Global Trade This Week – Episode 125
What’s going on in Global Trade this Week? Today Trade Geek Pete Mento & Doug Draper of Inland Star Distribution cover:
1:56 -Holiday Shopping is Going to Lift Spirits for Q1
8:09 -New Argentinian President Javier Milei
13:47 -Halftime
18:48 -Shein & Fast Fashion Supply Chain Practice
23:50 -Houthi Helicopter Raid on Civilian Cargo Ship
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Keenan Brugh 0:00
You're watching global trade this week with Pete mento and Doug Draper.
Pete Mento 0:10
Hello, everyone. IP Ventolin with me is my good friend Doug Draper. That's right. The adults are back home. So, Keenan, thank you for doing such a great job last week, Doug, thank you for keeping him on the straight and narrow. I was way. I was in Chicago at a sales call. I could not make a regularly scheduled show Doug. Mia culpa. Mia culpa, mea maxima culpa. I'm, I'm so very sorry for that. Friend.
Doug Draper 0:39
We made it through Keenan Keenan crushed it. Keenan crushed this. So not
Pete Mento 0:43
get carried away. The problem with these millennials and Gen Z's and zoom or rumors or whatever they are. They've just had way too much encouragement their whole lives. I don't think he needs any more encouragement. No. Yeah. Well, satisfactory. Okay. Satisfactory. Let's just leave it at that. Awesome. Some people have a place behind the scenes for a reason, Doug.
Doug Draper 1:07
Yes. And he's actually behind the scenes and the great town of Breckenridge, Colorado, as he's watching the snowfall right now. So yes, snow. Humbug. For gas. Well, pretty soon we'll both be in the snow me Kena. Not you
Pete Mento 1:27
know, I'll be in Virginia, where if it snows, everyone has a heart attack. So there won't be any snow for me, pal. Yeah,
Doug Draper 1:35
cool. Good. All right. Well, this is the the Thanksgiving edition. So if it's not completely obvious, we'll probably have a little Thanksgiving chatter at halftime. So I'm looking forward to that. Yeah, buddy.
Pete Mento 1:49
Well, listen, I kicked it off, which means it's your turn to go first this week. So what do you got for us? All
Doug Draper 1:56
right, man. I'm going to drop the I dropped the gauntlet sounds very confrontational. So I'm gonna do a moonshot here and tell everybody that this holiday shopping season is going to lift spirits for first quarter 2024. And here's, here's what I'm why I'm saying that. So there was some and I'll make a caveat. I think Adobe was the are wired. Can't remember I saw that this morning when I was reading about this. So like, where did these numbers come from? So in October 23, excuse me, October 22. That month, there was $72 billion of ecommerce spend. And in October 23, there was $76 billion dollars of E commerce spend. They're expecting that trend to continue in November and into December. Mobile, which is not surprising is up 10%. There's price decreases of 6%, on average, from consumer goods to apparel, household appliances, and things of that nature. And inventories that were exploded post COVID. Because forecasting was just out of whack with the consumer buying habits. Those are starting to mellow because of a third prime days that kicked off in I think, was that in October, November. When was the recent prime days? October? Yeah, yeah. So October prime days you shoot it up. That's part of the reason that that $4 billion span. So my point European is that, even though there's macro economics issues that are going on, everybody talks about what the Feds going to do on the interest rate, you know, How stable is the economy, yada, yada, yada, which are very important. If you look at what consumers are doing, they're gobbling up the inventory, as retailers present it to themselves or presented to them. And that's starting to balance out inventories, I think we're gonna see a pretty stable consumer buying season for the holidays. And I think q4 is going to roll some positive vibes into the first part of 2024. That will impact the macro economics that drives the headline news, day in and day out. So strategic deliberate, are a couple of words that I would use in how consumers are buying in this quarter. And I think that's going to speak well. I think there's going to be positive news about what consumers are doing. And that positive news is going to come in first quarter, specifically at the end of January. I think you have a holocaust expected in February. So I think we're gonna have some good news before that. But that's my take. It's going to be a good holiday season. And that's going to reflect positively in q1, which is going to help the narrative of our macro economic uncertainty.
Pete Mento 4:50
I love it. When you talk about economic stuff. It makes me feel like
Doug Draper 4:54
I talked about that much of it. I love it. No,
Pete Mento 4:57
it makes me feel like my entire career was not for nothing. So thank you for that. One of the first, one of the first things I do whenever I see prognostications about growth, is I look at the numbers based on last year and the year before that, are they adjusted for inflation? So I don't know if the study looked at was adjusted for inflation. And when adjusted for inflation, it's still generally pretty good. Not great. But right now, our expectations are so low, that we don't need we don't really need some blockbuster quarter to really get people excited, what we just need to see is some degree of growth, mainline growth. And when you're talking about an expectation of three to 5%, okay, you know, when, when a typical holiday growth would have been like an 8%, three to 5%, I think we're all going to be doing, you know, cartwheels down at the Fed, if we can pull something like that off. So I agree with you, I think that we're going to have a pretty good holiday season. And the reason for that it's going to be like you said, clearing of inventories, people are all employed. Not all a lot of Americans currently employed. And there is a degree of exuberance, not going to call it irrational, but exuberance for people's current state in life. I think that it would be it would be poorly founded to look at the holiday seasonal sales as a positive indicator of current American economic health, when there are so many underlying critical factors that are really playing against us. Everything from commercial real estate to the orders being down. So preposterously coming out of China, American saving habits, and let's not even begin to start with debt, and where Americans are with debt. So will Americans go out and spend a bunch of money they don't have for Christmas? Oh, hell, yeah. Yeah. Yeah. That's That's the American way. Do I think it's going to be as great as the year before or the year before that? No, I do not. But again, with expectations being loaded. It's not hard to hit that barbell.
Doug Draper 7:02
Yeah. Yeah. What we usually agree with each other. I think that I would disagree. You're the the economics whiz and I certainly am not. So maybe my comments and things are a little bit naive. But in retail drive, I was looking to make sure people could reference this retail drive, which is a company focused on the retail segment and then Adobe analytics and digital services where those statistics came from. So I was looking just now there is no reference to adjusted for inflation. So that could be easily the reason for the for the $4 billion adjustment, but I still think shits gonna get balanced out. People are gonna buy and it's going to be a good trend going into 2024. I like it. I like it.
Pete Mento 7:45
Well, it could be the last tiny little schoolgirl last little scoop of ice cream you get before you get to throw the container away. That's probably a dud.
Doug Draper 7:56
Sometimes that scoop is good. And sometimes it's bad.
Pete Mento 7:58
Yeah. Well enjoy your last scoop kids.
Doug Draper 8:01
Yes. All right, man. I like your both of your topics. They're one of them. I love so you pick whichever one you want to go first, but balls in your court?
Pete Mento 8:08
Well, overnight, we have some not unexpected news of a new president being elected in Argentina. I never say his last name. Right. But Javier Malay I think is how you say his last name.
Speaker 2 8:20
So we came up with Yeah, he he, he
Pete Mento 8:24
is regularly referred to as the wig. He's also called the lion. But they call him the wig because he has some some serious hair. As Doug was saying he's before we started today, he's got mutton chops. It's like a modern day sort of Elvis looking kind of a cat. He is very ostentatious, extremely theatrical. He's also an economist. He's an economist. The man is a college professor. He's an economist. And he looks at the outrageous, rapid inflation happening in Argentina looks at a 40% poverty rate, which is incredible, if you think and says we can do better as a nation, and on a populist wave of really conservative, I mean, super conservative values of cutting government spending, eradicating grift, getting rid of a lot of the corruption that he sees in every single level of their government. He believes that it wouldn't take very long for the nation of Argentina to right size itself. One of the first things that he intends to do is to move Argentina off of its its current currency and to the US dollar. This is guidance, some, you know, pockets of interest in the news today. It's one of the first articles that will come up when you read about his his platform. And why would he do that? He's doing it in the hopes that as the American currency begins to deflate, as America's economy begins to flatten out, probably get a little bit more predictable. It will allow for more predictable Argentine economy as well and even more predictable Argentine currency. Many countries have done this in the past, not the least of which In a very interesting success story being Costa Rica, who also did the exact same thing at the exact right time and reaped incredible benefits. Argentina as a nation has always had so much potential. But it's never quite made it from the global standpoint that people thought that it should. It has a very large workforce. It's set up very well for logistics, and has tremendous individual raw resources. They're also a consumption economy. So in his hopes, and his dreams, this will be step one of trying to right sighs the economy will also reaching out to multiple nations to look for more liberalized trade. He's not just saying it'll be with the United States and with Western Europe. No, he's talking about China. He's talking about Mexico and the rest of Latin America. So there's a lot of exuberance, there's a lot of excitement. But anytime I hear about a South American leader, deciding to shake up corruption, I think it's only a matter of time before, you know, you might have an untimely end due to acute lead poisoning to the brain.
Doug Draper 11:06
You may, I had not even thought of that. Pete, when when we were chatting before the show here about about that that. First of all, the guy has a a comic highlight reel, right? I mean, if you go online, and just look, there's like a montage of him with a chainsaw. He dresses up and does performances and does parody songs about the economy. I think you mentioned he was in front of a chalkboard just ripping off, you know, different seas, yeah, different agencies and within the organization. And that will drive interest and it'll drive the voters to get the voters excited, right. But now that he's in, he's not dealing with voters anymore. He's dealing with the old, the old guard, and then we'll see how much impact he can make. I don't know. I mean, his he's gregarious, he's, he's a little bit off center. So we'll see. But I think you have a comment, we'll see how much of his banter and antics will go beyond just getting elected. And I hope that that doesn't happen, what you said in the end there, but there could be a chance where people just don't put up with it that are really now involved with controlling his comments and destinies and, and policies. So it'll be interesting.
Pete Mento 12:22
People are already comparing him to Trump, which I don't think is a fair comparison. Yes, he is definitely entertaining. He says outrageous things. And he's trying to single handedly change the direction, the entire course of the whole economy. But as you point out, Doug, you can't. Governments are not run by one person anymore. And he's going to run up against other people with other ideas, and other, you know, other other Northstars that he's going to come up against, like, you know, human resource human, caring about people, and trying to get things done for people. And when you have a 40% poverty rate, the idea of getting rid of the Department of Education, which he called the Department of indoctrination. You know, you're a good a good, a good nation starts with a well educated populace. I don't know. We'll see where this guy goes with all of it. But as somebody who looks at his tax bill, and just wants to light something on fire, I can see where he probably got a lot of folks excited about him. Yeah, well watch this one closely here global trade this week. Absolutely. And
Doug Draper 13:23
that shifts us gears into our halftime, brought to you by CAP logistics. They have Kenan up in Breckenridge, in the mountains enjoying things today. So, Cap logistics.com for logistics and transportation needs, check them out. And now, as I said, this is the Thanksgiving edition. So we'll kind of jump into it a little bit. So Pete, you had some good topics to roll on this one. So I'll let you go first. Yeah,
Pete Mento 13:48
I had to get an MRI today on my on my leg. I've had I've had some problems with a quad strain for a while now. And I went to get my MRI today and my MRI technician just trying to make you know, banter trying to calm this big old man down was like Hey, got any big plans for Thanksgiving and you just try to talk to me and I was like, Yeah, Virginia about where it's talking. is like oh, you know I'm really looking forward to get together my family big French Canadian family cabinet Shut up and take pictures. And i i Hold Thanksgiving very, very close to my heart because I love the idea. And I take it I take it at its core being thankful for my family thankful for my ability to care for my family my friends be very thankful for the nation that I live in. But you know, man, there's a lot of Thanksgiving stuff to me that's the things on the table that my family is white trash stuff that we ate that no one else eat like, ambrosia salad which is basically love it. Fruit fruit, canned fruit with cool whip and coconuts and chocolate chips and how you can you call it a salad right and being texted And there's really very rarely a meal. It doesn't involve beef. So yeah, we'd have turkey, but we'd also have a prime rib on my table. And depending on what part of the family we were with, it was either bone dry because they were very Southern Baptist. Or it was just an absolutely alcohol fueled shit show. It was one way or the other. I enjoyed the shit shows, frankly. But yeah, yeah, really? Hmm. I'm excited for Thanksgiving. I don't know, Doug. So what do you think for for this year?
Doug Draper 15:29
Nice. Well, first of all, when your kids leaving, you're on the I'm on the end of that you're on the beginning of it. It's always nice to have him come home. So I'm thankful for the family as as cliche as that definitely sounds when they're not around and they come back. You kind of, you know, you really miss them. You don't know what it's gone. You don't know what you got till it's gone kind of thing. So I'm looking forward to that. And this will be the last Thanksgiving that we have in the house that we raised our family and my daughter was born. And she was like six months old when we moved in. And like Pete, I'll tell everybody, but we're moving and we're able to keep our house to the end of the year. So this is the last Thanksgiving then there'll be the last Christmas for our family. So that's kind of special as well. But yeah, I was at Lourdes excuse me this past weekend visiting my daughter and I went to the k U k State football game. Unfortunately Kansas did not win but saw tons of friends and and it was awesome. And the big thing with with college kids now is friends giving there were two back to back friends giving parties that my daughter was going to so I don't remember friends giving when I was growing up. It was just like kind of like what you said to boucherie at the with the wine at at dinner, but that's a big thing now and maybe that's been around for a while. I just didn't know about it. But friends giving is a hot button at the University of Kansas with 21 year old girls.
Pete Mento 16:52
I think it's dumb. Friendsgiving in the same category as pumpkin spice everything. And yeah, you know, it's sweater weather. Let's put on our odds. Just shut up. Shut up. Please shut up about all of it. You know, your friends giving us for me, Doug. It was the night before Thanksgiving, when all my buddies and I would get together at the local watering hole and get polluted. That's what friends giving was it was the night before when we would meet at a bar because we we hadn't seen each other in forever. And we would get looped. And then wake up the next morning and go to the football game to watch our high school play rival central shout out to the Trinity pioneers who won the state championship this year. Rock on but you know the next the next morning we'd wake up hungover and spend it with our family. You have to have another holiday because you've got to get to have a day with you and all your friends be thankful that you know it's called a dinner party Shut up or do your pizzas and have your luau or whatever it is you your friends giving grow up Okay, have a dinner party ask your friends to come over have genteel conversation put on some jazz smoke a little devils cabbage and act like adults for the afternoon friends giving it's just so contrived every we've got it we get to create all these little safe spaces for all these kids today. Grow up, Rob and that's coming from a guy with his hat on backwards. Okay
Doug Draper 18:20
I love it. I love it. Well, we'll have to talk next week about what actually transpired in each one of the dinner tables here in a couple of days so that's good I'm sure that my
Pete Mento 18:29
my leftist my leftist got slightly Marxist daughter will probably upset everyone at Thanksgiving. I'm looking forward to that.
Doug Draper 18:40
Yeah, yeah. Man. All right, buddy. I'm gonna jump into my second second topic and we'll get this party one down so excuse me. So she N Right it's the what do you call it the fast casual guy can think give me the give me the right word there I'm trying to think of a
Pete Mento 19:02
casual commerce e commerce company they're not
Doug Draper 19:10
yeah this thing's this thing's going down a wormhole already can't even think of the topic what I'm talking about but the quick commerce right quick retail so anyway, there she ends supply chain not only there are there are there methods of how they just kick out clothes based on trends and influencers within days and get them overseas. There's been a lot of draw with some of their supply chain and and not necessarily transportation supply chain, but apparently there was a couple of influencers that got some behind the scenes look at some of the factories and how they mass produce their clothing and their items. And they're able to walk in and look at some factory conditions. And the end result was the influencers painted a picture of favorable compliments, right. So I pulled up quote that I'm going to read here some Want to influence who said, I expected the facility to be so filled with people just slaving away. And I was actually pleasantly surprised that most of these things were robotic. Honestly, everyone was just working normal, like chill sitting down, they weren't even sweating it, that's a quote. So if you can't just smoke and mirror that thing with these influencers, it's unbelievable. I think that there's, there's issues there, I think as you pull the onion back with the labor force, they're pulling and having a pretty picture and bringing in a young influencer and showing them what they want to show is not a direct reflection of what's going on there. So unfortunately, I think that industry is guilty until proven innocent, but it's Chinese driven factories, and where there's smoke, there's sometimes fire, but I think that we'll see more and more of the industry, not necessarily specific to she can really be exposed, or some practices that are just don't align with, you know, the, the conditions that the younger generation wants, which is, you know, it's, I don't know, the bigger analysis on the fast fashion, that's what the word I was looking for fast fashion, the disposable nature of the whole process, it's counter to in the environment, sustainability. And that kind of goes against the mantra of some of the younger consumers. So it's an interesting dynamic that will continue to play out. But as of right now, there's eight influencers out there that think the factories are just perfect, and there's no issues whatsoever.
Pete Mento 21:40
And I'm sure that all those influencers have a wonderful friends giving, probably have a couple 100 people over for him. You know, this company, unfortunately, was the target of a lot of customs enforcement recently, where they allegedly, you know, we have to say that off the bat here, allegedly were found to have cotton that had been produced in the weaker nation. And because of the way that these goods were coming into the country, through the specific chapter 86 de minimis program with customs, they were not being inspected in a way that would be as when you bring stuff in under a manifest entry, only a small number of a large multiple number of E commerce shipments are actually probably going to be inspected. So as Customs has gotten much, much better at reviewing goods as they come in, they've been using genetic testing on cotton to determine where stuff comes from. And now Shan finds themselves wrapped up in a very political, ugly, ugly argument about the use of force labor in in that particular region. I don't think that there's a lot of good news in this for them. Right now, Congress is looking for every possible way to sanction companies that are doing this type of work, it's only gonna get their stuff inspected more in in fast fashion. You want to fast if it's being inspected more if this stuff is being you know, held up for who knows months at a time, I think that ultimately it's going to slow down their ability to make their customers happy by getting the crap they want cheap, quickly, and expensively. So I'm, I'm not, I'm not sold on the idea that the the party is just going to keep raging on this stuff, Doug, and you can send as many influencers on your Tickity talk as you want. Customs has got technology, and they're 100% going to get their foot in the door on this. Yeah,
Doug Draper 23:37
yeah. Yeah. It could be the end of the Fast, fast fashion. Industry. That was That's why I keep saying it. Yeah, good point. All right, man. Bring us home. What's your second topic for today? Yeah,
Pete Mento 23:51
doom and gloom for final topic, unfortunately. ocher? Yeah. Who do you helicopter raid on civilian ships? So what we're seeing, unfortunately, right now happening in the Middle East region, is terrorist activity by what can best be described as non nation states, Rogue Nation, enforcement agencies, attacking legitimate commercial vessels. And in doing so, disrupting maritime traffic, the United States has, has really pulled back on their willingness to protect the seaways because what they've realized is they're mostly protecting Chinese financial interest. And we have a whole portion of the world in that Suez Canal region that is so important, so vital to American energy concerns. A lot of aid as well. It's not stopped to mention that. And for decades, we have kept a strong arm in that part of the world, and it's a terrifying place to have maritime operations. With so much danger all around it. This news report did not get the attention that it deserves you If you continue to see disruption of maritime trade through the Suez Canal, to be able to get energy safely from where it is to where it needs to be, it would add months, literally months to the supply chain of energy. And in doing so would also disrupt supply chains, just from its very core. This is a big problem. I think that they understand it is I mean, there's been so many war games that have been done about this, so much insight that's been put on it by the US Navy and by our allied navies. This is a very big problem. I think you're going to see more and more of it over the next couple of weeks until something is done about what's going on in the Middle East. Yeah.
Doug Draper 25:35
Well, when I saw this topic, the first thing I thought about was what we spoke about last week, or two weeks ago, when you were on that with the Panama Canal and the situation down there with the water level and US grain exports are going through the Suez Canal. So not only is there a problem with fuel, and the uncertainty and what we're seeing, actually starting to happen. Now we're sending ships for that same reason, region, all the food, and it just food fuel going into the beast of the belly, it just is ripe. I mean, I'm just a dude from grew up. I'm just a kid from Kansas. And if I can see that, in the potential problems that is just laying out. I don't understand why we would do that. I mean, it's financial related, right? You got to sell the grand you got to move it. You can't go through your normal port because of delays. Let's go boys, let's just jam it through the Suez Canal. Well, all of a sudden, there's bombings and everything with the with fuel. I could see it become pretty dire pretty quick, if they decide to do the same thing with the food supply chain that they're doing with the fuel.
Pete Mento 26:43
And wait till insurance companies get a hold of this stuck. Oh. It's only gonna get worse belt.
Doug Draper 26:51
Yeah, yeah. All right. Well, that wraps it up for this edition of global trade this week. Before we sign off. I wanted to make a comment. Pete, we're going someplace on December 5 and sixth. Tell me about that.
Pete Mento 27:03
We're going to book a return buddy. Pete And dud take Boca for the Tampa conference. We've been invited to do the show live at Tampa. And we will very excited to record our show for the good people at Tampa. We will be discussing whatever the the latest exciting topics of international trade are. I imagine we'll take questions as well and doing in front of a live audience. So very excited to do that. Very thankful to the good people of Tampa, for inviting us and hopefully you'll be able to be able to be there to join us. So looking forward to seeing folks there.
Doug Draper 27:37
Absolutely, absolutely. So we got, I think at least one more episode before that happens. So until then, I want to thank everybody for listening. And if you have any comments, criticisms about the show, jump on LinkedIn and all the different. What's that?
Pete Mento 27:52
Any criticisms you can keep to yourself?
Doug Draper 27:56
Yeah, just do a thumbs up and like the episodes and keep your comments to yourself. I like that. So. All right, till next time. We'll catch you next week. Have a wonderful Thanksgiving. I'll be interested to see how it plays out on the next edition of global trade this week.
Pete Mento 28:12
See you Bye
Transcribed by https://otter.ai