Global Trade This Week – Episode 213
-
Keenan Brugh 0:00
Doug, you're watching global trade this week with Pete mento and Doug Draper,
Doug Draper 0:08
greetings from global trade this week. My name is Doug Draper. I am one of your co hosts for this weekly podcast. My other partner in crime, Mr. Pete mento, is on assignment, so our producer in the box, Mr. Keenan, is jumping in to help us keep our streak alive. Keenan, how you doing?
Keenan Brugh 0:29
Buddy? Doing? Well, thanks. Yeah. It's good to good to be on here again. Always love learning, and it's another opportunity to learn when you get to share stories and trends impacting us and the many aspects of logistics and
Doug Draper 0:41
trade. Yeah, you sound so formal. I love it.
Keenan Brugh 0:45
I've been on meetings all morning. I can't help it. I guess deformalize it a bit. Let's talk about the weather. It's starting to feel like fall. For those of you in Colorado, you've probably been seeing the leafing activities, people going up to the mountains for beautiful leaf observing, as well as now, finally, some cool nights, which is great. You can kind of see the break of the heat. And looking forward to fall and winter. Winter is my season, so I'm looking forward to peak season here.
Doug Draper 1:15
Yeah, yeah, I saw over the weekend that. I don't know if you saw this, but for those in Colorado along i 70, you get off on Georgetown, which is right after the pull off for Winter Park. And that is the base for gwinnella Pass. And if you go up over one Ella pass, amazing colors, right? Keenan, they, they shut down the the the off ramp, you like, could not get into Georgetown going east or westbound, because it was just a line to be like, I 25 traffic in the tech center, up and over the gwenilla pass. So I don't you see that they like, we're like, we're full, please go away. I did
Keenan Brugh 2:03
hear about that Gwendolyn pass is beautiful. It would be a great place. But then, yeah, if everyone has the same idea all at once, then your quick, beautiful drive through the leafs becomes a traffic jam up on a high mountain pass. So I had never heard of them closing down, yes, for snow, but I'd never heard of them being too busy for leafers. So that was that was news. And I have heard about people just in my daily life who said that that's what they did on Saturday, some of them who apparently got through before they shut it down. So yeah, it's happening. People are enjoying join the leaves. Yeah.
Doug Draper 2:35
Well, Keenan, that's a microcosm. And while we bit the bullet and decided to move up to steamboat. I just, I 70 traffic anymore. You know, I'm I Pete and I joke, you know, we're that those two old guys on the Muppets that are up in the balcony, right? It's like, I literally would lose my shit every weekend on i 70, we'd leave it 5am 5am to beat the traffic, and then we'd still get stuck in traffic. And I'm like, I'm never doing this again. I'm never buying another season pass. This is crazy. What are we doing? Blah, blah, blah, blah. So that is, it's not only winter season, it's summer season, and now it's fall season.
Keenan Brugh 3:17
So yeah, if you can get outside of the peak. That's obviously the best choice, if not. Make sure you pre download your episodes of global trade this week, as well as one more referral. Give a shout out to pod quiz. There's a computer programmer over in the UK that makes a fantastic music and general knowledge trivia podcast like 1520 minutes. There's over 1000 of them now, so if you're new to it, you can fill up as many hours as your Road Trip demands, but that's a fun way to get up to the mountains.
Doug Draper 3:50
Well, I forgot to let you know that cross marketing other podcasts on this podcast, it's not allowed. Oh, yeah.
Keenan Brugh 3:58
Well, hey. Well, we'll put a link, and hopefully he'll reciprocate and get some people our way as well.
Doug Draper 4:04
Yeah, very cool. All right, man, let's get this party started. I like your topics for today, so why don't you start us off?
Keenan Brugh 4:11
Absolutely. Let's kick it off. A little bit of news on Chinese automakers. So this first came to my attention a couple days ago. I saw that Berkshire Hathaway, Warren Buffett is now finally divested completely from the investments he made a long time ago, 2008 into b, y, d, the Chinese automaker, friendly exit. It was part of the plan, as I expected, just that type of time, length and growth they made billions of dollars on returns. Little unusual. Warren Buffett's more known for investing in the Coca Colas, right? Like the American staples, this was a little bit more tech risk, foreign investment, but it paid off handsomely for both parties. I'd say. Berkshire Hathaway made billions of dollars in profit, and BYD benefited early on. From the vote of confidence of having an investor like Warren Buffett, I'm sure that helped the company secure more funds, secure top talent, and BYD, has grown impressively in that time. The second part of this first topic here is that Chinese automakers are shifting investments abroad, surpassing domestic spending for the first time. So as there's all these trade barriers and uncertainty, maybe domestic market saturation from some other competitors within China. Now they're kind of following suit, like I imagine Japan and South Korea and car companies they've invested in facilities to manufacture in the US, for instance, right? So now it looks like China is doing their own version of investing abroad, and, you know, could have some impacts reshaping global automotive, automotive supply chains. And so we'll see if the capacities now can increase. They've been pioneering with their own row row ship that they've been taking from port to port, selling BYD cars, and from my limited trips to Latin America, seeing them for sale. They're selling them hard. It's the cool, sexy type of electric vehicle dealership, kind of like you imagine Tesla here in the US. But if you're in Mexico City, the one with the the people on stilts and drawing your attention is BYD also saw Ubers that were byds, right? So it's high quality for the cost, and people are are buying that. And that's something that even before the most recent round of Trump tariffs of the previous administration, Biden's administration, wasn't it 100% tariff on EVs from foreign countries. Just kind of goes to show that even someone not known for putting brand new tariffs on allies or enemies saw the the disruptive nature of Chinese electric vehicles, how good they are compared to the price. So that's why even Biden put 100% tariff on this category. But it's interesting to watch. You know, Berkshire Hathaway is pulling their chips back with a hefty amount of gain, and it looks like BYD themselves are now investing in foreign plants and facilities bigger than their investments in China. So kind of a new turning pointer mark of the tide for electric Chinese vehicles. So yeah, a couple aspects of that story. But what are your first takes, or thoughts around the story?
Doug Draper 7:25
Well, my first take is they don't call on the Oracle of Omaha for nothing, right? So here I'm putting my tin, my tin foil hat on a little bit for this one, right? So excuse me anyway. Great opportunity from an investment strategy. Let's get into this Chinese electric car manufacturer when things were kind of under the radar, like you had indicated before we started, they put in millions, and they're getting out billions, right? And I would think this is the right time to get out because of the tone and tenor of of the US and international trade partners and tariffs and things of that nature. And here's my tin foil hat. I think it relates to the rail industry, which is something that I'm going to touch on here in a second. So anyway, great opportunity. The Oracle saw it. He invested it, and now he's like, I'm getting, I'm turning on my cash liquid. I'm getting out of it. We made our money so we don't position ourselves in a negative light because of what I think is going to transpire in the rail industry. And I will talk about that right now, if that is okay, yeah, let's do it all right. So I don't know if you saw, you know, this whole thing is that we talk about rail maybe once a month, right? Maybe once every six weeks. And we've talked about rail, this will be the third time in in the in the last month or so. So there's this a CEO change over at CSX, right? So they've essentially, you can read all you want about it, but here's the deal, they kicked out their current CEO, Joe Heinrichs, I believe, is how you pronounce his last name. He'd been there for a couple years. He came over for Ford. He'd been falling behind and missed chances and opportunities, and so CSX, and this is my opinion is like, oh my god, the landscape has changed dramatically in the last nine months. What are we doing? How are we positioning ourselves in an offensive strategy versus a defensive strategy? So let's get rid of this CEO. He's not doing his job. But more importantly, let's bring in this gentleman named Steve Angel, who is not a railroad guy, but he is a guy that pulls off massive mergers in his former life, right? So Wall Street loves him. He comes in, he kind of facilitates mergers and makes people lots of money. So the timing of this matters, because obviously of the North. Folks southern and the up situation going on, and CSX is like, hey, we don't want to be left behind. We need a strategist in here to take us to the next level and and really go from there. So here's my tin, fat tin foil hat. There's only four class one railroads out there. Two of them have already merged. So you got two laps. CSX is either going to turn their jets on and try to move forward, but you cannot cut your way to profitability when you're dealing with huge assets and the infrastructure that CSX has. So I think CSX is going to be and the BNSF, which is a company of Berkshire Hathaway, is going to get really aggressive, and we're going to see more talks, maybe speculation out of the gate, but the railroad industry, it's it's going to be interesting, right? CSX, I love the fact that they're like, we're not playing defense anymore. We're going to be offensive. We're bringing in this guy, and I was liking it to Winston Wolf, right from you remember Pulp Fiction, you bring in the wolf,
Keenan Brugh 11:11
right? That's right, yes, yes, yes, yeah. So it's a little
Doug Draper 11:15
different context, because we're not dealing with with guns or death or anything here, but the line he says is, I'm Winston Wolf, and I solve problems. And that's exactly what the new CEO is going to do. He's coming in. He is going to fix a problem, and it'll be interesting to see what CSX does. And if BNSF is going to be part of the equation, rather than the acquirer, they may be the acquiree, if that's even the right term to use, but I think that has something to do with divesting of Chinese electric vehicles, so they're in a better negotiating position here with us, based companies.
Keenan Brugh 11:57
Very interesting. Yeah. I mean, if their competition is doing a big merger. I'm also reminded of you and Pete recently talking about how the average full truckload miles were going down because of more and more being put onto rail networks, intermodal style, and if the competition is doing a coast to coast big merger, I while not being super familiar with the ins and outs of railroad, can see why activist investors or the board might be concerned about them not making these big moves if the time is now to do mergers and so, yeah, the NSF would be Warren Buffett, from what I'm researching here, just last minute, they haven't made any announcements. He's not working on a bid for the railroad, but maybe, maybe that cash position now opened up from the BYD profit could be put back into America infrastructure. It'll be something to watch with great interest. For sure.
Doug Draper 12:52
Yeah, he's usually the acquirer or the investor, right? Maybe it's different now, maybe they bring in the wolf and and see what transpires. But you never thought railroad would be so sexy as it is right now.
Keenan Brugh 13:03
Keenan, some people are always into trains, and railroad, you know, for the rest of us, people often forget about it, but it is a very important piece, because of the distance, the reach and the cost that they're able to provide per pound is truly impressive. So being able to to have a bigger network, if it's times for if it is good times for merging and acquisition acquisitions, then yeah, they could. Maybe they will. And yeah, I have a feeling too, it would be Warren Buffett's BNSF being the acquirer. So maybe it's CSX, like trying to put up a bid or now, like prepare themselves to be purchased, but I'm not an expert. Well, we'll find out when, when we find out?
Doug Draper 13:48
Yeah, well, the wolf cleaned up the problem in Pulp Fiction really quick. So I would imagine we're going to see some some news and some movement with this wolf at the CSS CSX in the next couple of months, if not sooner. So all right. Well, that brings us to halftime. I have to do all these, Keenan, with the intro, the outro and the introductions of halftime, because it's your company, Cap logistics that makes all this happen, and we greatly appreciate it. And when you're on the show as a co host, Pete, I just or I'm sorry, Keenan, I lay off you, man, I don't, I don't go down a rabbit hole and put you in a corner with that. I appreciate you. Appreciate cap logistics and all the things that they do. So I'm going to jump in real quick with the with my halftime. It's going to be an all monopoly. It was funny. Literally, about 30 seconds before we jumped on here, you're like, hey, I want to talk about this new thing related to monopoly, and I was also going to talk about monopoly at McDonald's, right? So for those that used to experience monopoly at McDonald's, it was like a board game, right? If you remember when you were little, you'd have all these little pieces on your french fries, your Big Mac. Your your drink, and you'd peel them off, and you'd have these fun characters, and then you would save them on your board, or you drop them in your car, because you're eating your greasy french fries in your car while you're putting your hand on the steering wheel. And then you lose all these game pieces, and then you put them on the sticker board, and then you take it into McDonald's for free food or or trying to win millions of dollars. Go from there, but it's back, except this time Keenan. It's all digital. There's no game pieces, there's no board. It's all through your phone, which I am 100% against. There needs to be something tactile. I want to be able to peel something off my food, and I'm not talking about pickles, and have something very tangible. So I love the fact that monopolies back at McDonald's bring back the board, bring back the game pieces that you're going to roll out. But again, I'm that old guy on the balcony that just would be a purist in that factor. So anyway, that's my monopoly. Take what's yours? Yeah.
Keenan Brugh 16:03
So one, I am interested to see how it goes for McDonald's. I remember playing the board game as a kid. I remember then McDonald's doing the prizes you'd like, peel off two properties and you can see, and I remember, at least from my childhood perspective, that the gifts were actually pretty good, like they had like ranking ones, where ultimately it might be a huge amount of money, but more commonly, you could get an Xbox, or you could get this or that, things that the children wanted. And so I remember there being a level of excitement and potential with that going along with it. I also remember, there were scandals with that physical part, and that might explain why they're moving digital is that, like, people who won the like millions, or the big ones, like, turned out to be related, and, like, there's some sort of supply chain man in the middle attack, where people were like, you know, either peeling back and checking or some sort of scan or something. But when there's a stack of the fry containers, someone upstream was like picking out the valuable ones in there. And so maybe a digital supply chain might be easier for McDonald's corporate to not get defrauded and actually get the prizes out to the random turn them, and not just some organized crime like scamming ring, who has someone on the inside who has been like cherry picking all the good prizes before people get it. So I hear you, there's a benefit of the physical, but I think it might be better, actually fairer enforcement of the rules, as opposed to the scandals that have happened in years past with that.
Doug Draper 17:40
Yeah, yeah. That was, there was a documentary on that called mcmillions. I was trying to think when you were I forgot about that, but when you were explaining it, yeah, about
Keenan Brugh 17:49
to check that out, because I don't know exactly how it all went down, but I know that it was pretty bad, which has been just disappointing, both for the company who's trying to make a promotion and then all the people who like, oh, I never had a chance. Someone was taking all the good ones before, yeah. But related to that, I mean, I I liked playing the full board game as a child, and it was a fun game, though. It would last a long time. And I think it's the famous, you know, Dane Cook joke of, you know, three hours in, you flip the table and everything causes fights between you and your grandma and everything. There is a new and improved version of monopoly that's been taking off amongst people my age. I only found out about it maybe a year ago, but as I brought it up to people, a lot of people know about it. It's called monopoly deal. It's a card game version of monopoly, and I think it's better than the full Monopoly game for a couple reasons. Primarily, first and foremost, it's much shorter. It's not a three hour commitment. It's a 1520 minute commitment. If you're playing with people who know how to play, it's brand new half hour, right? There's a time limit on it. Something else that's more fun about it, too. All good games are games where there's an element of skill and luck. I feel like it was a little bit more set when you were playing the board game of, like, Oh, I did well early, and now it's going to take an hour and a half. But like, the person who started off doing well, like, is going to win with like, a little bit of luck in there. Monopoly deal has much more room for upsets with the game design the cards of steal an entire monopoly from someone else with all the houses and hotels on it. And so you can go from like almost winning to then everyone teaming up on you and then taking that away. And so you could go from I have nothing in front of me, you can still win if you have nothing in front of you, halfway into the board game, like you're not going to win. But there's a lot more ups and downs with the card game, and then, yeah, it's a fun one. So I'd recommend you and our listeners check out monopoly deal if you like the idea of monopoly, but you don't really have the time investment you want it to be a little bit more available. Also, last pitch for. This game, and I don't think we have a sponsorship deal with Hasbro or Mattel or whoever it is, but shout out for this game. A cool part about it is that it's fun for both two people as well as a group of people. Most games are like, yeah, it's three or four for Catan, but like, you can't play Catan with two people. This is a game you could play with two people or four people or five people. It's very fun in both those scenarios. So Good Game Design there. Whoever invented monopoly deal. It's a good one.
Doug Draper 20:28
Yeah, yeah. Well, you crack the code on that one. The whole thing that I kept thinking of when you were talking about that is the time, right? Because you're right. At some point it just labors on, and then somebody gets mad and flips the board. But yeah, I think this thing done in like 30 minutes or so that that's the secret sauce to reengage the younger generation and in Monopoly. Yeah. Well, let me get with mine. Keenan, then you can finish off your second topic. But so I'm jumping in. Thanks cap logistics for making this thing happen. We really appreciate you Keenan and the cap family. So the second half of global trade this week. So I read this last week and cut and pasted it and said, I need to talk about that on the show as far as the article goes. But merchants can now use Amazon logistics network to pick pack and ship for their Walmart orders, Shopify orders and sheen orders by the end of this year, right? Walmart, I think, has already happened, but then Shopify, so those are almost platforms that are in direct competition with Amazon. Everybody says, well, it's Amazon and Walmart. And now Amazon is saying, hey, we'll if you have a product and you're selling it in multi channels, hey, we'll warehouse it, will ship it. We'll do all the that activity for you, even if it is on somebody else's platform, in this case, a direct competitor. So I thought that was interesting for two reasons. One, it just shows that the logistics power the logistics network of Amazon is continuing to grow and expand. We've talked about how they've dabbled into ocean freight, and if you use our services, we'll expedite your delivery to another country. We'll get it in here to the US in our network, and move quicker. And then the second thing is that it's another, another growing revenue bucket, if you will. There's only so many fees you can collect with more people on your platform, right? Yeah, we'll warehouse it for you in our buildings, and we'll charge it up to do the pick pack, usually pretty inexpensive. The storage is where they kill you, because there's, you know, everything's in a box, literally a warehouse, which is a box. But they're really looking at revenue streams for their logistics network, not just to support their own, but you can only take X percentage of somebody selling on your platform, so why not open that up to other platforms and start generating some of that pick pack revenue? So it's just, I don't know if there's anything a light bulb going off in my head, other than the fact that it's another example of Amazon coming in and really continuing to migrate to a logistics company, not just a company that used to sell books and now has the Endless Aisle. So pretty interesting stuff from my perspective,
Keenan Brugh 23:30
absolutely and just with monopoly on the mind, it reminds me of just the benefits of economies of scale, right? So yeah, as you pointed out, these kind of are competitors, but if they can help support or make money on the logistics and the fulfillment and those intermediary steps, then Amazon becomes even a bigger monopoly esque with some monopoly power in the future. If they have really strong logistics all in they can give themselves advantages or just make money on doing that service. It reminds me of the Amazon Web Services, right? You know, they had to use a lot of computer hosted cloud assets for their own business, but by investing in that as a new business, you know, horizontally and vertically integrating, so to speak, getting bigger, that way, they're able to make a lot of money through Amazon Web Services, whether it's to a direct competitor, or the US government or whoever else uses that type of service. And now it's kind of like this more and more so with their three PL type offerings. You know, they're doing this for themselves, but if it can also be impacting is it sheen Shein? I've never used it, so I don't know how to pronounce
Doug Draper 24:43
it. I refer to it as Shein, Shein, Shein.
Keenan Brugh 24:48
If you can buy on Shein or Shopify, but then it's Fulfilled by Amazon. I mean, in a way, they're getting a piece of that business. You know, they're getting that market share. Maybe the rates are competitive, right? Now, but if that becomes a part of the supply chain, and Shein or Shopify couldn't really do it without it, and they get that market captured, they could raise prices in the future. They'd have the ability to do that. Or maybe they'll just give slightly better rates to their own stuff. Maybe they make plenty of money off Shein and Shopify and Walmart. But very interesting to see this move just not even that long after them announcing the three PL kind of opening up to begin with. Now, as some major would be competitors come on board, and that's sort of monopolistic power, I'll be very curious to see where that goes in the future with the relationships, if they can stay friendly with all these competitors if they're really long term focused, and that's kind of what Jeff Bezos and Amazon are known for, right like his letter to the investors back in the 90s of don't invest in us looking for like a return this quarter. We make our bets for long term returns. And so with that, they probably have a long term plan in mind, and it'll be it'll be fun to watch, yeah,
Doug Draper 26:06
yeah, for sure. All right, my friend, take us home. What's your second topic?
Keenan Brugh 26:11
Yeah, all right. Second topic here is, uh, air cargo capacity tightens globally due to typhoon disruptions. In Asia, there's a super typhoon. Ragasa. You know, I don't normally hear about Super typhoons or typhoon seasons over in Asia, but I did know about, you know, friends who are stuck and things being disrupted and port stopping and different stuff. And this is hitting air cargo, you know, as we kind of did, the early peak on ocean and that slowing down, but there's still time lines. Air Cargo is a very important part of what we offer at cap for our customers and what people need when there are time sensitive things. The storm has disrupted a lot of that. So it hit last week, and there are backlogs now all across Asia, Europe, North America. So the backlogs could be impacting time sensitive shipments. Be advised that that's something that's kind of going on outside of the normal Asian holiday type disruptions. There's weather, and anytime weather gets involved, people have to do their best, and plans get thrown off. So I don't know if you had heard about ragasa. If I'm pronouncing that one, right, but this one I had heard about through friends even,
Doug Draper 27:25
yeah, no. I mean, I don't remember the name that type of the typhoons, but just put the word super in front of something, right? And then, you know, it's just epic. You can't say epic typhoon. You could say super typhoon, but, you know, yeah, weather's weather. What are you going to do about it? But here's the thing, the mindset air freight you're using because you need it quickly. Obviously, people will have a little bit of patience with weather, but not too much patience, right? So you have a conversation in the morning. You explain that your shipment is delayed. Okay, that's fine. I get it. Thanks for the update. They have lunch, they come back at one o'clock and they're like, what's the deal with my shipment? You're like, I just spoke to you four hours ago, and nothing has changed since. So I think that there's a patience level related to weather implications and delays, but only so much. So it'll be interesting to see if it's just, you know, people get more frustrated and things happen, or if there's a ripple effect that will take weeks to to to call out, I don't know, but it, it's crazy when you get into major weather events. You know, most of us here in the US or winter time, you see trucks and snow storms and stuff, but it happens in different parts of the world, and a typhoon is right where there's a lot of export and activity with air freight,
Keenan Brugh 28:51
absolutely, and I don't know about where it all made landfall. Hopefully there wasn't that much damage to people, lives, property, though, it did get very close to a lot of areas it looked like it was kind of heading towards. And it seems like Hong Kong as a port, is the most impacted, compared to some of its neighbor type competitor ports in Singapore and Vietnam. So Hong Kong is kind of seeing it. And then, tying back to the Amazon discussions, people are describing how South China, you know, Shenzhen, the manufacturer of drones and all this electronic type stuff out of China, they're going to be facing higher rates now coming into America for Prime Day. So that was something people reporting on as Prime Day is coming up for amazon users, the cost to get those goods to America is higher than people were anticipating. Now. So interesting, interesting time there, yeah, there's, there's definitely a price on timeliness and urgency. You know, if you had time, you could put it on a boat and ship it. But time is money, so all these, all these things have to get balanced out.
Doug Draper 29:56
Yeah, yeah. I forgotten about the Amazon. On prime days, 2.0 that's coming up here in a couple weeks, actually, like one week anyway. Keenan, thanks for filling in. Man, I think we're going to wrap it up for this week's edition of global trade this week. It doesn't matter who's behind or in front of the camera, I should say we're going to bring this to you every single week, and if it's happening across the world and the globe, and it's related to global trade, logistics or transportation, we are going to be talking about it every single week. So thanks for joining us. Everybody. Keenan, thanks for participating, and we will catch you guys next week on global trade this week, you I think.
Transcribed by https://otter.ai