Global Trade This Week – Episode 193
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Unknown Speaker 0:00
You're watching global trade this week with Pete mento and Doug Draper,
Pete Mento 0:07
Hello everyone, and welcome to our newest edition of global trade this week. I'm Pete mento, and with me in the co host chair is Mr. Doug Draper, Doug, how are you buddy?
Doug Draper 0:20
Pete, I'm doing great. I appreciate you asking co host chair. I think we're co chairs on this show, my friend, but I appreciate that
Pete Mento 0:27
whatever, like, I look at it and it's sort of like, you know, are you in the a hole or the B hole? Is what they would say in marketing or in broadcasting. So I don't want to make, I don't want to put you in the a hole chair. We'll put you in the B hole today. How about that? Yeah, yeah. For the co host. So I like
Doug Draper 0:43
it. I like it. So anyway, my friend, before we jump into this, you travel so much, we have to say, you know, where in the world is not where in the world is Waldo, but where in the world is Menzo. Where are you
Pete Mento 0:54
at today? I'm in New Orleans. So we are. A lot of the team is here this week. A lot of importers here this week for CBP symposium, and we weren't sure it was going to happen, bud. So there was a lot of talk about it being canceled because of budget cuts, but they went through with it. And the the overwhelming majority of like serious trade professionals are either here physically or even more of them remotely, because of travel restrictions and cost. So you're gonna have a lot of people that are just watching the sessions over the next couple of days. And then I think, like 1000 of us are here with and then even more, from customs and CBP and DHS and FDA and all the other partner government agencies, they're all here so that that it's going to be a train wreck, and it's the kind of train wreck that I'm looking forward to. Because the last couple of months, as you know, Doug, there hasn't been a lot of give and take, not a lot of collaborative communication between customs and the trade, and I think there's going to be a lot of communication over the next few days. I'm not sure how collaborative that communication will be, my friend, I think it's going to be, there could be some shouting matches. I won't be involved in those, but there'll be some shouting matches, Assuredly.
Doug Draper 2:13
Yeah, I don't know what to say. Part of me says, this is a professional organization. Everybody is ultimately in the in the best interest. The the end is what everybody wants. How you get there is a little bit differently. So I'm going to put my faith in professionals in our industry that they will hold decorum and things will be just fine. So you can send a picture of either a throw down at a bar 11 o'clock at night when somebody's drunk or somebody's screaming in the back of the room during a breakout session. But hopefully neither one of those happen.
Pete Mento 2:46
Probably not. Customs folks, as you know, in our industry, are not really known for being the most gregarious people, so the idea of a whole bunch of brokers and Customs House brokers being in New Orleans to party, it's not like there's going to be folks out till four in the morning at the at the dungeon. I'll be there, but I don't know if there'll be a lot of trade people that are here really raised in hell, and then you don't want to get too mouthy with a federal law enforcement agency, is what I always tell people. You can have your opinions and you can be upset, but let's not that is very much a bear. Let's not poke the bear. Okay, let's, let's let that one lie.
Doug Draper 3:23
Yeah, good, good, good advice, my friend, but definitely keep us posted. Keith Keenan and I, we got a good text thread going back and forth, not only in for the show, but throughout the week. So you'll have to keep us, keep us up to date.
Pete Mento 3:37
If there's a great fight, don't worry, I will videotape it and I will scream world star as loud as I can while it's going on, but I don't foresee that kind of interaction happening here. Yeah,
Unknown Speaker 3:47
good, good Bucha
Pete Mento 3:49
buddy. All
Doug Draper 3:50
right, this one's a little related to supply chain, and a little bit not, right. So there's talks about tariff and all the things we've been communicating. But what about the jobs and the hiring, and what does that mean for your livelihood? Right? So there's been reports that transportation sectors has taken it down a downslope, and new hires in April came to a crawl, and all that kind of stuff. And I valid, right? I think we're going to see more of it, which is related to my next topic here in a few but the one thing I was talking to a couple of friends this weekend, Pete and they have kids. So this is a broader scope of what's happening in the hiring sector as we enter a summer time. This is graduation season. I have two friends whose kids are graduating, both of which had one had an internship and one had a full on job and not in the transportation logistics sector. Both of them said that we really like you. We think you'll do a good job. But for the here and the now, uncertainty means pause and. And I think one of the biggest group that's going to get hit, and some of our listeners may have kids that are in college or recently graduated or are graduating the semester, is that group is going to get hit hard, right? And I just heard it from from two friends. Interesting is that law school applications are up. I don't know if you knew that, and I think there's going to be a lot of overqualified waitresses and bartenders going on this summer because they don't know they had this job. They're going to wait. Maybe it'll be there in a couple of months when things kind of shake out. Maybe it won't, but, you know, it's the brakes can get put on immediately, like a truck, but to get things started up again, it takes time like a train. And I think we're going to be interested in for an interesting 2025 and the jobs will be impacted that have nothing to do with supply chain logistics. And I wanted to bring this topic up because I spoke to two good friends whose kids have nothing to do with supply chain. Have zero interest in participating in our industry, and they're being impacted
Pete Mento 6:05
absolutely well, you know, it goes beyond that, right? You've got the stock market that's being impacted and just the great uncertainty of business right now, which I think does lead back to the tariffs. I think it's got all this kind of part of it, right? You know that? And so with uncertainty comes a lack of desire to bring new people on. You know, I'm you'll hear a lot about inflation. People always worried about inflation, and then now you're hearing the news. Are we going to be in a recession this this summer? I'm much more worried about stagflation. And Stagflation is when we were kids, Doug in the 70s. If you remember, during President Carter's administration, unemployment was high, growth was not it was stopped, like the economy was not growing at all. And then on top of all of that, we had really high inflation. So all three of those things. The problem with that is it tends to create a long term doldrum, like nothing gets better quick. You have just the labor market stays kind of cruddy, and prices just stay where they are, and they don't come down, and there's not a lot of growth, and not a lot of people who want to invest in the future of business. So what ends up happening is just flat. Flat's bad. If things go down, you can bet on the come up. Things go up, you can bet on the come down, or make money on the way up, but when it just sits there in the middle, it's just not good. So the labor market, I think, is worried about both a summer recession and they're also worried about the possibility we can have something like stagflation happen this industry. We never learn our lesson. Things get quiet. Lay a bunch of people off. Tell truckers. You know, hey, go back to work. You know, at your cousin's place, filing stuff or whatever, until, until it comes back again. People don't come back. We tend to have these massive ramp ups. And then we crap, can everybody? And then we wonder, why the hell can't we handle the volume that just came back? We knew it was coming back, right? So I do worry about that. You know, you know, you and I are both Gen X. Graduated college around the same time, and I do remember in the early 90s, man, it was like this. There was a lot of people who had good degrees that were having a hard time getting a job because the the labor market was full of uncertainty, and that that's kind of how it feels right now. It feels like these kids are going into a labor market with just so much uncertainty. Doug,
Doug Draper 8:22
yeah, and there's, you know, in the big picture, what's their percentage in the workforce? Incredibly small, but it's just the mindset of spring and, you know, ever bountiful. And here's this new generation and where they're going to take us, right? It's more symbolic than actual. But your daughter is in college, and I still have lots of friends. My kids are gone, but gone on. You know, they're no longer in college. But it's real, right, from what I see in and is it going to move the needle? No, is it going to affect the mindset? Yeah, I think it would. Probably. I think it will. Well,
Pete Mento 8:56
Doug, unlike your kids, my daughter is an artist, which means that she needs to get used to unemployment and crippling poverty for most of her 20s and early 30s, if she's lucky, before things get better, I will probably have to work until I'm in a box because I'll be paying her bills for the rest of my life. Doug,
Doug Draper 9:13
yeah, yeah. Well, I'm sorry to hear that
Pete Mento 9:16
she's happy. That's all right.
Doug Draper 9:18
No, I'm not sorry to hear your daughter, your daughter, I'm sorry to hear about you.
Pete Mento 9:24
Why do we work Doug? We work to take care of these families, and she's my family, so I'm happy.
Doug Draper 9:29
Yeah, cool. All right, let's jump over. What's your first topic? Weird
Pete Mento 9:33
one, dude. Real weird one. And this is another one of these tariffs that's been threatened via truth social post that's kind of, that's kind of how it works in my world now, the President has one too many Diet Cokes and just starts clickety clacking on his iPhone, right? And today's is films. The White House has threatened a 100% tariff on films that are not made in the great infrastructure of Hollywood. And this is. Really interesting for a couple of reasons. So you got reason a which is just the the financial optics of it, right? You have a you have Hollywood that right now does do a lot outside the US. It's cheaper to go to Latvia or to go to Slovakia or to go to Colombia or wherever the case may be, Canada, right? That's another big one, yeah, to just, to just create, create movies. There, they get all these awesome tax incentives to do that. And you know, this weekend, I went and saw thunderbolts. You won't go see it. Doug, I know you won't. But for those of you that are really into comic book movies, fantastic. And you know, you're waiting for the post credit scene while, while you're waiting, there's usually extra scenes in a Marvel movie, Doug, I know you've never seen one, so I'm just at the end, yeah, I'm familiar with it, yeah. So my daughter and I are sitting in the theater, and we're waiting for these and believe it or not, even before this, you know, I noticed filmed in location, in all these different places around the world, like they were, they were in Southeast Asia. They were in Eastern Europe. They were all over the place with this. And then I was thinking about that today, like with this movie that's done pretty well at the box office, how would they have tariffed it? And that leads to number two. Okay, so the second big problem is the United States and Europe have been really vocal about not putting tariffs on digital services. So things like having an open platform for for salesforce.com, right, AWS, and all the services that they do for cloud computing, well, this would, in effect, be a tax on a digital service. On a it's not a it's not a thing like we don't, we don't put them in cans and reels of film anymore and ship them around the world. It's a digital download. So would we be going against that, which I've got to imagine? First of all, we've all agreed we were going to pause this, I think, till 2027 that there weren't going to be any digital tariffs. But if we were to do this, is this going to rip open an opportunity to tax all kinds of other international digital services, which we don't want to happen, because it's a huge part of our economy. I don't know if, in his haste and his zeal to do something about Hollywood, if the President and his advisors thought about this, because they may be biting off a lot more than anyone in this economy wants to
Doug Draper 12:14
chew. Yeah, I'm going to keep my comments real, real simple on this one, right? I'm curious to know, what is the value that they would be taxed upon? Is it the cost of the production? Is it the Bucha box office gross? Is it only the percentage of money they spent in a country outside of the US? I mean, there's so many variables in there that I've I read about or I heard about this this morning, but I didn't get in the story. Did not get into that. Like, what is the value that's being taxed? Like you said, it's not a it's not a commodity that you're putting in, that you made it a factory, and said, Here you go. So I don't mean, do you know what the value, what they talked about, what the value was going
Pete Mento 12:54
to be? No, that's one of the questions that was in the press, is, would it be on production cost? What about distribution. Distribution can oftentimes be, you know, almost as much as production cost. Would, would it be on on all films, or would it just be on stuff that's meant for theaters? So would this push stuff towards the digital platforms instead? I don't know Doug, you know, none of that information is out there. I think at this point, it's just really a threat, more than anything.
Doug Draper 13:19
Yeah, I think you're right. It's just some, I mean, you and I are talking about on the show, which is exactly the point of this whole thing, right? It's just to kind of see anyway, I'm gonna go down a wormhole here. So don't
Pete Mento 13:30
mess with my movies. Doug, don't mess with my movies. Like
Doug Draper 13:34
my wife actually said she would be interested in going to see that.
Pete Mento 13:37
Thunderbolts are centers. Thunderbolts. Oh, Thunderbolts is excellent, man. It's like antiheroes, you know? It's excellent. Centers is very good, too. Centers, it was not what I was expecting. It was really entertaining. So I really like that a lot. But I've got Fantastic Four coming out this summer. Doug on my birthday, no less. So fired up for that movie. Lot Superman, the new Superman reenvisioning is coming out as well. James Gunn, very fired up for that. And Doug will just be there like you nerds. What are you doing? You nerds? Why are you going to this? If you have not seen a Marvel movie before, Doug, I don't know if you will completely understand what's going on with thunderbolts. Yeah, there's a there's a lot of character stuff and story stuff that geeks just know going into this particular movie. So it's not an easy standalone film to go. It's
Doug Draper 14:28
hold on starting to get the buds are coming out. It's here at steamboat.
Pete Mento 14:37
Excuse me, I'm okay with that, buddy. I'm okay with being called the nerd. I'm perfectly fine with it. You know, you can thank us for all the, all the beautiful things we create, like the internet, you know, yeah, that's, that's kind of cool about how Gore created
Doug Draper 14:50
that. Anyway. Drum roll. So let's jump into one of my favorite parts of the show, which is halftime, brought to us by CAP logistics. We appreciate the. And letting us be on this podcast every week to talk about all kinds of crazy stuff, including halftime. So, Pete, what do you got for this first for halftime this week? I think
Pete Mento 15:12
it started last weekend. There's been this, this internet conversation about, could 100 men beat up a gorilla, okay? And I, I love this question, um, first of all, I don't think people understand just what we're talking about here. Like a gorilla is a very terrifying beast. So if we had a very big gorilla, and we could, we could get 100 men willing to fight with this gorilla. Could 100 men beat up a gorilla, and the Internet has had a really good time with this, everything from, you know, if I could pick the 100 guys, like, I'd want the the 1990 Detroit Pistons, I'd want like, Mike Tyson, probably Charles Barkley, when he when he's in a bad mood, you know, he's like, who are we going to pick? We pick MMA fighters, or is it just 100 dudes off the street? Like, you know, you're walking around, pick 100 dudes off the street? Could they kick a gorilla's ass? And then also, John Mulaney, last week, had said they were the comedian John Mulaney, he said, I'm in my writer's room, and we're all talking about this. And someone said, I wonder how many 13 year olds it would take to beat up John, because he's a very small guy. And so we got on the show and he said, If you are a 13 year old, have your guardian contact me, because next week on the show, they think that it would take 313 year olds to beat me up. So if you'd like to, we're going to have the fight. And he puts the email on the screen, and he says, so if you have a 13 year old that thinks they can take me, you know, this is the email address, and just to let them know I'm really gonna fight like I'm not gonna go down, I'm thinking, you know, this theater nerd that was a writer on SNL, probably not the greatest pugilist on the planet. And I know a lot of 13 year olds just from going to jiu jitsu class that would tear this boy up. So I'm pretty sure it won't take more than two, maybe even one, if you got the right 113, year old to beat John Mulaney ass. But Doug, do you think 100 people, 100 grown men, could beat up one gorilla?
Doug Draper 17:14
You know, I saw, I saw, I heard about this. I don't know if you saw Saturday Night Live. There was a parody on it that they did. I don't know, man, if Yeah, I think they could to answer your question. I always like to answer a question, and I think 100 men would be able to take down a gorilla. I don't think
Pete Mento 17:34
there's a right answer. I really hope no one ever tries to do it. Apes are terrifyingly violent. They are very, very violent. And they don't fight nicely. They bite off appendages and and things off one another when they fight. So I I don't know, man, like I don't want to have to find out. But I think I'm Team gorilla, Doug. I think I'm Team gorilla, yeah.
Doug Draper 17:57
Well, anyway, we shall find out. I don't know. We won't find out. We'll find out about John Mulaney and 13 year old. Oh, John
Pete Mento 18:04
lady is going to get his ass whipped. Yeah. But what do you got for us this week on halftime, buddy?
Doug Draper 18:08
All right, well, this past weekend was Berkshire Hathaway's annual meeting in Omaha, so this and, yeah, he talked about different things. I'm not going into that. I'm talking about the mic drop moment at the end where he is going to be stepping down and retiring at the end of this this year. So the Oracle of Omaha is Mike dropping this thing and and moving on, Greg, I think it's Apple able, A, B, E, L. He's the CEO of the Berkshire Hathaway Energy holdings division and non insurance operations. Anyway, He's the heir apparent. He's going to come in. Don't know much about him, but I was thinking that there's actually a friend of mine. Well, a friend of mine, my brothers, whose father got involved with Berkshire Hathaway was very successful. And I'm sure there are people listening to the show whose father, or possibly, or more likely, grandfather, that may have said, Man, I had the opportunity to invest in Berkshire Hathaway back in the day. And man, if I would have done that, you know, dot, dot, dot. And so I was trying to think that there's a lot of missed opportunities out there. My father. Keep in mind, Pete grew up in Wichita, Kansas, and he had a chance to invest $1,000 with two guys, two brothers named Dan and Frank Kearney, and who they are, but they started Pizza Hut. Yeah, right. And, and that was the missed opportunity from my from my old man, 1000 bucks. You know, I don't know, 1000 bucks wasn't $1,000 nowadays. But anyway, that was the missed opportunity. So Pete, I wanted to ask you, and I joked and said, This is a pretty heavy, heavy question. So don't freak out. Don't go into a cocoon. Beef. Be light hearted on this. But. Has there ever been a missed opportunity that you've had in your life? Many so
Pete Mento 20:04
the first was when my ex's oldest son tried to convince me to buy 1000 Bitcoin when they were at like $2 a piece, that would have been life altering money that would have been like generational wealth. And we know how I feel about Bitcoin, and I, you know, I definitely paid for that one second when I graduated from college, I had an interview with the Boston Beer Company, Sam Adams, and at the time, I think they only had like seven or eight employees and the stock that they would have offered me. So it's about half of what I would have made working in on the ships, you know, but the stock that they would have offered me today would have been worth, you know, well in excess of seven or $8 million I looked it up before, before we talked here. And then the, the third one that really grinds my gears, uh, I bought a house the week of the IPO for Google, and most of my money was tied up in that transaction. And I said, Well, you know, real estate's a safe, safe bet that what, $75,000 in cash, probably, again, generational kind of wealth, if I were to put that kind of money in there. The problem for me, Doug is, because of what I do for a living, I have a lot of pro probations, a lot of prohibitive so I can't invest in companies that I work directly with, because I have too much financial insight. And when I was public accounting firms, it was strictly forbidden. So I would, I would hear about things that were going on. I'm like, this is going to be huge, but there was nothing I can do about it. So, Doug, did you ever have any personal ones where you should have invested and didn't?
Doug Draper 21:47
No, I think the the only thing if I didn't get into this career, Pete, I would want to get into commercial real estate development, right? I think this, being in Denver, bought at my first house in 1997 right? It was in the wrong neighborhood for a song, and that neighborhood just exploded. I made some good money on the house, but if I would have held it for another 10 years, it would have literally tenfold. And so same thing happened with my second home that I bought, but not tenfold, but it went up. So anyway, I'm just saying that you can position yourself. I think it's fun to you know, I'm not in it. So maybe the word fun isn't the right one to use. But I think to get to your question, if I had a little bit more money, I would have invested in other homes when they were dirt cheap and been able it would have been a lifestyle enhancer. It wouldn't been generational wealth. But yeah, so maybe getting to more into real estate development and real estate investment. Yeah.
Pete Mento 22:46
You know, every young person that listens, don't have any debt, try not to have any debt. Put as much money as you can into your 401, K and by property and by property intelligently, and you're going to be just fine. But for whatever reason, when you're 25 you're a lot more interested in going to Cabo with your boys than getting yourself a condo. You know what? I mean?
Doug Draper 23:07
Yeah, yep, I'm living it vicariously. So you're Yeah. So I want to jump into my topic. It's kind of short and sweet, but it's related to a whole bunch of articles that we've been seeing, if you've, you know, I get, I don't know, 10, you know, email newsletters that pop in my inbox every single morning, and I cruise through them to see what's going on. But the one that caught my attention was from last week, and it just talked about all these different trucking companies, right, that are down. And I was going to call them out by name here, Pete, but I'm not going to do that. But their names that you and I have heard of, it's on the, you know, the internet, and there's articles being written about them, but every other day is this is down catastrophic loss, and these are big, multi billion dollar companies, right? And so I started thinking, all right, the thing with Trucking is it's transactional. And I'm not talking about contracts where you have transactional spot market rates and I have a contract, but I'm talking about the fact that a truck starts and stops their journey within a matter of two or three days, right? The whole lot the length of line haulage has shortened over time because of network analysis and things like that. But when people put the brakes on, and we've talked about this work, they can put the brakes on pretty quickly. Is that those trucks sit idle pretty quick, right? Because they are in a transitional movement from point A to point B. It takes two, three days, maybe cross country, four days, you know, with a team type of driver. And so that's why we're seeing all of these mis q1, targets and things of that nature. So what I'm thinking is going to happen Pete, and we always try to think forward on this, is that you're going to see the same type of conversations. Happening, I think first in air freight, and then secondly, in warehousing, because warehousing is just crushing it right now. I don't know how many people I've called or have called me and said, Do you have bonded warehousing space? And I'm like, you didn't have that conversation three, four weeks ago, that you know that that ship has sailed. But my point is that Trucking is so transactional, the movement from A to B is so short that when people stop immediately, that's the first group. That's the first supply chain node that is impacted. The other ones will be impacted, because it's a lot, it's still the pause is still there. So I think you're gonna see air freight. I think DHL is making some changes with their network. But I think you're going to see some large warehouse companies that are going to be having reductions in workforce. I guess I was trying to think of something funny to say there. But anyway, tracking first, I think warehousing and their freight are going to be second.
Pete Mento 26:00
I agree. I think ocean freight doesn't have lot to worry about right now because of the the pending doom that we're all waiting for, right? But, but trucking minutes is such a it's a complicated, difficult and soul crushing profession, and then on top of that, right? It's so fickle based on what's going on around us economically, like, I think you're right, and same thing's gonna happen that always does. We're all gonna be looking for truckers. We're all be looking for companies that can get a space, and it's just not gonna be there. This is what happens, you know, we we we crash, and then we have these elevations. It's like it's so bipolar, and it seems that we never learned the lesson about this to try to keep people on on a salary, keep them on working, so that when the time comes, we have someone who's able to really manage it for us. But I think you're 1,000% right, Doug, and you know these trucking companies that are going through it right now, it starts off small, and it makes its way to the bigger ones, because eventually it all sort of gets rolled up into one giant environment of economics.
Doug Draper 27:03
Yeah, yeah. Okay, all right, bring us home. Pete, what you got to wrap this up?
Pete Mento 27:08
Yeah, but so my last, my last topic is really about infrastructure and automation. There's a number of ports that have brand new facilities, new warehouses that were being built before the the new agreement with labor happened, and there was a considerable amount of automation that was agreed to beforehand, and now they're sitting idle until some kind of, I don't know what you'd call it. It's not really a retrofit, I guess, but to bring it back to where it would be before these agreements were made. And if you look at the executive order on maritime, maritime dominance that President Trump put out. A lot of it in there has to do with increasing the speed and efficiency of our ports that comes from automation. So I foresee Doug in the very near term, like next year or two, there's gonna be these two forces smashing into one another, of the desire for this country to help build better, faster ships and more efficient and more more cost efficient ports, in order to become not dominant, but in order to become less than a footnote on global maritime again. And in doing so, we're going to have to come up against a contract that was just signed with both sides of the United States that's doing everything it can to limit automation.
Doug Draper 28:21
Yeah, that's good point. When you were talking about this, I was thinking that the smaller, second tier ports that really exploded during COVID, and when the West Coast longshoreman situation was coming up, people are like, Forget LA, forget Seattle. We're going to go around the horn, and they would go into the savannahs of the world and things of that nature. That came full circle because the East Coast sport, pending port strike and the contract over there, everything switched back to LA. I think last year we said LA is back, baby and and that is definitely the case. But just like we my reference to a train, right? If you're like, hey, Charleston is the new place to be, you got to buy the land, you got to get the permits, you got to get all the regulatory things to to break ground, and then and then move forward. So some of those projects that started during the heyday are starting to come to fruition. And like you said, there may be some automation built in, but now they can't have as much automation. But I think that conversation that you said in the next year or two, there's going to be a lot of it focused around the second and third tier ports, because it was cheap land, unique buys, and again, that was a real estate play out of the gate when it was in their heyday. So I think you're you're exactly right. It'll be interesting to see how that evolves, but I think we're going to see some of that conversation around those second, third tier points, agreed, buddy. Yeah. Cool. All right. Well, that brings us to a close of this week's. Global Trade this week. Pete, every single time you're in motion, you still have time to sit down and do this show, and that's greatly appreciated. Makes good for scheduling. And thank you. Have a great event down there in New Orleans. And for all of our listeners, we appreciate it always welcome to make comments in the post that we put out there, and remember if it's happening global trade, we're going to talk about it here, and we're going to take a forward leaning perspective on those topics. So that's it. Pete, thanks so much. Have a good conference. Thanks,
Pete Mento 30:31
buddy. See you next week. All right. Catch it you.
Transcribed by https://otter.ai