Morning Brew Daily - Americans Have Bad Vibes on Economy & UK Demands Apple’s Encrypted Data
Episode Date: February 10, 2025Episode 515: Neal and Toby dive into the latest report that shows American consumer sentiment being at a low-point with the news of tariffs. Then, the British government orders Apple to let it spy on ...users’ encrypted data. Also, the National Institutes of Health cuts billions of dollars for indirect costs and universities say it could jeopardize their research. Meanwhile, the winners of the weekend. Finally, what you need to know for the week ahead. 00:00 - Why is the Super Bowl on a Sunday? 3:00 - Consumer sentiment is down on the economy 7:30 - UK wants Apple’s encrypted data 11:30 - NIH cuts billions of dollars 18:00 - The best Super Bowl commercials 24:30 - Week Ahead Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Check out https://wise.com/business for more! Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices
Transcript
Discussion (0)
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show. I'm Neil Fryman. And I'm Toby Howell.
Today, consumer sentiment is
way down. Inflation expectations
are way up. Are American
souring on the economy? Then
the Super Bowl was kind of
a blowout. But the ads, they were
also honestly kind of boring too. It's
Monday, February 10th.
Let's ride.
Well, that was a spanking.
The Eagles coasted by the Chiefs 40 to 22 to win the Super Bowl, avenge their loss to Kansas City two years ago,
and prevent the Chiefs from winning a historic third straight championship.
Just utter domination by the birds.
But many of you won't be around to discuss the game and the commercials at the office today.
22.6 million people across the country planned to miswork the day after the Super Bowl,
according to the Harris poll, which is up 40% from a year ago.
Now, whether these numbers are accurate or not, who knows.
But here's my question to the NFL.
Instead of making everyone have a brutal Monday,
why not just move the Super Bowl to a Saturday?
Well, Neil, Roger Goodell,
the commissioner of the NFL, has answered that very question.
It comes down to ratings, according to Goodell.
The reason we haven't done it in the past is just from an audience standpoint.
The audiences on Sunday night are so much larger.
So you got to feed the ratings machine,
even if it means giving 22 million Americans a case of a Super Bowl flu, which, by the way, Neil,
shouldn't you be partying in Philadelphia right now or something?
My heart is on Broad Street.
My body is on 6th Avenue.
I like that.
Married to the game.
We will discuss the big game in more depth later in the show, so stick around for that.
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While supplies last ends June 30th, terms at AKA.m.m.m.m. Business. Trade war 2.0 between
the U.S. and China has officially kicked off. Starting today, Chinese tariffs on $14 billion
worth of American exports go into effect. One of Beijing's responses to President Trump's announcement
of 10% tariffs on Chinese goods last week.
And then last night, in a surprise move, Trump also said he plans to impose 25% tariffs
on imports of steel and aluminum across the board to every country.
The flurry of tariff announcements in the past month, whether they've been delayed or not,
like in the case of Canada and Mexico, is starting to have a significant impact on
Americans' views on the economy.
On Friday, reports showed that Americans across the political spectrum have become increasingly
pessimistic over the economy and think higher inflation will rear its ugly head yet again.
Here's the data. In a closely watched University of Michigan survey, consumer sentiment fell about
5% to its lowest reading since last July, so levels are lower now than they were before the election.
At the same time, inflation expectations are surging, with Americans predicting 4.3% inflation in the
year ahead, up from 3.3% the month before. That full percentage point jump in inflation expectations
is almost unheard of. It's only the fifth time in 14 years we've seen such a big one-month rise.
Now, it's not all bad. The jobs report released on Friday showed strong employment gains in January
and an unemployment rate that ticked down to a very low level of 4%. But with all the uncertainty
and confusion related to tariffs, Americans are turning increasingly negative on the economy.
Yeah, it seems the Trump bump was short-lived. I mean, we have these tariff threats.
We have these tariffs that are actually being carried out.
these pretty crazy stock market swings as well as well as a ton of executive orders that, you know,
get issued and then immediately rescinded. It's all caused Americans to feel a lot more pessimistic,
a lot more uncertain about the economy than before Trump took office. Remember, immediately after
Trump's victory, consumer confidence went through the roof because he was going to be this very, you know,
market first. He wanted sentiment stayed elevated the entire run-up to the election in anticipation of
Trump taking office because he won the Oval Office by pledging to improve the economy to
bring down inflation.
Those two things, obviously, it's only been a month into his administration, but those two
things haven't happened necessarily, which is causing, you know, consumer confidence to
start to appear to be a little more shaky.
And uncertainty is manifesting in other ways as well.
I don't know if you've visited the Bank of England's gold vaults recently.
Try to withdraw some gold there.
Well, you can't because there is an eight-week-long long.
line to move gold from the Bank of England to the United States. And that is because of this
uncertainty around potential tariffs coming onto the EU, the UK, and it possibly could hit gold.
So right now, there's a very interesting arbitrage situation in the gold market where prices
in the United States are higher than they are in London. So there is very long, as they would
say in England, cues to ship these very heavy gold bars from England to the United States.
States, and that is all tied into this general uncertainty that traders have over what's going
to happen in the economy moving forward.
And finally, you mentioned Friday's jobs report.
This jobs report was also the one where you do some data adjustments that happens at the
start of every year.
And what we saw in 2024 was that the adjust side of two million jobs added over 2024.
That's around 166,000 jobs per month, which is a pretty solid rate, actually.
That is pretty much dead on with what we saw before the pandemic in 2020.
As for January's jobs report, though, there has been a little bit of a concerning trend. It was solid overall, but you have started to see that some of the churn that the job market needs to, you know, operate in a healthy manner, has been slowing down. We've talked about this on the show before. People are not, you know, quitting their jobs. A quit rate is down a lot. So there isn't a lot of movement in the job market, even though you are seeing pretty solid growth still. So, and there were some external factors as well, you know, a lot of, um,
sometimes weather and illness can affect January jobs report,
as well as some of the natural disasters we saw,
like the wildfires in California.
So it has been a good start to the year.
We're still seeing solid jobs numbers,
but when you factor in the fact that rates are still elevated,
the jobs market isn't popping off anymore,
that two factors could also contribute to some of these,
feeling some of uncertainty that we've mentioned so far in this story.
Security officials from the UK are knocking at Apple's backdoor,
asking the privacy-focused company to allow them to snoop around encrypted content that users upload
to their iCloud. According to the Washington Post, the British government issued an order,
which is called a technical capability notice last month. It's a criminal offense to even reveal
that the government has made a demand, which has put Apple in a rotten spot. Does it acquiesce
and break its privacy promises to its users, or does it cease to offer the encryption technology
so as not to run a foul of the order? The UK justified serving the notice,
to Apple by saying that end-to-end encryption makes it easier for terrorists and child abusers
to hide illegal activities from law enforcement. But tech companies have long resisted being used
as tools for governments to spy on their users. It's also a slippery slope. If Apple is forced to give
into the UK's demands, then other nations like the U.S. in China will likely make similar ass.
So, Neil, big privacy showdown brewing here with much larger implications for how tech companies
and governments interact. Totally. There is no known precedent in major democracies for a government
to go knocking on a tech company's back door like this and saying, hey, we know you have
encrypted data on users. Let us see them. And the big implication here is it's not just for
English people or British people. It's for the entire world. So any Apple user who uses this
feature, and we should say it's an opt-in feature, you're not on this by default if you want to
encrypt your iCloud you can but you do have to go through some steps that apple can take you
through but the fact that it implies globally is absolutely sending a chill down tech companies spines
and as and privacy focused groups as well who say that the government should not be doing this
not be asking tech companies to allow governments to snoop on their users right and i said it puts
apple in a rotten spot that's not just a pun that is so true because apple you know touts privacy
as one of its core values.
They literally describe it as a fundamental human right.
They've made it such a big selling point for users.
So if they have to, you know, give into this technical notice,
one, it will just shred their reputation because you can't be this privacy-focused company,
but then also let governments have a backdoor into their users' data.
So they'll probably just cease to offer this protection.
It's called Advanced Data Protection.
They've had it around since 2022 to encrypt user data.
They'll probably just stop offering that.
in the UK rather than give in and shred their reputation when it comes to privacy.
Now what's interesting is law enforcement has had a very interesting relationship with
encryption. So for the past few years or until recently they were very anti-encryption
because they want to see certain communications to prevent crimes and so they were going
to war with tech companies and saying let us see this encrypted data users. We do not want
you to encrypting things so we can we can
and Apple had this big showdown with the FBI in 2016 over the San Bernardino
shooter's phone where Apple actually won in a court case against the FBI.
The FBI wanted them to unlock the shooter's phone and they said no and then Apple won.
So law enforcement was very anti-encryption until a few years ago when the threat of Chinese
hacking operations became a little more prescient than this other consideration.
So they said, so now the FBI, a bunch of other Western countries,
except the UK, said, okay, we actually think you should be using encryption because the threat of hacking
from Chinese operations is more risky to us than what we need from you to prevent crime.
So that is the way the world apparently has been shifting is toward encryption.
The UK has zagged where others have zigged, and that's why privacy groups, tech companies,
say, UK, you're becoming a tech pariah rather than a tech leader.
A financial earthquake is about to hit the world of medical research. Today, the National Institutes of Health will begin implementing sweeping cuts to overhead funding for research grants. The NIH says this will save taxpayers more than $4 billion when it announced the move on Friday. But scientists have pushed back fiercely, saying that slashing the budget will halt progress on life-saving medical innovations and threaten jobs, medical research institutions, and regional economies that depend on NIH funding. To understand the
you first need to grasp how NIH funding works.
When the agency awards a grant to a scientist, an additional percentage of that award is provided
to the scientist's institution to pay for infrastructure that supports the research.
Think things like lab equipment, utilities, hazardous, waste disposal, and more.
It's a pretty sizable chunk that goes to overhead.
Of the $35 billion awarded to grants in fiscal year 2023, $9 billion or 26 percent, went to those
so-called indirect costs.
Sometimes the rate can be much higher, like in the 60s.
So the NIH under Trump says that's wasteful and that rich university should shoulder more of the burden.
They're now capping indirect reimbursements at 15%.
Scientists say, okay, maybe Harvard can afford to make up the shortfall, but many, many other institutions can't.
And critical research jobs, economic growth will dry up if this funding is cut off.
And this is because the NIH is truly an economic force.
It is the leading funder of biomedical research in the world and supports 412,000 jobs across the country.
Yeah, there are cascading effects.
There's a lot of people will lose their jobs.
Clinical trials will start to slow down as well.
A lot of research goals will go unmet because researchers have pushed back and say,
yes, of course you want to support direct science.
Those are the direct cost.
But you also need to fund the indirect costs.
You subsidize the infrastructure necessary to carry out those research things.
I mean, say you need a really expensive new electron microscope.
You can't afford to buy it yourself so you go to the NIH for a grant for that.
But then it's also just really mundane stuff, like heating the buildings, you know, paying personnel.
So it's not just the fancy stuff.
It's just everything you need to support this infrastructure.
Also, there was pushback, too, against this idea that these very rich institutions, these like Harvard, Yale, these research facilities can make up the difference with their endowments.
school endowments are not just this slush fund that you can go in and out of and pull money from
willy-nilly. They have pretty intense limitations that make it hard for schools, you know,
draw them down too quickly. So you can't just post a graphic saying, look at how big Harvard's
endowment is. They can definitely afford this. There are limitations when it comes to how you can
use an endowment. And indirect costs have been criticized before the government accountability
office in 2016 said that there were risks that they present waste and that this was a, this was
aspect of government spending that could be brought more into control in the government,
the NIH Trump administration in announcing this move, said, well, private foundations don't do
anywhere near these indirect cost reimbursements as the NIH. Many private foundations say the
Robert Wood Johnson Foundation, 12% goes to indirect costs, Gates Foundation, 10% for indirect costs.
So they're pointing to private donors here in saying, well, we're way out of whack with the private
sector here, the private philanthropic sector. So that's why other reasons why we need to bring
this down. So that's their argument. But yes, cascading effects and a disproportionate effect
on certain cities and regions that have become what they call meds and ed's economic base.
So I'm thinking Pittsburgh, Nashville, Chapel Hill area, Research Triangle, these are the areas
that will likely see a bigger impact. The University of Pittsburgh, for instance, is getting
25% of its NIH funding cut, which is $130 million.
And I was also in Birmingham, Alabama a few years ago.
That city runs on UAB.
That is the largest employer in Alabama.
The medical research center there is massive.
You can't walk a single street without seeing another UAB building.
So these are the areas that will be hurt.
And we'll see what happens going forward.
Like many other Trump administration, executive orders and actions in the first few weeks,
there have been legal challenges pushing back.
They've been tied up in the courts.
and you can bet university lawyers everywhere are pushing back on this
because they don't want to see all this critical research dry out.
Up next, we have our winners of the weekend.
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We have a special winners of the weekend segment coming your way today.
Obviously, the Super Bowl was yesterday.
And while the game was about as lopsided as a shopping cart with one wheel,
we're going to run through some of the other winners that weren't wearing Kelly Green.
Up first, old celebrities.
Meg Ryan and Billy Crystal recreated their deli scene from when Harry met Sally.
Except this time, Sally's enthusiasm was for Hellman's mayonnaise.
Harrison Ford narrated an ad for Jeep.
Martha Stewart danced around for sketchers.
Morgan Freeman's Dulcet Tones, grace a homes.com ad everywhere you looked, there were celebrities
pushing products, and most of those celebs were on the older side.
Neil, it felt like this year's commercials were characterized by pretty safe, nostalgic choices.
Totally.
And the one I want to focus on is the Mikhailo commercial that included Catherine and O'Hara and Willem Defoe playing pickleball.
That was, I would say, probably the most successful example of a brand utilizing older celebrities,
because I think they also tapped into, you know,
a bigger cultural moment that everyone's having with pickleball.
But I don't know if it's good for pickleball to be associated with beer
because if they want to take themselves seriously as a sport,
you maybe want to be associated with hydration drinks, water, gatorade,
instead of beer.
So I don't know how, you know, the pickleball community is feeling about this.
Yeah, you know, that small sport, the NFL never associated self as beer.
So I totally see where you're coming from there, Neil.
I do think that most of these ads were also in development during the,
last presidential election.
So no one really knew what was going to come later down the pipeline.
So they kind of chose safer, less controversial things, which is always what they do for the
Super Bowl.
But this year especially, I think they're like, let's reference a time in the past.
Let's reference nostalgia.
Let's reference these older celebrities because that's about as safe in middle of the road
as you can play it.
One ad that didn't play it safe, though, was Doritos.
It was this short ad featuring aliens trying to abduct a Doritos bag.
And it was funny.
We both chuckled at it when we said.
saw it at our watch party. And it turns out that the part of the reason for its edgier vibe was
that it was fan made. Doritos ran a contest where normal people could create a spot for the big
game after a round of fan voting abduction, which was the ad's name, won the prize, sending
its two directors to the Super Bowl and $1 million richer. Neal, it did feel like in a year where
a lot of brands were playing it safe, Doritos ad stood out because of that. It did. It had a very
strong narrative arc, which I appreciated. It felt like it was telling a story. And I'm not sure
if I'm working in an ad agency now. I'm not sure that I can, you know, do anything that
much better than what these content creators, the people who won this contest can do. So this
user generated, this user generated ad and how much did they get, they got paid like a million
bucks. A million dollars, yeah. Yeah. Okay. Well, that's probably what you're going to pay an ad
agency. So maybe crowdsourcing is going to be more prevalent going forward because that was a great
ad. And it was smart too because they had three finalists and they kind of put them all out on their
social media. So they kind of got triple bang for their buck. They got three ads made. They only had to
a million dollars to the eventual creator. And it was just trusting creators always leads to a better
product. I think by the way, these aren't just some no-name filmmakers. One of the creators, Nate Norell.
He's got 6.2 million followers on TikTok. He is a filmmaker. So it's not like he just picked up a camera
for the first time, you know, one a million bucks. Another ad that turned heads this year came from
Nike. Nike's been on a rough run recently.
Its stock is down about 35% over the last year.
It's losing ground to brands like On and Hoka.
Desperate Times call for desperate measures.
So last night was the first time in 27 years that Nike ran a Super Bowl ad.
It leaned on stars from women's sports to spark a brand revival.
Its 60-second spot featured people like Caitlin Clark, Asia Wilson,
Shakery Richardson.
In an earnings call back in December, Neil, Nike said it would be investing more in marketing
to try to get some of its swag back, some of its aura back.
That ad last night was a step in the right direction.
Yeah, in 2021, Nike spent $3.1 billion on marketing in 2024.
They spent $4.3 billion on marketing.
That also included a lot around the Olympics.
And now they have the Super Bowl ad.
They're first since 1998.
They're tapping into larger cultural conversations about the rise in women's sports.
So I think that was a very well-received ad.
And maybe Nike is getting its marketing mojo back a little bit.
And I watched it this morning, and I did get chills.
It was Led Zeppelin using the background, too.
It just did hit really well.
It wasn't just women's sports, too, specifically women's basketball.
Four women's basketball players featured in it.
They think that the meteoric rise of women's basketball,
they just want to ride the coattails of it, essentially,
by elevating, you know, these players and these women.
The final ad trend that we have to mention,
flying facial hair.
Two different brands, Pringles and Little Seasers,
came up with essentially the exact same concept.
Facial hair of some famous people uproots itself from men's faces,
and flies around, freaking people out.
And Little Caesar's ad actor Eugene Levy bites into some piece, and he likes it so much.
His famous eyebrows lift off from his face and fly around like a big hairy insect.
Then Pringles followed that up by showing the equally famous mustaches of Nick Offerman,
James Hardin, and Andy Reed lifting off to fly around as well.
The similarities were uncanny.
I think it speaks to my earlier point about ads playing it rather safe this year,
that two ad agencies came up with the same concept for two different brands.
Do you think this was a coincidence?
I think it is a coincidence because you can go back to Super Bowl's past
and similar things have happened in 2021.
Two advertisers indeed and guaranteed rate actually used the same exact clip of stock footage
showing this man carrying a kid on his back.
So it just happens.
Like these ad agencies, you know, some of the similar people work at both.
So I can see how it happens, which I think, again, just props to Doritos
because let the fans make an ad.
Let's do something different.
you will never end up doing the same ad as another ad agency if you let fans do it.
So I thought it was very funny.
People were scratching their heads saying, are they related?
I think it truly was just a coincidence.
All right.
So overall, the commercials, at the top of the show, you said they were a down year.
But to be honest, I feel like every year we say this was a little disappointing.
So every year we say that the commercials did not live up to the hype.
And I think we just have to acknowledge that they're never going to.
and that 90% of them are going to be commercials
and there's going to be so many celebrities
doing things that aren't particularly interesting.
There will be a few standouts.
There'll be a few duds that everyone is talking about.
So I think that's just,
we have to arrange our priors to be.
This is what the commercials are.
They're commercials.
It's Monday once again.
And as per tradition,
here are the big events you should know about this week.
A massive AI conference begins today in Paris,
where world leaders and top tech bosses
will meet to hammer out the thorny
geopolitics of this rapidly advancing technology. The artificial intelligence action summit is basically
the Met Gala for tech and the invite list proves it. OpenAI's Sam Altman, Google Sundarpeche,
Microsoft President Brad Smith, and world leaders including Justin Trudeau of Canada and Narendra Modi
of India, German-Chance, Olaf Schultz, and U.S. Vice President J.D. Vance. You can bet discussions
will revolve around DeepSeek, China's surprisingly capable AI model, and the Trump administration's more lax
approach to regulating AI. Yeah, themes will definitely be what do we do with deep seek. What do we do
about deep seek? Also, what's the most effective way to work with the current administration? He wants
to, you know, strip some of those regulations away without, you know, sacrificing safety.
And I do think that last point will be a big talking point. How do you deal with the risk
associated with AI without stunting progress? Apparently, Sam Alman is going to give a speech
related to that topic as well. So safety, deep seek, what to do with Trump? Those seems to be the
main themes here. Wall Street has no time to nurse a Super Bowl hangover with lots happening on
the economic calendar. On Wednesday, we'll get the January inflation report, which will certainly
be a big deal given tariffs and eggs and what it means for the Fed's interest rate plans.
Plus, lots more earnings are on the way, including McDonald's and Coca-Cola, which really
should do their report together. I know, they should. I'm just curious to see if Uncle O'Grimacy
has made a market. He was just rolled out last week, so I don't think the Shamrock Shake is going
to impact this quarter reports of earnings, but look forward to, you know, next quarter
see if Uncle Grimacy leaves his mark.
All right.
Friday is Valentine's Day, and if you're just learning this information, it might already
be too late.
But if you're locked out of a dinner reservation, at least there are ways to get back at
your ex.
Zoos around the country have rolled out fundraisers that let you take revenge on the one who got
away.
A $10 donation to the San Antonio Zoo will allow you to name a cockroach after your ex before
it served to one of the zoo's animals for lunch.
At the Columbus Zoo and Aquarium in Ohio,
they'll name a superworm after your ex that will be fed to its sloth bears.
And if you get in before Wednesday,
they'll even send you a clip of the bear devouring the worm.
Toby, I love this tradition.
I love this tradition, but if you're an ex and you get a video of your ex
feeding a superworm to a sloth bear,
you're like, I think you feel pretty good.
You're like, I still live so red and free in your head
that you're paying, you know, aquariums,
and zoos to feed me to their animals,
I don't know, I think that makes you feel pretty good as the ex.
I don't think the ex gets it.
You get it.
Yeah, but you can get the, oh yeah, I guess you wouldn't send it to your ex.
You get it, but if you're extremely, yes,
if you get the video and then you send it to your ex
and say this is what I think of you,
I think they are living rent free in your head
and maybe, you know, you should do a little self-evaluation there.
But I think it's a great tradition that zoos do
and they raise a lot of money for upkeep
and things like that.
Okay, let's wrap it up there.
so much for starting your morning with us and have a wonderful start to the week.
For any questions, comments, or feedback, send an email to Morning Brew Daily at Morning
Brew.com. And if you're enjoying the show, share it with a friend, family member, or coworker.
Maybe it's an early Valentine. You know what? Don't spend any time thinking about it.
Just listen to Toby and do what he instructs.
Neil, you actually read my mind. I want you to share today's pod with someone. You want to be
your Valentine's. Yeah, you're a little late. Yes, the podcast isn't the most romantic thing
to ever share, but still, sugar shot.
Let's roll the credits. Emily Milliron is our executive producer.
Raymond Loo is our producer. Olivia Graham is our associate producer.
Yucenoa Ogu is our technical director. Scoop Stardaris is on audio.
Just got an email from hair and makeup.
Gonna be in at like 10 today.
All right, can't blame you.
Devin Emery is our chief content officer and our show is a production of Morning Brew.
Great show today, Neil. Let's run it back tomorrow.
Hey, Mama.
Thanks for making all my favorite recipes.
Hi, Ma.
Thanks for your unfiltered advice.
Hi, Mom.
Thanks for always being by the phone.
Hey, Mom. Happy Mother's Day.
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