Morning Brew Daily - Auto Strike Gets Even Bigger & Tinder Lets Your Friends Play Matchmaker

Episode Date: October 24, 2023

Episode 176: Neal and Toby have the latest news surrounding the UAW strike and why workers walked out of a Ram 1500 truck plant. Plus, Bill Ackman doesn't want to bet on bonds and Chevron spends billions in another oil mega deal. The guys also recap stories including the off-duty pilot who tried to take over an Alaska Airlines flight, what happened at a Chinese beer company and the latest lawsuit against Tesla. Finally, Toby shares his favorite trends and Tinder wants your friends to help you swipe. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Listen to Our Future Podcast Here: https://link.chtbl.com/ourfuturepodcast Learn more about your ad choices. Visit megaphone.fm/adchoices

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at pwc.com slash US slash brew AI. That's pwc.com slash us slash brewAI. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. On today's pod, we've got our second energy mega deal in the last couple of weeks. Maybe oil is the new oil? Then the United Auto Workers Strike is getting bigger.

And this time it's the RAM 1500 pickup truck, a.k.a. an American money-making machine that's getting targeted. It's Tuesday, October 24th. Let's ride. Neil, last night. night, I had what is considered to be one of the best, if not the best cheeseburgers in New York City at four Charles Prime Rib. It had two Wagu beef patties and egg on it, thick cut bacon, the whole nine yards. And here's the thing. It totally lived up to the hype. I love when things live up to the hype.

How much was it? Okay. Neil, come on. Don't ask that question. All right. I guess living up to the hype means worth however much you spent on it. But I agree. When something lives up to the hype, it's not often. So good for you I'm very curious I mean everyone's just going to look up How much it costs after this So you might as well just say it

It's really the bacon in the egg That makes it more expensive Like the actual burger I mean I'm just not gonna say The bacon the egg are on top of it Yeah that's what makes it so expensive Those are the add-ons yeah But honestly if you guys have had a great meal

Recently leave us an Apple review And tell us about it Or I mean they could just email us I'm trying to share the pot here Like let me do my thing here I'm a marketer, but yes, tell us about your good meals you've had. All right, before we jump in the news, we have a quick word from our sponsor, Yahoo Finance. Yahoo Finance is the number one finance platform on the internet for a reason.

Isn't it because the number one business podcast, Morning Brew Daily, talks about it every day? Of course, but also, it probably has something to do with the seamless and intuitive experience. It offers you, whether you're a beginner or an expert. It's probably because of us. Who am I to disagree? Head to finance.ycom if you're looking for help, navigating the financial landscape or download the Yahoo Finance mobile app to get it directly on your phone. It's time to refresh your yard during spring backyard days at the Home Depot.

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But it's not just the number of workers that makes this significant. The latest strike targets a plant that makes RAM-15-100 trucks. Stalantis' best-selling vehicle by far. It's already sold 332,000 RAM pickups in the U.S. through the first nine months of the year, which means the plant shutting down will likely end up costing Stalantis $110 million a week for the foreseeable future.

Just to break down that math a little, Stirling Heights produces around 1,000 trucks a day, six days a week, which comes out to about 300,000 trucks a year. With the average sales price being around $64,000, The trucks from that plan alone could produce revenue of almost $20 billion a year. So yes, this strike is hitting them right in the moneymaker. Solances presented a new offer to the union last Thursday. That included a 23% wage increase over the life of the contract,

but the UAW thinks they can get more. Neil, this thing keeps dragging on in Sean Fane, the union's leader, isn't giving up an inch. Not just dragging on, but ramping up. I just remember six weeks ago when this started, they just did strikes at one of each of, the Ford GM and Stalantis factories. Now, as you mentioned, it's widened to a bunch of warehouse, a bunch of different factories,

and they're now 40,000 people striking. This is ramping up in a big way. I just want to go over what Stalantis is, because people might be like, okay, I've heard of Ford and GM. What is Stalantis? I've heard you talk about it. But it was from the merger of Fiat Chrysler and Francis PSA Group in January 2021. It's a big global automaker, the fourth largest in the world by sales.

And the American brands, you may know, are Dodge, Chrysler, Jeep, and then they're the European brands like Pugéau and Opel, and those have, they're more profitable than Ford and GM. So this is considered a huge car company. Sean Fane is really swinging them in the gut right now, and that metaphor did not work. You can swing someone in the gut. I do think that Fane almost wants to make an example a little bit of Stent's because it has the highest profit among the automakers.

And so it's also, according to him, lagging behind Ford and GM in addressing the UAW's demand. So the cost of living adjustment that they're offering is not as big as foreign GM. So it does seem like Sean Fane looked at, okay, where can we hurt Stalantis the most? And it is at this Dodge Ram pickup truck because they, they're the moneymaker in the U.S. Like, we've seen those commercials like, Dodge Ram. It's a very American type thing. So automakers and their suppliers are getting hurt from this strike so far. But if you're buying a car, you might not notice. There's plenty of inventory at dealerships. Dealers are saying that they've stocked up, they've learned from previous strikes, but they have about a month

left, and then they say the faucet is about to be turned off. So everyone's looking at Sean Fane's end game here and wondering, dude, you've got these concessions from all these automakers. You brought up pay raises from the single digits now. They're all offering 23% pay raises over the year of the contract, over the years of the contract. Where does this end? At one point, do you say, I've got enough from them? I know. People have been pushing it back a little bit on his leadership style because they're saying you're pushing these companies to the absolute limit, but he's saying they have more to give. And again, we mentioned it on yesterday's show, but GM reports quarterly earnings today. Ford's report comes out Thursday and Slantis

reports on Halloween, so that's going to be a spooky time for them. So yeah, we will see just how much they have to give because it's going to probably be a pretty nice quarter for automakers, and that's only going to help Sean Fane have even more leverage in this situation. Okay, moving on. I feel like many of you listening aren't fully awake. yet, so let's discuss a story that will make you shoot straight out of bed, the 10-year Treasury yield. Yeah, it doesn't sound so exciting at first, but this is the biggest story in the economy right now, and we need to get to the bottom of what's going on. Here is what's going on, and I'm going to explain it as best I can. Yesterday, the yield on the 10-year U.S. Treasury note extended

its astonishing upward climb to hit 5% for the first time in 16 years. As we've talked about on this show, the rate is a measure of how much it costs the U.S. government to borrow, and it's used across the world as a benchmark for all types of lending, like mortgages and corporate debt, as well as stock prices. The spike in yields is one reason why you probably haven't opened your Robin Hood account in a while, because it's been weighing down stocks big time. And remember, yields rise as bonds fall, so climbing yields reflects a major bond sell-off. Investors aren't exactly sure why yields have spiked from 3.8% at the start of the year to 5% now, but it's likely in anticipation of the Fed keeping interest rates higher for longer

and anxiety about the U.S.'s deteriorating finances and mounting debts, which we discussed on the show yesterday. But some big-name investors think this bond sell-off is too fast, too furious, and has become unmoored from reality. Billionaire investor Bill Ackman, who was short government bonds, meaning he was betting on them to fall, which has been happening. said yesterday, he now thinks more investors will buy bonds, not sell them. That's because they're considered the safest asset in the world, and with the Israel-Hamas war threatening to spill into a larger regional conflict, he thinks the bonds will become more attractive as a safe haven in these tense times.

And so yields fell below 5% after Ackman made his announcement, and now they're now at about 4.8%. Does that make sense? That made a lot of sense to me. I'm still reeling from the – this is the most excited – that your intro is very exciting, and I'm totally awake now, Neil. But honestly, the scary part here is potentially the motivation behind the sell-off. And you mentioned it.

If people are selling bonds, it usually means there's a certain level of confidence in the economy because you can find better yields elsewhere, maybe in the equities market. But if analysts are concerned this time around, because maybe people are just losing confidence a little bit in kind of this safe haven asset, that's been a safe haven asset forever. And, yeah, you mentioned the government debt is one of those reasons why they, that confidence might be shaken a little bit. But I also just want to highlight the Bill Ackman piece of this because it's so funny to me.

I have this econ teacher in high school that taught us about animal spirits. Animal spirits is this famous term coined by John Mayter-Kane's. And essentially it means that human emotion can drive financial decisions more so than we'd like to admit. So if we look at the trading activity around Bill Ackman's announcement, you literally saw the bond yields dip back beneath 5% because Bill Ackman said that he does see, people flooding back into bonds as this safe haven asset.

So it was funny to me that one person and one announcement actually did kind of manipulate the market. So, again, you use the word unmoored a little bit. If the bond market is unmoored from the usual things that make it go up and down, it's a bit of a scary time for investors. Well, maybe investors were thinking in the back of their mind that this bond selloff had been too big already. And when somebody as prominent as Bill Ackman and who looks at the,

market very closely. He just said there's too much risk in the world to remain short bonds at current long-term rates. And when geopolitical tensions are high, then bond yields go down. That is kind of an economic fundamental. That's what you learn in Econ 101 or Markets 101, whatever. I was a history major, so I didn't take any of those classes, as probably listeners can tell. So when the Israel Hamas War broke out a couple weeks ago, the bond yields did dip a little bit, but then they came roaring back, which was perplexing to a lot of investors. And now that Ackman has come out and said, guys, these are some tense times we got going now. Like, I'm pretty sure a lot of investors are going to be piling into U.S. government debt,

which is considered the safest asset in the entire world. We should probably see those yields dip a little bit. But who knows? We've been at 5% before. This is nothing new. They could go to 6%. But the big picture here is that this is also doing the Fed's work for it because it is raising borrowing costs. It's putting the brakes on the economy, and this is raising concerns that we could go into a recession at some point soon.

Yeah, it could help the Fed out and keep them from needing to hike rates even more. So it is weirdly doing Jerome Powell's job for him. All right, Neil, for our next story, we have another mega oil merger on our hands. Yesterday, Chevron agreed to acquire Hess Corp for $53 billion, which, if you remember, is the second major deal in the U.S. oil industry in just the last few weeks after Exxon Mobil bot pioneer natural. resources for $58 billion. There are some differences between the two acquisitions, though. Whereas the Pioneer deal deepened Exxon's presence in the North American oil landscape, Chevron's deal for Hess gave it a significant foothold in Guyana, the South American country

that is one of the newer producing oil nations in the world. Guyana is especially important to Chevron because Exxon actually already owns 45% of the production in that region, so Chevron no doubt felt some urgency to establish itself there as well. Neil, Hess's shares have almost doubled in the last year, and yet Severon is still paying a 10% premium for them, which shows just how desperate they are to snag a piece of the world's largest crew discovery of the past decade. This is a land grab right now, and the two fastest growing production zones outside of OPEC are the ones that were the subject of these recent acquisitions. Guyana and Permian Basin in Texas. It's kind of crazy the story of Guyana because this was just – it was always overshed. by its neighbor, Venezuela.

And then in 2015, you remember him, Rex Tillerson? Yeah. Who was the former Secretary of State and the former CEO of ExxonMobil, said, let's drill here. And he called up his buddy, Mr. Hess, who ran the Hess Corporation and it currently still runs it. Said, let's drill here. And then they found what is, like, the most breathtaking. I don't know if anyone would describe it as breathtaking. But it's a huge moneymaker to find that oil off the shore of Guyana.

And now, you know, the economy in Guyana is exploding, and Chevron really wants to take a piece of this really fast-growing oil. Yeah, it's on, its oil production is on course to triple to a million barrels of day by the end of the decade. And it's absolutely crazy that it pumped its first barrel back in 2019. So it is so new. And that would put it, the country, it only has 800,000 people on it. It puts it on par with OPEC members. So it just goes to show you how one, yeah, oil discovery, can really change the fortune of the country.

The economy is expected to grow 37% this year. And we talked about Alaska recently that has this huge oil dividend because there was oil discovered there in the 70s. And so it kind of reminded me of that. The big question I'm sure everyone has about this acquisition, though, what is going to happen to the Hess trucks? Because I got a Hess truck every single Hanukkah for like 25 years from my grandfather. And so my basement at my home in Massachusetts is full of Hess trucks.

Amazing marketing. I saw this on social media. I don't get the Hess truck thing. You're from Florida. You just don't understand. Is it literally just an oil truck that, like, can't get to play with? No, no, no. It is like a fire truck.

Each year they come out with a different model. Sometimes it's a fire truck, sometimes. Just plain as Hess. Yeah. Interesting. Look it up. Have you seen those commercials? No, this is one of those trends, I guess, that it was going around social media and

everyone's saying, the Hess trucks, the Hess trucks. And I felt so uninformed. So thank you, Neil. I'm sure we're going to get a lot of emails from people being like, Toby, I can't believe you don't know the Hess truck. But for a young boy who loves transportation, playing with trains and planes, to get those trucks every year of us always super high. All right. I'll keep an eye out. All right.

We're going to take a quick break before we jump into our next story. Today we helped a latte for Sam. Coffee shop, get an insurance quote simply and easily. And made sure a floral delivery van was able to make someone's day. We're the Hartford. with decades of experience ensuring millions of unique small businesses. When it comes to your small business insurance, Thank you.

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Don't just dream about that next trip. Book it with Priceline. Download the Priceline app or visit Priceline.com and book your next trip today. We're back with some more headlines from yesterday's news. This was freaking wild. An off-duty pilot riding in the jump seat of a cockpit was arrested and charged with 83 felony counts of attempted murder after he attempted to shut down the engines on an Alaska air flight headed to San Francisco. The flight crew was able to subdue him and the plane diverted to Portland where it landed safely.

But according to one passenger, the flight attendant came on the speaker and said, he had a mental breakdown. We need to get him off the plane immediately. That is not the kind of announcement you want to hear. Apparently, it's common practice in the industry for off-duty pilots to hitch a ride in the passenger seat of the cockpit, known as the jump seat, while going to different airports for work. but this guy was potentially the worst passenger on Earth and tried to take down the whole plane. I'm glad this whole ordeal turned out okay, but it makes you wonder.

It was a crazy headline to real. We just kept sending it around going like, what? This doesn't happen. It is interesting, too, to put this kind of in the backdrop of what's been going on in the aviation industry. I mean, United pilots just secured a $10 billion union deal that would raise pay up to 40%. And then also there's been some proposals recently to cut the amount of flight out. that pilots need to in order to fly commercial. So I don't actually know if this incident helps or hurts the case in any way because

it actually was the pilots reacted extremely well and reacted very quickly. They got the fuel lines back on. But then you also see that this one pilot who is certified having a mental breakdown. So I don't know, just putting it in context of these two other aviation stories, it was interesting to see whether this is going to help or hurt pilots case for higher pay and like better hours going towards. I think we'd get a scarier story on a plane this year than the diarrhea one, but this immediately leaprogged it.

You're totally right on that. All right, Neil, for our next story, the DOJ is investigating Tesla for potentially exaggerating the range of its vehicles. Remember, there was a report earlier this year from Reuters that said customers were filing complaints left and right about the range of their Teslas, which was sometimes less than half the miles they were supposed to get on a full charge. The company got so many complaints that Tesla actually created a special diversion. team in order to cancel some of those appointments.

There was also that car and driver's test from earlier this year that found German automakers like BMW, Mercedes, Audi, and Porsche typically provided conservative range figures, while Tesla always ended up overshooting theirs. Tesla ranges were on average two times as far off from their label value as most EVs. So now the DOJ is breathing down Tesla's neck to see if there really is some illegal exaggerating going on. There's also a bunch of other investigations that the DOJ is looking into at Tesla. One is called Project 42. And there was this Wall Street Journal article out a few months ago that talked about how Elon Musk was allegedly dipping into company coffers to build an expansive glass walled house near his Austin Gigafactory.

So the DOJ is also looking into the range issue and also a lot of other perks and other shenanigans that Tesla's execs may have been doing. But Elon Musk living in a big glass house near Austin. I don't know. What's the Glass Onion movie from the second Knives Out movie? Did you ever see that? No, I did not. Okay, you should see it because it kind of does encapsulate that situation. It's almost based off Elon Musk as well.

That's funny. Okay. This story is in the second half of our show, but it probably could have been number one. A man in China has been arrested after he was caught on video peeing into one of the tanks at a facility for Qingdao Brewery, the country's second largest brewer. As you can imagine, this video went viral on Chinese social media and the jokes were flying. The brewery went into crisis management mode, saying it reported the incident at the first opportunity, sealed off the batch, and none of its operations were hindered as a result. And in a sign that this probably won't have a major impact besides a loss of embarrassment.

The stock fell in early trading but recovered most of its losses. Still, this won't help your cause if people think your beer tastes like pig. I know. Okay, but you're saying it won't have long-term effects. The fact that the stock fell at all just based on one video to me was something that was kind of crazy of this. You're right. It did rebound shortly after.

This to me is also just a byproduct of the TikTok age or whatever you want to call it, where you see behind the scenes of workers a lot more than we have in the past. I mean, literally just yesterday I saw a Starbucks worker who had just recently quit, and he said, screw it. I'm posting all the recipes to all their drinks online. And my big takeaway was everything has a lot more pumps of sugar than you would ever imagine. But yeah, I do feel like we're in this era of people, of workers especially.

They probably always have done this stuff. I mean, I hope they're not always peeing in our beer. Well, this guy allegedly wasn't even a worker. But either way, it shows a security breach at a food production facility, which should be pretty tight. They sealed off the vat of beer, which thank God for that. All right, Neil, it's Tuesday, which means it's time for Toby's trends where I, a young Gen Zier, who just discovered Britney Spears discography, educate you a millennial who can receive the lyrics of Toxic Without Missing a Beat about a recent trend I've had my eye on. And for today's

trend, I want to teach you about the age of the hermit consumer. The hermit consumer is a term to describe someone who spends more money on goods rather than experiences. As you may have surmised, the pandemic has something to do with this. When widespread lockdowns hit, spending on services and experiences like going to bars or concerts fell to essentially zero during 2020. And some of those habits have stuck around. Three years later, the share of spending devoted to experiences remains below pre-COVID levels as of now, and rich consumers are spending around $600 billion less than you might expect based on previous trend lines. But wait a minute, all we've heard about this summer is the ERAs tour, and every time we open Instagram, someone is traveling to

Europe or going out to eat. But that actually might be more of a product of constrained supply than increased demand. In the U.S., total employment in the hospitality industry remains lower than in late 2019, and the number of hotels in Britain has remained flat at 10,000 since 2019. Neil, all you have to do is look at Home Depot versus Olive Garden to see the difference of what I'm talking about. In a recent earnings call, an executive at Darden restaurants, which runs Olive Garden, noted that relative to pre-COVID times, we're probably in that 80% range in terms of traffic, yet at Home Depot, which sells physical stuff, revenue is up by 15% compared to 2019. So, Neil, the summer of Barbineheimer,

may have been a sham. We're still in Hermit mode. I don't know if I agree with this. I don't think I've been in Hermit mode. You maybe haven't, but are you in Hermit mode? I know. That's why this was a little bit of cognitive dissonance for me, but you kind of start looking around the economy

and there's things that haven't rebounded to where you would expect them. Like in America, spending on hairdressing and personal grooming treatments is 20% below pre-COVID levels, but spending on cosmetics, perfumes and nail, and nail preparations are up by 25%. So you do see this dichotomy in a lot of industries where people are buying stuff, but maybe not the experiences

or the services that went along with it. Yeah, maybe the COVID behaviors have just stuck with us subconsciously that we don't even realize that we're, you know, maybe staying in a few extra nights that we would have gone out in 2019. One of the funnier parts of that is global online searches for solitaire card games

are running at about twice through pre-pandemic levels. You're coming armed with all the stats. I know. It's so funny everywhere you look that even though we are seeing people reemerging, there's some stuff that just stuck around from the COVID times. I was just looking this entire story to get in a toxic lyric. It did not. It did not.

Nothing worked. Good spending is too high. I can't come down. See, I knew you knew the lyrics. That was just. It just didn't work. It's not the right. You should have done another Britney song.

Okay. For our final story, have you ever been swiping and thought, this person's kind of cute that I'm not sure if they're for me? I'd love a second opinion from a friend or a parent. Well, Tinder is making that a lot easier. The dating app is rolling out a new product, Tinder Matchmaker, that lets you invite other people to view and suggest potential matches. The way it works is you select up to 15 profiles that you're interested in, send them to friends and family,

and within a 24-hour time frame, they can recommend profiles for you without needing to be a Tinder user. The app says this product is the result of user behavior. A survey they commissioned showed that 75% of singles said they discussed their dating lives with friends multiple times per month, so it wants to grease the wheels a little bit. So is this a smart move? Is this concerning from a privacy standpoint that a non-Tinder user can see 15 Tinder user profiles?

I feel like that's a little weird. Well, I love this from Tinder because it is just absolutely having your finger on the pulse of what your consumer is doing. I mean, you mentioned that survey, but also everyone has had that experience of being on a dating app and having your friend looking over your shoulder saying, ooh or ah, I'm like, this person's cute or this person's not. And so I love that they are doing that. And it's also a sneaky marketing tactic. You know how I have to always sneak in the marketing tactics. Yeah, wait.

I don't know. What is the marketing tactic? Because you're soft introducing Tinder to 15 people every time that profile is sent out. And so even if maybe it's a single friend, maybe it's not a single friend, but you are at least introducing Tinder to people who don't even have the app downloaded. So I do think they are seeing, hopefully maybe someone will recognize Tinder is a good place for finding love online. Yeah, this is a part of a broader product release that's going on at Tinder as users stagnate across Match Group's portfolio, which owns Tinder. Paying users fell 5% to 15.6 million last quarter. So they're trying to squeeze as much revenue out of everyone they've got right now. They rolled out this $499 per month. Tinder select subscription, $500 a month to find true love on Tinder. They're offering that to less than 1% of their users, but they're hoping that the high end of,

of the range will pay up. So I don't know about that. 500 bucks to find love? I don't know. It seems like a bargain to me, Neil. Okay, that is all the time we have for today. I'm getting very anxious about not having a Halloween costume. So if you have any ideas, listeners, shoot them my way. Our email is Morningbrewdaily at Morningbrew.com, and I will be refreshing it all day. Let's roll the credits. Emily Miliron is our editor and producer. Samantha Bellas and Raymond Lou are associate producers. Euchinawa Ogu is our technical director. Billy Minino is on audio, hair and makeup is the embodiment of the Hermit economy.

Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show that, Neil. Let's run it back tomorrow. Yamava Resort and Casino at San Manuel is California's number one entertainment destination for today's superstars. Catch the Jonas Brothers return to the Yamava Theatre stage on April 30th, the powerful vocals of Demi Lovato on May 17th, and the signature Southern Country Rock of Eric Church on July 19th. Tickets on sale now at Yamavata Theatre.com.

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