Summary
➡ The text discusses the strategic importance of allies for power projection and resource acquisition, with a focus on the U.S.’s global positioning. It highlights the potential of Kazakhstan as a significant player and the ongoing geopolitical ‘game of risk’. The text also compares the political strategies of Biden and Trump, emphasizing Trump’s transactional approach to trade and his efforts to boost the economy through a looser monetary policy and tariffs. It concludes with a discussion on the impact of global trade on the U.S. economy, particularly in relation to China and Mexico, and the role of Canadian Pacific in this context.
➡ The discussion revolves around the consolidation in the infrastructure sector, particularly in rail and trucking, due to the need to efficiently transport imported goods across the country. This consolidation has led to increased control over routes and potential price hikes. The conversation also touches on political influences on trade and economic issues, such as food stamps and their impact on companies like Walmart. Lastly, the potential effects of the Biden and Trump administrations on these issues are discussed, with a focus on future developments.
Transcript
So no one better to cover what we’re seeing in the markets and what we’re talking about today. Heading into an election, we’ve got what we think are two candidates. We don’t know if Biden’s going to be there or not, but let’s write the September surprise. Yeah. Hypothetical. Biden’s there. So let’s just say Biden’s there. Trump is there yet. So what are you seeing from an economist standpoint? From a data standpoint, what would be the differences if one wins versus the other? Just so we can start specking out where we. You have to have a Biden proof portfolio.
You have to have a Trump proof portfolio. And then off on the side, a portfolio doesn’t matter, right. Both players defense, industry, doesn’t matter. Right. Both players energy, but a different flavor. So if Biden’s in there, it’s a social welfare game. We see that. But the benefit is both guys have been president before, so we know what their agendas are. We know what they actually will do, not just the campaign trail promises. And so it makes it a lot easier to say past his prologue. Okay, so we start with Biden. Biden was given a blank check when he came in because of COVID $2 trillion.
How do you want to spend it, Joe? A lot of that money, almost 40%, the lion’s share, went to social benefit type of stuff. But it’s not just throwing money at problems. Remember, these guys, they owe quid pro quo. They owe their donors, corporate donors. And so it’s interesting to see things like abide very quickly through $70 billion at the Internet infrastructure. $70 billion. So what that means is, for example, lower income households need access to the Internet. Well, what does that mean, really? Well, it means that we’re going to pay your Internet bill. We, the public, are going to pay millions of subscribers to charter or at and t or spectrum or whoever it is.
Same thing with mobile phones. Probably do a repeat of that. Why? Well, network equipment and Internet players in the infrastructure world, theyre not doing so well. So its time to throw them a bone. Well see Biden do a lot of that. I think energy and high tech is where Biden would focus. And remember, this is Santa Claus time. Theyre just, its pork barrel. Theyre going to throw the money out. I think you’ll see a lot of focus on energy, alternative energy. I mentioned this recently, Earth Day Biden comes out and $7 billion to the solar industry, and you’ll see a lot more of that.
I’d love to see nuclear finally embraced by the alternative energy crowd. There’s a big story in the nuclear reactor space. We’ve got new technology that allows smaller nuclear reactors to be built. What that means is if you want to generate electricity in today’s nuclear reactor, you got to shut the whole thing down. But for the same footprint, you could have four or five smaller reactors and you could shut them down in a sort of a sequence as you need to. And so you don’t, again, if you’re an owner of an asset, if you got to shut it down for two months, there’s a cost to that.
Well, if you don’t have to really shut down the whole thing, your costs are lower. It also means you can put more nuclear power plants out there. This is something that hasn’t happened in 30 something years. They just approved new nuclear reactors in the US. But forget about the US. Western Europe is embracing nuclear power because they see what happened by playing a dancing with the devil with Russia and natural gas. So you got this compelling demand for uranium. Meanwhile, we’re trying to cut off our supply of russian uranium. They give us 25% of our uranium needs.
There’s a big play here, actually. Politically, I think everyone needs to watch what’s going on in Kazakhstan. This may sound very way off the charts for where you are today, folks, but you need to start thinking about a country called Kazakhstan. Now, I don’t mean Borat style, okay? If you look at a map, Kazakhstan is massive and it is bordered by Russia on one side, China on the other, one country above Iran. Okay? If you want to talk about a geographically strategically placed, this might be just for my edification as well, but I’ll throw this up here in case anyone else is a map person.
But here we go. Okay. Look at Kazakhstan. You want to mess with Russia or China or Iran, you could do it from Kazakhstan. Really? Well, not just geographically. Are they important? Massive resource wealth. They are massively wealthy when it comes to oil. They supply almost 50% of the world’s uranium. Right now you’re hearing about some moves in Africa, like Nigeria or whatever. These are all going after uranium. A lot of these moves are. The future of the world depends on uranium. Uranium is not that viably. It’s not that valuable to Russia. It’s a couple billion dollars.
But everyone in Europe and the US depend on russian uranium. If Russia wanted to, they could say, okay, no more uranium. By the way, this was a Bill Clinton initiated thing. So we sold a lot of our uranium rights to Russia. So at the end of the day, though, Russia has leverage over the west, not just with oil, but with uranium. The key to unlocking that is Kazakhstan. Massive oil reserves. Massive uranium reserves. Medvedev, the puppy dog of Putin a couple months ago, said, maybe we should take over Kazakhstan because the US is already making moves.
We’re already starting to put bases in places like Turkmenistan. These are the weaker players that orbit Kazakhstan but border Iran. Right now the US is saying, goodbye Middle east. This is too messy for us. But you can’t say goodbye to the region. We’re simply moving our places, our positions to Kazakhstan. And it’s under the radar because again, you do it slowly, slowly. A couple weeks ago, we announced that we purchased 81 soviet planes from Kazakhstan. Okay, these are functionally capable planes. Well, guess what Kazakhstan is doing? They don’t want russian planes, they want american planes. Once you start buying american, you don’t stop.
And then there’s going to be more alliances and building. This is going to emerge quite dramatically. And you will see, hey, yeah, you’ll have Iran messing around in the sea, Persian Gulf, and all of a sudden you’ll see that doesn’t matter anymore. You’ll have a land bridge from Saudi Arabia going probably through Israel to get to Europe. You’ll start to see more overland. So, hey, Iran booties. You want to mess around? We don’t really care anymore. There aren’t going to be as many ships carrying oil in and out of that area because we can undo a pipeline straight through.
You know, there are pipelines that exist today that go from Iraq and Saudi Arabia through Israel already. They’ve been there for almost 100 years. Start them again. I bet you that’s part of the future alignment. Now you’ve got Kazakhstan. You will see us presence in Kazakhstan mining. Look at the size of that country. It’s almost the size of Europe. And it starts to squeeze Russia and starts to squeeze China because we’ve got Vietnam and Taiwan. And now we’re coming down from the side, make friends with South Korea. We are in what has been called the great game.
170 years it’s been called the great game. And it’s all about containing some of the superpowers in the world. Okay. Economically, this is massive. We, the US would then have a. And Exxon tapping into the oil reserves of Kazakhstan. Access to these resources would be huge for a lot of our traditional resource focused us conglomerates. Tell me more about that. What’s the stat with. So we’re buying russian planes, like. So we’re doing that. They’re buying ourselves. Dig into that one. Win, win, win. Okay. So I just laid out a big thing. Hey, guess what the future is.
Kazakhstan. Why? Because we’re tired of being messed with by China and Russia, folks. Real politics. The reality is there are bad, hostile countries out there. You’ve had peace for a while. That is the exception. And while we’ve had peace, we have countries out there, namely Iran, China and Russia, who’ve been taking advantage. And they are hostile. They are absolutely hostile. In the real world, you have to project power. Not, you don’t just say Iran, Bill, and then sit back while they do. You have to have places where you can project power and so you have to have allies that you can operate from.
Israel is basically an island of power projection. Now we’ve got Qatar. We have places around the world that are fortified where we can put our weaponry and project power. And we need to. To get resources flowing our way. I just mentioned Russia. Russia could cut off the taps when it comes to uranium. You don’t think they will? Look at what they did with gas to Europe. They cut that off just to show that they could. These are hostile countries. Only way you deal with hostile countries is physical force and you have to have a physical presence and you operate through your allies.
They’re the ones who have to have boots on the ground, but we’re going to enable them. And so the question is, I just laid out that Kazakhstan is going to be a major play. The US is not backing down. If anything, we’re just. It’s kind of like the game of risk. We’re going to move our pieces around a little bit, but the targets are the same. And at the end of the day, the goals are the same. Resources. All right, so wait, let’s dig back in. We just took a nice aside and that’s a very good breakdown.
And again, it could be the next step from Ukraine. Ukraine is a mess. We know that. We emptied all of our shelves of old weaponry, sent it over, blew it all up. Now we’re paying defense contractors to fill our own shelves with all the new stuff, paying a bunch of money that way. But it’s a mess. They go next door, Kazakhstan’s there. Maybe there’s more stuff happening there. All right. That was all on the side. We were talking Biden versus Trump. Speaker one, I’m trying to plan not six months, not a year, but I like this.
All right. We kind of got the Biden feel. What do you think? If Trump wins, where does that go? So Trump, a lot of people don’t like Trump’s style. I love what he brings to the table. He actually has done, I’m less concerned with the stormy Daniels type of oh, my God, this guy’s a buffoon type of. Trump is very transactional, okay? He understands that the future of the US is in trade. And so when he came into power, my God, this guy was actively engaged in trade. He was actively engaged in our economy and making changes.
I dont want a strong dollar. Right. Why trade? Because a strong dollar hurts our exports. I want to rejigger NAFTA. It has been used against us. And he did it time and time again. Correct. He went around the world and said our trade agreements suck. Were going to fix them because were not going to be taken advantage of. Its a very transactional man. In fact, recently hes getting pilloried because he recently had a meeting with apparently a bunch of the CEO’s of oil companies and said, remember, you put me in power. I’m going to reduce the climate change agenda and I’m going to accelerate the oil drilling agenda.
Oh, my God, people are up in arms. How dare he actually said this. Well, you don’t think that Biden makes the same kind of deals in the background. He just may not support oil. Biden just makes them for energy. That doesn’t make sense. So that’s the thing. He makes the same deals but then we don’t get any energy from it. So, I mean, yeah, I mean, I think, I think Donald just doesn’t have the filter. But I also think he’s smarter in these areas than the Democrats are. Democrats don’t really, they don’t do trade and they don’t do foreign affairs very well.
They don’t defense energy, weak dollar for Trump. We’re going to see Donald do the fall. Yeah. So you’re going to have Donald sit there as he is right now our economies. You know, he’s like, economy sucks. You know, Joe, you suck. So he’s going to try to find ways to boost the economy. So he’s going to be very much in favor of a looser monetary policy. Cut those interest rates, get the dollar down, not up. He’s going to be in favor of more tariffs, which is interesting when you think about it. You want more cheap goods to help people.
But he’s going to hit China. You’re going to have a lot of anti China. Yeah, we’re going to see some interesting things as he tries to deal with China. Right now we have a pipeline, chinese goods. When Trump came, he said, I’m going to hit China with tariffs. And he did. Those tariffs are still in place. All the Chinese did is say, fine. The way the US keeps track is if it came on a ship to the port of LA and it came from China, that’s a chinese product. If it came on a ship from China, but it went to Mexico and then moved up from Mexico to the US.
Well, that’s a mexican export, and that’s what they’ve been doing. If you look over the past couple of years, chinese exports to the US are down 140 billion. Chinese exports from Vietnam and via Vietnam and Mexico are up 140 billion. All right, so you’ll see some Trump trying to deal with that nonsense. And so right now, there’s exactly one way you get goods from Mexico into the US. It’s by railroad and it’s a publicly traded company. And so I think. Give us, give us that ticker. That’s canadian. I think it’s Canadian Pacific. All right, Canadian Pacific.
I’ll bring it. CPX. So they bought, they. Oh, man. This is just, you just sit there and you go, why can’t I be in the room when people make these big grand deals? There’s a port on the west coast of, of Mexico, Cardenios. I’m not good at Spanish, but it’s a massive port. Okay? The ports of LA and all the various shenanigans that go with those union heavy ports. Mexican ports pay probably 25% of the cost. And you’re coming to the same place. Okay. The problem was, and this was done by George W. Bush, to beat the trucking unions in the US.
We allowed goods to come in from Mexico unchecked, and they would go up through the, basically, basically Texas, which is the heartland, and then they would move up. So we told them, you can go all the way up to Kansas City. We’re not going to ask you to open your container loads. So now you had a means of going into the port of Mexico, up to Texas nonstop with one railroad spur, and then you’d offload in Texas or wherever onto a truck, and it gets distributed, goes to lowes or wherever. This was huge for Mexico. You had a supply chain shift and it’s been leveraged.
I mean, this is something that we’re talking about, what, 2025 years ago? I mean, this was in the makings and you’re seeing it now take off. And basically you have one company that now owns all the chinese exports to Mexico into the us, have to go through this railroad, essentially. I’ve talked about it in some previous pieces, and you’ll see some interesting moves from Trump. If he blocks it, does that company take a hit? Because goods are being offloaded in Mexico and bypassing the controls that Trump put in? You’ll probably see some efforts to hit that.
But by and large, global trade is the way it is. Trump will come in and try to throw up tariffs. Chinese goods will become a little bit more expensive. I don’t think that’s a big deal at this point in time, because, again, most people are going to start, they’re buying next year. Hey, my couch is five years old, or whatever I bought from China five years ago, four years ago. There you go. There we go. This is trains.com, comma, a frequent website of mine where we get some train maps. But this is, I believe, what would be.
Yeah, you can see the red and the blue, but this is like Canadian Pacific was probably up here and then they merged or bought Kansas, KSU, Southern, or whatever. But you can see, I believe this is what you were trying to pronounce. I’m not going to do it, but there it is. And then that’s the port down in Mexico. Pop it on a train. Train comes on up. I mean, if you’re trying to exporting across the ocean, your destination point doesn’t matter from a cost standpoint. Do I hit La in southern California? Do I go further south to Mexico? Well, yeah, your longshoremen are super cheap.
The cost of going further south and then having to go further north, well, you’re also in the heartland, so you might have other rail routes that are going east, west. Great, you offload to them. Meanwhile, you dominate. You are starting to dominate the flow. And I think it’ll take a while for agreements and Trump to do the tariffs he wants. So for now, I mean, this is a core holding as far as I’m concerned. It’s a monopoly. Yeah. And that’s going back to their cp if anyone’s looking at it. The chart looked pretty decent, was sideways for like three years and it looks like it’s breaking out a little bit on the upside.
But that’s a good, again, those are the kind of things consolidation. Think Warren Buffett owns that one. But that’s the kind of stuff that Warren Buffett, when he was moving crude inland, he was like, im going to buy all the rails. Preston, infrastructure plays another avenue for that. The thing is with infrastructure were talking about a fairly capital, intense place to be, but you bomb your interest rates, its a little bit easier. Theres been consolidation in trucking, theres consolidation in rail. And again, a lot of that comes down to because its not so much what we make here, it needs to go from Rhode island to California.
We are importing, we are like Rome back in the day. We are sucking in all this stuff from around the world but primarily from China. And so as we suck in all that from China and from Europe, it’s just funnel, it’s a funnel. How do we funnel it in and out? And so that has consolidated to get the economies of scale and the efficiencies and so forth. But then the result is, hey, what can I do to squeeze out profit now that I control the roots? Now I’m going to squeeze out things like how many people do I need on the railroad car? How many railroad cars can I loot in one big route? They’ll explore stuff like that.
And again, that’s where China starts angling and they try and get some of their cheaper goods that are getting tariff elsewhere in there through the port, through the rail. At first those cheaper goods are probably coming through and maybe helping with inflation somewhere or just pricing of prices. But at some point the railway or someone is going to just start taking some of that margin and saying, hey, everything’s more expensive. What are you going to do to rail it up there? Yep. What are you going to do? I’ll charge you a penny a mile more. What are you going to do? Oh, you’re going to go through the port of LA and those hustlers.
Come on, buddy. So I mean would a Biden push back against this? He’s oblivious to this stuff. The guy can’t even like stop 10 million people coming in order. How’s he going to stop 10 million train loads? Right? He’s not motivated. Right? Again, this is where the trade issues are not a priority for the democratic party. A Trump will come in, but he’s not see, the thing is, there’s only so many companies that Trump is going to fight. For example, again, this is one of those obscure data points, but we want to talk about what Trump does.
When Trump came into office, one of the first things he looked at was, where’s the spending going? And I hate excess or waste. And he looked at food stamps. Now, food stamps, $100 billion a year. And he said, well, wait a second. How many families? He did the math and he said, you know, would it just be cheaper if this is for food, for me to drop ship flour, pasta, you name it, all this food on doorsteps. Why don’t I be doordash? Basically, for people who need this support every month, I’ll just send you the milk, eggs, whatever, we’ll just drop it.
Why go through this large layer of bureaucracy and all this other stuff? And what was really interesting is, at first, you had the people out there, oh, my God, you’re trying to control how people eat. You’ll give them what they want. You’ll give them the money to decide what. And you had these ridiculous arguments. You follow the numbers. Coca Cola, 40% of their money comes from food stamps, right? Same thing with candy bars, Walmart, most of that money. This is where I’m going. Most of the money for food stamps goes to Walmart. Now, I don’t mean like 20%.
We’re talking over 50%. This hundred billion dollar is a funding of Walmart. Okay? Now, we do a lot of interesting things in this country that benefit Walmart. We left. I mean, if you wanted to be the poster child of a company that takes advantage of american largesse, I mean, they deliberately keep workers under the 40 hours limit because then they have to give them healthcare. Okay? So now we’ve got all these Walmart workers getting healthier. Now, if you wanted to go after the food stamp, you would be hitting Walmart in the pocketbook mightily. Hugely. Yeah. And guess what? Trump backed off real fast from going after food stamps.
So there are some third rail things going on in our economy where you go, why isn’t this happening? Well, it comes back to their donors. You don’t piss off your donors. You deliver on promises to them. And so what is Trump delivering? See, Trump was a little bit foolish to go out and make such an explicit promise that then leaked to the press. I’m sure Biden’s out there making the same kind of promises. Hey, Elon, this is what I’ll do for you. I will enable electric vehicles. I will keep out chinese electric cars because that will hurt your pocketbook.
And you know Trump is having Trump met with Elon, right? What do you think they talked about? X? Twitter? No. Come on. Hey, what are you going to do? And my car factory, I’m getting hit by Boyd. Chinese are going everywhere. Now, let’s face it, I’ve got a battery operated car. It’s not that complicated. Me. Okay, I’m sorry. People who sit there and want to pay $100,000 for a Tesla, you’re out of your flipping mind. Okay? The reality is, that’s a third. It’s cheaper to have an electric vehicle. The parts don’t break down as fast as an internal combustion engine.
Okay? China’s going to bring that for GM. We’ll see some interesting initiatives there from a Trump. He obviously didn’t win Elon over. So guess what, man, screw Tesla. You’ll see him do that. He’ll be like, yeah, whatever, Elon, you’re just another. All right, well, if you’re at home and you came here for the moneyball economics, I think you got it. We covered a bunch of different topics, a bunch of stuff that’s going on here in America and some really good nuggets. Again, we didn’t talk about a lot of that stuff in the green room, Andrew, but the, some of the plays with Biden and Trump and where it goes in Ukraine, Kazakhstan, and then also how tariffs are working and how chinese goods are getting into the US, these are the winners and losers.
And your breakdown, even on Walmart, this is the kind of stuff that, like at strategic intelligence and paradigm press, we’re trying to stay ahead of it because there’s so many moving parts. Money is trading hands. Politics and money are creating winners and losers all over the place. So we’re very lucky to have your expertise, Andrew, and we appreciate you stopping in today. I’ll give you the last words, if you got anything else that you want to leave everyone with, and then we’ll call it a day. Thank you very much. The whole Biden portfolio, Trump portfolio, is something I’m fleshing out right now.
And so I’m trying to get the themes down and who’s going to be the most, who the winners and losers are going to be. So stay tuned. I’m going to be focusing on that more and more as the summer rolls around. Awesome. And Andrew is now he’s a contributor to strategic intelligence. We’re releasing his stuff sometimes on our YouTube channel, sometimes through the daily reckoning and all around Paradigm press. So keep your eyes out for Andrew Zatlin’s. Name for moneyball and any other very interesting insights and data driven research. Andrew, thank you so much and thanks, everyone, for tuning in.
We appreciate it. Hey, everyone, take care. Thanks, Matt. See ya.
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