Global Trade This Week – December 20th, 2022
What’s going on in Global Trade this Week? On this final episode of 2022, Doug Draper and Pete Mento make some new logistics predictions for 2023:
2:34 -US Economy Goes into a Correction, Not a Crisis & -We’ll See at Least One High Profile Logistics Bankruptcy
4:25 -There’s Going to be a lot of Overcapacity
7:45 -At Least One US Governor Declares War on Crime
9:55 -This Will Be the Year Pretender Cryptos (AltCoins) Tank
11:03 -Electric Vehicles Poised to Dominate Last Mile
13:23 -Russia Will be Forced to Negotiate
14:56 -Interactive Online Retail Explosion
19:23 -World Politics: 1.) Britain to Hold UnBrexit Referendum. 2.) Macron Resigns. 3.) Trump Sees Charges. 4.) Biden to be Impeached by Congress.
21:37 -Near Shoring and Reshoring will Gain Momentum
26:34 -Heavily Tax Then Ban Domestic Production of Meat
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Keenan Brugh 0:00
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Doug Draper 0:10
Good afternoon Global Trade this week, friends, this is the episode that you have been waiting for myself. Doug Draper, I'm one of your hosts, Pete mento, on the other side of the coast is going to be joining. And we're talking about 2023 predictions. And I'm super excited. Pete, what do you think you're ready for the show?
Pete Mento 0:31
Look at this hat, Doug. I mean, does this hat not scream guy making predictions? This This has festive end of year prediction show.
Doug Draper 0:45
Yes. I want to thank you
Pete Mento 0:48
for taking nine of my dollars and giving me this hat in return.
Doug Draper 0:54
Yeah. What was the Johnny Carson? What was his character's name when he put that hat
Pete Mento 0:59
on? Carnac? The Magnificent. Yes,
Doug Draper 1:03
there you go. I would liken it to something of that nature.
Pete Mento 1:06
So I love Carnac. I love that. That gag. It was fantastic.
Doug Draper 1:13
I don't know it doesn't play very well. I think it looked just like movies. When, when I'm with my kids, and we're talking about movies like The Breakfast Club. We watched that about a year ago and 1520 minutes into it. They're on their phones completely bored out of their mind. And I'm just like, this is one of the best movies of all time, blah, blah, blah. They could care less. So I don't know if Cognac is going to hold up the way it would and 2023
Pete Mento 1:37
we're dads and we do like the corny jokes, too. I mean, I can't speak for you about but as far as I'm concerned, I do enjoy a corny joke from time to time. So Johnny Carson is is just chock full of stupid jokes. So I do I just don't like the old ones, buddy. If, if I must be honest about it. So yeah, I'm still okay with current act. And I'm still okay with Ed McMahon. And you know, all the other things that came on there. I loved it when the guy from the sea Diego zoo would come on. I love Don Rickles, I loved all the bells. So I'm still okay. Yeah.
Doug Draper 2:13
Yeah, for sure. All right, well, let's jump into this thing. We got quite a few predictions. I'm excited to hear what yours are. I know, our audience can't wait to laugh or cry or ponder some of our pontifications as I mentioned in the hype video earlier. So with that being said, Pete, I'll just roll it out to you. Prediction number one.
Pete Mento 2:37
Yeah, so Prediction number one is a bit of a twofer here. So I'm gonna, I'm gonna squeeze two together. And that is that the US economy is going to be in a correction not a crisis. So we're probably looking at a double dip recession. So we had to two quarters of backward GDP growth or lack of growth. And that that along with what I believe will be continued backward, you know, lack of growth, and that, that situations for unemployment should be the case for probably q2, q3, at least, maybe in q4, which is going to be you know, the dictionary definition. And then on top of that, I think we're also going to see some at least one high profile bankruptcy in our industry, maybe more. So All the king's horses and all the king's men situation, I think there's going to be some people who are done with money through the course of the pandemic, who over invested in some silly things and are going to find themselves on the wrong end of the wrong end of some bankruptcy papers, your pals so that's, that is probably a very on unpopular opinion, given the kind of cash that just flew out of everybody's pockets to move containers around the world. I'm gonna stick by that one of the community a couple of high profile logistics, bankruptcies in the next 12 months.
Doug Draper 4:07
Well, I liked that one because we spoke many times about the explosion of acquisitions and money coming into our industry in the logic tech, the log tech so that one has me interested. I can't wait to see how that transpires.
Pete Mento 4:25
Anybody What's your first one?
Doug Draper 4:27
All right, so my first one could be one of those de that doesn't seem to be much of a prediction, but there's gonna be a lot of overcapacity across all lanes and transportation modes. We're starting to see that rail air around ocean. But one thing that I wanted to point out is that I think ocean freight and air freight will correct themselves a lot quicker than the other ones and and really, air freight that I've seen a couple of things that a lot of capacity came into market. But I've seen some trends that air freight is starting to pull out of selling services direct to former forwarders and non asset based companies. And they're taking their asset, which is a very expensive piece of equipment. And they're putting it in the hands of asset based carriers. So they are leasing their planes to the DHL is in the UPS is the world and other contract cargo across the country, so, or across the world. So by taking it out of service in the sense that they're not going to be selling directly to non asset based carriers, they're going to put those to work and sell them just as basically an asset to get out there. So that will adjust the air freight prices quickly. Because it'll essentially take capacity out of the market. And then we've talked about the ocean freight, and how it's essentially one step away from the mafia. And they can turn on blank sailings and turn off those sailings pretty darn frequently. So I think that they have the ability to ratchet up and ratchet down and test the volume, if you will, to a right size, their capacity constraints. So the overall capacity is a lot of capacity out there, but air freight and ocean freight are going to correct themselves probably mid year 2023 prediction one,
Pete Mento 6:28
yeah, mid year, maybe even earlier. But I think this is going to be a really tough year for carriers. Tough in that they're just making money hand over fist. I mean, it was just the golden age of bonuses and and rates. And I think you're you're absolutely right. It's going to be a correction efforts. A fascinating one, we're just now beginning to see those rates begin to come down they capacity to be corrected. I'm not really comfortable predicting on that one. And a big reason for that is because I don't see the big electronic doodad that would normally you know, shut out there. Next year is their big iPhone releases. You know what I think could save airfreight is continued hostilities in in Eastern Europe. I'm not sure that's even going to be enough to do it. To be very honest with you. So it could be right on that one. I guess I guess time will tell. People are acting like that's a that's like a really Captain Obvious. I don't think it's so obvious. I think I think there are ways that airfree could pull itself back out of it. I think ocean freight is doomed, because rates are going to be absolutely in the toilet next year. Right. So keep going. I think that at least one US Governor next year will declare a a war on crime. And what I mean by that as a high profile. You know, what's the term that they use? You know, zero? What do they call it? When like, there's there's no, you know, oh, zero tolerance, almost. If you steal a pack of gum from a Walgreens, you're getting rolled up kind of, you know, we're, I think somebody might go as far as to actually even call it the National Garden, some American cities like I think it's gonna get to that point. I think that there are there are some American cities that are just sick and tired of it. And what does it have to do with global trade this week, and as a lot to the global trade this week, you have retailers who are having a hard time living up to their insurance standards, you have people who are afraid to go out to retail settings right now afraid. They're afraid. So there are major American cities now where people are not, are actively not going into retail establishment because of fear. They're there. They don't want to deal with appointment shopping. So the you know, the E commerce thing is great and all but it's actually hampering movement of inventory. I think you're gonna see a political pushback on this, Doug.
Doug Draper 9:07
Yeah, I would. Speaking from a personal experience here in Denver, in Colorado, the whole concept of the donut, people are leaving downtown. It's happening here in Denver. And to be honest with you, it's already happened. It because of those reasons. I mean, it is it's not safe. It's not enjoyable. Things have been. It's just not a good, good look. I love the fact that Denver's downtown was bustling and happening, and it needs to pivot and come back. Because what you just described is happening in Denver, Colorado.
Pete Mento 9:40
I miss the fact that Manchesters was kind of sleepy. But now it's sleepy for the wrong reasons. People are genuinely afraid. It's just not the city I grew up in but if I can throw one more at you, I think that this is The year I know people thought that last year was the crypto correction. This will be the year of the crypto correction, much like the NF TS had their moment of the Sun abruptly taken away from them. This will be the year that most of especially the pretender and Kryptos, will find a great financial correction. I'm not so sure about Bitcoin, Bitcoin. But I think many of these pretenders are going to find them. Most of their value eroded. The Bitcoin will have a corruption of its own, but not to the degree that these other ones Well, I think this is the year that pretenders are sorted out. This is the year that you you begin to find a normal level to what its value is. And then we we begin to see some rationality brought to that market. That I bet Kenan wishes this was the week that he was on the show last week.
Doug Draper 10:59
Absolutely. All right. So my next one is is maybe another Captain Obvious. But I think there's a couple of things here, number one, electric vehicles and Evie is really poised to dominate last mile. And I think that we saw a pivot, where electric vehicles kind of migrated to the to the final mile, it's just, you know, having the technology to have a semi drive 500 miles across the country just isn't there yet, it makes for a good headline story. But the bottom line is that electric vehicles final mile is really going to blast off. And I want the audience to think about this, right? There's this bell curve of innovation, and I don't know exactly, all of them, but there's the innovators, the early adaptors, and then the the majority, and then then the folks that are late to the game. So the innovators in electric vehicle final mile delivery have happened in 2022, the early adaptors are really going to take off in 2023, they're gonna see some creative Eevee distribution models, some of that could be electric vehicles in the sense of scooters and bikes. But I think that the piece on this one Pete, I'm trying to understand or trying to convey to our audience, is that 2022 was the innovators of final mile electrification. 2023 is early adaptors, and that is a sharp bell curve climb. And so I think we're going to see that as a big topic, it's going to be a lot more players in the industry, and it's going to get a lot of buzz, and we, as the consumers are going to benefit from them.
Pete Mento 12:46
I agree, Doug, I think that the the people that poured money into this, that are beginning to see results, they're gonna be the big winners, and the people that did not see the results. So their innovation failed, they're gonna have to pull out of the market, they're not going to have the money to continue to invest. So it's going to be ugly. And then the next thing will be the final mile people that are doing the delivery vehicles, I don't think it's going to be the autonomous stuff. It's going to be the people that are making the mail trucks and the rest of it where there's still people driving them. They'll they'll be the ones that are, that'll be that next wave. And we'll see what the next couple of years bring with that. But I completely agree with you. i So my next one. You know, last year, I said Russia is going to invade this year, I think Russia is going to be forced to negotiate. And I'm gonna, I'm gonna explain why I think that Ukraine will make it through the winter. I think that Ukraine will fight Ukraine will find themselves bolstered by incredible technology provided to them by the West, particularly Patriot missile systems. And in doing so will find themselves in a position ready for spring offensive, ready for summer offensive and facing a Russia who is looking down the barrel of a very unpopular war with its own people and running out of people to conscript. So it really puts Putin in a difficult situation. And he could be facing a mutiny of people who support him. So I think that about this time next year before the next winter, so probably late fall of 2023, you may finally see a willingness for Vladimir Putin to actually be sitting down to begin the negotiations for a ceasefire and not a surrender, but a ceasing to the conflict between Russian
Doug Draper 14:39
Interesting. Well, you had probably the bold prediction of the year last year when you talked about Russia invading Ukraine so we'll we'll see how this one pans out. And I think you're spot on it can only go on so long before something needs to transpire. So my next one I was going to use the term e commerce but It was a post that you made recently Pete about e commerce this and ecommerce that and it's almost used too much. So I'm just going to say like online retailing. But it's going to have an explosion, not from a pandemic perspective, but with a couple of key things, one, interactive, interactive shopping, Voice Search and immersive shopping. Right. So now you can access things online Tiktok, or, you know, Facebook and things of those nature. And when you click on it, it takes you to their static or not static but their website, right, it doesn't really take you to the next level of of shopping and engaging the user. And so I think what you're going to see is a lot of clicking on pictures. And then it's going to immerse yourself in any experience, not just dive into the web, or send a link to say, here's a web that you can pull up. I don't have a lot of specifics on how that's going to look, but I've seen you know my kids out there, looking at it, but clicking on tick tock clicking on a video be able to, you know have kind of like a dressing room effect with, with putting different styles on, I think is really going to drive the online retailing, the other piece is going to be payment options are going to continue to increase more options equal more purchases, kind of the one click where you don't have to type in a credit card or have them remember it where it's a one touch type of thing where you can have your information saved and and your payment goes through immediately. And then installment payments have been a big thing. And I think that will continue to grow digital wallets, QR codes that you can scan and take you to, to a site to take care of it. So I think you're gonna see the experience of the consumer really take off with immersive shopping options, which is going to make it easier to push by, which will continue to drive online retailing and E commerce. Last couple of years it was COVID related. This coming year is going to be all about immersive shopping, and making it a whole heck of a lot easier to push the button and buy things. So I think we're gonna get a blip. How does that relate to transportation and logistics, the easier it is to say buy and purchase something, the more product is going to drive through the system. So there's going to be an increase in an E tailing and ecommerce,
Pete Mento 17:36
my friend. And let me tell you why I wholeheartedly agree with that, Doug, so you have giant e retailers like Amazon, giant e retailers, whose by the way, you know, they got cash, right? We have a lot of retailers period that are sitting on cash. And they do not have a consumer base that is hungry to take on more debt. So they're not hungry to take on a credit card. So the idea of them clicking on for a new, you know, retail driven MasterCard that's branded with this retailer at 30% is not getting a lot of takers right now. But the idea of buying 250 $300 worth of material at a click that they can pay for over four or five installments at 0% interest that's being actually funded by the the retailer that they'll play around with. And being able to do that without the surety the bank behind it. You know, looking at past purchasing seems to be something folks are actually open minded to do. So I agree with you 100%. I think that this is actually more important that people realize, I think that you're, you're about to see the credit card companies and the banks begin to really pay attention to ecommerce, because part of them is about to get cut out of the actual, they're gonna get cut out of the process and not gonna like it. So they're gonna start talking about how can we get more engaged with the platforms? What can we do to become more important with it? And you make a great point, Doug, it's, it's too easy. It's too easy to clickety click, click, click, click, click, click. And the credit card companies don't want to be left out of that, because they were part of the reason why it was so easy to shop that way. So
Doug Draper 19:22
yeah, just for another evolution. All right, my friends.
Pete Mento 19:25
Let's keep I'm gonna give you a political triple play. They're all somewhat related. It's more of a quadruple play. And they're all related. Okay, so verses I believe that you're going to start to hear in the spring, the call for a referendum on Brexit. So I think that the UK is going to request a new, a new vote on on Brexit. I think the economy is going to hit stagflation in the UK hard and you're going to have a call for people to enter back of the European Union. Not sure Europe's gonna want it back. Right. I believe that you're going to see In a vocal consideration, if not an actual execution of Macron, the president of France to resign. I think he might actually do it. But number three, I believe that President Trump will be brought up on charges. I don't think it's just going to be like a call to Embrapa charges. I think you're gonna see the Senate demand that he's brought up on charges. And lastly, I believe that President Biden will be impeached by the Congress. I don't think it will make it past the Senate, but he will be impeached. So you'll have in our short lifetime, another president impeached, my friend. It's almost like, it's like a rite of passage. You know, if you're going to be president, you gotta get impeached. The Senate won't hold it up. But Congress, absolutely. So you're gonna see a year of international political upheaval?
Doug Draper 20:52
Interesting. Well, if you're not a polarizing audience, one topic to bring up would be Trump. So I think you just did that. And why not your comments
Pete Mento 21:00
and Macron? And basically, British politics? Do I hit all of them with one like, I think you're gonna see, you're going to see hard, right, European politics begin to really matter. And hard left us politics begin to have some interesting, truly fascinating repercussions. But more important than anything, every single political leader of the spectrum worldwide is going to be called to task because of economic concerns. It's just how it's going to be them. I'm glad I'm not alone, that makes complete. Makes complete sense.
Doug Draper 21:34
So all right, I'm winding this down, I got I just have one more. And the whole, it's related to nearshoring. And reshoring, is going to gain a lot of momentum. And we could actually take that from, from a who the band The WHO song Won't Get Fooled Again, the difference between companies reacting to Holy shit, my stuff is on the water, how do I get it in my consumers hands as reactive. Now that things have calmed down, this can be more strategic and strategic, will allow it to set up manufacturing, re review how you source raw materials, and there's more time to set it up and take care of it. So we won't get fooled again, with a pandemic craziness that transpired. So that means companies that may have been thinking about it, that had to pivot hard right, during COVID are going to a flourish and look at nearshoring I think the nearshoring is going to be more popular, and bringing things back here to the US, although that will certainly gain some momentum. So I think you're gonna see that I think people are going to promote it, companies are going to promote it and hype it. Because now they have time to strategically insert themselves into a more stable supply chain than a reactive oh my god, what just happened to us. And the C suite people at a company are just, you know, everybody's got their hair on fire, kind of like that scene from Ferris Bueller's Day Off whenever the when they were called into the principal's office and the principal's running around. It's going crazy. So that's a pretty pathetic analogy there, Pete. But anyway, I think you understand my point with reshoring. And nearshoring is going to gain some serious momentum. And we're going to hear about it because companies are going to know that they're doing
Pete Mento 23:29
it. Do you think Keenan knows who the who is?
Doug Draper 23:34
Yeah, I think he does. I think he does.
Pete Mento 23:37
If you think that Keane, like how, how absolutely cool. The who was like, while everybody else was sitting there playing three chords with their suits on like the who was breaking their crap on stage and like, the who was awesome. That was awesome.
Doug Draper 23:52
That was if you think if you take a step back and you hear about the British invasion from the late 60s, I mean, if you just start clicking off all of the bands that came over that you and I still talk about and have relevance. It's It's pretty amazing. It was a true impact.
Pete Mento 24:09
We might have to be seen in a new mixtape to get them through the ski season. Snowboarding season. Pardon me. But but there's a really important line from that song. Right. And I think that American companies are learning it now. Meet the new boss, same as the old boss. And the reason I bring that lineup is I have had some really weird uncomfortable calls over the past week duck, where many of my Simplot my my clients have learned that their Vietnamese Cambodian, Thai suppliers are owned by Chinese companies. The factory like it's basically it's like, it's no different. The money is all going back to the same place. The supply chain is basically it's just been like, pushed to a different country. There's absolutely no difference. You know, they're in some cases they're actually dealing with The same central authority is just being produced in another country. And I think that that could end up being a real problem for some folks, because of this is a huge distinction. America is sincerely talking about that next level of sanctions. Beyond the section, you know, the section, three ones in the 320 ones about doing these three, three sevens, which are like, for Rudel on an entire industry out of China. So where do you go? You you go to Europe, you go to Mexico, Central America, Latin America, and even then, you know, so I think that nearshoring and in offshoring beyond these, you know, nations that are so deeply influenced by China, because the Belt and Road, think that it's going to be incumbent on the buyer, buyer, beware to know who they're buying from, and to understand the supply chains of these people that they're nearshoring with. And, and I think there's going to be a lot of people who are thinking, of buying some automotive parts, or buying electronics or whatever, from the super awesome supplier in Vietnam, or, you know, Colombia, or whatever, it turns out, it's just basically Chinese stuff. That's, you know, been tested in package someplace in Bogota, and set up through Mexico, and people are going to be screwed. So my hope for for their, their sanity, that the people that that are doing all that work, are really looking into just how sustainable and how strong. That leaves me with my last one. So I read this a couple of months ago, and I thought this is absolutely ridiculous. And then it started to gain some traction, I believe that a country will start to will propose by like 2030, or 2025, they'll propose at this year that by 2020 30, or 25, one of them that they're going to put a an almost prohibitive tax on meat that was raised or produced in a corporate fashion in their own country. And that it will eventually be part of a plan to make it illegal to produce livestock for consumption in their own countries. What I mean by that is that a country most likely like Sweden, or Denmark or Norway, so probably like one of the one of those countries will make it effectively illegal to raise livestock for human consumption in their country. And that if you want to import it, or if you do want to raise it to sell, it will be taxed to high heaven. And they'll do so because of carbon and emissions and health concerns. And an attempt to get people to push towards you know, Doug, you and I will just sit here in blue jeans dress like Bruce Springsteen in the 80s Eaten rib eyes the whole time. It's happened and I'm telling you right now, cold dead. I mean, my art my arteries filled clogged up with plaque hands. You are not taking steak away from me. wrapped in bacon dipped in beef towel. Hello. Bring it on, bro.
Doug Draper 28:19
Yeah. About halfway through that Pete. I just started thinking about a steak that I want to grow that can see it on the outside and
Pete Mento 28:27
everything else. You know what I started thinking about? Pork Tenderloin pow. How nice is that?
Doug Draper 28:34
Yes. And that's the meat of choice for Christmas, as our audience may know from a
Pete Mento 28:38
previous episode, maybe a ham. Oh, God. Oh, you know, it'd be nice to have some venison. That also sounds good. Santa. Oh, venison. But I think that this, this is coming. I think that it will be used as the test case for states, certain US states to actually consider it as well. And then my friend, everyone's moving to New Hampshire. So we welcome you with open arms.
Doug Draper 29:07
Nice. I like that. That is one hell of a prediction to end on. I love it. I love it. I give I tell you what our audience did not see that one coming. I can guarantee it. But it has a lot to do
Pete Mento 29:16
with trade. I think that you know, taxation and tariffs on things where you're trying to make changes with regards to environmental policy are going to become more and more likely, you know, so I think we're gonna see more and more of that. We'll see buddy.
Doug Draper 29:30
Good Anya.
Pete Mento 29:31
So I'm taking this out. Right, because you brought us in? Is that how that works? To die? Yeah. Do I get to make the the Happy Holidays. Bye bye. Is that what's going to happen here?
Doug Draper 29:42
We flip this coin for the hat and you guys so yes, you can you can send us out. Well, on behalf
Pete Mento 29:47
of all of us here at global trade this week, and of course from our sponsor, or the good people at CAP logistics. We want to wish everyone a happy and healthy and safe holiday season and we we certainly do hope that you all enjoy our content this year. And we hope that we'll see you for even more next year. Merry Christmas Happy holidays, happy Hanukkah, happy Kwanzaa and whatever else it is that you happen to celebrate. And Doug, Merry Christmas to you and your family and Keenan, Merry Christmas to you and yours as well. And I cannot wait for another year of sharing these crazy stories and ideas. Halftime and all the rest not thank you for always being here, buddy.
Doug Draper 30:22
I really do appreciate it. Yeah. Thanks, man. This has been a fun. Merry Christmas. All right. Merry Christmas.