Shownotes
Jacob and Rob Larity dive into another weekly update, focusing on the intertwined economies of the United States, Canada, and Mexico. They discuss how the U.S. administration's approach to tariffs and trade could significantly impact these neighboring countries, particularly highlighting Mexico's unique position to leverage its relationship with the U.S. amidst rising tensions. They explore the implications of economic policies, such as the recent jobs report and inflation data, while also dissecting the emotional drivers behind public sentiment on inflation forecasts. The conversation touches upon historical parallels in presidential second terms, underscoring the challenges that may lie ahead for Trump as he navigates a politically divided landscape.
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Timestamps:
(00:00) - Intro
(00:46) - Naptime and the Economy
(22:35) - The Impact of Tariffs on Canada and Mexico
(29:29) - The Economic Landscape of Mexico and Canada
(45:35) - The Importance of Maritime Choke Points
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Jacob Shapiro Site: jacobshapiro.com
Jacob Twitter: x.com/JacobShap
CI Site: cognitive.investments
Subscribe to the Newsletter: bit.ly/weekly-sitrep
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The Jacob Shapiro Show is produced and edited by Audiographies LLC. More information at audiographies.com
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Jacob Shapiro is a speaker, consultant, author, and researcher covering global politics and affairs, economics, markets, technology, history, and culture. He speaks to audiences of all sizes around the world, helps global multinationals make strategic decisions about political risks and opportunities, and works directly with investors to grow and protect their assets in today’s volatile global environment. His insights help audiences across industries like finance, agriculture, and energy make sense of the world.
Cognitive Investments is an investment advisory firm, founded in 2019 that provides clients with a nuanced array of financial planning, investment advisory and wealth management services. We aim to grow both our clients’ material wealth (i.e. their existing financial assets) and their human wealth (i.e. their ability to make good strategic decisions for their business, family, and career).
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This podcast uses the following third-party services for analysis:
Podtrac - https://analytics.podtrac.com/privacy-policy-gdrp
Transcripts
Hello, listeners.
Jacob:Welcome to another episode of the Jacob Shapiro Podcast.
Jacob:I'm Jacob.
Jacob:Rob is joining me for our weekly chat.
Jacob:We recorded a day early this week on Wednesday.
Jacob:So if things seem a little more behind than they usually are, that's why, although I don't think a whole lot is going to change in 24 hours, I don't really have any other housekeeping notes.
Jacob:Take care of the people you love.
Jacob:Cheers, and see you out there.
Jacob:All right, we're back at it.
Jacob:I'm coming to you from frigid Menominee, Wisconsin.
Jacob:It's a balmy negative three, I think.
Jacob:Now here it was like negative six when I woke up this morning.
Jacob:Rob, how are you doing?
Rob:All good here in Paris.
Rob:Another dark day.
Jacob:I gotta stop asking you how things are in Paris.
Jacob:It's really.
Jacob:It doesn't.
Jacob:It doesn't serve me well.
Jacob:At the beginning of the podcast, I wanted to start off with a little.
Jacob:With a little Parent Corner rant.
Jacob:I don't know if you can relate to this.
Jacob:And I'm gonna start in a weird place.
Jacob:People often ask me if I like Curb youb Enthusiasm.
Jacob:Are you a Curb youb Enthusiasm fan, Rob?
Rob:Yeah, I think it's really good.
Jacob:Yeah, it.
Jacob:It's one of those.
Jacob:It hits a little too close to home for me.
Jacob:Like, I have trouble laughing at it because I know too many Larry Davids in my life and also, like, have an innate, like, tendency to be like Larry David, which I am consciously always trying to stuff down because I don't want to be.
Jacob:And it comes out even when I don't mean it to be.
Jacob:It's the same reason that I can't really find Woody Allen funny.
Jacob:It's like, it's too real.
Jacob:It's, like, not fictional for me, anyway.
Jacob:I had.
Jacob:I had a Larry David moment this past week.
Jacob:So, as you all know, we've had our second daughter.
Jacob:If you've had children, you know that naps during the daytime can be quite a challenge.
Jacob:That has been the case for our second daughter.
Jacob:She's sleeping pretty good at night, but the daytime has been a struggle.
Jacob:And the only thing that works is I strap her in this, you know, ergonomic looking, cool carrier.
Jacob:And I just have to walk really as fast as I can while patting her on her back or on her booty.
Jacob:And she will fall asleep, and she will stay asleep for as long as I am moving.
Jacob:As soon as I sit down, as long as I'm moving, I can get the nap.
Jacob:So it's the sort of contest between how long my back can take this and how long she's willing to stay asleep and how important it is to get the nap.
Jacob:Everything else.
Jacob:Anyway, here's my Larry David thing.
Jacob:For the life of me, I do not understand why.
Jacob:And it's particularly boomers.
Jacob:It's not just boomers, but it's mostly boomers will see me furiously pacing up and down, patting this baby, shushing, trying to get her to fall asleep and keep her asleep.
Jacob:Why they think that's a good time to get up in my face and go, oh, is that a baby?
Jacob:Oh, she's so cute.
Jacob:Can I see her?
Jacob:Oh, she's asleep.
Jacob:And I'm like, no shit, Sherlock.
Jacob:She's asleep.
Jacob:Thank you for waking her up.
Jacob:What?
Jacob:I don't understand why people, people think this is okay, so if you're listening to this and you see a stressed out father who's pacing up and down the street in a carrier, don't say hello to him.
Jacob:That is not the time to be a good neighbor.
Jacob:All the other times that you're ignoring me or looking down on me because I'm biking around and stuff like that, I would be happy to speak to you.
Jacob:Leave me alone.
Jacob:And Larry David, please take.
Jacob:I know you don't do curb anymore, but just give me some credits for this episode.
Jacob:I think it would be a great one.
Jacob:Any comments, Rob?
Rob:No, you're on your own here.
Rob:Let sleeping babies and sleeping dogs lie, I guess is the takeaway here.
Jacob:Exactly.
Jacob:There are no geopolitical implications to this like my previous leading.
Jacob:It's just I have a platform and I wanted to rant for a second, so here I am.
Jacob:It's a particularly maddening week to plan podcast content around geopolitics.
Jacob:It's actually a particularly maddening week to give presentations about geopolitics.
Jacob:I'm in Wisconsin.
Jacob:I'm supposed to give a presentation a couple hours at a crop insurance conference.
Jacob:And in some ways it's the hardest I've ever.
Jacob:It's the hardest.
Jacob:It's the hardest presentation I've ever had to prepare because Trump is saying all of these crazy things and all of them could be geopolitically significant if he meant them.
Jacob:But we don't have any official appointments, we don't have any official policies.
Jacob:We have a non stop waterfall of leaks to Bloomberg and Reuters that are, oh, he's going to do tariffs.
Jacob:Oh, he's going to walk the tariffs back.
Jacob:Oh, it's going to be gradual tariffs.
Jacob:Oh, he's going to like.
Jacob:And I don't have anything real to sink my teeth into.
Jacob:The only things that I, I can really sink my teeth into are these things that are blowing up the headlines everywhere, which as we talked about last week, I think only serve to obscure what's actually going on.
Jacob:So I'm in sort of a difficult place there.
Jacob:I thought we would begin maybe just with some hard market pieces of information that are not up to bias or all these other sorts of things, although I guess they are up to bias.
Jacob:I don't think I actually sent you this, Rob, but University of Michigan in Bloomberg had a chart that they put out that showed Democrats five year inflation forecast and Republican five year inflation forecast.
Jacob:Republicans it was at about three and a half percent until the election and now it is sub 2%, whereas for Democrats it was below 3% and now it's approaching 4%.
Jacob:So even inflation and objective like measures of sentiment around inflation are not that objective.
Jacob:But the two things that we can say that have happened since the last time we talked, there was a pretty robust jobs report, a surprisingly robust jobs report.
Jacob:So the US economy added 256,000 jobs in Denver.
Jacob:That was well above most of the forecast.
Jacob:It brings unemployment down to 4.2%.
Jacob:Average hourly earnings also rose 0.3% from November, 3.9% over the previous year.
Jacob:So that's running above inflation.
Jacob:So all of that sounds good.
Jacob:And then just this morning we got the CPI print, the inflation print.
Jacob:It increased 0.4% on a seasonally adjusted basis.
Jacob:That is another sort of unexpectedly high increase, not a huge increase, but unexpectedly high over the last 12 months.
Jacob:It's 2.9%.
Jacob:That is being driven primarily by energy.
Jacob:There's some, you know, some weird stuff with eggs and bird flu going on in there.
Jacob:But when you look at the breakdown, energy was up considerably.
Jacob:And gasoline and fuel oil, for example, up 4.4% still.
Jacob:Actually, some of these energy numbers are down over a 12 month period.
Jacob:That 4.4% is month on month.
Jacob:But that's really what's driving things here.
Jacob:We talked a little bit last week about how historically low natural gas prices, if you saw any meaningful increase in energy prices, could you see a rather large spike in inflation?
Jacob:You combine the wildfires and the cold weather and Trump's pick for energy secretary going out there and saying we want to export more LNG than ever before.
Jacob:Like you put those things together, you get sort of a picture of rising energy costs.
Jacob:So it just seems to me that even before we get to Trump and any of his tariffs, the inflation picture is not Looking particularly good, the Fed might have to pause interest rate hikes.
Jacob:And even so, like Trump is in the honeymoon period where his supporters are expecting that inflation is going to drop off a cliff as soon as he gets into office.
Jacob:And I have questions about what happens when it not only does not fall off a cliff, but maybe starts to go up.
Jacob:So why don't we start there and we can work our way back into some of the other things that are happening in the world.
Rob:Yeah, the inflation numbers are particularly, I mean, the inflation survey numbers are particularly interesting and they do pose a challenge because it clearly is very emotions driven.
Rob:We've been talking about the Michigan University of Michigan survey which asked people for their outlook on 5 to 10 year inflation looking forward.
Rob:And that just came out yesterday as we record and you mentioned Democrats are zigging, Republicans are zagging.
Rob: %, which is the highest since: Rob:So you broke that barrier, which is really important.
Rob:Interestingly, we talked about the difference between the average number and the median.
Rob:So the average previously was just way off the charts.
Rob:Like 6% was the average response for the same question.
Rob:And interestingly that actually went down on this latest print.
Rob:So the median went up, the average went down.
Rob:Which if I had to speculate, I would say that the typical person who was putting a very high number into the response was skewing Republican and is reducing, you know, the, the extreme responses are coming down a bit after the election.
Rob:So there's a lot of moving stuff in there.
Rob: because it was, it soared in: Rob:It went into the tank during COVID and stayed there throughout all of the post Covid years.
Rob:And now it has surged again, sort of coming off the bottom in the wake of the election cycle.
Rob:And interestingly, if you look all of the sort of underlying indicators have gotten very, very positive in terms of outlook, but all the indicators of contemporaneous events.
Rob:How are things right now?
Rob:Are you actually spending more on capex?
Rob:Are you actually hiring more?
Rob:Did not get really any better so there's sort of this expectation and the whole environment is really emotionally charged.
Rob:And that thinking in terms of inflation, it's problematic because part of the problem with inflation is uncertainty.
Rob:And we talked about sort of the uncertainty of timing at great length in our last conversation where people are pulling forward inventory purchases, they're building inventory ahead of projected tariffs.
Rob:We had the auto new car sales number come out in the last week since we spoke.
Rob:That was really, really high for December, it was 16.8 million.
Rob:That's the highest we've seen really since COVID So people are out there, they're buying cars, they're worried that prices are going to go up.
Rob:So as I said last time, this seems to be creating an environment where a, the uncertainty is raising prices more than they would be otherwise, because uncertainty is risk and risk has a price.
Rob:I think, you know, if you think of it in insurance terms, it's a, it's a nice mental model to use when you're thinking about how this flows through.
Rob:But also they could be setting themselves up for a lot of anger if they come out and say, they just say, oh, we're, you know, I have no reason to think this is going to be the outcome.
Rob:But if they say there's no tariffs, or the tariffs are going to apply to just this very specific group of symbolic goods or whatever it may be, and all of a sudden prices fall through the floor in the first quarter because everyone bought in advance, everyone's sitting on this inventory, and all the other cyclical things that we talked about last time are turning downward.
Rob:Then you have a lot of pissed off people who bought an overly expensive car because they were freaking out, only to discover that they could have bought the same car a few months later for less.
Rob:That's not a recipe for happy consumers.
Rob:It's not a recipe for easy business planning or decision making.
Jacob:Yeah, and just to sort of throw on top of that a few more sort of indicators, the first being that I don't know if you saw this, mortgage rates are above 7% again.
Jacob: the highs that we touched in: Jacob:So for people who are buying houses, there's also some things going on there.
Jacob:And then Brent crude, I already sort of alluded to this, but I was just looking at it while you were talking.
Jacob:We are creeping above 80 a barrel, which we sort of touched there in October for a very, very brief moment.
Jacob:But we haven't really seen Brent crude hanging out at 80 a barrel until last summer.
Jacob:And before then, your previous Peaks would have been around April or around July.
Jacob:So you put the picture together.
Jacob:It's not a very heartwarming picture.
Jacob:And yet Mr.
Jacob:Market is just kind of shrugging it off.
Jacob:I mean, we're recording here on Wednesday, not Thursday, like we normally do, so maybe the market will completely tank tomorrow.
Jacob:But, I mean, S&P 500 is up almost 2%.
Jacob:The Nasdaq's up over 2%, oil up 2%.
Jacob:I mean, you look down the list, all the things on my screen over here look pretty green.
Jacob:So we're out here sounding a little bit cautionary, but the market is not apparently feeling that way.
Rob:And it gets back to the breadth thing that we talked about before.
Rob:It's not really a positive sign that most stocks have not been doing well.
Rob: n, if you look at the Russell: Rob:And the S P500, like, maybe it's just a pullback within a broader uptrend, but you would like to see more participation in some of these things.
Rob: mp bump, much like you saw in: Rob:Those names have mostly given it all up again.
Rob:And now you're sort of having, you know, this narrow crowding into a smaller number of big names.
Rob:Again, not necessarily even big tech names.
Rob:A lot of the big tech names are not making new highs, which is a big change.
Rob:Nvidia has been a relative underperformer as we talked about.
Rob:So people like to look at the index and say, oh, the S&P 500 did this or that.
Rob:You really have to look at the underlying kind of structural components of what's moving, what's leadership, and that's really not great.
Rob:It's not a disaster by any means.
Rob:And I think there's a lot of hope out there.
Rob:And the numbers continue to look very good.
Rob: ow, we talked about this, but: Rob:Margins were very, very good because all the input costs collapsed and demand held up.
Rob:So we're sort of coming off of, in many cases, record margins or near record margins.
Rob:And a lot of Wall street analysts just see no reason to come out and downgrade that significantly in their 25 numbers.
Rob:So people are looking at these margins.
Rob:They're assuming that they're normalized earnings power for these businesses.
Rob:That's a concept that people understand, right?
Rob:Normalized earnings power?
Jacob:No, I don't think the normal person understands that, but that's cute.
Rob:Basically, what is the average.
Rob:When you value a business, if it's a cyclical business, you don't look at, okay, here's the peak margin or the trough margin.
Rob:You want to get a sense of what is the average profit margin, and that's what you base the valuation on.
Rob:People are very bad at that, though, because when margins are really good, you're like, oh, this is the new normal.
Rob:Great 20% operating margins.
Rob:Wow.
Rob:Clearly we're just killing it.
Rob:It's just a psychological bias because you're anchoring in near term numbers and there's a lot of that going on right now.
Rob:And especially because Wall street analysts, they have no real incentive to model significant margin declines because it pisses off the company and they tend to herd.
Rob:So they'll wait for the first prints to come out where those margins start to come in because energy costs and food costs are going up, for example, and demand is softening.
Rob:But right now, if you're a professional investor and you're looking at 25, you're saying, hey, the market maybe isn't that expensive based on these numbers.
Jacob:Well, yeah, and you can tell yourself a story about there'll be more tax cuts and the tariffs are.
Jacob:I saw our friend Marco, literally, while being evacuated, is doing CNBC interviews.
Jacob:Hope you're good, Marco.
Jacob:But was giving a CNBC interview where he was talking about the difference between, between emergency tariffs from the White House versus tariffs that are enshrined in law, which was actually, I think, a really helpful clarification because if the White House is passing them, they can easily take them down.
Jacob:It's not like they have to get congressional approval to do so.
Jacob:So the bad part of the White House being able to do whatever it wants is that it can do whatever it wants, but it really might be a negotiating tool.
Jacob:So you put all those things together and probably the Trump administration, much to the chagrin of the musks and the fiscal conservatives, I don't see any fiscal conservatism coming.
Jacob:So you got to think there's also going to be fiscal stimulus of some kind because they got to give the goodies to the people that they're talking about for whom sentiment is really good.
Jacob:So you put all that together.
Jacob:Maybe it is a better economy than we're, or at least a better economy in the short term.
Jacob:You would think that eventually that bill is going to become due.
Jacob:But I guess you could see how it'll continue to get frothy and that we're just at the beginning.
Jacob:I don't know.
Jacob:Do you think that's right or do you think that's the wishful thinking?
Rob: ll, this is sort of the Nixon: Rob:Inflation was not necessarily problematic.
Rob:I'm talking about through the late 50s, through mid-60s.
Rob:And then you reached a certain point where inflation started to become predominantly the bigger concern.
Rob:And when they tried to turn to the same playbook, if you look at Nixon in the early 70s, they were deathly afraid of a recession, deathly afraid of how it would impact their electoral prospects.
Rob:He was leaning on Martin in the Fed to reduce rates.
Rob: that story and the fed in the: Rob:And they put in a lot of similar measures actually to try to certain tariffs combined with price control mechanisms and that sort of thing.
Rob:And it was a total disaster.
Rob:It was a total failure.
Rob:And you ended up making inflation worse and not really helping growth.
Rob:And it had the negative effect of really unhinging people's expectations.
Rob:And this was as Vietnam was really raging and it was not a confidence inducing backdrop.
Rob:So I'm not saying that this is necessarily a replay of that, but the notion that you're going to come out and you're going to pass some stimulus bill and you're going to throw money at people and that's going to necessarily get stock markets higher than they are today or they're going to be on the whole positive.
Rob:I'm not sure that that's true anymore given how tight the economy has been running at and the amount of supply side constraints.
Rob:Demand is not a problem right now.
Rob:And that's hard to get used to because demand was our problem for so long.
Rob:We were stuck in a deflationary trap for so long.
Rob:And it's really, really hard during those transitions.
Rob:It takes a long time for people to really get it.
Rob: The: Rob:I forget what it was called, Clarium Partners or something.
Rob:That was his first foray into financial investment.
Rob: And at the time, in: Rob:And he ended up being totally right.
Rob:But he couldn't stay in the trade and his fund kind of blew up because he thought long term Bond yields were going to go way down.
Rob: staring them in the face with: Rob:So I don't think Trump has many good options.
Rob:In short, to, there's no easy.
Rob:There's no easy button you can hit to say, oh, just take on more debt.
Rob:We'll deal with it later.
Rob:Like, that option is not really on the table anymore and it makes things a lot harder from a policy perspective.
Jacob:Yeah.
Jacob:Before we move on to some other things, I was listening to a podcast that Jonathan Alter was on.
Jacob:And Jonathan Alter skews pretty liberal, but he is a very good writer and a best selling author.
Jacob:He wrote a book about Jimmy Carter, which is why I was interested to listen to him because I wanted some coverage of Jimmy Carter since his passing.
Jacob:A Georgia boy, our pride and joy.
Jacob:But he made a really interesting point that I had not thought of in this podcast where he said, basically no second term of a president has been good.
Jacob:And he sort of went down the list.
Jacob:And I started like nodding my head.
Jacob:I was like, yeah, like Clinton, not so great.
Jacob:And Reagan, not so great.
Jacob:Eisenhower, not so great.
Jacob:The one that really warped my mind.
Jacob:He was like, fdr, second term was terrible.
Jacob:Like, all these other things came back on him and the economy didn't do what he wanted to and the court packing stuff blew up in his face.
Jacob:He sort of went down the list till he got to Grover Cleveland.
Jacob:Grover Cleveland is the only other US President besides Trump who came back after losing and sort of had an interregnum.
Jacob:And he had a terrible time his first year in office.
Jacob: a grit, there was a panic of: Jacob:So even in that sense, just the weight of history is working against Trump.
Jacob:And maybe it has something to do with the fact that most of these, you can't say this for Grover, but ever since fdr, those presidents would have been lame ducks.
Jacob:So maybe they can't move Congress the way that they need to.
Jacob:And while Trump does have the House and the Senate nominally Republican, he's got, you know, he's got at least three or four Republican senators who don't particularly want to go along with him.
Jacob:I'm thinking of Collins and Murkowski especially, but I don't think Mitch McConnell likes him very much, which is going to be interesting to watch.
Jacob:And the House is just a complete and total mess.
Jacob:So I think you're right that it's going to be difficult sledding.
Jacob:I thought we would also take a step back because one of the things that I'm having to think about the most right now and a lot of what I'm going to be talking about today at this presentation is going to be specifically what the impact of tariffs and what the United States is doing on Canada and Mexico.
Jacob:So we've spent the first 20 minutes talking about the U.S.
Jacob:economy, what that looks like.
Jacob:But I wonder if and I think Canada and Mexico are two interesting ones to look at because they're U.S.
Jacob:allies, they're close to the U.S.
Jacob:they're completely different economies and have completely different economic, economic relationships with the United States.
Jacob:Even though they're both dependent, they are also both taking completely different approaches to dealing with Trump in the early goings here.
Jacob:Trudeau, of course, has announced his resignation.
Jacob:He's going to be around for a couple months, but he's a lame duck, but he's out there.
Jacob:And the Canadians are out there leaking that they are preparing a massive retaliatory list of tariffs, that it's not going to be these very focused tariffs that are going to impact specific Republican constituencies, that they're going to go dollar for dollar across the board with the Trump administration.
Jacob:And I don't know if you saw that cheeky interview that Trudeau gave where he was like, yes, Trump brought up annexation with me and I brought up trading Vermont for one of the Canadian provinces.
Jacob:And then he didn't think it was so funny.
Jacob:And you could tell, like Trudeau was so pleased with himself.
Jacob:And I was like, dude, I think you lost the game already.
Jacob:I don't know why you're feeling pleased with yourself.
Jacob:Anyway, on the other side of this, Claudia Sheinbaum in Mexico, while she has pushed back a little bit so the Gulf of America, Gulf of Mexico thing, she went back to Trump and said, well, maybe we should call some parts of America Mexican America or something like that, which I thought was clever.
Jacob:But what the Mexican government is doing is saying, hey, we seized more illicit fentanyl, like a record amount of illicit fentanyl in the last couple of months.
Jacob:And we have increased our crackdown on counterfeit Chinese goods going into the American market and sort of showing all these ways in which they're trying to do what the United States is is asking.
Jacob:And she's alluded to maybe we'll do some retaliatory things, if that what happens, but really keeping her powder dry, like not, not leaking that they're going to go right up against Trump.
Jacob:Shanebaum also, by the way, I don't know if you saw this, like has approval ratings approaching 80%.
Jacob:Like maybe that won't hold, but man, like, can you imagine in the United States if we had a leader with 80% approval ratings?
Jacob:I doubt Bush even got that high around 9 11.
Jacob:So the question that I'm leading up to here is so, you know, taking into stock everything that we've talked about, how would you view this from sort of a Canadian economy perspective and how would you view this from a Mexican economy perspective?
Jacob:Is it the same?
Jacob:Is it just too much uncertainty?
Jacob:Is it good for one, not good for the other?
Jacob:I'm curious how you would do that because I think that's what I'm going to spend most of my time talking about this afternoon in the presentation that I haven't finished yet.
Rob:You better take some notes so you can regurgitate whatever we say.
Jacob:I've got my AI.
Jacob:My AI is recording everything.
Jacob:It records all things now, apparently.
Rob:Yeah, it's a tricky one.
Rob:I think you have to look at the economic structure of both.
Rob:I mean, just on the surface, the US Is the big deficit nation, which means sort of at the very high level.
Rob:By definition, they are in, I don't want to call it the catbird seat, but they have more leverage when you have trade wars and tariffs.
Rob:It's always the current account deficit or current account surplus nations that are, you know, have an excess of exports that are kind of hit the worst.
Rob:So that's kind of the starting point you have to begin with.
Rob:Mexico is the most obvious one because of their trade position to the United States.
Rob:And we've talked ad nauseam about the growth of Mexican manufacturing and how that's, you know, playing out in geopolitical terms and nearshoring and things like that.
Rob:But that said, I think it's really, it's really difficult because as some of the if you were to look at the auto industry, for example, it's very nuanced.
Rob:And nuance is not something that the administration really does, as we all know.
Rob:I read an article today that said the typical steering wheel on an American car might be manufactured in Germany, then sent to Mexico for sewing and then sent to the US for assembly.
Rob:A lot of other parts go back and forth between the Mexican and US Borders.
Rob:So you have supply chains, especially on the Mexican border, that are just crisscrossing each other in multiple Directions all the time.
Rob:Companies are going to be really pissed off if there's kind of broad brush tariffs and also if there's tariffs that are kind of a pain in the ass to calculate, to figure out what is the local component, how are you going to physically implement that?
Rob:So it's really uncertain to know what's going to amount from that, especially on the Mexican side, just because of the potential pressure that could be put on the administration, like, hey, you guys have to walk this back or you have to simplify this or use other methods because it's a mess when you try to really dig into individual products and how that works.
Rob:So that would be one initial thought.
Rob:The second thing would be, and this is really more your area, that it's hard to think of historical parallels where you had a great power or a regional power that essentially just bullied its two closest neighbors and allies who are kind of part of its local trading block into doing what it wants using just the stick and not really much of any carrot.
Rob:And maybe the carrots are forthcoming and we just don't know what they are yet.
Rob:But that seems like a strategy that's bound to backfire in ways that are perhaps difficult to anticipate.
Rob:It's hard to imagine trade moving smoother between any of these nations.
Rob:And given what I just said about the integration of those supply chains, Canada is very similar.
Rob:If you were to look at steel production in Canada, how it goes into the US Auto manufacturing business, for example, how those supply chains are intertwined, it's the same story on the northern border.
Rob:So it's trying to apply almost a nationalistic framework to an economic reality that's not really taking so much account of the borders anymore.
Rob:And in that sense it seems really mismatched.
Rob:And I don't really know what's going to come out of it other than that it'll be very difficult and messy.
Jacob:Yeah, I've been a Mexico bull now for a few years with you, and I continue to be a Mexico bull.
Jacob:We'll get to Canada in a second.
Jacob:But it seems to me like the table is set up well for Mexico.
Jacob:And the cute thing that I've been saying in presentations and stuff like that is that Mexico has more leverage over the United States since Santa Ana.
Jacob:And I think that's still the case because whether you're talking about migration, whether you're talking about drug trafficking, whether you're talk Chinese goods coming into the United States from Mexico, whether you're talking about manufacturing capacity, like Mexico has ways in which they can affect all of these things.
Jacob:And if you're the United States and you're out there, and, yes, you're threatening these tariffs against Canada and Mexico, but you're threatening much bigger tariffs against China, like, China is the country that is firmly in your crosshairs.
Jacob:And if you're going to follow through on China, and I think that's what the Trump administration is going to do, you cannot also attack Mexico, because you're not going to have any options at that point.
Jacob:You're going to need some place to tell American companies, hey, here's where you can take.
Jacob:Here's where you can push your manufacturing, and there's going to be cheaper labor here, and it's going to be all the things that you were getting from China, but it's going to be more secure and will incentivize you to do it.
Jacob:And we have a history of working with this government in general.
Jacob:I think in that sense, things are going to be good for Mexico.
Jacob:Now it's going to require Mexico to do some really hard things like cartel violence.
Jacob:They're going to have to get that under control, at least enough in the regions where there's going to be increased manufacturing that companies feel safe and secure in moving down there.
Jacob:They're undergoing a major political transition away from a very popular populist leader to Claudia Sheinbaum, who is at least early returns are good, but that's going to be difficult for her to maintain that same level of popularity and that same level of control over the system as it goes.
Jacob:But all of that should be net positive for Mexico.
Jacob:It doesn't make sense to me that the Trump administration is going to do all of these things, but it's also going to attack Mexico.
Jacob:It seems to me that the Trump administration is going to be satisfied if the threat of tariffs leads.
Jacob:Leads to things that they can show with migration, with fentanyl, with counterfeit goods.
Jacob:Those are all parts of the narrative where Trump can claim victory without having to go on and on about tariffs.
Jacob:And there are meaningful ways in which I think the Mexican government can also have certain parts of the economy that they want to protect, which are not going to matter that much to the US Government anyway.
Jacob:Canada seems like a bit more of a different story, because I don't know exactly what Canada has that it can offer the United States or what leverage Canada has over the United States, apart from, you know, it is true that if you go after Canada, the way that Trump is talking about, you're going to cause havoc for supply chains and for states that are on the border with Canada in particular, it's going to be awful.
Jacob:There's going to be a ton of economic dislocation.
Jacob:And I mean, kiss your midterms goodbye, say hello to Democratic majorities in the House if you're really going to do all this, and say hi to higher inflation numbers.
Jacob:But you know, the one thing that Canada really had with the United States, I was looking at, you know, what are, do you know what the biggest import from Canada that the United States imports from Canada is, but by a country mile, do you know what it is?
Jacob:It's oil.
Jacob:It's mineral fuels.
Jacob:It's 50% of America's imports right now of mineral fuels.
Jacob:And the thing is that doesn't matter as much anymore because the United States is an energy superpower and the Trump administration says they want to unshackle the US Energy industry industry and go further.
Jacob:So it's not like Canada can say, hey, like, you know, we have all this oil that we're exporting to you.
Jacob:If you really go after us, we're going to cause you that specific immediate pain that we can point towards.
Jacob:And there's really, you know, there's not huge hordes of people coming over the Canadian border into the United States.
Jacob:There's not, there's not these levers that they can pull on.
Jacob:So it seems to me like Canada is in a much worse position here and that I'm trying to spin.
Jacob:The story is still positive for Mexico, but, you know, it can go the other direction too, I guess.
Jacob:I know I left you hanging there without saying anything, so I'll get you to a question, listeners.
Jacob:Rob just looked at me kind of like that's where you're going to end it.
Jacob:Like you're going to have to do better than that.
Jacob:Jacob, I can't pick up the thread from there.
Jacob:The unarticulated question that I wanted to throw at you at the end of that sort of ramble was that one of the interesting things to me about Mexico, and we talked about this actually on the podcast with ELO that published earlier this week, I'd highly recommend listeners go check it out because I thought it was a very good episode.
Jacob:Mexico is bucking the trend of the rest of the region, whereas most of the region is moving towards this libertarian or conservative or some weird hodgepodge of these different types of policies.
Jacob:Mexico is moving.
Jacob:And Mexico has a populist government, but it's much more of a state oriented sort of leans more left than right, I would call it, you're seeing a bigger role, I think for the Mexican government in how the economy is actually working.
Jacob:And for most of the 20th century that didn't work for Mexico.
Jacob:Like it needed NAFTA to increase economic growth.
Jacob:But I wonder if the current geopolitical climate and if the current US Mexico relationship means that if you had competent state leadership at that level, that it might actually put Mexico in a position to outperform Precisely because the things that are most difficult about what we're talking about you already alluded to.
Jacob:You need massive amounts of capex at the front end.
Jacob:You need to pass regulations that make it attractive for businesses to move operations from where they're currently doing them to this place in Mexico that you want them move them to.
Jacob:And it's really hard to do that if you're a libertarian government that doesn't want to actually put the state behind it.
Jacob:In some ways you need Mexico to operate more like China if it's going to take the place of China than sort of vice versa.
Jacob:Do you think that's a reasonable thing to say or is that kind of off the line?
Rob:The only thing I would, I would see it a little bit differently specifically if you, if you dive into the very specific areas of the economy that you're talking about.
Rob:So sometimes government can be really good for growth.
Rob:And it has been in the Chinese case, which is, you know, the biggest miracle that the world has ever seen.
Rob:Full stop bringing hundreds of millions of people into, you know, material well being that they couldn't have imagined even a generation before.
Rob:So you have to acknowledge that.
Rob:But it really depends on where and what you're talking about.
Rob:Because in many ways the manufacturing miracle in China was not so much state driven thing, that was really kind of a southern China, Shenzhen, you know, free, free trade zone sort of.
Rob:This is what Deng Xiaoping sort of had in mind when he did this experiment.
Rob:It was, hey, you know, the cadres can't touch these guys to some extent.
Rob:We're gonna, we're gonna experiment with this.
Rob:And even today that's sort of where the hub of export oriented manufacturing in China remains.
Rob:So especially when you're talking about, you know, lower level industrial manufacturing or consumer manufacturing that doesn't have a huge technology component to it in terms of like being on the technological frontier.
Rob:I'm not talking about like SMIC and you know, high end batteries and, and that sort of stuff.
Rob:I'm just talking about, you know, ordinary day to day things that really wasn't helped so much by the Chinese state.
Rob:In fact, Quite the opposite.
Rob:The state is really, really good.
Rob:Sometimes when you're talking about climbing up the technology ladder and pursuing catch up growth or getting that sort of savoir faire, the knowledge of how to do things and providing the protection so that your infant industries can learn and then compete on the export market, like that's the East Asian growth model.
Rob:Mexico isn't really in the situation where they can or maybe even should pursue that.
Rob:I think it's going to be very difficult.
Rob:They're almost too close to the United States.
Rob:It almost seems, as you've alluded to many times in the past, leaning on that relationship as much as possible is the best sort of growth lever that they might have.
Rob:And by definition that doesn't mean necessarily trying to have the heavy hand of government providing certain subsidies or doing direct investment or trying to, I don't want to use the word metal, but trying to direct because that's the sort of manufacturing where they've been growing that doesn't require that much direction because they're right next door to the people who know how to do stuff, essentially.
Rob:So other than security and trying to make Mexico attractive to the US Capitol, which in many ways isn't even, isn't even in their hands right now because it's so much depends on what the US itself is going to do.
Rob:I'm not sure that a greater role for the Mexican state is going to turn out so well.
Jacob:Yeah, I mean, probably not.
Jacob:It didn't, as I said, literally for all the 20th century, it didn't go well.
Jacob:But I guess I'm trying to have optimism about this particular Mexican state, but perhaps it's unfounded and perhaps I'm drinking the Shanebaum Kool Aid a little bit too much.
Jacob:I don't know if you want to.
Jacob:Do you want to leave it there, Rob, or do you have any parting thoughts on anything else that's happening in the world?
Jacob:The Middle east is not uninteresting.
Jacob:It doesn't have a whole lot of geopolitical, political or market impact.
Jacob:But we've got.
Jacob:I feel like this is the 500th time we've seen this, but rumors of maybe a ceasefire in Gaza finally, to the extent there's anything left of Gaza for the Israelis not to bomb.
Jacob:But I do think it's also interesting.
Jacob:One of the things that I talked about when I popped my head up over paternity leave was when the Assad regime fell, that I thought the center of gravity of the conflict was going to move toward the Syrian curve.
Jacob:And that it was going to be important to watch, not necessarily how this HTS group, which took over all the Syrian cities, was going to govern, but what Turkey was going to do with the Syrian Kurds.
Jacob:And some pretty disturbing reports just in the last couple of days of Turkish backed Syrian national army troops building up positions, starting to go after Syrian Kurdish positions.
Jacob:It's a little weird for me because 10 years ago I remember being very, very plugged into what was going on on the ground in terms of the broad fight against the Islamic State.
Jacob:The Syrian Kurds took over lots of those areas.
Jacob:So all those same sort of battle sites and things like that are now slowly working their way back into the news.
Jacob:As you're reading about what's going on in Syria, it's like those same places, except it's the Syrian Kurds who are now getting ready to defend themselves against the Turkish backed Syrian rebels.
Jacob:So, I mean, again, there's not a whole lot of market and geopolitical implications there.
Jacob:I guess beyond it just, it confirms all the things that we've been talking about with Turkey.
Jacob:We can talk about that a little bit more.
Jacob:If you've got other things you want to talk about, we can talk about that.
Jacob:Or we can just say a short and sweet episode and wish the listeners well.
Rob:No, I mean, no strong takes on the Middle east, which I think does show how marginal it is, unfortunately, to kind of the core spheres of influence that we're so focused on in terms of actual investment destinations and investment, you know, opportunities.
Rob:They're kind of in, in the gears between these big powers.
Rob:And it looks like they'll stay that way.
Jacob:It does look like it'll stay that way.
Jacob:Although, I mean, this is, it's ironic that lack of importance is maybe one of the reasons why Trump's rhetoric about Iran is maybe really important to watch because he's called out Iran repeatedly.
Jacob:He had a maximum pressure campaign against Iran in the first administration.
Jacob:Iran is reeling right now.
Jacob:I mean, whether it's from its proxies getting taken out or from its internal political drama, the weakness and sickness of the Supreme Leader, you know, might be an interesting time for the Trump administration to really push on Iran as being the first thing that they go after from a foreign policy perspective.
Jacob:And that could cause, you know, more instability there.
Jacob:And even though the Middle east has not been at the center of our minds, you know, the higher crude, Brent crude goes like if we're hanging in the 80s, if Brent crude starts going towards 90 or 100, you'll start here.
Jacob:And oh, the Middle east, geopolitical risk, trade is on, like we're going to be back sort of there.
Jacob:So that's not completely outside of the realm of possibility.
Jacob:But I do think it's important to watch what Turkey is doing.
Jacob:I think people are sleeping on Turkey and it's been very quiet and very strategic, but it's very slowly starting to expand and to some of these portions of Syria.
Jacob:And if eventually they are the ones who are, they're not going to be calling the shots, but if they're the ones that really have influence there, I mean, it's a huge geopolitical coup for them to flip Syria from, you know, a Russian backed military alliance to a country that will look to Ankara for guidance and which will put pressure on, say, Israel or which will put pressure on some of these other rivals in the region.
Jacob:It's a really interesting look at how Turkish, Turkish foreign policy is building out.
Jacob:And then there's also sort of in the background, like Egypt is a basket case economically.
Jacob:The Gulf is have good ties with the Trump administration, but what does that mean?
Jacob:And they've sort of made their temporary peace with Iran.
Jacob:Would they not look so kindly on increasing instability there or would they be in the front row cheering for it?
Jacob:I don't know.
Jacob:There's a lot of interesting dynamics to play out there.
Jacob:So it's quiet, but it may not be quiet for that much longer.
Rob:And in the meantime, you can't put ships through the Red Sea and the Suez Canal very easily.
Rob:And that reality remains there behind all of this, right?
Jacob:Well, that's exactly the point.
Jacob:What if Trump decides, you know, fire and fury.
Jacob:I am reopening Red Sea shipping as quickly as possible.
Jacob:Although if what you want is higher energy prices for US Exporters, you probably don't want to do that.
Jacob:You'd actually probably prefer for shipping to not be so good because then those US Energy exports are going to garner higher prices, although that bites you on the inflation level.
Jacob:And it also goes back to what we were talking about last week, which I'm still building my scenarios for this, but not the wackiest, the scariest thing or the most important thing that Trump has said in these weeks of craziness while he's waiting to actually get in the office was the thing about the Panama Canal.
Jacob:I think we really have to be watching every single one of the key maritime choke points, because you already have one that is basically closed.
Jacob:What if you had another where the United States was trying to impose influence?
Jacob:Like I was talking to a client earlier this week.
Jacob:And he was asking me what I thought about the Panama Canal comments.
Jacob:And I was like, look, this is, here's a scenario that's not so hard to imagine.
Jacob:Let's say there's massive political unrest against the Panamanian government because of rising food and energy prices.
Jacob:This happened, by the way, two, three years ago.
Jacob:And let's say that the US Decides that it's going to deploy its military just to the canal to make sure that, that the operations of the canal are not harmed by the political unrest in Panama.
Jacob:And let's say that a friendly force takes over the Panamanian government and says it's okay if the United States stays here for security purposes.
Jacob:We're not going to cause a big stink here.
Jacob:They're allowing us to continue the operations of the canal.
Jacob:And then what if the Trump administration decides to take it one step further and say, and by the way, if you don't go along with our new, I don't know, semiconductor restrictions or this restrictions or that restrictions, you will now pay a 30% toll to cross the Panama Canal or we will close the Panama Canal to ships of this flag bearing, blah, blah, blah, blah.
Jacob:Am I saying that's going to happen?
Jacob:No.
Jacob:But is that a completely and totally realistic scenario?
Jacob:There's no part of that that sounds far fetched.
Jacob:So I'm glad you brought up maritime choke points.
Jacob:I think they're always really important.
Jacob:But, but I think it is really important to note that one is closed and that you've got all these pressure points, whether it's Panama, the Strait of Malacca, some of these others where people are talking about others.
Rob:Just on the same note, you mentioned the Ships act that was in the works, which we talked about in this context.
Rob:I think it's worth just bringing up what that is because I don't imagine anyone has seen that.
Jacob:Yeah.
Jacob:So the Ships act is something that's been working through the US Sort of government bureaucracy for some time.
Jacob:But it's basically, I mean, for those that don't know, the United States does not manufacture ships anymore and it doesn't really have the capacity to do so right now.
Jacob:The, and the US only has like 80 ocean going cargo vessels.
Jacob:To put that into some perspective, China operates like over 5,000 such ships and they're the ones that are actually building here.
Jacob:Interesting that the bill is a bipartisan bill.
Jacob:So it was introduced by a Democratic senator from Arizona and a Republican senator from Indiana also has bipartisan support in the House.
Jacob:And the idea, I mean, there's a couple different ideas in this bill, one of them is to allow the importing components from foreign countries and foreign companies into the construction of ships.
Jacob:Others are to actually try and build shipbuilding capacity inside the United States itself.
Jacob:And you know, as you sort of noted to me, it's one of these perfect things where it sounds good on paper, but it's not like you're going to flip a switch and suddenly start building ships inside of the United States.
Jacob:But I brought it up just because it also was accompanied with, I don't want to say a change in rhetoric from Trump, because I don't think he changes his rhetoric.
Jacob:I think he's more like a dog chasing cats when it comes to this point of view.
Jacob:But, you know, South Korea has been one of his favorite whipping posts.
Jacob:When he was talking about South Korea in the context of the Ships act, though, he was like, yes, this is an opportunity for South Korean shipbuilders.
Jacob:We want to have good relations with South Korea.
Jacob:We want South Korea to help us rebuild our shipping industry.
Jacob:That's like, kind of interesting.
Jacob:That's not what you normally hear from the Trump administration, but it goes to this point about the United States government.
Jacob:And this is true of Biden, too, wanting to put forth America first policies targeting something like shipping, which like semiconductors.
Jacob:Makes sense that you would want domestic capacity to do that.
Jacob:And yet even if you can get a bipartisan bill through Congress to get some support there for that, it's going to be impossible.
Jacob:Like the actual lift of starting to build ships again in the United States, like, it's going to be really difficult.
Jacob:So I don't know, I was viewing it from maybe an optimistic perspective from Japanese and South Korean shipbuilding companies, because if any of it's going to work, it's going to be Japanese and South Korean shipping companies are going to have a bigger role in the US Supply chain.
Jacob:But how did you read it?
Rob:I think it's interesting that he called out South Korea and not Japan as a source of know how in this area, given our con, our conversation about Japan last week.
Rob:I guess the broader point that I would make on this is it's funny how many, how many of these policies and all, you know, tariffs are the biggest example.
Rob:But when you think about, like, what is a tariff?
Rob:A tariff is trying to incent certain behavior.
Rob:It's trying to impose a cost on something to incent someone to build capacity in the US to replace that thing.
Rob:Right.
Rob:And it's interesting when you get into these situations where policy is so volatile and everything is so volatile and uncertain because it reduces the value of the incentive.
Rob:And I bring this up because if you think about shipping in particular, like we've had the Jones act on the books forever.
Rob:And in theory the Jones act should incentivize US production of ships, but in reality what happens is no ship ever carries anything from one US port to another.
Rob:Like does anyone?
Rob:You know, isn't that weird?
Rob:Like no ship, no big ship ever carries something from Seattle to Long beach just never happens because you can't.
Rob:Like there's little ships that do, you know, certain things.
Rob:Obviously there's not no capability.
Rob:But despite having just an outright ban on providing that kind of service for any non US built or US flagged vessels, it never happened.
Rob:The incentive didn't work.
Rob:And I think that's a bigger theme that I'm thinking about a lot in terms of what are the likely outcomes here of a lot of these policies.
Rob:And you can almost compare them to Hungary's birth rate incentives where they threw all of this money at people to try to incent them to have more babies and it barely moved the needle.
Rob:And yet the costs were significant, I would think of tariffs in some ways.
Rob:And these shipping tariffs essentially because they're putting tariffs on goods that are not carried by US ships, almost like these Hungarian baby incentives.
Rob:I think they're going to end up being very costly in ways partly that we don't even anticipate because there's after effects and people sort of respond in ways that are unusual sometimes, but that the notion that they're going to have the desired effects and that people are going to say, oh yeah, this seems like a really stable policy I can count on for the long term.
Rob:Let me go plow a billion dollars into a U.S.
Rob:based shipyard to make container ships here in the U.S.
Rob:i would just be very surprised if that happened.
Jacob:Yeah, but there's all sorts of stuff like this in the ecosystem right now.
Jacob:For instance, like I was reading this morning about.
Jacob:Let me get it real fast.
Jacob:The GM had signed this huge supply deal with Vianode for synthetic graphite for EV batteries, a multi billion dollar agreement.
Jacob: y and the deal would run from: Jacob:So if you look at every single part of the economy, there are like all of these big fancy things like, oh, we're going to build capacity here and it's going to be great.
Jacob:We're not going to be dependent on the Chinese who dominate 95% of the graphite market anymore.
Jacob: And by: Jacob: e we live in the, in the year: Jacob:Because to your point, like it's easier and cheaper to do this in other parts of the world.
Jacob:And it's really, really hard to just use economic incentive measures like tariffs to get that to change.
Jacob:You either have to crack the whip or there has to be some kind of war or conflagration that forces people to eat the cost there to eat the cost and have that inconvenience be set upon them for long term gain.
Jacob:It's hard to imagine that it's going to work with the level of pressure that's being put on a lot of these different companies in these industries.
Rob:Yeah, EV batteries are a great example because that was the Cinderella story of the immediate post Covid period.
Rob:We had an enormous stimulus.
Rob:Everyone was anticipating a very rapid shift to EVs.
Rob:Ford and GM were flogging this night and day.
Rob:I mean, I don't remember Exactly.
Rob:I think GM was saying they were going to expand from 300,000 capacity to 2 million capacity of EVs within three years.
Rob:The Korean battery makers were announcing, you know, battery factory after battery factory in the US they were signing these supply agreements with the big automakers.
Rob:And then it all went to shit because people didn't buy EVs.
Rob:I mean, what kind of story is that, you know, you're, you're building this sort of house of cards on subsidies and sort of artificial nudges to natural economic behavior or sort of what people would do otherwise.
Rob:And not only does it not always turn out remotely the way you think, but it's just not something you can count on.
Rob:And now who's going to do that today?
Rob:Who's going to build a giant EV battery factory that seems to be uneconomic based on current market economics in the new administration, which doesn't support those things.
Jacob:Yeah, this is maybe a good place to close because I thought the most successful thing the Trump administration did on the first round was Operation Warp Speed.
Jacob:And it's easy to forget because Covid seemed so long ago.
Jacob:And Covid ended up not being the threat that everybody thought it was going to be.
Jacob:But the fact that the United States had vaccines out there as quickly as it did.
Jacob:And you basically had the US Government forcing all these different companies together and saying, like, no cost is too great, like, get this shit done.
Jacob:And it was done in a really, really rapid amount of time.
Jacob:Like, that's the story of when what you're talking about works for the United States.
Jacob:Like, think about the nascent semiconductor industry and computing and the Internet and all these other things.
Jacob:They all happen because Kennedy wants to go to the moon and because the United States is terrified of the Soviet Union because of Sputnik and things like that.
Jacob:That's when it works.
Jacob:When you have a real cultural wind behind you that says, we have to spend the money, we have to do this quickly.
Jacob:There is urgency.
Jacob:None of that is.
Jacob:We're not seeing any of that.
Jacob:And as long as that's not there, like, I don't think there's going to be competition, which, you know, that takes us to a really dark place, which is, you know, if you're a Trump advisor listening to this, then you're like, aha, we need a Sputnik moment.
Jacob:We need to generate some kind of moment that gives us the excuse and the impetus and the support to do something like this.
Jacob:But it's not just going to be, you know, the way that they're.
Jacob:The way that they're articulating things right now.
Rob:Yeah, I think that's right.
Rob:I mean, if you look at any of the, look at any of the case studies or the data about what America was capable of doing in World War II, and it's absolutely extraordinary.
Rob:I mean, never mind the space program, obviously, that was, that was extraordinary in its own right.
Rob:But you're.
Rob:I think you're right.
Rob:You need existential risk.
Rob:You need people to truly feel like it's an emergency, like they did in Covid, like they did during the war, like they did in the Cold War.
Rob:And as much as you want to manufacture that by sort of resorting to the playbook of, we're being swarmed by foreigner, like, whatever you want to say, criminals, like, the fact of the matter is like, except for inflation, most people have never had it so good in the US and there isn't a sense of emergency that's, you know, that's.
Rob:It's difficult to manufacture that out of whole cloth.
Rob:And if you can't manufacture that out of whole cloth, it's difficult to get the sort of people coming around these big initiatives and having them stick.
Rob:You know, what are you going to say?
Rob:Oh, the emergency is climate change.
Rob:So we all have to drive EVs as soon as possible.
Rob:I mean, it doesn't have the same impetus.
Rob:As, you know, the Nazis are coming.
Jacob:The emergency is the Canadians are invading our country with their airplanes to help us put out the fires in Los Angeles.
Jacob:That's the emergency.
Jacob:All right.
Jacob:All right.
Jacob:Let's leave it there, Rob.
Jacob:I'll talk to you next week.
Rob:All right.
Jacob:See ya.
