Morning Brew Daily - Apple Bets $500B on the US & Rich People Are Powering the Economy?

Episode Date: February 25, 2025

Episode 526: Toby and Ann discuss Apple’s latest announcement to invest $500B into US-based manufacturing and hiring 20,000 new jobs to bolster its AI efforts. Then, a study shows rich Americans are helping to power the US economy by continuing their spending habits while the rest are cutting back. Also, a major trial begins between Greenpeace and the company behind the Dakota Access Pipeline that could shift the landscape of the fossil fuel industry. Meanwhile, HBO’s ‘The White Lotus’ has had an impact on travel destinations such as Hawaii and Sicily. Will the same happen for Thailand? Finally, closing things out with a wrap of headlines.  LinkedIn will even give you a $100 credit on your next campaign so you can try it yourself. Go to LinkedIn.com/MBD Terms and conditions apply. Only on LinkedIn ads. 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://linkedin.com/MBD for more! Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Hear more from Ann on After Earnings: https://open.spotify.com/show/5I5q3LIg1ueDWoTM8AZsHQ?si=38da6cb59c874a5e Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning brew daily show. I'm Toby Howell. And I'm Ann Barry. Today, the U.S. economy is increasingly reliant on the spending of the richest 10% of Americans. And Apple, a half a trillion dollar bet investing big in America. It's Tuesday, February 25th. Let's ride. Good morning, everyone.

And happy Tuesday. Three men who were accused of stealing a golden throne worth three and a half million dollars back in 2019. A standing trial in England this week, but it's not your typical. golden throne because the throne in this instance refers to a toilet or in my country's parlance the loo the loo yes six years ago thieves broke into an english country mansion where Winston Churchill was born and swiped the two hundred and fifteen pound 18 carat gold conceptual art piece in just under five minutes at the time the gold was valued at three and a half million dollars but was insured for six million not your typical spash and grab toby it is

not often that your booty is a place for booties in this case sorry I had too. Ironically, this toilet was a conceptual art piece by the name of America from the artist Mauritio Catalan meant to represent excess. If that name sounds familiar, Catalan is the same artist behind the banana peel duct tape or the banana duct tape to a wall that sold for $6.2 million last year. Probably a little easier to steal a banana than a 215 pound golden toilet, but also harder to sell on the secondary market. So they stole America. and they're selling it off for parts. There's some metaphor in there somewhere,

but it is very funny that the Lou in this case was the valuable thing that you wanted stolen. Now let's hear a word from our sponsor, LinkedIn ads. And I use an espresso machine for the first time over the weekend. Bancy, was it a real one with all the bells and whistles, or this is more of an espresso vibe? Oh, it was real, all right. I was getting my barista on.

Unfortunately, I baristaed too hard and accidentally pulled multiple shots through this. same coffee grounds did not taste all that good. Okay, Toby, that's actually amateur hour. All the soluble compounds are already extracted. So you're using a waste product at that point. See, I'm a rookie. Luckily, you never have to deal with a situation like that, though, if you use LinkedIn

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projects. The tech giant also announced plans to open a 250,000 square foot factory in Houston that they will develop with partners to make servers and power Apple intelligence. The announcement comes as tech companies try to make good with the Trump administration, with tariffs from China looming. Now, if you remember the Trump administration, did put out there a 10% tariff on all Chinese goods earlier this month. Now, the 20,000 employees at Apple plans to hire in the US will be focused on research, engineering, and software and AI development, the company says. Meanwhile, in other Apple news, it is set to defend its DEI programs

against critical investors during its shareholder meeting amid other major corporations axing its diversity pledges. Toby, there's an awful lot to unpack here, but it looks like CEO Tim Cook is deciding to spend dollars on building infrastructure on American soil to play ball with Uncle Sam. What are you, what are you thinking about this one? I think that this is something that Tim Cook has done in the past. This is a playbook that Apple has run in the past. If you go back to Trump's first term back in 2018, they pledged to make $350 billion in direct contributions to the U.S. economy. That was to play ball with Trump because what you are seeing under this administration is that

they're threatening these tariffs. Terrorists have already been levied. against China. And so Apple is saying our supply chain is very, you know, sensitive to these tariffs. And so we should try to kind of reshore some of those operations, bring some operations back to the United States. And in doing so, hopefully skirt by and maybe avoid some of those tariffs that are being levied against, you know, countries where it develops most of its products. So I think that for Trump, to him, this is another win for his tariff approach. He said in a speech to governors recently. Apple is going to build here instead because they don't want to pay the tariffs. And for Apple, it's just another instance of them, you know, moving and grooving around this

administration saying, yes, we will play ball with you. We will invest in America in order to, you know, try to avoid some of these punitive tariffs. Yeah. So I feel like President Trump's definitely taking a victory lap on this one. But there are some parts of the Wall Street, Toby, that's asking, is this really a response to that or is just kind of a logical business step? So when we take a huge step back. There's been a huge movement with tech companies to try and, for example, get their chip manufacturing back to the US. We've seen a ton of the big players talk about it. We've seen folks like Microsoft talking about investing more in the US, partly national security concerns, but partly also because in a world where there's so much uncertainty, it feels

as though people want to build in their own backyard. But I don't know. I feel like Apple's all over the headlines at the moment. I was really stunned, but to the positive. I was really excited by part of this announcement is to create an academy in Detroit to train small and medium-sized businesses and implementing AI. And I just thought that to me feels like a really solid investment in Michigan. Oh, absolutely. I mean, a lot of this is something that aligns with AI. I mean, obviously, every investment you're going to hear about is going to have those two letters in it.

This manufacturing plant, this 250,000 square foot facility in Houston, those are going to how servers that they hope can accelerate the company's efforts to build out AI. In this case, it's Apple intelligence for them, which has been a little bit of a nothing burger so far. So I think they are trying to say, hey, we're making these investments here. We're trying to beef up our AI capabilities because we've been lagging behind a little bit. So who knows how much will actually come of this, though, because I mean, I mentioned that $350 billion it pledged in 2018. That really hasn't come to fruition that much. So part of this is maybe PR posturing like we've seen with people announcing these big investments. Because if you go down the list, not all of these

investments actually come through. You have things like the Foxcon factory. That was a really big deal. This $10 billion high tech campus in Wisconsin under Trump's first administration that never really materialized to the degree at which Foxcon kind of promised. But then you also have companies like Toyota and this U.S. steel producer, New Corps, who did actually follow through and did invest billion dollars, built manufacturing plants in Kentucky that now do employ thousands of people. So is this going to be more of that PR bucket, or is this going to be actually an investment that you do see, you know, bring jobs, bring investment to America? For the last few years, the American economy has been chugging along at a rate far exceeding its peers,

but that engine is increasingly being powered by a single fuel source, rich Americans. According to new data from Moody's analytics, the highest earning 10% of Americans those households making $250,000 or more, are fueling the economy at unprecedented levels. Consumers in the top desile now account for nearly half of all consumer spending the highest it's been since 1989. If you go back three decades ago, that number stood at just 36%, showing, how much more dependent on rich people the economy is today than ever before. Two things are true at the same time. The finances of well-to-do have never been better. Their spending never stronger,

Mark Zandi, the chief economist at Moody's told the Wall Street Journal, and the economy has never been more dependent on that group. And the U.S. economy has been very strong emerging out of the pandemic, maintaining higher GDP growth and lower unemployment than pure nations. But it's also in a precarious position given how reliant it is on wealthy people. It's created this odd sort of paradox, strong, but delicate. You know, I looked at this and I asked myself, well, why is, how do we get here? And I went back, I went down the rabbit hole, Toby, you know, I'm a complete data nerd. And I'm also markets person because brew markets is the franchise I look after here. I asked myself why. Back in January, 2024, a year ago, there was a Fed survey that came out and said

that the top 10% of Americans hold 93% of all stocks, right? 93%. That was a year ago. And since then, the S&P 500, the NASDAQ markets were up over 20% in 2024. So I look at today and say, how is it that spending is so dependent on the wealthy in America? I'm like, because the wealthy just got even wealthier because they're investing. And I think that separation between spending, investing, saving wealth creation, I mean, the divide is just getting bigger and big. A fascinating why. It is 100% related to the stock market, and it's also related to the housing market as well because, you know, richer people can afford houses. Housing values have just exploded over the past, you know, a few decades or so. So I want to dig deeper, though.

Is this inherently a bad thing? Why is it a bad thing that, you know, so much of our economy is powered by such a small portion of the country? It's not inherently bad, but it is risky because, say, there is a stock market sell-off. say home values do start to fall a little bit, and the confidence of that top 10% begins to rattle. If that causes them to cut back on all this heavy spending that they're doing, that influences the economy because, again, consumer spending contributes 70% to GDP. So that would have a massive effect on the economy altogether. So if you start to see consumer sentiments start to slide in the top 10%,

then it's going to affect the economy as a whole. Well, I'll get to your question of is this a bad thing. I think we could agree that socially it's not a good thing to have this degree of inequality. So I just want to sort of go on the record and sort of say that. I do think there's risk to having this kind of concentration. And, you know, there are a couple of data points I found really interesting. Walmart, did you see that recently? Toby came out and said, we've got like 87% of folks earning over $100,000 and now shopping at Walmart.

And I guess that would be a good thing if it means that you can see lower prices in places like that, which inures to the benefit of lower income folks, but I don't think we're necessarily seeing that because inflation's kept on going up, right? You are right, too, to call out just how this affects companies and businesses. You are seeing this bifurcation in how businesses have been doing. If you look at companies that cater to people lower on the income spectrum, Big Lots filed for bankruptcy last fall,

Coals, Family Dollar, those two businesses are closing stores left and right because there's just all this competition for fuel. dollars down at the lower end of the income spectrum. But then if you look at the higher end of the income spectrum, Delta is killing it mainly on the backs of very high spend from business travelers. LVMH is the biggest company in Europe. It kind of tosses that title back and forth between them and Novo Nordisk on the backs of this really intense luxury spending.

So you see this bifurcation not just across, you know, where the spending is coming from, but the businesses that are attracting that spending the top end are doing much better than the ones catering to the bottom end. And just to building that with one last thought, like back several years ago when I was investing, the conventional wisdom was, to your point, luxury will always do well because the rich will always figure it out. They'll be fine.

The other place that people would invest was a places like Dollar General, like the dollar stores. And so, you know, two years ago, I went and invested a bunch of money in the dollar stores thinking this bifurcation is going to play up. They've done terribly, to your point, we've seen the bankruptcies, but also Dollar General, folks like that, the share prices have not performed well.

that old model of the poorer, you know, the less wealth you're going to get to certain places, just hasn't panned out. It's been that hard for people. So I think really worth keeping an eye on to see how this inequality sort of pans out from the economic perspective. Let's move on. Let's change gears a little bit, Toby. Let's talk about Greenpeace, which is our next story. We've got a pivotal trial taking place in North Dakota that could jeopardize the existence of the environmental group, Greenpeace USA. There's some real context here, which is worth going over it. The company behind the controversial Dakota Access Pipeline energy transfer tried to sue Greenpeace in federal courts back in 2017,

alleging that the group's protesters who camped near construction sites for months cost the company $300 million. Now, the federal court ended up dismissing the case, but energy transfer filed a similar suit in state court, and that's where we are today with the trial. The issue that's underlying all of this sits with a small section of the pipeline that crosses near the Standing Rock Sioux Tribe's reservation

where tribe members argue they were not consulted in the planning process and that the construction poses of pollution risk to sacred sites and to its water supply. Now, it should be noted that energy transfer disputes all of these claims. But Toby, this battle's had real messiness around it. Police and protesters have clashed. Protesters say they were pepper sprayed and police officers say protesters threw rocks at them.

The outcome of the trial, which again is focusing on energy transfer, saying all of this cost us in terms of this project could have serious implications, not only on the fossil fuel industry, ensuring what they're capable of doing, but also the environmental industry. I think the punchline here when I really looked at the say, what did the story is, if energy transfer wins, Greenpeace could be out of existence. Right. That is the underlying fear here, if you are an environmental organization,

that this lawsuit is designed to silence free speech, because Greenpeace is obviously a much smaller organization than a company like energy transfer. Energy transfers alleging that these protests cause physical harm to its employees, to its physical infrastructure. But Greenpeace is saying that this is existential for us. Like we cannot bear to fight this lawsuit in a court. And so it sets a precedent against that could allow other major corporations to target organizations that they disagree with and kind of essentially put them out of business through this threat

of litigation. So that is the broader picture here. North Dakota specifically is important in this because this case is what's known as a slap case. Slap stands for strategic lawsuit against public participation, SLAP. Slap cases are usually designed to cost your opponent's money, force them to spend all this time, all this money defending against the case. And you can tell this is a slap case because the actual financial damages, energy transfer seeking is not that significant. $300 million is a lot of money for Greenpeace, but for energy transfer, which generated $82 billion in revenue in the last year, it's not a massive financial portion.

So their concern isn't really financial loss. They are trying to, you know, basically turn public opinion and also try to squash a similar protests against them. North Dakota is among 15 states that do not have anti-SLAPP laws, which makes it easier for, if you have an anti-SLAPP law, it makes it easier for these. cases to get dismissed and then potentially like recover some of the costs that these plaintiffs have that file them. So I do think that the fact that this is happening in North Dakota is important because of, you know, the fact that there is no anti-SLAPP law there.

Critical taking. We'll keep watching this one. Up next, it is time for Toby's trends. Good sleep is everything. That's why Ali's science back support is made with a blend of melatonin and L-Dienine for both kiddos and grownups. So when your mind won't switch off, you've got something that can help. You're racing thoughts and restless nights won't stand a chance. Find Ollie sleep solutions for the whole family at ollie.com. That's OLLLY.com. You said this place was steps from the water. We just haven't found the steps yet. How much did we save? Enough. Enough to get lost. Or you could book a stay with Hilton. Welcome to your ocean front room. Just steps from the water.

Hilton sale is on now. Book on Hilton.com or the Hilton app and save up to 20% to get the stay you expected. When you want savings, not surprises. It matters where you stay. Hilton, for this day. It is Tuesday, which you guys know means it's time for a Toby's trend. But for some today is also the day after when an episode of White Lotus airs where you might be digging into what weird thing that North Carolina family did this time around.

I mentioned White Lotus, the smash hit from HBO now in its third season, because it's become a reliable driver of travel booms. Each season has taken place in a beautiful four-season resort around the world, the first in Hawaii, the second in Sicily, and now the third in Thailand. While it was difficult to quantify if season one drove an increase in travel to the already very popular Maui, the second season had a much clearer cause and effect. One luxury operator told Bloomberg it's Sicily bookings tripled after the finale of season two. Another saw a 424% spike in sales. And now Thailand is hoping for a similar boom. Bookings at the $2,000 a night, Ko Sumai, four seasons resort, have already jumped 40% according to the New York Times. And we're only three episodes in to this season, Anne.

I know, I haven't watched it yet. Is that terrible things? It's not. It's not. There's a lot of good TV out there. But yes, continue. There's so much good TV. And I'm completely the target for TV-driven destinations. I watched Shogun.

Did you watch Shogun? I did watch Shogun. Devour Shogun. I could not book a flight to Japan fast enough after watching Shogun. So, look, I get it. I get it. I'm a TV tourist too. No, this is a real industry that has, you know, popped up.

It goes all the way back to, you know, Lord of the Rings where, you know, people saw the Shire and immediately started booking their flights to, you know, New Zealand. Jet setting, in this case, literally means jetting off to air. a set of a movie or a TV show. I think it's fascinating, too, that four seasons have really, you know, capitalize it. They have a formal marketing partnership with HBO. So it's not, you know, a coincidence that these shows keep taking place at Four Seasons Resorts. So they are kind of have this deal to market themselves as the real life version of the fictional

White Lotus brand. So there is this promotional machine at play here for sure. I mean, if the Four Seasons is listening and they happen to want to do a promotional partnership with Morning Brew, I think Toby and I would be very open to having that conversation. I do think, too, this is just a growing industry. We're seeing American Express, the card brand is offering White Lotus Thailand experience packages to certain card members. It includes a stay at the Four Seasons resort. You can also do a seven-night White Lotus Thailand trip for just under $8,000 a person from another travel company.

That includes private tours of Bangkok. That is what people are saying about this particular season. It's not just contained at the resort. It is broadening the world. You're going to other places in Thailand as well. So Thailand is kind of saying, yes, we're opening, we're welcoming you guys with open arms tourists. Because right now, tourism is a little bit down from pre-pandemic. Pre-pandemic, they were getting 40 million visitors a year.

That number fell all the way down to 28.2 million in 2023. It's back up to 35 million in 2024. And so they're hoping they can close that gap to, 40 million that was flowing in pre-pandemic. Now let's sprint to the finish with some headlines you may have missed. Up first, the Starbucks asance is fully upon us. The struggling coffee company is laying off over 1,100 corporate employees and leaving several hundred positions unfilled as it aims to streamline its operations.

Part of that effort also includes streamlining its coffee menu. 13 drinks are on the chopping block, including the ice macha lemonade, the white hot chocolate, and whatever a chocolate cookie crumble crem frappuccino is. The strategic shift under new CEO Brian Nichols is all part of the effort to reduce wait times, focus on customer favorites, and revitalize the brand's core coffee house experience. And sometimes you've got to cut the fluff in order to grow again. I think that's right. And when are they going to fix their food offering?

Do you know what I mean? You're not a fan? I'm not a fan. Every time I walk in there, it looks good. It tastes terrible. I think Starbucks fix your food and then you're on to your new. chapter. Let's go on to our next headline, Toby. Lester Holt, the legendary newscaster and anchor of NBC's nightly news, is stepping down. Holt has been a mainstay for the evening program since 2015,

but announced he plans to step away from the desk this coming summer. NBC executive Janelle Rodriguez called Holt, quote the beating heart of his news organization, highlighting his steadying voice during the early days of the pandemic in 2020. At the time, the show was averaging 12 million viewers a night. Even though broadcast TV audiences have declined in recent years, nightly newscast can still draw 20 million viewers on a good evening. Toby, look, trust can be the most valuable asset a news program can have. Lester Holt's been a trusted face for NBC for years. Is it going to be hard to replace Holt, or is this just the end of an era now for news? It's a slow end of an era for sure because you have seen a spate of high profile news anchors stepping away from their

post recently. Just in the last few months, Joy Reid, She's leaving her position as a host of MSNBC. Her show was actually canceled by the network. Nora O'Donald recently left her spot as anchor for CBS Evening News. And then Chris Wallace left CNN. Chuck Todd left NBC News. Hoda Coteby left NBC's today. So we are seeing kind of these networks pull back on spending.

They don't want to, you know, hand out these hefty contracts to these faces of the network. And I do think we are just seeing a gradual but, you know, suddenly sudden shift away. from these, you know, faces that we used to see all the time on network TV towards, you know, more media news influencers, like, you know, podcasts like us. We are seeing just a shift happening over time. It is spring training time in Major League Baseball, and for the first time, MLB is allowing pitchers and batters to challenge balls and strike calls, but rather than adding another human into the mix, they found a neutral arbitrator, a computer.

That's right. The league is testing out robot umpires with the hopes of adding them to the regular season eventually, dubbed the automatic ball strike system. It allows players to challenge umpire decisions, adding a strategic twist to the game. The challenges can only come from the pitcher, catcher, or batter, and they must happen immediately, which so far has led to some pretty funny mix-up. Pitchers are horrible at it, said Dodgers pitcher Landon and Nack. We probably had a 90% misrate with all the pitchers last year.

Dodgers catcher Hunter Feducia chimed in. It is funny, and as a player, you always think umpires are getting it right. wrong, but this is exposing. It might be the opposite. Hasn't this been happening in sports for years? Like tennis with the line calls, hasn't this been happening in basketball? Why is this new news? It's new news because baseball has been, it's a slow moving game. They didn't want to replace umpires. They think that it's moving to a fully automated strike zone, got negative feedback from fans. I don't know. I think you are right. Baseball is just behind the curve in this instance. But I do think that this is the way sports are going

because it adds a lovely strategic element to the game as well because remember in tennis too, you used to be able to challenge, you know, line calls. But now it's just all automated for at least most tournaments. Same thing is happening in baseball now where some players just get way too caught up in the moment and challenge a call that is not even close to correct, but you're just like competitive and you, I don't know, you just have a vendetta against the umpire.

So a lot of players and teams are like coaching their players to say, only use them in high leverage situations, only use them when the outcome could affect the outcome of the game. Don't just do it because you're mad at the umpire here. So I think you are right though. Baseball is a little bit behind the curve when it comes to, you know, automated systems like this. I think right there I just got a window into how Toby plays sports. Like right there, like the strategic timeout, the high leverage point in the game.

It's important. It should golf your tennis. I think everyone we just figure out how Toby plays mind games in his athletic pursuit. True. That is all the time we have for today. And thanks again for joining me while Neil is enjoying his White Lotus experience. Let's roll these credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Olivia Graham is our associate producer. Yuchanan Oogu is our technical director. Scoop's Dardaris is on audio. Hair and makeup is ponding off a golden

toilet handle. I wonder where they got that from. Devin Emery is our chief content officer and our show's production of Morning Group. Great show. and we'll see you all. Own it all. Pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly Big Board Buckslot Machine by Aristocrat Gaming, Yamava Resort and Casino at San Manuel

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