Global Trade This Week – August 15th, 2022
What’s going on in Global Trade this Week? Today Doug Draper of ACME Distribution and Keenan Brugh of ICOSA Media cover:
1:15 -Inflation Reduction Act & PPI Still Outpacing CPI
7:36 -Collaboration Between Competitors
13:32 -Halftime
20:09 -Nuclear Energy is Clean - Still Faces Resistance
25:11 -Over-Expanding Air Cargo
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Keenan Brugh 0:00
You're watching Global Trade This Week with Pete mento and Doug Draper.
Doug Draper 0:12
Hello, and welcome to another edition of global trade this week. I am your host, Doug Draper. And normally I say across the pond, not across the pond, but across the country is he mento. But he is on assignment. That's what you use in the news business when you say he's on vacation or out of pocket. So I'm excited to have Keenan Brugh from, from our pot production team. Join us, Keenan, what's up, man?
Keenan Brugh 0:41
Hey, it's good to be on this side of the camera. You know, I get to chat with you, gents before and after the show each week and get to edit it together. But excited to be here on this side of it with Yeah.
Doug Draper 0:51
Yeah, that's awesome. It's great to have you appreciate it. And before we jump in, just want to remind everybody cap logistics. And the ones that put this together. Like Keenan said, He's usually in the box pushing the buttons and the levers. So we're excited to have him on this side. So please visit cap logistics.com for transportation logistics services. And I think we'll just kind of jump into it. Does that sound alright, Kanan
Keenan Brugh 1:15
sounds great. You know, I wanted to kick us off this week with something that I was excited for Pete's take on, and maybe we'll get to hear his take next week on it. After last week's show, both the Senate and the House passed the inflation Reduction Act. And so President Biden is due to sign this this week. And then they're going to be celebrating it in September, and kind of trying to play this all the way through November and actual voting and situations. But the inflation Reduction Act has that name, though, it's really sort of build back better infrastructure tight bill, it's really sort of a clean energy, like climate change bill, which a lot of people like parts of it and different things, though, there's not too much in there actually aimed at reducing inflation, it's just one of those things, you know, you got to name stuff to get it passed, even if it has nothing to do with the act itself. I could be wrong, maybe it's long, and there's more analysis, but a lot of the analysis I've seen so far is that it's more like a build back better. They're gonna, you know, have a billion and a half for planting trees. It's like almost a $500 billion act. However, with all that stuff being said, they're also making an announcement saying in July, you know, we didn't have as much inflation even before this act, I'm seeing something a little different. On the logistics side, we put together some economic analysis for CAP logistics top customers. And one of the things we noticed this month was that the PPI or the purchasers Price Index is still outpacing CPI, or the producers Price Index is still outpacing CPI consumer price index. And so even as we've been seeing, and noticing inflation for a while now, in the consumer sphere, sphere, and the narrative has kind of been that some corporations are being greedy, and just charging more prices, because they can and different things like that. We're actually seeing higher numbers year over year for the producers. And so what that seems to indicate to me is that even with this axe that may or may not address much inflation, we're still looking at the rest of the year that we could have prices rise, because the costs have been going up on manufacturers that haven't yet been passed on to consumers. And a lot of this in the month over month information that you hear about, you know, we didn't have inflation in July, a lot of that was really dependent on energy. That was pretty much oil market changes going on maybe some Iranian oil deal stuff going on. But we're gonna be seeing increasing prices for consumers for the next six months. It's very possible you know, I agree with what you and Pete have talked about for certain items, you know, large screen TVs and things like that there's going to be fire sales, it's going to be cheaper than ever before, as the inventory needs to get cleared out and those types of things there will be some very affordable deals the overall I think producers are going to still have to be passing on their cost to their customers. So I know I mentioned a lot it's kind of a wide ranging topic but feel free to wrap on any part of that you see
Doug Draper 4:29
now Yeah, well first the build back better I mean inflation reduction act right I love your take on that because I would agree a little bit and everything good there man.
Keenan Brugh 4:43
Oh, yeah. Just opened up a door how to fly buzzing around here.
Doug Draper 4:47
Okay, cool. So I love that take on it. You're exactly right. You start looking at it. You're like what? I'm not sure. Let's just rebrand what we didn't pass earlier and see what happens. So, but when you shot over this topic, A little bit ago, I'm thinking almost like a seawall, right? The seawall is the production piece of it that you described. And so the waves come in hot and heavy, right? That's the big, the big influx, and the seawall breaks up a little bit. And then so when you're in, or you still get a little bit of those waves, but that was the first thing that came to mind, with your topic. I think you're right, there's a little bit of buffer there, whenever the raw materials are turned into a consumable, whether that's tangible, good food, you know, things of that nature. So anyway, I totally get it, the see takes a little ways to slow up. But inflation is a number of people love to hang around on. And that's not necessarily a direct indication of what you and I are experiencing every single day, all of a sudden, our problems are not solved, because the report comes out that talks about flat inflation month over month. So I like that take as well.
Keenan Brugh 5:55
You know, you and Pete have already been kind of talking about these things with how politics might twinge. Just the narratives of things, you know, whether it's the definition of a recession, no longer being just two quarters of negative for, you know, reduced growth, GDP, shrinking GDP, you just got to kind of look at the actual number like CPI is also one of those things that even before the local politics, and this year, over the last several decades, they've been changing what goes in there, what doesn't go in there, how people report on it. And in some cases, those are improvements and trying to make better indexes. And some times it's more of, we need the story we need to tell. So we gotta like make the numbers look that way. I think America does a much better job at giving you actual economic data, compared to some countries. A lot of people just don't really trust what's happening in China. And China's been having from what we know, maybe some rough economic times with their finance sector, or their housing sector or some of that stuff going on. And so it's one of those where, yeah, we're seeing interesting mixed signals. I think we're likely seeing recessionary forces. And we're going to be seeing increased costs being passed from producers to consumers in a lot of ways, even if we have some really crazy deals on TVs, this cyber Friday, and such Cyber Monday and Black Friday, and all that stuff going to be some crazy deals. But yeah, it's gonna be a wild ride for the rest of the year. Cool. Yeah, how about your topic kicks off,
Doug Draper 7:25
we're gonna have to name that fly.
Keenan Brugh 7:29
It was leaving me alone all morning until we turn on the camera, then all of a sudden it wants to have some airs.
Doug Draper 7:34
For sure. So my first topic is related to collaboration between competitors, primarily, and transportation helps solve our supply chain crisis. I've seen some some, some comments, some writings recently about, hey, let's have competitors collaborate, to help reduce some of the congestion, the bottleneck and the delays. And immediately, Kenan my thought went to the concept of book smarts, and street smarts, right book smarts, which you learn in school, in a vacuum, all the things that you're learning, analyzing, putting numbers around, really makes sense. And the best laid plans are just that until you get smacked in the face, which what Mike Tyson had said, is that that's the street smarts, right? So it may sound good on a piece of paper and talk about all the efficiencies and the gains, but the reality Kenan is they are competitors. And that's what made telecon competitors, your objective is to do better than your competitors. So your mutual clients will want to work with you instead of the other. So I think it's it's a little naive, in my personal opinion that a collaborative effect. And engagement will solve all the world's problems, because we have to overcome the concept of collaboration amongst competitors first. I'm sure there's industries out there that that's happened. And you know, if any of our folks are listening, and they want to throw some things in the comments about how competitors collaborate at work, and maybe there's one or two instances in the supply chain over the years, but I think to solve something monumental as the supply chain crisis, competitors, collaborating, I don't, I don't think that's really a deal. The only thing I could see happening is if the competitors are using a neutral third party, and that would be kind of the best example I can think of as the final mile. All of the carriers in some form or fashion, look at a crowdsourcing final mile delivery. You got folks that are in their cars with their phones trying to make delivery. So if FedEx Amazon ups to some degree are using final mile crowdsourcing delivery folks, and they are making deliveries for all three entities, I can see that a little bit. The one, the one challenge would be, the technologies are proprietary. So if I'm delivering packages on behalf of all three of those carriers, I have three different technologies, even if they're on my phone, I gotta log into a different application to take my picture and upload it. So, conceptually, it sounds good. I think it checks a box with some of the environmental concerns that we have. And I really think it's a good idea, but the practicality of it and the street smarts in me, Kenan, this is a long way from being a realistic solution to some of our supply chain capacities, may be in the final mile. But I still think that's quite a ways down.
Keenan Brugh 10:41
I think your instincts are spot on of what could happen if it works out well. And maybe there are instances like you're talking with final mile, or, you know, a couple years ago, even looking at what companies were trying to voluntarily do as far as standards for using Blockchain or some sort of like, we're going to make up our own industry standard for international transportation would kind of work but then yet does get to the, well, everyone wants to own it, everyone wants to have the data, everyone wants to be in control, because ultimately, they are competitors. And if they don't act, that way, they will probably be taken out by the competitor, who does act more Monopolistically and try to create the most value for them and their shareholders and their customers. But there's also intermediate parts where, you know, if everyone's really busy, and we can help each other, I think we've probably seen some of that over the last couple of years. Where like, you know, we cap logistics gets, quote, requests from other brokers, other people with assets, trying to see us to do it. But honestly, you know, we might consider it if it's a strategic partnership, but we're probably going to be working directly with the customers, and we're not as interested in coming up with a quote for you and doing your job. And then, you know, all that sort of stuff. So, yeah, it's interesting. I think you're also right, that competitors can collaborate more effectively, when there is that third party, whether it's a government regulation, if this is just the rule, this is how international maritime laws work. This is how this trade agreement works now, within this framework, do what you will need to do. And then there might be some collaborative wins in there. But the individual companies are pretty incentivized to do the best they can and they want to dominate their space.
Doug Draper 12:26
Yeah. And that, you know, a regulatory when you're just saying that, Keenan, there needs to be a regulatory body that will put everybody in their right corner and talk about how they're going to come together to work because I could see, hey, we're competitors. But let me go ahead and deliver that final mile for you. And you're like, Nah, that's okay. But I'll deliver the I'll deliver your package on our equipment. And then there's this, you know, us Soviet distrust, so to speak. Right? So I think the there needs to be a governing regulatory body, which just adds to another layer of correct chaos. Yeah, I don't know. Go down a wormhole. And there's,
Keenan Brugh 13:02
like, do you even want that? If, depending on who makes it? Is it going to be bureaucrats? Do they know what the industry is or needs? And then another area to have to consider is enforcement. Even if you have something like the World Trade Organization, historically, they haven't really been able to enforce a lot of the findings of you know, oh, China, or this country broke this value added tax like loophole thing. And then what do you really do about it? So yeah, interesting topic. For sure.
Doug Draper 13:29
Yeah, for sure. Well, the we're about ready to jump into our halftime excited to hear Kenan steak Of course, halftime brought to you by by camp logistics. So yeah, sometimes a Pete's half times just kind of go off the rails a little bit. So I'm anxious to hear what you have to say there. Keenan, I'll let you go first.
Keenan Brugh 13:49
Sure. Well, I am stoked. This morning. Uh, just finally successfully compiled and flashed my feet 3d printer to work again. So this kind of will tie into logistics and industry more broadly, that there's been a rapid decrease in the price and increase in the capability of 3d printers. I'm into technology, I've sort of been following this stuff for a long time. With a coupon, I was able to go to micro Center here in Colorado, and get $100 3d printer parts, I had to put it together sort of kit. That would have been $5,000, you know, five years ago, eight years ago, something like that. So the capabilities have really increased of what people can do with these things. And my personal win was that after accidentally breaking it, I'd flash to the memory with a voice activated project I'd use for different, different project. So the software was totally borked wouldn't turn on wouldn't do anything. And I had to learn a lot of firmware to get it all working. But speaking of collaborative, there are areas especially in open source software where people like myself and smarter people who do a lot more development work, make work available. And then that can become the groundwork, the framework that then a for profit company in Shenzhen uses this version of software and then makes a little modification and they're selling it. But ultimately, it's being driven by the users, the programmers who are adding and making it. So it was messy. It took a lot of reading and figuring out but because there's so many goodwill, people doing good work without expecting any money, I was able to get my machine up and running again. So pretty stoked about that the printing will continue.
Doug Draper 15:35
Nice. And what did you say you pay for? $200 $100?
Keenan Brugh 15:39
Yeah, five years ago, this was like a $5,000 machine equivalent. But now it was 100 bucks.
Doug Draper 15:45
Nice. Nice. That's cool, man. So well, my halftime kind of goes a little bit to our first topic. I was in our nation's capitol this weekend. Keenan Liu out there was involved with just conference for college age kids talking to them about being good stewards and, and developing leadership techniques and things as they grow older. But that's not what this halftime is about. It's about my trip when I went out to do a little sightseeing. And I hadn't been to DC in probably 10 years, right. So I went out and saw some of the sights on the mall and a couple of things that was kind of disheartening. It wasn't disturbing and I wasn't mad about it, it was just disheartening is that any type of anyplace I went to get a good visual? Washington Monument, the with the White House, everything has a barricade, and then there's a fence around it with barbed wire. And then there's probably some secret service cops around, and then the wall or the fence. So that iconic view of the White House with the you know, the black fence in front of it? Well, the reality is kind of like when you go on vacation, you're like, here's this beautiful beach in Rio. And then you take a picture what it actually looks like, and it's horrible. Yeah, so that fence is there. But in front of that fence is another fence and as Bob wire that blocks your view, and in front of that is a jersey barrier. Those big blockades they, they put on roads, you can't even do that. And it just it was a little disheartening. So I turned around literally turned around, if you've been there, you just can kind of turn around to an open grass area and look at the Washington Monument. The entire grass area, which is very large, was fenced off. So you couldn't even get on the grass areas. So everybody was relegated to the sidewalk. And you got segway tours and people and and and tourists. It was just congested, right? It was just blah. And I literally, I laughed, I'm like, This is crazy. This is not what in my opinion, Founding Fathers would want to you know, embrace all these things. So I was shocked at how rigid and fenced off everything was. And then the other piece that took me by surprise was the homelessness. Right? I know that's a challenge, especially here in Denver, people from watching the show from Denver. I know that's big deal across the entire country. And I was shocked. And it's pretty bad there as well. And then if you've ever been in there, there's this area called Chinatown, which is like, three blocks long. And we were walking home from dinner about 11 o'clock at night, and we shot through that area, which probably wasn't the smartest thing to do. But that was pretty rough too. So I don't know, it's the nation's capitol. And I wasn't, I was just disheartened a little bit, right. So the good one Pete So there's my two negatives, the positive was the food was awesome. I went to some amazing restaurants there. And I think the food in Washington DC is spot on. So anyway, the conference, the purpose of myself being there was very successful. So that's the check. A little disheartened with the way you can engage with our national monuments. But the food kicked ass. I'll tell you that. So there you go.
Keenan Brugh 19:10
The food was good. Yeah, I wonder how much of that started post 911 security state beginning sort of thing. But then I feel like at least from pictures I've seen some of that's increased since like the Trump era in the last four years six years where I probably went I don't know how many years ago now where there was definitely some of that but I feel like there's getting more of it. Like I remember being tapped on the shoulder of you're not allowed to film here and all this sort of stuff. Yeah, but it feels like I was able to go on the grass. Maybe they rotate it and just try to like give the grass of breathing room is my optimism there. But maybe it is just increasing police state keep away from the buildings like the odds are something could happen so we got to pretend like everyone could be that threat. I don't know Yeah, kind of destroys the magic a little bit.
Doug Draper 20:02
Yeah. Well, if any of our listeners have any take on that, too. So please, please chime in. So, Keenan, let's roll on second half of the show. What's your second topic? Yeah, so
Keenan Brugh 20:13
I've been seeing some speaking of DC now and the connection with Colorado. I've been seeing some contacts in DC. And it's not just in that one place, but around the world, talking about nuclear energy again, and I've been hearing it from a couple different angles. Where, you know, a year or two ago, you would hear Chernobyl is the show, and everyone's afraid of nuclear meltdowns and this sort of thing. And the green environment is very against nuclear because nuclear kills bunnies or something, where I think maybe Pete's made this argument too, that far fewer people have ever died from the nuclear power generation industry than even coal. When people die in regular coal mining situations or manufacturing, like, yeah, it's not ideal, but there's just a lot of it. And the standards for nuclear are so high that you end up getting more radiation coming out of a coal factory coal power plant than you do for nuclear. So I've just been seeing kind of a resurgence on several fronts. Some Department of Energy type contexts, investing in fundamental basic science as well as larger investment groups. Can we commercialize Small Modular nuclear reactors, can they be added on to coal power plants kind of transition and phase them over? There's obviously a lot of issues, you know, everyone's maybe nowadays thinking more of Fukushima than Three Mile Island or Chernobyl, but the TV shows are still big enough that your noble still matters. Fortunately, the technology has already come a long way, where you can design much more passively safe, you lose all power, like in the Fukushima event, if you have a backup generator fail and a backup generator fail, there are ways of designing that it just won't do a runaway. I'm a big fan of the thorium fluoride Molten Salt Reactors, I think those are cool lifters. That's a big area. But whatever the technology is, I think that that is undeniably a clean and reliable source at economics and scale, that we'll be seeing what they're estimating right now is like a trillion dollar industry coming up here soon. So is America going to be a leader in it? Is China going to be a leader in it, you know, I'd like to see America do it. But if we're not going to do it, I prefer China to do it, then not do it. Because otherwise, you know, I mean, as far as I'm into solar, and I'm in the wind, you can't replace all of the needs with those we need, we need baseline. And that's something I think nuclear can do. And as long as we do it carefully, and there's no major accidents, because we do have to overcome a huge PR challenge of, of people on the environmentalist side on all sorts of sides, we think of it as negative, even just because it uses the same word as nuclear weapons, we can diverge away from nuclear weapon technology, we're talking about power production. And I was also encouraged to find out I don't know if you ever read the whole earth catalog, like San Francisco 1960s style, like early hippie environmental movement, apparently the founder that Stuart Brand has been pro nuclear for a very long time. And I just discovered that there are people like me, techno, hippie economist, people who can make the argument for nuclear with caution, of course. So that's my second topic there. I don't know if you've seen anything recently, or what your gut reactions on nuclear technology for sustainability might be.
Doug Draper 23:40
Yeah, yeah. I think that in order for that, to move forward, it's got to have the biggest PR campaign that the world has ever seen. Right. I think that you, you nailed it, right? I don't think well, for number two, anytime somebody talks about it, you're gonna throw a picture up of Chernobyl or, or Three Mile Island. Right, right. And people now they weren't even on round, Three Mile Island. So there's this perception. And then the other piece that you mentioned, I had not thought of, because I thought of those two things, is just the use of that word around weapons, right. And the destruction that that caused in World War Two and the devastation went over those power plants. Reactors melted down. So people in my opinion, they're scared, they don't understand it, but the opportunity there, and I, you know, it's not like I can go in there and craft out how a nuclear reactor works. But I think that just has to overcome the negative perception that it has and until that is collaboratively put together it's going to be a tough uphill climb, but there's only so much there's the sun and the wind are super important, but that's a third prong and I think can really make move mountains as we continue down, identifying how to keep our inner GE moving. So it's a good topic there. Kenan good topic,
Keenan Brugh 25:05
shares. And yeah, what do you have for us on the second round?
Doug Draper 25:09
Yeah. So the the thing and I pitched this to you earlier is that it seems like you can't swing a dead cat around without hearing a story about some company, expanding their air freight capacity. So just in the last a week or so not all this has happened in the last week, but it's gotten some some press but the funds of cargo is expanding Air Canada cuantas. dB. Schenker has expanded. Maersk, you know, is expanding into air freight. And then just I think I think it was today or even over the weekend, and Vietnam air is going to start a cargo division. So I just thought it was interesting that air freight air freight air freight is the solution to the supply chain challenge. And it certainly is for certain commodities, I get that. And I'm sure there was a lot of under, you know, under utilized opportunity there. But my question is, are we chasing a consumer buying habit that pivoted really, really quick, right? In the sense that the goods of the economy, we talked about goods and services and the goods, and the appetite for people to consume and put stuff into their homes and their offices and things of that nature, during the height of the pandemic, was a huge demand. And then everybody ordered, you know, all the buyers from all major companies that make a widget. So Oh, my gosh, we don't have enough stuff. Let's get more stuff. Well, now the reality is that people have flipped to a, a services economy and an experience economy. So people want to get out post pandemic and experience the world, not bring it inside their home. And so my question is, could we see the same thing with air freight, we beef up the air freight capacity to the point where the consumers no longer dictate it, people may just just expect and deal with the supply chain craziness that we have. So my take Keenan is that I think it's great. Ultimately, there's only a certain type of commodity and price point a commodity that can justify long term airfreight. And if I order, you know, a new lamp from my desk, or a new shirt to wear, if it takes three or four days or five days to get there, it's not that big of a deal. So my point is, I think air freight is going to be overcapacity here in a very short period of time. And we're going to be hearing liquidations of the same company saying we got too much of this and I'm trying to get rid of it. So I think in the air freight market, everybody's jumping in but they're chasing a consumer buying habit that has already pivoted. So we'll have to see what happens in end of 2023 or 2024. That's kind of my forward leaning take on that.
Keenan Brugh 27:50
Yeah, that's really interesting. And I agree, there's often a sort of pendulum swing, people are exposed to some economic stimulus, some situation and then they make the decisions of mom gonna get into airframe, because, you know, the cast index has shown that we're spending 83%, more than we were two years ago. So let's just expand and we become airfreight people, and then you get more entrants to the market and they compete, and then all of a sudden that drives it down, especially if consumer demand is changing, like you were describing. Yeah, some, there may be some permanent knock on effects from COVID policies and certain different things. But I think generally, we'll see pendulum swings back and forth, you know, we're going to start building a bunch more ships, we're gonna have a lot more air carriers, you know, right away, it was just can we repurpose planes outfitted for humans just to start putting cargo on and then you started seeing more and more cargo dedicated airlines going on with this and there will be some need. And you're right, in some industries will always be air, air cargo. And cap logistics can always get you hooked up with that, though, you're right, I think the market will change where you're not going to send everything by air all the time in the future. And if too many companies got into it, because of what we've seen the last couple of years, there probably will be fire sales of companies of planes of assets and probably a reduction of the peak of air cargo capacity. Yeah, I mean, especially tying it into some of the other topics with clean energy type things. What's that going to look for in the future? I know we've talked about it a little bit, but what's the cleanest way to move things around the world? If we're starting to add on some of those ESG or some type of targets, companies might voluntarily start looking at those things themselves before regulation comes in and starts dictating how they can operate their transportation businesses.
Doug Draper 29:45
Exactly. Yeah. Great. Take on that one for sure. Great take. Well, Kanan, I think, a plus as far as you fill it in for for, for Pete. I appreciate it's always always great to have and talk to you and I talk all the time. I'm, you know, on lots of other other things, but it's cool to have you on the show. Appreciate all your perspectives. So for sure, and I want to thank our audience for joining us this week global trade this week. That's the name of the show. Hope you enjoy it. And, hey, we say this in there. So I'm talking to you, the listeners in the audience out there. We want some feedback, put some comments if you think we're knuckleheads, and we don't know what we're talking about. Tell us if you think we're spot on, tell us we want your feedback and and we will reply suggestions on topics as well kick them in there. So I think that's it. Look forward to firing up the show again next week. And thank all of you for joining us. Have an awesome, awesome week. Take care. See everybody