Global Trade This Week – July 11th, 2023
-
Keenan Brugh 0:00
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Doug Draper 0:10
Hello, and welcome to a another edition of Global Trade This Week. My name is Doug Draper. I'm one of your co hosts. I'm actually coming to you this week from a lake house in Wisconsin. I have a funny story to share about that. But I need to introduce my partner in crime. Mr. Pete Mentos, a co host of the show, Pete what's going on? And you two days or excuse me two weeks in a row, you got a collared shirt on so how's the new job?
Pete Mento 0:38
It's great. But I am I am at the corporate headquarters. So I do have to dress like an adult. When I come here, seeing this I do have a rather adult job just like you. But I do have to dress like an adult. Just in case someone important comes by you know. So I do think the new the new Draper look, I love this. I love the whole. Is it rock Rock Chalk, Jayhawk? Did I say it right?
Doug Draper 1:03
Chuck J hawk and I got my little guard shirt off. So when I'm on the on the lake, I can be responsible. Yeah. But hey, global trade this week is an important show. It needs to be weekly, like the name. And so yeah, I'll peel off the lake, get this thing done and go back and enjoy life. So here. So here's the funny story, Pete and we can jump into it. So rural Wisconsin, right. It's just, it's just a whole nother world. So I'm driving. Just yesterday, we just got in yesterday. And I make this left hand turn, kind of out in the middle of nowhere small town. And there's a sign that's leaned up on this table in the front yard of this house. And it says local honey for sale. And it's in masonry jars. And there's a cash box on the table with a rock on top of it. So I was like, wow, I gotta see this is about I pulled over to check it out. I opened up the cash block. Literally, there's cash in there so you can make your own change. And I'm like only first of all that gives me such good you know, the world is not imploded imploding. It's just a little example that there's still good people out there and trustworthy areas of the country. But I was just, I'm like only in the middle of Wisconsin. Can you have a lockbox of money with a rock on the table that says honey and everything else? So anyway, I thought that was pretty cool.
Pete Mento 2:30
Well, it does. Also you know, honey is not easy to get so the fact that got all that honey just hanging around, you know, get your inventory out for any any scumbag freak salesman like you're right, it come steal. That's fine. Now, I know I was thinking I'm a big believer in local honey, if you have allergies, you should put that in some tea. It really does help. It really does help.
Doug Draper 2:51
Yeah, and I heard that, like, it truly needs to be like hyper local, within a couple of you know, two to five miles. You know that stuff. That's where you want to pull money from those bees.
Pete Mento 3:02
Doug, I think we've talked about this before, don't get me started about bees. I am fascinated by them. I am fascinated by them. So if you get me started talking about it, this will be a two hour podcast and we don't want them.
Doug Draper 3:14
Yeah, well, the podcast is about global trade, transportation and logistics. So let's get it started my friend, I opened it up so you get the first topic?
Pete Mento 3:23
Well, I texted you guys this morning. And I told you, we're gonna have to talk more about yellow. You know, we, we got into it last week, it was your topic. And that just sort of opened it up to a broader labor conversation. But I believe this Jason O'Brien is that his name, the gentleman who represents the Teamsters, he he is he is fascinating to follow on Twitter, if you are not. And last week, the good people at yellow, just came out and said, because of the way that we did our integrations, we have some, we have some internal issues that are forcing us to restructure, it's going to take us a while but we're not doing so well financially. And if you force us to work out of these contracts, we may legitimately be in a position where we're not going to be able to operate anymore. And you know, you read that and like that's pretty honest. I'm not a lot of publicly traded companies will come out and say that in public, you know, and he sends out a tweet that basically says, it's not our problem. Like you guys lost was a 37 or $38 million in the last two years. That sounds like a yellow problem. And then he puts a picture up of a gravestone with a yellow on it, their logo on it, buddy, with like the years and it's like you figure your stuff out. You agree to a contract with labor, figure it out, you know, you're not going to continue to use us as a leverage point. And their attorney was also quoted. He had a great line. He said people have To stop looking at labor, like a variable cost and logistics, and that has been stuck in my head, since I read that article, Doug, he said, you know, you look at fuel, like it's a variable cost, but now you just know, it goes up and down, and you have to deal with it. Labor's the same way, labor gets more expensive, and less expensive. It's something you have to manage as a professional in this industry. You know, and you read those, but you know, to the credit of yellow, they're not taking the bait. As far as I can see, they're not coming back like, oh, yeah, well, you know, I'll tell you a thing. Like they're, they're a bit of a bore, but the labor disputes, ups and yellow O'Brien has been saying in both of them, like I, I know, it's awful, but boy, is it entertaining. His tweets are very, very entertaining. But, I mean, we're in a situation now, where you have a serious major, very important company, there's only three that are still a union, that saying that we would rather our people have to go find other jobs and be paid less than we believe that they're worth. And that's a sign of how important labor has become. And sort of, I believe, and I could be very wrong about this. But I believe that we're seeing a systematic cultural shift in Americans attitudes towards organized labor, I think towards more towards organized labor since the pandemic, and you know, the way things have been going with the labor markets these last couple years. So it just really got my attention dug in, you know, we touched on it last week, but this, do you think they would really go through with it to deal with go through with letting the whole thing collapse rather than renegotiate?
Doug Draper 6:39
You know, you made a comment before the air 22,000 employees. Yeah, you know, if I was one of those, I'm like, Hey, I'm all for the team. And I saw like you said earlier, I have a mortgage to pay my kids in football camp, you know, my wife's in transition, or whatever it may be, have somebody control my destiny like that and take it to the nth degree and watch it go off the cliff, I'd be pretty pissed off. So it's just a big, big company, you know, it's almost too big to fail. I don't know if that's the right term to use here. But holy cow, does he control a lot of people in his hands with flippant tweets like that, right? I don't know if it's the right word, but just off the cuff. So I don't know. It's it's an interesting scenario. In the one thing Pete, I noticed I was looking back, it seems like yellow has always been in been in trouble. I would like 2008, I think, or 2009. They were close to bankruptcy. And they were on a thread and they kind of made that through to seems like yellow, as always had difficulty trying to get get situated. And oh, by the way, you and I, and the rest of people listening here just gave them a $700 million loan from the government through the Cares Act factory COVID. And like, where did that go?
Pete Mento 8:03
Yeah, it's it how many companies do we know of size that have not just been running around a shareholders like well look at all this money? Last couple of years. And now the you know, that that was in the market was insane. So how are they going to get by now that the market is really starting to take a drastic turn down? This is just, it's incredible. But as you were saying, do you really trust your union that much, and I guess it's up to them to vote, and make that decision, we've had this conversation before, you know, as as laborers, we are, we are agreeing to take our precious time and use it towards shareholder value, or ownership value. And you've got to determine what that value is. And if they're not willing to value it at a basis you think is valuable, you got to find someplace else to work. But collective bargaining makes a little more harder, a lot more harder to do that as an individual, but it gives you a lot more strength when you do it as a group. So I just I'm going to do a trade school on Friday to talk about this Vancouver ups. All of it its delegates, it just seems like I can't remember labor having more of a disruptive input into our business that has right now in our in our career.
Doug Draper 9:21
Yeah, well, you got parcel LTL, and ocean freight that's all being affected by that to some degree. So it's,
Pete Mento 9:28
it's crazy. It's crazy.
Doug Draper 9:30
So my first topic is a little bit along those lines. And I'm sure you have been aware or maybe not, but today and tomorrow is prime days, Amazon Prime days. And so a couple things when I heard about that. First of all, first thing is my family's probably going to make some purchases in the next 48 hours. So I need to be aware of that. The second thing the good news is ups and and yellow. Prime days will have come and gone and packages been delivered, whether it's LTL parcel, before any of the labor situations come to a head, so don't worry about it, your packages will be delivered, it won't be problematic. So that's one thing that caught my attention. The other one is it's starting to pull in other retailers. Now I think Best Buy, the last couple of years has said, Well, we're gonna run a, you know, sailing in concert as well as Walmart and Target. So Amazon by itself is almost created a mid year holiday by putting this out, I think years ago. Correct me if I'm wrong, but whenever they really amped up their own delivery network, it was almost like a test run to prepare for for q4. So what's one a special sale in the middle of summer and see what you come up with. So it's interesting that that their directive has brought other retailers on. And then the third piece is, everybody's kind of cleaning their closet out, right? Think of it as a yard sale, because although the purchase orders are smaller, I've seen that in my industry with with inventory levels, starting to decrease because the POS that are coming in for fourth quarter are smaller than they were during the COVID era is that people are like, we got to get this stuff out of here, we're going to buy or sell this stuff. So it'll be interesting to see what the holiday peak looks like. Because if if if companies get rid of their inventories, and the replenishment isn't quite as high, does that mean the sales in the holiday season aren't going to be as aggressive, so is this kind of the best last final to get really good deals for the rest of the year. So anyway, people are gonna get rid of it. But there won't be an end won't be impacted with with parcel and LTL on the strikes and the labor issues we've been talking about. But it's always nice to see prime and how much they have shifted, and controlled consumer buying habits and how other companies responded to react, which is a sip, which is essentially just me too. Right? So anyway, it'll be fun to see how, you know, Wednesday. Well, tomorrow's Wednesday. So Thursday, there'll be all kinds of statistics about how much business they sold and the throughput. So that'll be interesting to see.
Pete Mento 12:17
I love it. I as a spectator of American consumption. There are few things as exciting as these these consumer holidays like, like Black Friday, or wait a week that we had at Wayfair prime days here with Amazon, I think they're incredible. And the fact that it's become something that folks look forward to, you know, it's like, well, you know, I was thinking about buying that new big TV, but I think we can wait, I think we should probably wait till for Prime days, because I'm sure we're gonna get a hell of a deal. And they you know, they really do, like you said, they're cleaning out their inventory as much as they can to get to it. But I'm wondering is, you will know what's going to happen every year. So I'm sure that there's some people a lot smarter than me, that have done a lot of analysis to understand how to set themselves up for that inventory moment and to buy to suit that might have happened in the past. But given COVID I'm sure a big part of this, like you said, it's just trying to clear out what they've got. And get ready for Christmas. I'll be fascinating to see what those numbers are like, buddy. Really fascinating.
Doug Draper 13:25
Yeah. You know, what else is fascinating. Pete is the segment of our show called halftime brought to you by as a pretty good segue, I have to admit, brought to us by CAP logistics. We're just talking to Keith and he pushes the button and the Levers as I say. So it's always great to have those and we appreciate their support. So cap logistics.com If you have questions on supply chain, so Pete, I like yours. We'll get you all fired up and then I'll do my second so let her rip on halftime.
Pete Mento 13:56
So a lot of stuff in the news these last couple of weeks about people just losing it. That's the only way I can put it ducks so there was the there was the young woman who was on a plane and said I have to get off because I don't you can believe you're not believe me. But there's like there's Puritans or old timey people out on that wing and I can't be on this plane. And then there's this this rash of people starting fights on planes, getting violent on planes. You've got people getting violent in airports. That's a problem then you've got these idiots that are throwing things at concerts now. And people like Adele are saying Go ahead throw something at me. I will stop performing. See if I care and you know the road rage folks starting fights at fast food restaurants. The hell is wrong with people duck. And I I went down a rabbit hole this weekend looking at it because I was wondering what the people that they associate ologists say and of course, they say COVID had a lot to do with this. People were lonely. They forgot how to act in public to drinking, lots of drinking lots of recreational drug use lots of stress. But they said they can't blame mental illness for all of it. Just they just can't, it just seems like a social contagion almost. And my, you know, my MeeMaw had a great way of putting it, Man, y'all got to act, right. And that's just, you know, though, I feel too taxing for some people, but it's like, you know, your parents raised you well enough to realize that they might not have the make rib tonight. So you might need to get a quarter pounder instead, at the McDonald's, rather than ripping stuff off of the counter and starting fights with people and I worked in fast food when I was a teenager, and it was very boring. I probably would have welcomed an opportunity to throw down with some drunk people, you know, 10 o'clock at night when I was a teenager. But now what is what is going on with people are just freaking out all over the country, man.
Doug Draper 15:57
Yeah, it's, well, here's the good news. I was on a plane yesterday, from Denver to Milwaukee. Everything was calm and cool. We're actually delayed. An hour and a half the crew was late and everything so there was a little rumblings. But yesterday for my flight, it was pretty smooth sailing, but I don't know, I guess I'd say two things, insert alcohol and there's always problems. And then number two, is the ability to get likes and shares and views. Right? If you look like I can go on right now to any one of the social medias and be able to pull up some freak out. You know, it's even promoted. There's channels on Reddit and everything else, you know, public freakout where you can just go and watch people lose it. So I think I think that has something to do with it. And, you know, alcohol and there's a camera everywhere you are, so it's getting captured more. But the craziness, like you said, throwing stuff on stage and hitting performers. It just seems like it's just you know, going to the nth degree.
Pete Mento 16:58
Y'all gotta accurate to say it again. Y'all got accurate you get you gotta knock this off. Because Ultimate is going to happen is you're not gonna be able to see the people that you love. Performing. Is that what you want? You know, and I'm that guy, man up. I wish somebody would get up on my plane. Okay. I've been training for so long to choke somebody out, please. Please get out. Like who these people with your cameras out. Put your camera down and do something.
Doug Draper 17:28
Yeah, that's something
Pete Mento 17:31
man like I tell you right now one of my boys is on the plane and be like You ready to go? Ready to go? One of my sons or my rugby buddies be like it's like I would be it'd be like the prom and Prime Day all wrapped up into one for me Dog. I'd be up in that aisle. You know, just throwing haymakers grounded pound and I'd be so fired up. So I wish somebody would on my flight. It took one this morning. Everybody was snoring? Not a problem. I wish somebody would
Doug Draper 18:00
rise. All right, well, I'm going to jump into something that's made a little bit of news recently. The Northern Lights, I guess aurora borealis is more commonly referred to as normal life. 17 states, I think it's Thursday. So two days from now is 17 states we'll be able to see it. So I was like, always heard of it. kind of know what it's about. So here's a logisticians perspective of it right, I'm gonna dumb it down. So the lights actually take place like 80 miles up into the atmosphere. But here's, here's the, the basis is, there is a storm, right? A solar storm that happens on on the sun, those power particles give off, you know, electrically charged particles. And then they collide with, you know, the magnetic fields that the Earth's atmosphere, the magnetic nature of it pulls it to the north and the south pole. And then our atoms and molecules interact with their electrons, and yada, yada, yada, you get some pretty cool lights. And so apparently, there's a pretty large solar flare, that's gonna happen. So I'm excited for it. I'm kind of in the middle of nowhere. And Wisconsin, I will be maybe I'll wait. Maybe we'll get on the boat and go check it out in the middle of nowhere without any light distractions, but it and I think it's pretty cool. I like to talk about it, as far as on the show goes here and just really understand it. So I don't know. Have you ever seen the northern lines?
Pete Mento 19:35
When I was a teenager shipping on the Great Lakes, I got to see them. They're beautiful. They really were. So again, it. It's all the things that we see in our regular interaction with the environment around us. You don't see the sky just start shimmering in all these different colors. I saw them again in Alaska, when I was a bit older. And New Hampshire is one of those states where we're going to have pretty good visibility. And because we don't have as much light pollution up north, there's a lot of people from New England that are driving to Maine and New Hampshire, get a good look at it. And, you know, pretty good explanation to all those semesters of meteorology. I forgot almost all of it. But I do remember that it's a it's a, it's a, it's a magnetic storm, essentially, of those particles like, it really is. It's just beautiful. So there's somewhere out in Colorado. I don't know exactly where it is. I think Keenan knows he's probably sitting there like, you know, munching on his Kind bars right now drinking his camp Bucha. Like, is there someplace in America, the best place in America to not have light pollution is somewhere in Colorado. And it's so good that without a microscope, you can see the Milky Way from the naked eye. So if you guys are in Colorado, and you're going to have it, I mean, you're probably going to have some of the best viewing in the whole country to see it. You should absolutely get out there. Check it out.
Doug Draper 20:57
Yeah, I have no idea what you're talking about in Colorado, but it really exists. It exists.
Pete Mento 21:03
Yeah, I saw a CBS This Morning Show about it. That really got deep on the fact that it's just so perfect. And like stargazers from all over the country come with their telescopes, because they just get a much better, much better view. So, yeah,
Doug Draper 21:19
interesting. It's probably a southwest part of Colorado, on the border of Utah, out there. But anyway, back to the show, my friend since logistics gave us that five minutes of banter. Let's get back to to global trade. So what's your topic number two,
Pete Mento 21:36
I had to write down some numbers here to make sure I got them. Right. But we're according to the number of different global organizations, so the World Trade Organization, the World Bank cscmp, we believe that amongst those groups, our industry believes that the cost of transportation and global trade as a whole will be increasing around 4% Or about $800 billion. And that will be due to the modernization of vessels to live up to the IMO international maritime organization's requirements to be better on the environment. So to deal with their, their their carbon emissions. And when all this came out, all the air all the ocean carriers, you know that we all signed on to these pledges, they said they'd make it happen. And now they're all very worried, because they're doing all that they can to say, this is Look how expensive this is going to be. It's going to crease all the costs you freight, we're gonna have less ships, you just like COVID all over again, you know, but they went out and they bought all these new vessels that did not have the necessary at all, I can't say all that many of the vessels that were purchased globally, did not have the necessary technology to deal with the carbon emissions. So it's, it's at least companies that wave the green flag all the time if you're going to if you're going to go out there and espouse that sort of mentality you delivered as well. And much like when we talked last was it last week about the air carrier security changes? And I said no, I've got I've got a similar attitude about these ocean carriers. You need to do this before it's 20 years from now we're finally forcing you to do it. You promised you would step up get it done
Doug Draper 23:20
yeah, it's kind of out of sight out of mind because you don't see the movement of the vessel you see it in the horizon when it leaves the party we see it you know, backed up in in LA Long Beach or or Vancouver as it is right now. But one thing I did not manage an industry for a long time you always hear about bunker fuel, and doing some research that's like the the dregs it's like the bottom of the barrel crap. Sludge. You know, fuel that's, it's just dumping into these things, right? I'm just pitching a picture of a guy shoveling snow shoveling coal, it's just dripping thick sauce that they're putting in these vessels to make them go so yeah, I didn't, you know, they're not pumping diesel pulling up a boat side here at a lake. So it'll be interesting. I don't know if it's just a little bit of improvement will check the boxes, and the compliance that needs to be met or if it's going to be major overhauls. I also heard that the technology to get it to you know levels that's really going to be impactful. This isn't quite there yet, right? So we're trying to hit the standards with technology that may not be able to get there as efficiently your cost effective so it's a big, big topic that doesn't make a lot of a lot of headlines until you wonder why the hell is this this ocean freight rate just jumped 500 bucks because of bunker fuel.
Pete Mento 24:44
That bunker fuel the smell of it just remembering right that makes me a little sick to my stomach and I got no problem doing less than container loads on on ocean clippers again. sending this out there on wooden ships and let the sea in the in the wind take us where we Gotta go ask me if I care. Right? I'll go back out there. Just be waiting two and a half months, maybe for your stuff. But we'll see. You know, I've kind of had it with the this attitude that it's going to cost a lot of money. Well, we just got through that, didn't we? So I think if we're going to do this, let's do it. Let's just stop talking about it. Let's do it.
Doug Draper 25:19
Yeah. Cool. Bring us home. Yeah. So my final one is related to I think the third trip from politicians from America going over to China to have a meeting that doesn't really amount to anything. But Yellen is recent visit caught my attention specific to I wouldn't maybe not a mic drop moment. But it's kind of coincidental, we're yelling, what Yellen went over there to have her conversation that the China essentially put restrictions on the world's access to gallium and germanium, which are precious metals, I think is what rare metals is what they are. And those items go into the manufacturing of batteries and a lot of the kind of technology. So it's like, right before she says, shows up. Here's a little Zinger, you know, just kind of poked you in the side. If you dive deeper in the story, yes, China has a lot of those, you know, rare earth metals. But it's not that rare. And there's other countries out there that can it can produce it. And the amount that those metals require the amount required to manufacture is pretty minimal in the big picture. So is it impactful? Yes. But I think it's more politically impactful than then an actual impact my personal opinion, I guess, if you're somebody else making EVs or battery technology, maybe maybe have a different take on it. But my whole point in this one, Pete Is it seems pretty coincidental, or it's not coincidental that, that that came out just days before the latest meeting with China that amounted to nothing with another political politician coming from from the US. So I don't know, I think that this whole trade war is more passive aggressive than anything, right? You come out you make nice and then there's little zingers on both sides that I got so passive aggressive trade war. So a patter I'm trying to think of an acronym, because I love those pa t. W, trying to think how you would pronounce that. But I think that's the new term I'm going to reference. When we talk about the trade war between the US and China, pat, pat work, there you go. That's what I'm gonna call,
Pete Mento 27:45
there's actually already a name for it. It's called diplomacy. Diplomacy is sticky and ugly. And it's a dance, you know, there's this, what we show everyone we're doing. There's what everyone believes is actually happening. And then there's what's going on behind the scenes to make it palatable for everyone's political outcomes. And yeah, this was clearly a, don't forget what we can do sort of a moment, we've been just as guilty as that in the US as any other country. It has far sweeping global issues don't come from it like the United Kingdom, when they did Brexit, they made an agreement that it's some absurd number, like 54% of the EU value in EVs has to come from UK and EU production, well, most of the cost of these EVs is the battery. So the inability to get these things is is making it more and more expensive, more difficult to create them. And they may actually start losing jobs in the UK, because they just can't live up to their expectations. And that's going to make it hard for these EVs to be compliant with the UK as requirements for value. So they're playing around with it, but at the same time, you're right, there are American solutions that we are working on, that should be able to overcome what China's doing. It's gonna take a little while, and it's gonna cost a little more, they just want to remind us, you know, I just want to remind you, I can do this if I want to it's, it's just another one of those reminders that they're not a paper tiger, if they want to, they can make life very, very difficult, even if it's the short term, and it's more than just irritation or annoyance, they can actually make it pretty rough when it comes to these rare stuff. But it's I mean, you want to talk about a topic you and I could spend a whole hour on. This is a pretty ugly one on what the different countries could pull from one another if they wanted to make life difficult.
Doug Draper 29:44
Yeah. Yeah, well, diplomacy. Yeah. The diplomacy of countries that have precious metals in the earth that are needed for battery production is going to be a topic. I'm sure you and I will speak about multiple times in the future.
Pete Mento 29:57
It's not going away, buddy. No, but thanks so much. Register Doug speaking of going yeah, we we appreciate all of you coming today but it is time for us to go. Your global trade this week brought to you by our great friends at CAP logistics. Doug has always just been a pleasure chef's kiss. And you know also thank you to Keenan back in the booth. Hopefully he's finished with his camp Bucha and he can do his two hours of sun worshiping yoga before he gets back to work. But we appreciate everything that cap logistics does for us appreciate all the hard work you do Doug and and Keenan and all this. Can't wait to see you again next week on another exciting edition of global trade. See you awesome you guys.
Transcribed by https://otter.ai