1 00:00:02,600 --> 00:00:08,559 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:21,360 --> 00:00:24,600 Speaker 2: This is Wall Street Week. I'm David Weston bringing you 3 00:00:24,840 --> 00:00:28,880 Speaker 2: stories of capitalism this week. Why families from Las Vegas 4 00:00:28,880 --> 00:00:31,440 Speaker 2: to Vancouver can't afford to buy a house. If you 5 00:00:31,600 --> 00:00:33,880 Speaker 2: can buy the house, why you may not be able 6 00:00:33,920 --> 00:00:36,680 Speaker 2: to afford to ensure it, particularly if you live in 7 00:00:36,720 --> 00:00:41,600 Speaker 2: Florida or in California. And US ports are consistently ranked 8 00:00:41,600 --> 00:00:44,680 Speaker 2: among the least efficient in the world. What sort of 9 00:00:44,760 --> 00:00:48,960 Speaker 2: investment would it take to fix that? But we start 10 00:00:49,000 --> 00:00:52,559 Speaker 2: with the story about that trade balance. President Electroump focuses 11 00:00:52,600 --> 00:00:56,000 Speaker 2: on so intently. On Thursday, we got the numbers, which 12 00:00:56,040 --> 00:00:59,200 Speaker 2: once again showed the US in the red. But what 13 00:00:59,240 --> 00:01:02,000 Speaker 2: does that tell us about the economy? And is restoring 14 00:01:02,040 --> 00:01:06,440 Speaker 2: the balance, as mister Trump insists, really so important. Here's 15 00:01:06,440 --> 00:01:10,280 Speaker 2: Bloomberg International Economics and Policy correspondent Michael McKee. 16 00:01:11,880 --> 00:01:14,280 Speaker 3: There is a story about a college professor who told 17 00:01:14,319 --> 00:01:18,320 Speaker 3: his economic students anyone who used the term bilateral trade 18 00:01:18,360 --> 00:01:23,280 Speaker 3: balance would automatically fail. That's because international trade is a system, 19 00:01:23,520 --> 00:01:27,520 Speaker 3: not a series of summable individual country by country relationships. 20 00:01:28,160 --> 00:01:30,760 Speaker 3: A country's trade balance is the difference between what it 21 00:01:30,800 --> 00:01:34,679 Speaker 3: consumes and what it produces. In the US, we consume 22 00:01:34,840 --> 00:01:38,679 Speaker 3: more than we make. Aggregate demand is greater than aggregate supply, 23 00:01:39,240 --> 00:01:42,680 Speaker 3: so we end up importing the difference to satisfy that demand. 24 00:01:43,200 --> 00:01:46,120 Speaker 3: We have a trade deficit. China, on the other hand, 25 00:01:46,160 --> 00:01:49,520 Speaker 3: produces more than it consumes. It sells its excess to 26 00:01:49,760 --> 00:01:52,440 Speaker 3: US and the rest of the world. It has a 27 00:01:52,440 --> 00:01:55,960 Speaker 3: trade surplus. To Donald Trump, the answer is to slap 28 00:01:56,000 --> 00:01:59,640 Speaker 3: tariffs on Chinese made goods. But that won't solve the 29 00:01:59,640 --> 00:02:03,600 Speaker 3: problem because we are the problem. As long as we 30 00:02:03,640 --> 00:02:06,720 Speaker 3: demand more than we produce, the trade balance won't change. 31 00:02:06,800 --> 00:02:10,120 Speaker 3: We will just buy more stuff from countries other than China. 32 00:02:10,720 --> 00:02:14,160 Speaker 3: If China isn't the lowest cost supplier, someone else will be. 33 00:02:15,080 --> 00:02:18,000 Speaker 3: Why won't we make more stuff here? We likely will 34 00:02:18,480 --> 00:02:22,640 Speaker 3: just not enough. Meanwhile, our other economic policies are working 35 00:02:22,680 --> 00:02:25,919 Speaker 3: to worsen the trade deficit. The US has a large 36 00:02:25,960 --> 00:02:29,280 Speaker 3: and growing budget deficit, which we fund by selling debt. 37 00:02:29,880 --> 00:02:33,160 Speaker 3: As the deficit rises, interest rates have to rise to 38 00:02:33,240 --> 00:02:37,640 Speaker 3: attract buyers. That strengthens the dollar, which makes American exports 39 00:02:37,680 --> 00:02:41,680 Speaker 3: more expensive and harder to sell. It makes imports cheaper. 40 00:02:42,560 --> 00:02:46,320 Speaker 3: Tax cuts, meanwhile, give people more money to spend, increasing 41 00:02:46,400 --> 00:02:51,000 Speaker 3: demand for those imports. We increase demand without increasing supply, 42 00:02:51,680 --> 00:02:55,160 Speaker 3: and the trade deficit gets worse. Not even Donald Trump 43 00:02:55,240 --> 00:02:57,760 Speaker 3: is above the law of supply and demand. 44 00:02:59,200 --> 00:03:02,840 Speaker 2: So why the difference between exports and imports matter to 45 00:03:02,880 --> 00:03:05,800 Speaker 2: a country that hasn't had a goods trade surplus since 46 00:03:05,880 --> 00:03:10,519 Speaker 2: nineteen seventy five? We asked very lovely of the Peterson Institute. 47 00:03:10,919 --> 00:03:13,840 Speaker 4: We shouldn't care about the trade balance. The trade balance 48 00:03:13,919 --> 00:03:17,080 Speaker 4: is an accounting number, and sometimes a country has a 49 00:03:17,120 --> 00:03:20,320 Speaker 4: trade surplus, sometimes it has a trade deficit. What it 50 00:03:20,400 --> 00:03:24,240 Speaker 4: means is it reflects how much you are spending relative 51 00:03:24,240 --> 00:03:26,760 Speaker 4: to how much you're earning. And just like in your 52 00:03:26,760 --> 00:03:29,640 Speaker 4: own private life, there are times when you should spend 53 00:03:29,680 --> 00:03:33,560 Speaker 4: more than you earn. For example, the country of Norway 54 00:03:33,760 --> 00:03:37,720 Speaker 4: discovered north sea oil, and it did not want to 55 00:03:37,800 --> 00:03:41,320 Speaker 4: depress the consumption of the current generation the people alive 56 00:03:41,360 --> 00:03:46,640 Speaker 4: at that time to build up the investment necessary to 57 00:03:46,720 --> 00:03:51,360 Speaker 4: exploit that new resource, and so they ran trade deficits 58 00:03:51,760 --> 00:03:53,840 Speaker 4: as they bowered from the rest of the world to 59 00:03:54,080 --> 00:03:58,960 Speaker 4: begin to drill and to get this precious resource from 60 00:03:59,040 --> 00:04:01,960 Speaker 4: under the ocean, and lo and behold, now they run 61 00:04:02,040 --> 00:04:06,600 Speaker 4: trade surfaces. So they invested the money wisely in an 62 00:04:06,640 --> 00:04:09,760 Speaker 4: asset that played off for years to come. So the 63 00:04:10,080 --> 00:04:12,720 Speaker 4: answer to is the trade devisit bad or good? Is 64 00:04:12,760 --> 00:04:14,520 Speaker 4: really why do you have one? 65 00:04:15,520 --> 00:04:19,919 Speaker 5: We like to buy, we're big consumers, we have the 66 00:04:19,960 --> 00:04:24,640 Speaker 5: most open market, we have low tariffs, and it's actually 67 00:04:24,720 --> 00:04:25,560 Speaker 5: been a benefit. 68 00:04:26,160 --> 00:04:29,520 Speaker 2: Fred Hockberg was president of the Export Import Bank under 69 00:04:29,560 --> 00:04:33,440 Speaker 2: President Obama and author of Trade is not a four 70 00:04:33,520 --> 00:04:37,640 Speaker 2: letter word. Like Mary Lovely, he questions all the emphasis 71 00:04:37,640 --> 00:04:39,000 Speaker 2: on the balance of trade. 72 00:04:39,720 --> 00:04:42,680 Speaker 5: Yes, there are obviously some shortfalls, but we have the 73 00:04:42,720 --> 00:04:45,600 Speaker 5: greatest array of products. You go to a supermarket, they're 74 00:04:45,600 --> 00:04:49,120 Speaker 5: over thirty thousand different products. So that's been a great 75 00:04:49,160 --> 00:04:51,200 Speaker 5: benefit to our economy. 76 00:04:51,240 --> 00:04:53,920 Speaker 2: Even if it were important to address the trade balance. 77 00:04:54,200 --> 00:04:56,839 Speaker 2: Lovely is not at all sure that the sixty percent 78 00:04:56,880 --> 00:05:00,480 Speaker 2: tariffs on Chinese imports and twenty five percent reports from 79 00:05:00,560 --> 00:05:02,640 Speaker 2: Mexico and Canada are the way to go. 80 00:05:03,360 --> 00:05:07,279 Speaker 4: There's a misunderstanding of thinking that TIFFs, because they'll lower 81 00:05:07,360 --> 00:05:12,440 Speaker 4: our imports, will change our trade deficit. So if President 82 00:05:12,440 --> 00:05:15,680 Speaker 4: Trump goes ahead and put on tariffs, we would expect 83 00:05:15,720 --> 00:05:18,600 Speaker 4: that the US dollar will strengthen. That will make our 84 00:05:18,640 --> 00:05:23,080 Speaker 4: exports less attractive to foreign customers, to buyers abroad to 85 00:05:23,200 --> 00:05:26,000 Speaker 4: have to pay more for them, and so both imports 86 00:05:26,000 --> 00:05:29,920 Speaker 4: and exports can shrink and the balance could very well 87 00:05:29,960 --> 00:05:33,080 Speaker 4: be unaffected. So it may have zero effect on the 88 00:05:33,120 --> 00:05:36,880 Speaker 4: trade deficit. It could even increase the trade deficit, that is, 89 00:05:36,960 --> 00:05:40,039 Speaker 4: if we don't handle the underlying drivers, which have to 90 00:05:40,080 --> 00:05:42,240 Speaker 4: do with domestic saving and investment. 91 00:05:43,200 --> 00:05:46,000 Speaker 2: When the President elect talks about the problem of the 92 00:05:46,080 --> 00:05:50,600 Speaker 2: US trade deficit, he consistently focuses on goods, not services, 93 00:05:51,000 --> 00:05:53,760 Speaker 2: when much of US strength is in the latter category. 94 00:05:54,240 --> 00:05:58,120 Speaker 2: Hackwork says that means the trade balance numbers may be distorted. 95 00:05:58,520 --> 00:06:01,080 Speaker 5: With the second largest export in the entire world, were 96 00:06:01,080 --> 00:06:03,600 Speaker 5: second only to China, and one of the things we 97 00:06:03,680 --> 00:06:07,839 Speaker 5: excel in is service exports, whether it's media like Bloomberg, media, 98 00:06:07,920 --> 00:06:12,080 Speaker 5: financial services, insurance, travel, those are much harder to calculate 99 00:06:12,120 --> 00:06:16,160 Speaker 5: and capture, so my hunches our exports is somewhat understated 100 00:06:16,200 --> 00:06:16,880 Speaker 5: as a result. 101 00:06:17,560 --> 00:06:20,719 Speaker 2: Beyond their effects on the trade balance, there's another aspect 102 00:06:20,800 --> 00:06:24,200 Speaker 2: to tariffs that have attracted President elect Trump, the prospect 103 00:06:24,240 --> 00:06:26,120 Speaker 2: of raising revenue. 104 00:06:26,440 --> 00:06:29,839 Speaker 4: Why did we turn away from tariffs as a source 105 00:06:29,880 --> 00:06:35,479 Speaker 4: of revenue? And the historical record shows us what folks 106 00:06:35,520 --> 00:06:38,280 Speaker 4: were talking about one hundred years ago. What they were 107 00:06:38,320 --> 00:06:41,240 Speaker 4: talking about is that it was a tax on consumption, 108 00:06:41,960 --> 00:06:46,600 Speaker 4: and it left earnings that were saved untacked. So what 109 00:06:46,640 --> 00:06:51,159 Speaker 4: you had was lower income people who save relatively small 110 00:06:51,240 --> 00:06:56,640 Speaker 4: percentage or even zero of their income, really facing taxes 111 00:06:56,680 --> 00:07:01,760 Speaker 4: on everything that they buy, whereas rich people were only 112 00:07:01,800 --> 00:07:04,200 Speaker 4: taxed in the small share of their income that they 113 00:07:04,240 --> 00:07:05,640 Speaker 4: actually used to buy things. 114 00:07:06,279 --> 00:07:08,920 Speaker 2: Donald Trump is far from a loan in thinking that 115 00:07:08,960 --> 00:07:12,000 Speaker 2: the sort of across the board free trade approach taken 116 00:07:12,040 --> 00:07:15,160 Speaker 2: in the past has done real damage to certain industries 117 00:07:15,240 --> 00:07:18,280 Speaker 2: and workers in some parts of the country. The question 118 00:07:18,440 --> 00:07:21,440 Speaker 2: is whether tariffs are the best way to address the issue, 119 00:07:21,920 --> 00:07:24,520 Speaker 2: or whether a more selective approach is called for. 120 00:07:25,200 --> 00:07:30,000 Speaker 5: We have something called trade adjustment assistance. It's never been 121 00:07:30,040 --> 00:07:33,960 Speaker 5: really fully funded to sort of support workers whose jobs 122 00:07:33,960 --> 00:07:36,560 Speaker 5: have been compromised or loss due to trade, to make 123 00:07:36,560 --> 00:07:39,800 Speaker 5: sure that they can find other jobs and seek other employment. 124 00:07:40,840 --> 00:07:43,040 Speaker 5: That needs to be far more robust than it's ever been. 125 00:07:43,880 --> 00:07:46,400 Speaker 2: To say that we may be misled by focusing too 126 00:07:46,520 --> 00:07:49,800 Speaker 2: much on the trade deficit, or that imposing tariffs may 127 00:07:49,800 --> 00:07:52,120 Speaker 2: not get us where we want to go, is not 128 00:07:52,200 --> 00:07:55,200 Speaker 2: to say that the new President Trump's trade policies could 129 00:07:55,200 --> 00:07:57,960 Speaker 2: not help the US accomplish things it needs to get 130 00:07:58,000 --> 00:07:59,160 Speaker 2: done well. 131 00:07:59,200 --> 00:08:01,120 Speaker 5: I think what he likes to do is one on 132 00:08:01,120 --> 00:08:05,120 Speaker 5: one negotiations. He doesn't want to like the trans specific partnership, 133 00:08:05,160 --> 00:08:07,400 Speaker 5: and there's a talk he might want to do some 134 00:08:07,480 --> 00:08:10,880 Speaker 5: other one on one trade deals that would include higher 135 00:08:10,880 --> 00:08:13,520 Speaker 5: tariffs that they would impose on China to sort of 136 00:08:13,560 --> 00:08:18,840 Speaker 5: stop the Chinese overproduction. And China is overproducing and exporting 137 00:08:19,120 --> 00:08:20,520 Speaker 5: a lot of the goods because they want to keep 138 00:08:20,520 --> 00:08:24,200 Speaker 5: people employed. That hurts other countries that are trying to 139 00:08:24,240 --> 00:08:27,920 Speaker 5: increase their businesses, their manufacturing, or their agriculture. 140 00:08:28,560 --> 00:08:31,240 Speaker 2: In the end, maybe the most important point about the 141 00:08:31,360 --> 00:08:34,040 Speaker 2: US trade deficit is that it can distract US from 142 00:08:34,080 --> 00:08:37,880 Speaker 2: its underlying cause and a much bigger problem, how much 143 00:08:37,960 --> 00:08:40,440 Speaker 2: the US is borrowing from the rest of the world. 144 00:08:41,080 --> 00:08:45,120 Speaker 4: A trade surplus is the excess of your saving over investment, 145 00:08:45,640 --> 00:08:49,320 Speaker 4: so that can change when you're saving the rate changes 146 00:08:49,440 --> 00:08:52,280 Speaker 4: or when your investment rate changes. The US has had 147 00:08:52,400 --> 00:08:56,560 Speaker 4: very healthy investment, and that's good. Our saving, though, has 148 00:08:56,720 --> 00:09:00,800 Speaker 4: gone down, so we have a relatively low savings rate 149 00:09:01,559 --> 00:09:05,080 Speaker 4: comparing across countries, and part of that is due to 150 00:09:05,160 --> 00:09:10,400 Speaker 4: low private savings. But also low government savings. So here 151 00:09:10,480 --> 00:09:14,400 Speaker 4: we get back to the large federal budget deficit and 152 00:09:14,720 --> 00:09:18,160 Speaker 4: evaluating whether you think that deficit is something that should 153 00:09:18,200 --> 00:09:20,120 Speaker 4: be made smaller. 154 00:09:21,440 --> 00:09:26,280 Speaker 5: You know what drives our economy, it's consumer spending, business investment, 155 00:09:26,720 --> 00:09:32,439 Speaker 5: government spending, and a deficit, whether it's exports or our 156 00:09:32,480 --> 00:09:35,720 Speaker 5: budget deficit, so that it's only one of four components. 157 00:09:35,920 --> 00:09:39,319 Speaker 5: We need to up our exports. We probably need to 158 00:09:39,520 --> 00:09:42,760 Speaker 5: have our budget and better alignment because we are spending 159 00:09:42,760 --> 00:09:44,599 Speaker 5: a lot more than we're taking in. It's one of 160 00:09:44,640 --> 00:09:48,120 Speaker 5: the things Scott Bessant, the incoming Treasury nominee, says he 161 00:09:48,200 --> 00:09:51,439 Speaker 5: wants to work on so that we have to look 162 00:09:51,480 --> 00:09:53,800 Speaker 5: at in the totality. But it's easy to focus on 163 00:09:53,840 --> 00:09:56,600 Speaker 5: the trade deficit because it's like foreign and we don't 164 00:09:56,600 --> 00:09:58,360 Speaker 5: have to talk about raising taxes. 165 00:09:59,440 --> 00:10:02,800 Speaker 2: Coming up. The US is way behind in the efficiency 166 00:10:02,840 --> 00:10:05,760 Speaker 2: of its ports. Does it matter and what can be 167 00:10:05,800 --> 00:10:17,600 Speaker 2: done about it? That's next on Wall Street Week. This 168 00:10:17,840 --> 00:10:22,080 Speaker 2: is a story about American exceptionalism, but not necessarily the 169 00:10:22,120 --> 00:10:22,800 Speaker 2: good kind. 170 00:10:24,320 --> 00:10:27,080 Speaker 6: Their Rural Bank comes out with this list of the 171 00:10:27,120 --> 00:10:28,760 Speaker 6: top four hundred or five hundred. 172 00:10:29,040 --> 00:10:31,800 Speaker 7: The USA ports are not hardly ever in the top 173 00:10:31,800 --> 00:10:32,440 Speaker 7: one hundred. 174 00:10:33,480 --> 00:10:36,720 Speaker 2: That's Mario Cardera, CEO of the Port of Long Beach 175 00:10:36,760 --> 00:10:41,520 Speaker 2: in California, America's second busiest port. It ranks number nine 176 00:10:41,559 --> 00:10:44,320 Speaker 2: in the world and level of activity, but number three 177 00:10:44,400 --> 00:10:47,200 Speaker 2: hundred and seventy three in the list. He refers to 178 00:10:47,600 --> 00:10:51,920 Speaker 2: the World Bank's annual Container Port Performance Index, which measures 179 00:10:51,960 --> 00:10:54,959 Speaker 2: efficiency based on how long a ship stays in port. 180 00:10:55,520 --> 00:11:00,559 Speaker 2: That index for twenty twenty three ranked Yangshan, China, Salala, Oman, 181 00:11:00,960 --> 00:11:05,560 Speaker 2: and Kartahina, Columbia, first, second, and third. The only US 182 00:11:05,600 --> 00:11:08,920 Speaker 2: ports that made the top one hundred were Philadelphia at 183 00:11:08,960 --> 00:11:12,680 Speaker 2: fifty five and New York, New Jersey at number ninety two. 184 00:11:13,440 --> 00:11:16,959 Speaker 2: Of the bottom fifty ports listed, six of them are 185 00:11:17,000 --> 00:11:21,680 Speaker 2: in the US, making America's shipping infrastructure exceptional in the 186 00:11:21,760 --> 00:11:26,240 Speaker 2: length of its delays. Turlock Mooney is the global head 187 00:11:26,240 --> 00:11:28,959 Speaker 2: of Port Intelligence and Analytics at S and P Global, 188 00:11:29,320 --> 00:11:32,840 Speaker 2: which partnered with the World Bank to create the efficiency ranking. 189 00:11:33,520 --> 00:11:40,680 Speaker 8: Ports are critical to fluid supply chains. Efficient ports are 190 00:11:41,200 --> 00:11:49,240 Speaker 8: extremely necessary to keep goods flowing smoothly. Efficient ports are 191 00:11:49,280 --> 00:11:58,040 Speaker 8: actually catalysts for development. They attract investment, they attract logistics infrastructure, 192 00:11:58,920 --> 00:12:05,040 Speaker 8: and they ultimately helped to drive growth Conversely, in efficient 193 00:12:05,120 --> 00:12:07,640 Speaker 8: ports can have the opposite effect. 194 00:12:08,520 --> 00:12:11,400 Speaker 2: Time, as they say, is money, and when it comes 195 00:12:11,440 --> 00:12:14,000 Speaker 2: to United States imports, it can be a lot of 196 00:12:14,040 --> 00:12:17,480 Speaker 2: money given the importance of consumers, which makes ports like 197 00:12:17,600 --> 00:12:20,559 Speaker 2: Long Beach an indicator of the strength of the economy. 198 00:12:20,640 --> 00:12:24,599 Speaker 6: Overall, you have a great economy, and you know the 199 00:12:24,760 --> 00:12:27,640 Speaker 6: amer consumer is spending in terms of peor Long beachs 200 00:12:27,640 --> 00:12:31,079 Speaker 6: our numbers lately have been historic, so we're approximately now 201 00:12:31,120 --> 00:12:34,120 Speaker 6: after nine months, we're up in terms of te volume. 202 00:12:34,600 --> 00:12:38,439 Speaker 7: We're up about nineteen percent over and above last year's number. 203 00:12:39,280 --> 00:12:42,559 Speaker 2: To handle all that volume, ports like Cordero's Long Beach 204 00:12:42,720 --> 00:12:45,520 Speaker 2: have been changing the way they do business, trying to 205 00:12:45,520 --> 00:12:47,840 Speaker 2: make sure that they're as efficient as they can be, 206 00:12:48,480 --> 00:12:52,000 Speaker 2: improving that low ranking in the World Bank Index. And 207 00:12:52,080 --> 00:12:53,960 Speaker 2: some of that requires automation. 208 00:12:55,000 --> 00:12:58,960 Speaker 6: The research right now points to the fact that automation 209 00:12:59,040 --> 00:13:03,040 Speaker 6: clearity is a cost reduction policy for the poor Long Beach. 210 00:13:03,120 --> 00:13:05,480 Speaker 7: We're interested in productivity as. 211 00:13:05,280 --> 00:13:09,959 Speaker 6: A global community. We've entered the fourth Industrial Revolution, so 212 00:13:10,040 --> 00:13:14,640 Speaker 6: to speak, and that is the coming of robotics automation. 213 00:13:15,080 --> 00:13:17,640 Speaker 6: If you go back to a report that mckensey issued 214 00:13:17,679 --> 00:13:22,280 Speaker 6: back in twenty seventeen, they predicted that by twenty thirty 215 00:13:22,400 --> 00:13:26,000 Speaker 6: we would lose two thirds of American jobs. As we know, 216 00:13:26,800 --> 00:13:29,440 Speaker 6: for every robot that you put in place, there's six 217 00:13:29,559 --> 00:13:33,600 Speaker 6: jobs that are limited. So I think for a poor 218 00:13:33,679 --> 00:13:38,040 Speaker 6: long beach, how we navigate that issue as a public port. 219 00:13:38,600 --> 00:13:41,920 Speaker 6: We have to consider all factors and I think what 220 00:13:42,000 --> 00:13:45,679 Speaker 6: we've been successful at. Then when we do talk about 221 00:13:46,040 --> 00:13:49,040 Speaker 6: automation or in the case of the Blombach container termal 222 00:13:49,120 --> 00:13:53,760 Speaker 6: semi automation, we have that discussion as a stakeholder group, 223 00:13:54,440 --> 00:13:55,560 Speaker 6: a collaborative effort. 224 00:13:56,320 --> 00:13:59,640 Speaker 2: Automation at seaports is not an all or nothing proposition. 225 00:14:00,240 --> 00:14:03,720 Speaker 2: Loading and offloading ships and moving cargo from one form 226 00:14:03,760 --> 00:14:07,760 Speaker 2: of transportation to another involves many complex steps, some of 227 00:14:07,800 --> 00:14:11,360 Speaker 2: which are more readily automated than others, and some of 228 00:14:11,400 --> 00:14:15,599 Speaker 2: which don't lend themselves to automation at all given current technology. 229 00:14:16,280 --> 00:14:19,840 Speaker 8: The main benefit of automation and the reason that it 230 00:14:20,000 --> 00:14:22,920 Speaker 8: is the future and the reason that you see the 231 00:14:22,960 --> 00:14:27,800 Speaker 8: most efficient ports and the world automating operations more and more, 232 00:14:28,480 --> 00:14:33,040 Speaker 8: is that it sits very well with digitization. So it's 233 00:14:33,480 --> 00:14:39,960 Speaker 8: an important part of the technical foundation for interoperable data 234 00:14:41,040 --> 00:14:46,520 Speaker 8: sharing of data between different stakeholders. Sharing of good quality 235 00:14:46,640 --> 00:14:52,400 Speaker 8: data so that action can be taken where necessary to 236 00:14:52,560 --> 00:14:56,880 Speaker 8: drive efficiency and improve efficiency of port operations. 237 00:14:57,960 --> 00:15:00,880 Speaker 2: Automation is far from the only way that ports like 238 00:15:00,960 --> 00:15:04,440 Speaker 2: Long Beach are seeking to improve efficiency. Indeed, it may 239 00:15:04,480 --> 00:15:07,640 Speaker 2: not even be the best way. A better approach may 240 00:15:07,680 --> 00:15:10,360 Speaker 2: be to get more productivity from the system the way 241 00:15:10,400 --> 00:15:15,280 Speaker 2: it's now configured, particularly by extending the hours the port operates. 242 00:15:15,760 --> 00:15:17,920 Speaker 7: One of the things that I was very vocal about 243 00:15:18,120 --> 00:15:20,320 Speaker 7: is how we move to twenty four to seven operations. 244 00:15:20,560 --> 00:15:23,040 Speaker 6: Now we're not working twenty four hours a day, seven 245 00:15:23,120 --> 00:15:26,000 Speaker 6: days a weekening time soon. Imagine if you told the 246 00:15:26,080 --> 00:15:28,560 Speaker 6: American consumer you can only fly during the week and 247 00:15:28,600 --> 00:15:31,280 Speaker 6: the airport will closed on weekends, or you can only 248 00:15:31,280 --> 00:15:33,720 Speaker 6: fly between the hours of eight am and six pm. 249 00:15:34,080 --> 00:15:38,000 Speaker 6: I mean, imagine what the airport bottleneck would be like. 250 00:15:38,240 --> 00:15:40,280 Speaker 6: So I think the same emphasis needs to be put 251 00:15:40,320 --> 00:15:41,520 Speaker 6: in terms of how we move cart. 252 00:15:42,880 --> 00:15:47,080 Speaker 2: Another route to improve efficiency is rail. One train can 253 00:15:47,120 --> 00:15:50,360 Speaker 2: carry seven hundred and fifty trucks worth of cargo, and 254 00:15:50,480 --> 00:15:53,400 Speaker 2: earlier this year, Long Beach broke ground on a one 255 00:15:53,480 --> 00:15:56,680 Speaker 2: point five billion dollar expansion of its rail yard that 256 00:15:56,720 --> 00:15:59,800 Speaker 2: will triple the amount of cargo it can handle annually. 257 00:16:00,440 --> 00:16:05,000 Speaker 2: John Gabriel is Group president for Consumer Products at b ANDSF, 258 00:16:05,360 --> 00:16:07,840 Speaker 2: one of the two railroads servicing Long Beach. 259 00:16:08,640 --> 00:16:11,760 Speaker 9: October of twenty twenty four was the biggest single month 260 00:16:11,800 --> 00:16:15,800 Speaker 9: moving intermodal that we've had as BNSF Railway. Tying that 261 00:16:15,880 --> 00:16:18,520 Speaker 9: back to the ports this year has it's on a 262 00:16:18,600 --> 00:16:21,240 Speaker 9: record pace for the most shipped the train movements that 263 00:16:21,280 --> 00:16:23,520 Speaker 9: we've done. It's the fastest we've ever gotten to a 264 00:16:23,640 --> 00:16:26,480 Speaker 9: million containers loaded on the trains and departed out of 265 00:16:26,480 --> 00:16:28,800 Speaker 9: the ports of LA and Long Beach. And I would 266 00:16:28,800 --> 00:16:31,400 Speaker 9: certainly say that's a testament to, you know, the investments 267 00:16:31,440 --> 00:16:36,040 Speaker 9: we've made. Again, we've invested in tracks facilities more than 268 00:16:36,040 --> 00:16:38,520 Speaker 9: two and a half billion dollars over the last five years. 269 00:16:39,240 --> 00:16:41,200 Speaker 9: I think it's a testament to the collaboration we have 270 00:16:41,360 --> 00:16:43,560 Speaker 9: with the ports of LA and Long Beach and the 271 00:16:43,600 --> 00:16:47,920 Speaker 9: investments they've made. That's so important. Right now, right now, 272 00:16:47,920 --> 00:16:51,440 Speaker 9: we're handling more volume than we were post supply chain crisis, 273 00:16:51,440 --> 00:16:54,600 Speaker 9: where we saw the huge uptick in consumer demand, you know, 274 00:16:54,640 --> 00:16:58,000 Speaker 9: post pandemic, and we're doing it about fifty percent faster 275 00:16:58,360 --> 00:17:02,840 Speaker 9: from ship to train and ultimately the ship to end destination. 276 00:17:03,080 --> 00:17:06,479 Speaker 9: Across our animal network is about seventy five percent faster 277 00:17:06,720 --> 00:17:09,280 Speaker 9: than it was from a transit perspective back in twenty 278 00:17:09,320 --> 00:17:11,280 Speaker 9: twenty two. And you know, really, I would say the 279 00:17:11,440 --> 00:17:14,440 Speaker 9: entire supply chain and all stakeholders have really stepped up 280 00:17:14,800 --> 00:17:17,359 Speaker 9: and it's really been a great demonstration of you know, 281 00:17:17,560 --> 00:17:20,919 Speaker 9: a capacity and supply chain resiliency for all the goods 282 00:17:20,920 --> 00:17:22,040 Speaker 9: moving through the West Coast. 283 00:17:22,760 --> 00:17:26,480 Speaker 10: Containers and Rossterdam are only thirty three percent off the 284 00:17:26,520 --> 00:17:31,399 Speaker 10: total cargo through pit the major cargo nearly fifty percent 285 00:17:31,440 --> 00:17:33,480 Speaker 10: of liquid bulk clicking i AIN World Away. 286 00:17:33,720 --> 00:17:38,320 Speaker 2: Anna Steltzel is working on maximizing efficiency in Rotterdam, where 287 00:17:38,359 --> 00:17:42,400 Speaker 2: she's the Director of Containers. It's the world's tenth busiest 288 00:17:42,440 --> 00:17:46,479 Speaker 2: port and ranks ninety first in the World Banks Efficiency Index. 289 00:17:46,920 --> 00:17:50,680 Speaker 2: As with Long Beach, Rotterdam is facing increasing demand. 290 00:17:51,880 --> 00:17:56,560 Speaker 10: We're expanding our container capacity. We do know from research 291 00:17:56,680 --> 00:18:00,800 Speaker 10: that to container business in Europe will be actually it 292 00:18:00,840 --> 00:18:03,399 Speaker 10: will be growing all over the world. That has to 293 00:18:03,400 --> 00:18:06,520 Speaker 10: do with containerization, that has to do with a growing 294 00:18:06,520 --> 00:18:10,600 Speaker 10: middle class, and in order to prepare for their growth 295 00:18:10,640 --> 00:18:14,359 Speaker 10: and to participate in their growth, we had decided to 296 00:18:14,440 --> 00:18:15,760 Speaker 10: invest into our. 297 00:18:15,600 --> 00:18:21,040 Speaker 2: Infrastructure Rotterdam is a leading port in a new system 298 00:18:21,080 --> 00:18:25,280 Speaker 2: called Gemini, involving shipping companies HAPAC, Lloyd and Meersk. 299 00:18:26,280 --> 00:18:29,760 Speaker 10: The trends that we see is that transhipment volumes are growing. 300 00:18:30,280 --> 00:18:33,760 Speaker 10: That has to do, for example, with the fact that 301 00:18:33,960 --> 00:18:38,720 Speaker 10: we have hubbinspoke concepts that are being introduced. Maersk, together 302 00:18:38,760 --> 00:18:41,480 Speaker 10: with Harperkloyd, introduced the Gemini concept. 303 00:18:42,160 --> 00:18:45,399 Speaker 2: The Gemini project features a series of hub ports around 304 00:18:45,400 --> 00:18:48,400 Speaker 2: the world that handle the bulk of the cargo. Containers 305 00:18:48,440 --> 00:18:52,080 Speaker 2: are then immediately loaded under smaller ships destined for spoke 306 00:18:52,280 --> 00:18:55,919 Speaker 2: ports dotted all over the world. Central to the project 307 00:18:56,000 --> 00:18:59,640 Speaker 2: in Rotterdam is APM, which bills itself as the most 308 00:18:59,640 --> 00:19:03,680 Speaker 2: advance against most fully automated terminal in the world. Its 309 00:19:03,720 --> 00:19:05,640 Speaker 2: CEO is Harold Kunst. 310 00:19:06,400 --> 00:19:08,800 Speaker 1: The Gentleman and I approach is different than the traditional 311 00:19:08,800 --> 00:19:10,200 Speaker 1: shipping line approach. 312 00:19:09,920 --> 00:19:11,120 Speaker 10: We took for many decades. 313 00:19:11,800 --> 00:19:15,439 Speaker 2: With the up structure integrated into the network of the 314 00:19:15,520 --> 00:19:18,880 Speaker 2: five hubs in the East West approach from the trade 315 00:19:19,320 --> 00:19:21,280 Speaker 2: is that we are able to enable the ships to 316 00:19:21,320 --> 00:19:25,600 Speaker 2: be nine days earlier from far rays into Europe. Sports 317 00:19:25,720 --> 00:19:28,719 Speaker 2: like Rotterdam in Europe and Long Beach in California are 318 00:19:28,760 --> 00:19:32,120 Speaker 2: seeing greater demand than ever for cargo handling, and are 319 00:19:32,119 --> 00:19:35,160 Speaker 2: investing and innovating to keep up with what's coming their way. 320 00:19:35,840 --> 00:19:38,320 Speaker 2: So why is it that they still lag so far 321 00:19:38,400 --> 00:19:41,600 Speaker 2: behind their counterparts in Asia, in the Middle East, and 322 00:19:41,720 --> 00:19:44,720 Speaker 2: even in Latin America. Why is it that it takes 323 00:19:44,760 --> 00:19:47,280 Speaker 2: two or three times as long to move a container 324 00:19:47,359 --> 00:19:50,320 Speaker 2: at a US port than it does in China. It 325 00:19:50,359 --> 00:19:53,720 Speaker 2: turns out that there are several reasons. First, and most 326 00:19:53,720 --> 00:19:57,000 Speaker 2: basic is that twenty four to seven schedule that Cardero 327 00:19:57,240 --> 00:19:59,879 Speaker 2: is pushing for at Long Beach, but that hasn't yet 328 00:20:00,040 --> 00:20:01,520 Speaker 2: been accomplished. 329 00:20:01,480 --> 00:20:04,600 Speaker 6: After nine months in the year twenty twenty four because 330 00:20:04,600 --> 00:20:08,200 Speaker 6: of expanded hours of operation which commenced with the twenty 331 00:20:08,320 --> 00:20:12,639 Speaker 6: four to seven conversation. Again, are we twenty four seven today? No, 332 00:20:13,280 --> 00:20:17,560 Speaker 6: have we taken incremental steps to expand operation hours. Yes, 333 00:20:17,960 --> 00:20:20,320 Speaker 6: that's a big reason why we don't have congestion and 334 00:20:20,320 --> 00:20:23,200 Speaker 6: bottlenecks at the Pear Long Beach because our terminals have 335 00:20:23,320 --> 00:20:25,560 Speaker 6: been able to work with us and making sure that 336 00:20:25,960 --> 00:20:30,440 Speaker 6: we use night gates, we use early morning gates, we 337 00:20:30,560 --> 00:20:34,199 Speaker 6: use weekend hours in times that we have historic volume, 338 00:20:34,600 --> 00:20:36,200 Speaker 6: which is what we have done. 339 00:20:36,920 --> 00:20:39,280 Speaker 7: So I think again we'll get there. 340 00:20:40,200 --> 00:20:42,960 Speaker 2: Even if Long Beach were up and running all the time, 341 00:20:43,119 --> 00:20:45,240 Speaker 2: it would be very difficult for it to approach the 342 00:20:45,280 --> 00:20:48,199 Speaker 2: efficiency level of some major ports because of where it 343 00:20:48,240 --> 00:20:52,360 Speaker 2: fits in the supply chain. Goods coming into Singapore or Oman, 344 00:20:52,480 --> 00:20:56,480 Speaker 2: for example, are transferred from one ship to another rather 345 00:20:56,520 --> 00:21:00,000 Speaker 2: than being moved over land by train or truck for distribute. 346 00:21:00,359 --> 00:21:03,840 Speaker 2: In the United States, we're not a transhipment port. 347 00:21:04,200 --> 00:21:06,360 Speaker 6: I mean some of the larger ports that you look at, 348 00:21:06,480 --> 00:21:10,960 Speaker 6: for example Singapore, they are a transhipment port. They always 349 00:21:11,200 --> 00:21:14,000 Speaker 6: have been, and the allies will. 350 00:21:14,040 --> 00:21:17,479 Speaker 2: And finally, there is the question of automation, something that 351 00:21:17,560 --> 00:21:20,800 Speaker 2: others make more use of than the US. But as 352 00:21:20,880 --> 00:21:23,439 Speaker 2: much as automation promises to be an answer to so 353 00:21:23,560 --> 00:21:27,520 Speaker 2: many prayers for greater efficiency, first it comes with a price, 354 00:21:27,960 --> 00:21:31,840 Speaker 2: quite literally, in the investment it requires, with the associated 355 00:21:31,920 --> 00:21:34,600 Speaker 2: questions of where the capital will come from and whether 356 00:21:34,680 --> 00:21:37,879 Speaker 2: it will earn the return on investment normally required. 357 00:21:38,800 --> 00:21:43,240 Speaker 7: There's about twelve hundred legitimate container terminals throughout the world, 358 00:21:43,840 --> 00:21:46,399 Speaker 7: only about four percent are automated. 359 00:21:47,400 --> 00:21:52,360 Speaker 6: So the challenge with any type of transformation of technology 360 00:21:52,800 --> 00:21:57,280 Speaker 6: is a costly endeavor. So from a private sector perspective, 361 00:21:58,080 --> 00:22:02,400 Speaker 6: what's the return on investment. I think that question is 362 00:22:02,480 --> 00:22:05,960 Speaker 6: probably going to be more challenging moving forward, because obviously 363 00:22:06,000 --> 00:22:10,040 Speaker 6: none of this happens under some private sector investment in. 364 00:22:10,000 --> 00:22:12,280 Speaker 2: The United States. It's not just a question of the 365 00:22:12,359 --> 00:22:17,680 Speaker 2: capital investment in return. Automation also has potentially substantial effects 366 00:22:17,720 --> 00:22:22,119 Speaker 2: on employment, which led forty seven thousand members of the 367 00:22:22,160 --> 00:22:25,280 Speaker 2: Longshoreman's Union to go on a three day strike in 368 00:22:25,480 --> 00:22:29,280 Speaker 2: US ports on the Eastern Seaboard and Gulf Coast in October, 369 00:22:30,160 --> 00:22:33,280 Speaker 2: something Cordero on the West Coast is very aware of. 370 00:22:34,080 --> 00:22:36,920 Speaker 6: For a port like Low Beach, who are public ports, 371 00:22:37,280 --> 00:22:40,840 Speaker 6: we need to take into account the social impacts that has. 372 00:22:41,119 --> 00:22:43,439 Speaker 6: I think that at the Port of Lombreaes we're proud 373 00:22:43,480 --> 00:22:47,360 Speaker 6: about the footprint that we have in terms of job production. 374 00:22:48,200 --> 00:22:50,920 Speaker 6: You know, five hundred and thirty five thousand the local level, 375 00:22:51,960 --> 00:22:54,560 Speaker 6: at the state level seven hundred and four thousand plus 376 00:22:54,680 --> 00:22:56,800 Speaker 6: jobs directly and directly as a result of the pro 377 00:22:56,920 --> 00:23:00,000 Speaker 6: Long Beach, and at the national levels the numbers like 378 00:23:00,040 --> 00:23:03,760 Speaker 6: two play six million. So we just were talking earlier 379 00:23:04,320 --> 00:23:08,239 Speaker 6: about the great economy that we have, our dependency of 380 00:23:08,280 --> 00:23:15,080 Speaker 6: our GDP based on consumer spending robots don't spend money. 381 00:23:15,240 --> 00:23:15,919 Speaker 7: Consumers do. 382 00:23:16,560 --> 00:23:20,920 Speaker 6: So that's the conversation that I haven't really heard amplify 383 00:23:20,960 --> 00:23:24,240 Speaker 6: it because for US, it's very important to keep labor 384 00:23:24,280 --> 00:23:29,560 Speaker 6: in place, because hypothetically you eliminate labor, what are you 385 00:23:29,640 --> 00:23:32,960 Speaker 6: doing to the economy and spending in terms of consumer spending. 386 00:23:34,680 --> 00:23:37,040 Speaker 2: And that story will be an important part of the 387 00:23:37,200 --> 00:23:41,280 Speaker 2: larger story of American exceptionalism and whether the US can 388 00:23:41,359 --> 00:23:46,040 Speaker 2: remain the dominant economic force in an increasingly competitive world. 389 00:23:47,359 --> 00:23:50,840 Speaker 2: Coming up by families from Las Vegas to Vancouver can't 390 00:23:50,840 --> 00:23:53,240 Speaker 2: afford to buy a house. If you can buy the house, 391 00:23:53,320 --> 00:23:55,840 Speaker 2: why you may not be able to afford to ensure it, 392 00:23:56,320 --> 00:24:00,280 Speaker 2: particularly if you live in Florida or in California. On 393 00:24:00,400 --> 00:24:13,880 Speaker 2: Wall Street Week, this is a story about risk, how 394 00:24:14,000 --> 00:24:16,280 Speaker 2: much we are willing to pay to protect against the 395 00:24:16,440 --> 00:24:19,719 Speaker 2: risk of losing something we value. It's a story that 396 00:24:19,960 --> 00:24:22,879 Speaker 2: always begins when something goes very wrong. 397 00:24:28,960 --> 00:24:36,440 Speaker 1: This is where we designated the water levels for Helene. 398 00:24:36,800 --> 00:24:40,200 Speaker 2: Glenn Scarpa and his wife own Scarpu's Coastal restaurant in 399 00:24:40,240 --> 00:24:43,240 Speaker 2: Boca Grande, a small island town in Florida. 400 00:24:43,720 --> 00:24:47,520 Speaker 1: We cut everything around the whole restaurant at two feet, 401 00:24:47,640 --> 00:24:50,240 Speaker 1: you know, to get all the wet stuff and insulation out. 402 00:24:50,280 --> 00:24:54,280 Speaker 1: Ten twelve days later we got this one. And then 403 00:24:54,320 --> 00:24:55,480 Speaker 1: we walked in here and said. 404 00:24:55,280 --> 00:24:59,560 Speaker 2: O, December first marks the end of the Atlantic hurricane season, 405 00:25:00,040 --> 00:25:04,600 Speaker 2: and it's been expensive and deadly. In Florida alone, three 406 00:25:04,760 --> 00:25:08,800 Speaker 2: hurricanes made landfall in twenty twenty four, tying the highest 407 00:25:08,920 --> 00:25:12,120 Speaker 2: years on record, And although the toll is still being 408 00:25:12,160 --> 00:25:14,920 Speaker 2: added up, we now know the storms sweeping through the 409 00:25:15,040 --> 00:25:18,640 Speaker 2: United States took more than three hundred lives and cost 410 00:25:18,720 --> 00:25:21,920 Speaker 2: over one hundred and ninety billion dollars across the country. 411 00:25:22,359 --> 00:25:25,600 Speaker 2: That price tag makes it the third costliest season in 412 00:25:25,760 --> 00:25:30,199 Speaker 2: US history. Scarpa, like millions of other Floridians, turns to 413 00:25:30,280 --> 00:25:33,920 Speaker 2: insurance to help protect against losses from extreme weather. As 414 00:25:33,960 --> 00:25:37,000 Speaker 2: the insured, he's the first step in a food chain 415 00:25:37,040 --> 00:25:41,040 Speaker 2: of risk that starts with individuals or businesses, goes up 416 00:25:41,080 --> 00:25:45,440 Speaker 2: to insurers, then to reinsures, and ultimately can hit investors 417 00:25:45,880 --> 00:25:51,560 Speaker 2: or even taxpayers. With each step, the risk is calculated, changed, repackaged, 418 00:25:51,600 --> 00:25:55,000 Speaker 2: spread around. But one thing we know for certain, it 419 00:25:55,119 --> 00:25:59,320 Speaker 2: never goes away. As risk increases in the United States 420 00:25:59,480 --> 00:26:04,040 Speaker 2: and costs, two insurers stack up insurance premiums have also 421 00:26:04,160 --> 00:26:07,440 Speaker 2: been on the rise. Are we in a historical high 422 00:26:07,440 --> 00:26:09,240 Speaker 2: here in the cost of insuring a home? 423 00:26:09,440 --> 00:26:13,280 Speaker 11: I'd say yes. The average cost for Florida homeowness policy 424 00:26:13,320 --> 00:26:14,639 Speaker 11: is about six thousand dollars. 425 00:26:15,160 --> 00:26:19,600 Speaker 2: Jerry Theodoru is director of the Finance, Insurance and Trade 426 00:26:19,640 --> 00:26:23,720 Speaker 2: Policy Program at Our Street Institute, a DC based think 427 00:26:23,760 --> 00:26:26,080 Speaker 2: tank that promotes free markets. 428 00:26:26,200 --> 00:26:29,960 Speaker 11: In the insurance world. In rate making and pricing, the 429 00:26:30,040 --> 00:26:34,119 Speaker 11: rate follows the risk. The risk magnitude has increased, So 430 00:26:34,440 --> 00:26:37,919 Speaker 11: because the risk has increased, the losses have increased, and 431 00:26:38,040 --> 00:26:41,760 Speaker 11: insurers are playing catch up and raising prices. And there 432 00:26:41,760 --> 00:26:45,080 Speaker 11: are some unique factors for Florida which differentiated from the 433 00:26:45,080 --> 00:26:45,960 Speaker 11: rest of the country. 434 00:26:46,359 --> 00:26:48,840 Speaker 2: It turns out that extreme weather is only one of 435 00:26:48,880 --> 00:26:52,480 Speaker 2: those unique factors. Insurance has also gone up because of 436 00:26:52,520 --> 00:26:56,000 Speaker 2: people moving to the state and building more expensive houses 437 00:26:56,200 --> 00:26:57,560 Speaker 2: in risky locations. 438 00:26:58,160 --> 00:27:02,000 Speaker 11: There's more built up value. Had a population of two 439 00:27:02,080 --> 00:27:05,360 Speaker 11: point two million in nineteen forty six and it's now 440 00:27:05,640 --> 00:27:08,800 Speaker 11: twenty two million. It increased ten times, So there's a 441 00:27:08,840 --> 00:27:13,640 Speaker 11: lot more built in value in Florida that's available there 442 00:27:13,680 --> 00:27:16,720 Speaker 11: to be hit by hurricane and be destroyed. So we've 443 00:27:16,760 --> 00:27:20,640 Speaker 11: got climate change We've got the built up environment which 444 00:27:20,640 --> 00:27:23,560 Speaker 11: has grown, there's more real estate out there to be destroyed, 445 00:27:23,840 --> 00:27:26,440 Speaker 11: and you have the inflation in these prices. So it's 446 00:27:26,480 --> 00:27:27,280 Speaker 11: like a trifecta. 447 00:27:27,320 --> 00:27:29,919 Speaker 12: A lot of circumstances hit at the same time. 448 00:27:29,960 --> 00:27:33,439 Speaker 2: One step up the ladder of risk from insured to ensure. 449 00:27:33,880 --> 00:27:37,680 Speaker 2: Tim Cirio is CEO of Citizens Property Insurance Corporation. 450 00:27:38,240 --> 00:27:42,360 Speaker 12: You had, you know, COVID and post COVID, A lot 451 00:27:42,400 --> 00:27:47,040 Speaker 12: of folks flocked to Florida. You had property values skyrocket, 452 00:27:47,520 --> 00:27:49,720 Speaker 12: which you know, you could be very happy that your 453 00:27:49,720 --> 00:27:52,080 Speaker 12: home was worth more, but if it costs a lot 454 00:27:52,119 --> 00:27:54,560 Speaker 12: more to replace it, you know you're going to be 455 00:27:54,560 --> 00:27:57,760 Speaker 12: paying more in insurance. You had inflation over the last 456 00:27:57,840 --> 00:28:00,919 Speaker 12: several years which drove up construction calls cost to replace 457 00:28:00,960 --> 00:28:01,399 Speaker 12: your home. 458 00:28:01,680 --> 00:28:04,280 Speaker 2: It's not just Florida. It's been hit by higher insurance 459 00:28:04,280 --> 00:28:08,240 Speaker 2: costs recently. Across the country. Insurance prices have surged over 460 00:28:08,280 --> 00:28:11,520 Speaker 2: the past two years. Since the beginning of twenty twenty three, 461 00:28:11,720 --> 00:28:15,560 Speaker 2: the cost of homeowners insurance nationwide has climbed over twenty 462 00:28:15,640 --> 00:28:20,000 Speaker 2: one percent, while CPI rose just five percent. The price 463 00:28:20,040 --> 00:28:23,360 Speaker 2: of some commercial insurance is up nearly fifteen percent over 464 00:28:23,400 --> 00:28:27,080 Speaker 2: the same period. Theodorus says the greatest problems facing insurance 465 00:28:27,119 --> 00:28:31,000 Speaker 2: markets have been man made. Companies leave states like Florida 466 00:28:31,040 --> 00:28:34,760 Speaker 2: and California, not because they can't price climate risk, but 467 00:28:34,800 --> 00:28:38,120 Speaker 2: because they know the risk and state laws and litigation 468 00:28:38,200 --> 00:28:40,000 Speaker 2: won't always let them keep up with it. 469 00:28:40,120 --> 00:28:41,960 Speaker 11: Now, if they're underpricing, they're not going to have a 470 00:28:42,000 --> 00:28:44,880 Speaker 11: six percent profit margin, which is the going rate for 471 00:28:45,240 --> 00:28:48,920 Speaker 11: insurance companies. Insurance companies are not fat rich organizations, so 472 00:28:49,000 --> 00:28:53,200 Speaker 11: that's why you have this seeming exodus from California. 473 00:28:53,280 --> 00:28:56,480 Speaker 2: This problem of insurance companies leading the state gave rise 474 00:28:56,520 --> 00:28:59,320 Speaker 2: to Cirio's Citizens Property Insurance Company. 475 00:28:59,440 --> 00:29:03,960 Speaker 12: Citizen is the state created insure of last resort. The 476 00:29:04,000 --> 00:29:07,800 Speaker 12: idea is that we exist to help the people of 477 00:29:07,840 --> 00:29:11,080 Speaker 12: Florida find insurance when they really have no options. Maybe 478 00:29:11,120 --> 00:29:15,240 Speaker 12: it's because of maybe they're a higher risk, not necessarily 479 00:29:15,280 --> 00:29:18,000 Speaker 12: because they've done anything wrong, but the characteristics of their home. 480 00:29:18,160 --> 00:29:21,240 Speaker 2: Today, the last resort has become the only one for 481 00:29:21,360 --> 00:29:25,360 Speaker 2: many who live in Florida. Citizens is the largest insurance 482 00:29:25,400 --> 00:29:26,480 Speaker 2: firm in the state. 483 00:29:27,080 --> 00:29:30,600 Speaker 12: Our rates were artificially suppressed and we became probably on 484 00:29:30,640 --> 00:29:33,320 Speaker 12: the whole, the cheapest in the state. Of Florida, which 485 00:29:33,400 --> 00:29:36,960 Speaker 12: caused us to grow exponentially, and that's not a good thing. 486 00:29:37,280 --> 00:29:41,280 Speaker 12: There has been pretty much bipartisan agreement that a very 487 00:29:41,360 --> 00:29:45,480 Speaker 12: large citizens is not healthy overall for Florida because if 488 00:29:45,520 --> 00:29:48,200 Speaker 12: we grow too large and there's a storm or a 489 00:29:48,240 --> 00:29:51,040 Speaker 12: series of storms and we can't pay our claims. The 490 00:29:51,040 --> 00:29:53,880 Speaker 12: good news for our policyholders is their claims will always 491 00:29:53,960 --> 00:29:58,680 Speaker 12: be paid because we have the requirement to levy a 492 00:29:58,760 --> 00:30:03,240 Speaker 12: surcharge on citizens policy holders. And if that doesn't suffice 493 00:30:03,240 --> 00:30:07,000 Speaker 12: to pay claims, then it's an assessment on policy holders 494 00:30:07,000 --> 00:30:10,720 Speaker 12: and non policy holders alike to make sure claims are paid. 495 00:30:11,080 --> 00:30:14,560 Speaker 2: Individuals may be struggling to pay their premiums and states 496 00:30:14,560 --> 00:30:17,760 Speaker 2: may be struggling to keep premiums within reason, but it's 497 00:30:17,840 --> 00:30:21,920 Speaker 2: not because the insurance companies are pocketing big profits. Profit 498 00:30:22,000 --> 00:30:24,360 Speaker 2: margins for the S and P five hundred insurance sector 499 00:30:24,600 --> 00:30:27,440 Speaker 2: have climbed over the last few years, but to levels 500 00:30:27,480 --> 00:30:30,920 Speaker 2: that are far from shocking, peaking around twelve percent this 501 00:30:31,000 --> 00:30:34,720 Speaker 2: year before sliding to seven percent in November. Compare that 502 00:30:34,880 --> 00:30:37,920 Speaker 2: to twenty twenty four highs of around sixteen percent for 503 00:30:37,960 --> 00:30:41,480 Speaker 2: the financial industry and over twenty four percent for big 504 00:30:41,520 --> 00:30:46,320 Speaker 2: tech One factor constraining profit margins for insurers beyond the 505 00:30:46,360 --> 00:30:49,480 Speaker 2: claims they're paying out, has been the rising cost of 506 00:30:49,520 --> 00:30:53,479 Speaker 2: insurance that they themselves have to pay one more step 507 00:30:53,760 --> 00:30:54,840 Speaker 2: up the latter of risk. 508 00:30:55,520 --> 00:30:59,360 Speaker 13: Swissree is a global reinsurance company and our clients are 509 00:30:59,520 --> 00:31:03,640 Speaker 13: insurance companies. We partner with insurance companies to protect their 510 00:31:03,680 --> 00:31:04,440 Speaker 13: balance sheets. 511 00:31:05,320 --> 00:31:09,160 Speaker 2: Monica Ningen is CEO of US Property and Casualty Reinsurance 512 00:31:09,200 --> 00:31:13,040 Speaker 2: at Swiss Reed, one of the largest reinsurers in the world. 513 00:31:13,600 --> 00:31:16,560 Speaker 13: When it comes to reinsurance rates, there is an impact 514 00:31:16,640 --> 00:31:20,400 Speaker 13: from climate change, but it's relatively small. The other factors 515 00:31:20,480 --> 00:31:25,560 Speaker 13: being economic inflation, wage inflation. Inflation of construction plays a 516 00:31:25,560 --> 00:31:28,560 Speaker 13: big factor, especially in the last few years, but you 517 00:31:28,640 --> 00:31:33,640 Speaker 13: also have things like urbanization and people moving into areas 518 00:31:34,040 --> 00:31:37,200 Speaker 13: that are more susceptible to catastrophes. 519 00:31:37,440 --> 00:31:40,640 Speaker 2: Each of those factors helped push reinsurance rates higher every 520 00:31:40,720 --> 00:31:44,400 Speaker 2: year since twenty seventeen. Within especialist sharp rise in twenty 521 00:31:44,480 --> 00:31:48,320 Speaker 2: twenty three, but early figures for this year suggest the 522 00:31:48,320 --> 00:31:51,560 Speaker 2: trend might finally be leveling off. And even though we're 523 00:31:51,600 --> 00:31:54,520 Speaker 2: closing the books on one of the worst hurricane seasons 524 00:31:54,520 --> 00:31:58,200 Speaker 2: on record, signs are that this year's natural catastrophes haven't 525 00:31:58,280 --> 00:31:59,600 Speaker 2: led to financial ones. 526 00:32:00,160 --> 00:32:03,120 Speaker 11: It's a chain there that spreads the risk around so 527 00:32:03,160 --> 00:32:07,880 Speaker 11: that when you have a catastrophic event like Hurricane Helene, 528 00:32:08,160 --> 00:32:12,080 Speaker 11: it didn't hurt the third quarter earnings. A remarkable thing 529 00:32:12,120 --> 00:32:14,680 Speaker 11: that happened at the end of September. Helene went up 530 00:32:14,720 --> 00:32:17,320 Speaker 11: to North Carolina. But the insurance companies, they just reported 531 00:32:17,360 --> 00:32:20,239 Speaker 11: the third quarter earnings last few weeks and they were 532 00:32:20,280 --> 00:32:24,480 Speaker 11: pretty upbeat. Didn't lose a lot because very sound prudent 533 00:32:24,760 --> 00:32:28,400 Speaker 11: use of reinsurance. And there's also private investors that want 534 00:32:28,400 --> 00:32:30,960 Speaker 11: a piece of the action in the form of insurance 535 00:32:31,000 --> 00:32:34,120 Speaker 11: linked securities also called catastrophe bonds. So there's a lot 536 00:32:34,160 --> 00:32:37,120 Speaker 11: of capital. So whereas people are talking about, oh, this 537 00:32:37,160 --> 00:32:39,240 Speaker 11: is going to be a forty billion dollar, fifty billion 538 00:32:39,280 --> 00:32:43,120 Speaker 11: dollar event, insurance companies can handle that. They're built to 539 00:32:43,200 --> 00:32:46,920 Speaker 11: do that, that's what they do. So we're seeing some positive, 540 00:32:47,720 --> 00:32:52,040 Speaker 11: some tailwinds that are really worth watching. 541 00:32:52,400 --> 00:32:55,960 Speaker 2: Despite all the factors driving insurance costs up. Those who 542 00:32:56,000 --> 00:32:58,800 Speaker 2: know the industry well see cause for hope. At least 543 00:32:58,800 --> 00:33:01,920 Speaker 2: in Florida, where the government has worked to reduce lawsuits 544 00:33:02,240 --> 00:33:04,960 Speaker 2: that have cost a good deal to insurance companies. 545 00:33:05,240 --> 00:33:07,320 Speaker 11: The good news is about a year and a half ago, 546 00:33:07,400 --> 00:33:10,400 Speaker 11: the Governor of Florida as signed into law some comprehensive 547 00:33:10,440 --> 00:33:14,000 Speaker 11: Tart reforms that really cut the feed out from the 548 00:33:14,240 --> 00:33:17,480 Speaker 11: or cut the legs off from some of these excesses 549 00:33:17,480 --> 00:33:21,320 Speaker 11: of litigation. After the Tart reforms went into effect last 550 00:33:21,400 --> 00:33:25,200 Speaker 11: year in March, we've seen that the number of lawsuits 551 00:33:25,560 --> 00:33:27,480 Speaker 11: in the first three quarters of the year, because we 552 00:33:27,560 --> 00:33:29,520 Speaker 11: just saw of the Q three numbers went down by 553 00:33:29,560 --> 00:33:30,320 Speaker 11: twenty four percent. 554 00:33:30,520 --> 00:33:33,240 Speaker 12: We hit one point four to one million policies in 555 00:33:33,280 --> 00:33:36,080 Speaker 12: October of twenty twenty three. We're a little over a 556 00:33:36,160 --> 00:33:38,280 Speaker 12: million now we should end the year at around a 557 00:33:38,280 --> 00:33:42,120 Speaker 12: little over nine hundred thousand policies. That means that private 558 00:33:42,160 --> 00:33:45,440 Speaker 12: carriers are coming in, they're taking policies out of citizens, 559 00:33:45,880 --> 00:33:48,880 Speaker 12: They're willing to write more risk. So I mean that 560 00:33:49,000 --> 00:33:50,720 Speaker 12: is evidence that the market's getting healthier. 561 00:33:50,960 --> 00:33:53,840 Speaker 11: Recently, one of the publicly traded insurance companies in Florida 562 00:33:54,040 --> 00:33:56,520 Speaker 11: said that we're not doing more rate increases. So it 563 00:33:56,560 --> 00:33:59,840 Speaker 11: appears as if the insurance industry has caught up with 564 00:34:00,160 --> 00:34:01,240 Speaker 11: lost magnitude. 565 00:34:01,480 --> 00:34:04,200 Speaker 2: Whether or not lower insurance rates find their way to 566 00:34:04,280 --> 00:34:07,520 Speaker 2: businesses and homeowners in Florida and across the country. In 567 00:34:07,560 --> 00:34:10,680 Speaker 2: the short term, we do know that climate risk and 568 00:34:10,760 --> 00:34:15,239 Speaker 2: development in risky areas isn't going away. Monica and Ningen says, 569 00:34:15,280 --> 00:34:18,359 Speaker 2: what happens next will come down in part to those 570 00:34:18,400 --> 00:34:20,160 Speaker 2: of us at the bottom of the chain. 571 00:34:20,560 --> 00:34:22,919 Speaker 13: So when you look to the future, I think there's 572 00:34:22,960 --> 00:34:27,160 Speaker 13: a few things that will change. I think that consumers 573 00:34:27,200 --> 00:34:31,799 Speaker 13: were still to better understand their own risk exposure and 574 00:34:31,840 --> 00:34:35,960 Speaker 13: what their own resiliency looks like. As events impact our 575 00:34:36,000 --> 00:34:41,000 Speaker 13: lives every day, whether it's snow impacting your commute to work, 576 00:34:41,120 --> 00:34:44,839 Speaker 13: or it's a flood that's imposing on you returning back 577 00:34:44,880 --> 00:34:47,920 Speaker 13: to your home, consumers are being more aware than they 578 00:34:47,920 --> 00:34:51,200 Speaker 13: ever have been on the risks that their homes face. 579 00:34:51,880 --> 00:34:55,480 Speaker 2: Back in Boca Grande, Glenn Scarpas says he's very aware 580 00:34:55,520 --> 00:34:58,520 Speaker 2: of the risk of another hurricane, but he's hoping to 581 00:34:58,600 --> 00:35:01,839 Speaker 2: manage with a little bit of luck and insurance. 582 00:35:02,360 --> 00:35:05,560 Speaker 1: I mean, you've got to anticipate that it's probably going 583 00:35:05,640 --> 00:35:08,120 Speaker 1: to happen again. Who knows it could happen next year, 584 00:35:08,480 --> 00:35:11,200 Speaker 1: could be thirty years, it could be one hundred years, 585 00:35:11,200 --> 00:35:13,120 Speaker 1: but it's going to happen. Again at some point. 586 00:35:13,400 --> 00:35:16,120 Speaker 2: Having a business on the island Scarpus says is still 587 00:35:16,200 --> 00:35:19,399 Speaker 2: worth the risk, But after moving there five years ago 588 00:35:19,600 --> 00:35:22,920 Speaker 2: and seeing the destruction to both his restaurant and his home, 589 00:35:23,560 --> 00:35:27,800 Speaker 2: he's decided to sell his condo and move inland onto 590 00:35:27,840 --> 00:35:33,520 Speaker 2: greener and he hopes drier pastures. That does it for us. 591 00:35:33,520 --> 00:35:36,160 Speaker 2: On Wall Street Week, I'm David Weston. We'll see you 592 00:35:36,239 --> 00:35:50,480 Speaker 2: again next week for more stories of capitalism.