Global Trade This Week – August 9th, 2022
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Keenan Brugh
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Pete Mento
Well, hello everyone and welcome to another edition global trade this week you That's my buddy Doug Draper. I don't know. That side yet down on that side. Yeah.
Doug Draper
Yeah. Raise
Pete Mento
is his sidekick, Troy. And we're brought to you by our dear friends at CAP Logistics. Doug, how you doing, pal? I am doing
Doug Draper
great. It's a beautiful day in Colorado ready for the show? Couldn't be better.
Pete Mento
Now, are we? Are we getting ready now that August is halfway there. What point are we talking like mid September? You start to buy into snow shovels. Get ready?
Doug Draper
No, that's no, that's a different world out here. It could be if the sun is out. You know, sun's out. guns out. Sun's out. Fun is out. And as long as the sun's out the snow melts. So, you know, I'd probably say and people in Colorado are gonna say I'm a moron. Even though I've lived here for 20 years. November, right? There'll be a freak storm in October, but it'll go away. So November ish. I think what about you guys? Like next month?
Pete Mento
No, we are having a miserable summer in a drought. So it has been upper 90s 100 degrees now for the last cou ple of years. And we're finally going to get some relief in the 80s. But we usually get our first real snowstorm in October, early November. The ski season for us usually starts at some point after Thanksgiving. We're very fortunate if I see crappy ski conditions are settled by the beginning of December. So that's good for us when you guys usually start
Doug Draper
right around Thanksgiving ish. Everybody's trying to push the envelope a little bit. But
Pete Mento
yeah, I went skiing up there with my dear dear friend Sean Carroll for our friend Mark Saxon. And I lost a lot of weight. I was feeling really good about myself. I was felt like I was in really good shape. And it took me all about 30 minutes to see in an altitude that the powder and I felt like somebody was sitting on my chest. It was I was already okay. That's that's a level that lettuce ism. I did not. I had no change yet.
Doug Draper
That's a real hard workout. Now, yeah, but it's fun. You can get out there, just imagine. Yeah, chasing a teenager. Hey, Dad, watch this. And he'll do a helicopter and land at no problem. And I'm like, Hey, son, watch this. And I'm just in a pile of mess. buried in the snow. So
Pete Mento
I love it. You know, New Hampshire is beautiful and very proud of this state. But there's it's not even comparable. Like, the ugliest thing I saw in Colorado was pretty sadness. It was. It was humbling. And it was just so much. I loved every second of it. If you got a chance. I'll say it again. Doug have some hard saying that. If you had an ocean tomorrow
Doug Draper
it is dry and dry
Pete Mento
here at Vancouver. Right? You had an ocean. issue it?
Doug Draper
Yeah. So
Pete Mento
go man to kick it off, pal. What do you got for us?
Doug Draper
All right. Yeah, we had some great stories before we jumped on the on the broadcast?
Pete Mento
I asked with mostly Grayson, yes, that's true.
Doug Draper
So we're gonna we're gonna keep it on that side of the pond. And I just saw something the other day. And here's my here's my title. It took me a while to think of this one. But it's from a quote from Shaun of the Dead, which is a movie back in 2004. Ish. And the line was, let's go to the Winchester have a nice cold pie and just wait for this stuff to blow
Pete Mento
over. And I was yes.
Doug Draper
And that's related to a port strike that is pending over at Felixstowe for a day days. Basically, it's union they want more money. 1900 ish members. It's the United union. And of course they're saying, which could be valid. I'm not getting into the details of what the strike is all about. But obviously cost of living is going up. They want more money. Sports are making a killing from their perspective and they they want their fair share. So the funny thing about this one, Pete, is that they're going on strike. But in classic the way that they're letting you know when they're going on strike, right? So they're saying, Hey, we're gonna go on strike from the 21st of August through like the 29th of August. And, and I'm just like, what? So first of all, that was baffling to me that I'm going to tell you what I'm going to strike. That's not like tomorrow, it's like two and a half weeks out. So there's an opportunity to come up with contingency plans. But my question was, here's the strike and feel like so very large port, if not the largest, second largest in the UK? Is this going to have any ripple effects across the global supply chain? And after about five seconds of analysis? The answer is no. I think there'll be some impact there to United Kingdom. But for the most part, Hey, Pete, here's what I'm going to do two weeks from now. And if you don't like it, you have a lot of time to make a contingency plan. So I'm not sure what the impact is going to be super polite way to, to handle the strike. But you know what well behaved. Women seldom make history from that old saying, and so a strike that they're telling you about two weeks in advance, I'm not sure what the implications are going to really be. So I guess that's my whole take. I saw that just today when I was coming in. I'm like, What are they doing? So I don't think it's big enough to really impact you and I outside of the UK. And the diversion may be a little bit more difficult because trying to divert into the European Union and then bump it across with Brexit, prefect Brexit, maybe a little bit easier post Brexit, it's probably best to wait it out if that's your contingency plan versus the document flow and try to manage it. So anyway, there is a port strike coming and Felixstowe, I'm not sure we're even going to know what's going to happen. And I don't think the impact on the global supply chain is going to be much of anything.
Pete Mento
Well, the hits just keep on coming. So we've had an ongoing or disruption issue because of labor, Germany for some time. We have congestion on top of congestion and public congestion going on USC sales, because of everyone kind of hedging their bets, I guess, be worried about what's going on on the west coast, where we hear positive feedback. But nothing's done yet. And now, in Great Britain, we're hearing that we're going to be having a very pleasant strike. So this just carry on, but in a few weeks time, we'll be taking a few days off. Now having worked in those courts, I can tell you that it's not the way that those these gentlemen speak. But it's it's fun to think that that's, of course, pretty tough man is pretty rough places. And wouldn't want to be on the wrong side of those those those ladies and gentlemen, they're hard working, blue collar a lot. Professionals held it. Now, like it or not, this is a tough time to do it. And you're talking about Pete. So they're just like any other country, they're trying to get everything they can and now to prepare for the holiday season. So it's not ideal. I agree with you in that you're an island, you know, so just how much impact can it have on the global economy, especially in so many other ways to get product into the country? It's not like it's the only way that it can happen. You have channels that are the ways to get back and forth. And it's a country of only, I think, is working in creative Kenya could say this producer notes in years, but only like 100 million people in England, I think old country, maybe not even that many. So how much disruption could it have in the whole global economy? But then you hear about other ports starts on top of that, right? So there's been rumors, this is going to happen in Baltimore. For some time now. There's been talks about driver disruptions in places like Savannah and New York. It's just it's another thing on top of another thing you can pockets. It's just ers. What? You got these ocean carriers, putting out new guidance? Oh, you know, we're gonna make even more money than we thought we were. You know, I mean, one of these guys supposed to think it's like, where's our slice of the pie. And as the global economy begins to correct itself, I think they're beginning to say this is maybe our last chance to get a correction to what's going on with us while these folks have been raking in the cash, so as a guy negotiates for the gambling to get one shot
Doug Draper
Sure, yeah. No, don't blame them at all. I just think it's comical that they're giving us plenty a heads up.
Pete Mento
Very, very, very is a very,
Doug Draper
very polite, very polite. All right, my friend, you roll it. What's your first topic today?
Pete Mento
Yeah. So it'd be nice if we could just talk about what we are. Our Secretary of State decided to take, again, one of those planned, unplanned, sort of like this British portrait wasn't on the itinerary. But everyone seemed to know that she was heading to Taiwan to give a prize to their prime minister. And is this really angered the country China. So there is a two nations policy where the United States does not officially recognize Taiwan as a nation during the Chinese Revolution. She got check went to Taiwan did an operating as a shadow government, China, for those of you who don't spend your whole life following this up, China has always considered it a renegade country, they can go back and take it by force anytime they want. It's theirs their nation state, the big area and anybody recognize this nation. So over the course of the past couple of days, they have been running full on Livefyre military exercises, we've done everything but including flying planes via belongs orders shooting missiles over it, they've done. Similarly blockades. They've shown that they are very advanced for the last time they pulled this stuff. If they were going to actually go on vacation of Taiwan, there are a lot of political reasons why you would do this shisha Pang is about to put himself in a position to either refer another unprecedented current as president, which was not necessarily in the Constitution, or can even sell president but Right. And he's in a consult with this right now there are questions about the strip. And there are people who are worried that he may actually try to invade and hold true ownership of Taiwan. So why does this matter to us as much as it does is it as a bunch of reasons. Biggest is that our president has said that he will come to the aid. The second is the lion's share of the microchips that we use in everything from our phones, and our toasters, to our military equipment come from Taiwan. And although we've taken good steps to try to make our own semiconductors, it could take up to a decade for us to get any momentum on building. So we're we're pretty far behind the eight ball here. And then the third is the freedom of the seas. Especially Great Britain, the United States has established itself as a maritime power. The entire point of the United States Navy is a projection of power at sea, to the free movement of goods, you the last thing that you want is to have an American aircraft carrier. Often those Chinese are super proud of this new aircraft carrier that they built. And you can you can go on Google on any use out there. And there's two things that love to talk about. The first is China's new aircraft carrier. Its military superiority is a floating piece of shit. It's like it's 1970s technology. And the second are hypersonic missiles, which, you know, very impressive. But the United States just a couple of weeks, we just made them, we got them, we can do them. We, you know, there's nothing really that's all that impressive are our aircraft carriers, floating password sheets. And our ability to own the Seas is something that is it's undisputed, their new Russian and Chinese nuclear submarines have already begun a big a lot of those. They are decades, not a decade, decades behind the technology that the United States is currently currently deployed, not even the new stuff that's currently underway at sea with the boats that we have underwater.
So our ability to oversee, it comes into question, though. If you got to shoot war around Taiwan, you just cut out massive parts. We move cargo in the Pacific, what does it say passenger seat. Not only that, but you're talking about having access to Taiwan and its technology. And also China. If China decides to date Taiwan, the global pressure to sanction China will be immense. And you're going to have a lot of countries who will not necessarily disagree with that move, because they're worried about what will happen with China. You're going to have European countries. You're going to have South American countries and many Asian countries who will side with China, and you will have a lot of finger pointing about who's right and who's wrong. And you may have countries that are themselves, really to sanction China. I have a lot of folks who aren't necessarily on the same page. You also have people who are unable to actually pass through the shirts. It's going to be a logistical, economic, international relation to habits. And I'm going to say that there's a real good chance that there's a really, really
Doug Draper
it's almost like China, they couldn't have written a better script for themselves, to be honest with you. I mean, the turmoil, the chaos, the potential, the flex of of power, and the potential polarization of other countries across the across the world. I mean, jeez, it's almost like they were great and excited that Pelosi was over there. Right. I mean, all the things, I was just thinking about that when you're talking, you're scripting out a better scenario for them to be positioned in, you know, in the trade wars out there. So pretty, pretty interesting. I don't think that they're upset that she made a visit over there. They may show it, they may say it, but it's all about positioning and where they're going to be.
Pete Mento
Yeah. Yeah. It's one of those unnecessary miracles that came across that way. And when you do that they actually go through with it. I don't think that this is necessarily your a politically a position where many Americans wouldn't care. Most Americans don't understand the problem. So your position, we'll see where we are in a few months. I mean, you do have a prediction show coming up. But I'm beginning to leave for sinking the next 24 months if it's going to happen in the next decade. Yeah.
Doug Draper
All right, man, you ready to roll this thing and a halftime,
Pete Mento
so forth? All right.
Doug Draper
So here's my take, I'm gonna try to keep this one short. And we talked about Colorado before we jumped on here. So I'm going to and this is for folks here in Colorado that are gonna get this dialed in, immediately, but I'm gonna try to set the stage. So eastbound I 70 As you leave Summit County, which is Breckenridge, copper, Keystone, all those places as you approach the Eisenhower Tunnel, and it's about a six or seven mile flow incline. And it is pretty congested. It's three lanes that go to two lanes in the tunnel. And on Sunday afternoons trying to get back to Denver, it can be a mess. And so I did that yesterday afternoon. It's sunny, it's the summertime, you think things would be sweet and dandy, right? No, it was a absolute shitshow being on that on that climb. So my goal here, Pete is to talk about a microcosm of what I saw going up there. So here's the deal, we're moving come to a completely dead stop. The thing with that highway is there's no off ramp, and there's no on ramp, when you're climbing, you're climbing, right, and you're climbing into a tunnel. So if there's something wrong in the tunnel, you don't know that there's no way to get off, you're not turning around on the highway. So the uncertainty of what's going on in front of you at all times. is similar to to, to the to you know, life in general, there is uncertainty in the world, and you gotta come kind of deal with it. Sitting next to me was a couple of guys on on Harley's one was the guy and the onside kick behind and another woman. And the Gauss bike kept stalling out because she couldn't get it to go because it was just it creep a little bit creep a little bit. So the one guy was just chewing her ass out, right? bike was stolen, they were bickering back and forth. And then all of a sudden, things start rolling, and they're laughing and they're talking to each other. So again, stuff can get difficult in life. But you come together and you move forward. This one's kind of cool. A minivan full of kids Classic family minute minivan. I'm suspecting that a couple of kids have used the bathroom, right? We're at a dead stop on the highway that stop for 45 minutes. So they pull off to the side, they pull all these towels and blankets out on the side of the highway while their kids are going to the bathroom. Right? So it was you can tell the stress in the kids. The whole nine yards it was it was pretty, pretty, pretty crazy. And then people were stopped with their engines off, they just turn the car off and people are getting out of their cars and walking around and talking to each other trying to figure out what's going on. So probably with some good intentions, but just not very safe. That's something that you could talk to my son about good intentions, but safety may be on the back burner. And then there was stalled semis. There was a truck carrying a trailer carrying a boat that was stalled out there was an accident up there. I think somebody tried to get out of the way and so it's like this pinball machine up there. Right and so life is gonna have challenges you just have to navigate them. And it was it was crazy. And once things got started There was this immense sense of, of gratitude, at least for me, because I was freaking out, like, we got to get home. This is not and there's a thing with me, Pete, there's no way off. You were there. You were have zero control of the situation. And even though we were creeping, like three miles an hour, we were moving. And when we got through the tunnel, and we got through it, the gratitude and the joy and the hope of being able to get home was amazing. So a little long winded today, Pete, but that is my microcosm of being stuck on i 70. Approaching the tunnel out of Summit County back to them.
Pete Mento
Did you see like a fiery crash?
Doug Draper
know that's what makes it more more challenging, confusing, because you get up there and you're like, where's the big hang up? Right? It was just all these cars that were stalled out on the left, the middle and the right. That's crazy. It was it was crazy. So I
Pete Mento
kind of traffic would probably pretty close, pretty well neglected to mention that logistics for those who may never watched it before. And you're wondering why the show about global trade Logistics is talking about new traffic. But this is the part where we just talk about things I'm interested in. So my topic is a little different. I'm obsessed with a game called Ask the internet. And it started with a web question series where they would interview people got famous people generally, and they would ask them nonsensical questions that were asked by the Internet. Over time, this guy turned in like a party game. So you could you could ask these questions while you're drinking here. So some of these questions are absurd, and very interesting. So here's a couple of them. That I love asking people is serial seven. You answer that one.
Doug Draper
Do you want me to answer the question? The answer to that question is no, it's not.
Pete Mento
I don't know. So I can't eat cereal without the milk. But if you have cereal with milk, I mean. Is is a hot dog a sandwich? I think we've asked this question before.
Doug Draper
Yeah, and I will also say that answer is
a sandwich is a sandwich.
Pete Mento
Would you would you rather have to fight 100 duck sized horses or one horse sized duck is neither an urgent danger one or the other.
Doug Draper
A horse sized duck
Pete Mento
would be my goal for the 100 duck sized horses just because I think I would have an incredibly good night. I think that would be even though those horses the horses when they fight their feeders, but I think that would be more Conan the Barbarian. I can see how one giant leg as an angry Husky that angry as a big, angry millennial, I find these questions hysterical. And if you had to pick one celebrity to be our representative non politician celebrity? Yeah, that's the wrong one. Yeah, he's on my list. I think the rock nickel, I would say either the rock. Matthew McConaughey is another one I would send because like I feel he'd be like, he'd be pretty cool. I mean, personally, he would get super high. He would get in the right mindset. But the rock would be a good one as well. I think those are those are great. Oprah would be another one pick, Oprah would probably keep her cool. Those are all fantastic. And then the third one I loved would be if you had to either spend the rest of your life wherever wherever you want. There was a little person in front of you. Eating a child if you want are actually like a little person who was always walking about three steps slower than you want to go. And no matter how you turn or where you go, they're always in front of your child can be an extra little person person sure that you then or whenever you walk up steps. At some point, you're going to miss a step and fall
Doug Draper
Oh, the second one for sure. I couldn't stand having to zig and zag and deal with no way. All the stairs he just don't take any stairs. Elevator. stay flat. stay grounded. Second one easy.
Pete Mento
Definitely. I'm a fast water. I got places. Yeah. So yeah, as the internet is there, some of them are not safe for our show. But for the most part, I find these fascinating. Just because I wanted to learn more on automobiles. So let's have fun from our friends at Capital. If you are looking to do something, and looking for a great company who has the wherewithal and the kindness in their heart to continue to do this week after week, you should definitely do it our friends at Capital just X apophysis.com that we should be getting on to our second topics
Doug Draper
all right, this one's kind of short and sweet. But I was gonna say Pete don't let the low in the in the fuel prices. This is about fuel. Right. So I was getting some I was filling up the other day from a phenomenal convenience store called Kwik Trip just came to Colorado not sure if they have him out there but love it grew up with them grew up with them. They're clean, I could go on and on about the benefits and the amazement that I have when I go to Kwik Trip. And oh, by the way, 79 cent ice cream cones. Little side note, but I got their $3.95 Here in Colorado to fill up. Which is great. And initially I was thinking all right summer driving season's over, we're getting back to school, that pressure point is starting to relieve and and I think we're gonna, we're gonna see this stuff stay under four bucks and continue to decline, that's probably not going to happen. Because you need to look at the macro level, what I just described as the micro level right in front of you and how I use fuel. But the reality of is the diesel runs the world, there's a lot that goes on in the fall. A couple of things is that, you know, we got harvest season coming up. And yes, being from Texas and Kansas, we get that. But that is also a global process this time of year. And a lot of that is controlled and move using diesel. There's still the uncertainty of the natural gas pipeline, nor at stream from from Russia underneath the Baltic Sea over to Germany. And you can swap diesel out from doing a little bit of research this morning. Not necessarily flip the switch, but these look and supplement if that's an issue. And then oh by the way, Winter's coming. And although it may not be catastrophic out here in Colorado with our warm sunshine, but winter is a big deal all over the world. And a lot of those things I just described are supported and propped up with diesel fuel. So the gas might be coming down as Schmid. But all the indirect implications you have on what you and I eat, how we move and what we use, that is not directly put into our car or truck. It's not going away anytime soon. So buckle up boys, the road trips may be over. But that does not mean the diesel fuel is going to be dropping down.
Pete Mento
First of all thought I will see your quick trip and I will raise you a buggies while he's in Texas is just second of all. Oil is a resource that there's only so much you can make from it. And right now it didn't you just not going to make as much from it is going to remain the quantity of something that you're gonna make less on it, it's just gonna be more profitable, you're gonna make more money off the gas, diesel fuel jet fuel, so they do make diesel, they're going to check in and higher profit out of it. Also moving it logistically you mentioned support, it costs a lot of money. So you're gonna make the money off of there. It's just gonna stay in transit. So what was us? This is not, it's this simple equation of 20 something years. And it's one of those price, inflationary price pressures. That has more to do with the use case than it does with housing. Just telling you that we're gonna pay a lot of money on this thing for a while. And I don't see any pressure. Gasoline is one thing. Yeah, good. Good. Good.
Doug Draper
All right. Take us home. My man. What's your
Pete Mento
topic to know I was reading a report that came in from our folks over in Asia this week at work. And they were talking about the increased number of black sands and just just how many of them there are. When we say blank sailings, we're talking about how There are entire swaths or complete voyages that are being written off of the sailing schedule by ocean carriers. And this is largely done in order to impact costs. So you'll have ocean carriers, who will just say that we're simply going to cancel one of our voyages cancel one of our sailings between these ports in order to constrain capacity in order to save money, when he noticed that bonds have gone down, like any other business, we're going to keep the number of slots closed by just taking a ship out of service, this one particular route. And in doing so, and not envious, what that does is it constrains capacity, and makes the remaining capacity more valuable. So you're able to keep the price prices pretty consistent. At the same time, it also means that you have capacity that you pay for that you're not using. So there's a trade off with frustrating for those of us that are shippers though, is it means that we have inconsistent amounts of capacity, or we're expecting to use it from one place to another, it's not there for us, you can be frustrated. So we expected to have it for certain calendar times. And these carriers have been consistent for years, I'm never going to have it particularly now, when every available piece of capacity was being used because the faculty making money off of it. You look however, at the guidance of student profitability consortium she cares and notice somebody was lost. So don't let the downward forces price confuse you, these carriers are still doing quite well. And as long as that's the case, they will continue to fiddle the capacity is blank sailings will continue. I think over the course of the next couple of weeks, we're going to begin to see exactly what's left. And then between now and the horse at the end of the year, this is the last of what we're going to see what their levers I firmly believe that 2023 is going to be the return to quote unquote normal, normal hunger not being $15. Boxers, if we can go below $5,000 To the west coast, that will be a real
Doug Draper
Yeah, that's a good tie in for the prediction show. We'll be cranking out here in a couple of months. But you know, what, who it's who controls the power, right? Who maintains control and by having blank sailings, you keep a little uncertainty, you create a little bit of havoc, and whoever has the control wins. And we're seeing that with the profit margins, you know, the profit margins, these these steamship lines, I haven't. So you know, what you keep the demand, like you said become more valuable, and who has control is going to win, and they have control on moving things from one continent to the other. And they can manipulate, spin it however they want, they will maintain the control. And they're flexing to show that so
Pete Mento
the interest of larger scale version of an owner operator who decides to stay off the road or stay on the road based on cost and profitability. It's just doing it on a much larger scale. When you own the means of conveyance you can make those decisions, and a shipbuilding makes money when it's falling down. So you see why they do what they do. Yeah,
Doug Draper
that's it. And that'll also do it for for this week's show of global trade this week. It's brought to you by CAP logistics, we've mentioned that we always say keep it behind the scenes pushing the buttons, you and I wouldn't be talking we wouldn't bring in this great commentary to the world if they weren't involved. So please visit cap logistics.com and we'll take care of you on your supply chain logistics needs. So that's it. I don't know what else to say Pete, other than Have an awesome week and we'll look forward to seeing you and the audience in seven days. All right, man. Take care.