opinion. And and on we go.
Pete Mento 43:02
Doug, Were you ever a Seinfeld guy? Did you watch Seinfeld? Oh, yeah. Yeah. I used to have to record it. Because Thursday nights, I was almost always either doing spots or on the road or, you know, trying to find someplace to get a spot for an open mic. But I would always come home. And I can never sleep because I was always jacked up, you know? Be like one two in the morning. And I would always pray that it was an episode that had Jackie in it. Remember, Kramer's attorney Jackie. CREAMER would tell him what egregious assault had happened to him. There's always something really like silly and Jackie will look at him and say I am shocked and chagrined. Like I cannot. I cannot believe Kramer this is I am shocked and chagrin this has happened to you. And I remember in the in the final episode of Seinfeld, Jack even said I am shocked and chagrined dug, as I sit here clutching my pearls, shocked and chagrined I, I can't believe I simply I can't even conceive it's unconscionable that the ocean carriers wouldn't be fined for this, that they would simply have to give the money back. I mean, what were the odds? The odds were 100.00% That's what the odds were Doug. I mean, what are we expecting? These are some of the most powerful companies on planet earth you and I know that all the people that we work with in this industry know I mean, ocean companies have got some stroke, man like those guys can make it happen. If you need it, it's going on one of their boats baby and say what you will, you can say a lot during the pandemic. They were a necessary part of day to day operations. On planet Earth, so we gotta give him some credit. They do have some political capital to wield the moment, I got a feel and they might have wielded it on this one. It's like what do you want from us? Okay, we kept the earth spinning for you, in the worst crisis of pretty much anyone's lifetime since World War Two, knock it off. See what you will about it. You know, like Stalin said the strong do what they will and the weak except what they must. I'm just not shocked. I'd like to sit here and feign disgust. But you know, what I think is really scary, is you're gonna have a lot of freight forwarders who are suddenly breathing a sigh of relief because they were all terrified, they were going to get caught up in this mess and end up getting sued. So that's probably where offices it's maybe there's a little silver lining in it. But what stinks is what you just said. for months and months, people are getting whacked with millions of dollars, some companies of d&d, and they felt that there was some sort of justice that might be played out here. You know, Justice baby. This is this is for to do. So justice is just this just profits and losses. You know, you'll get yours next time. So speaking of next time, that's all the time we have for this week. We want to thank our our incredible, you know, incredible sponsor cap logistics for all that they do for us. We want to thank them for loaning us Keenan who I think is on is it work release or parole? I can never keep those two straight. But he does an incredible job for us on the buttons and dials back there. And in his fortress of solitude in Denver, Colorado. Want to thank my co host, Doug Draper for always, you know, knowing when he's wrong and admitting it here on the podcast, it takes a very strong, mature man to admit when he's wrong. And Doug did that today by admitting that drones do serve an important business purpose in this logistics industry, Doug, I don't know. I want to cry. I'm so proud right now.
Doug Draper 47:05
Bring that up again on the close. So I cannot retort that right. Yes, let the show come to a peaceful end.
Pete Mento 47:14
And of course, we want to thank all of you, our listeners and our viewers. Everyone listens to this on a podcast. Those of you who watch it on any number of the video releases that it comes on. And for those who watch the video, we are available now on all podcast outlets. So please do give us a listen there when you're going to and fro. And we can't wait to see you all again for another episode of global trade this week. Thanks, Doug. See you next week. Thanks, everybody.