Morning Brew Daily - Ben and Jerry's Done with Ice Cream? & Dell Says Work Remote, No Promotion

Episode Date: March 20, 2024

Episode 283: Neal and Toby chat about Unilever cutting ties with its 100+ year ice cream business. Then, the Bank of Japan has finally come back to the positive as it hikes up interest rates for the first time in 17 years. Next, Trump has been ordered to pay $464 million from his civil fraud case, but will he find anyone willing to help pay his bond? Also, why Dell tells its remote employees that promotions are off the table. Meanwhile, a new study shows that a recession could actually help people AND the planet live longer. Finally, South Korean baseball fans are buzzin’ for the upcoming MLB season opener in Seoul.  Use code MORNINGBREW50 to get 50% OFF your first Factor box at https://bit.ly/3UUZGG0 Get your Morning Brew Daily Merch HERE: https://shop.morningbrew.com/products/morning-brew-daily-sweatshirt?utm_medium=multimedia&utm_source=podcast&utm_campaign=mbd&utm_content=shownotes Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Options are not suitable for all investors and carry significant risk. Certain complex options strategies carry additional risk. Options can be risky and are not suitable for all investors. See the Characteristics and Risks of Standardized Options to learn more. For each options transaction, Public Investing shares 50% of their order flow revenue as a rebate to help reduce your trading costs. This rebate will be displayed as a negative number in the “Additional Fees” column of your Trade Confirmation Statement and will be immediately reflected in the total dollars paid or received for the transaction. Order flow rebates are only issued for options trades and not for transactions involving other assets, including equities. For more information, refer to the Fee Schedule. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, Inc., member FINRA & SIPC. See public.com/#disclosures-main for more information.*Transfer offer Terms and Conditions apply. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning, Brew Daily Show. I'm Neil Fryman. And I'm Toby Howell. Today, Donald Trump needs to scrounge up a half a billion dollars to secure a bond by next Monday. Can he do it? Then, pour out a melted pint of Cherry Garcia because Ben and Jerry's is getting kicked to the curb by its parent company. It's Wednesday, March 20th. Let's ride.

The moon has become a subject of exploration again in recent years, with another space race of sorts kicking off to see which country can establish a lunar presence first. The U.S. doesn't want to get left behind, so DARPA has been running a 10-year lunar architecture project to help envision what a lunar economy might look like. And it recently tabbed Northrop Grumman with scoping out what would be required to build a lunar railroad. Yes, DARPA wants to build a moon train. Neil, you're kind of our resident train guy of the two of us. What do you make of this effort? First of all, I am shocked that Amtrak didn't win this contract.

Wow. they were totally in the lead. The haters will say that we shouldn't be building a moon train when we can't build trains here on Earth. But I don't see it that way. It's not mutually exclusive. We can build a moon train and an Earth train and maybe even use the information we learn from building a moon train to help out our situation here on Earth because it's not so great.

That's a very optimistic take because, yes, I had written down. We're getting a high-speed rail on the moon before we get it here in the U.S., but hey, I'm all for it. We need to move stuff on the moon. So why not get out? ahead of it. So lunar economy, definitely something to keep an eye on in the future. Now let's hear a quick word from our friends over at Factor. Something that I know a lot of my young professional friends struggle with when it comes to

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While supplies last, ends June 30th, terms at aka.m.m.S. college PC. Japan put a wrap on one of the world's most radical monetary policy experiments on Tuesday when its central bank raised interest rates out of negative territory. It was the Bank of Japan's first rate hike since 2007 and a sign that its economy has finally returned to growth mode after decades of stagnation. But the move will echo well beyond Japan's borders. And that's because, say it with me, everyone, it's the end of an era.

Yes, I had to whip out one of Morning Brewdaily's most overused cliches because the move out of negative interest rates does symbolize the conclusion of one chapter in the global economy and the beginning of a new one. Rewind to right after the Great Recession. Economic carnage was everywhere, and it wasn't totally crazy for central banks to have negative interest rates to kickstart growth. The European Central Bank did it. Sweden and Denmark did it. And the Bank of Japan shocked everyone when it set rates below zero in 20. These days, every central bank has returned rates into positive territory, and Japan was the final holdout before Tuesday. Toby, I think this is as dramatic as it gets in the central banking world.

It truly is more dramatic than a Jerome Powell press conference, that's for sure. Negative interest rates are always a bit of a mind-twister to just wrap your head around because depositors are paying the bank to leave their money with it. It also means that borrowers can take out loans very, very cheaply. and both, again, are incentives to get people to spend money, to do deals, to generate economic activity. And Japan has been trying to bring some life to its economy for years now, almost decades now. And it's something that it looks like it finally has accomplished. All the signs of growth are there. Inflation, after being low for years, has finally sped up a little bit.

There's been larger than unusual increase in wages. And then also some of the things that we're hearing thrown around is that the words virtuous cycle keeps getting tossed around, which is basically a lot of stuff going right, feeding into other stuff. So rising GDP growth, wages, prices, corporate profits, all on the way up. So the end of an era is here. You said that we say it a lot, but I do think that for Japan, they finally have turned the page here. In the central banking world, people mostly, they don't zigzag. It's very much a sheeple thing where if the Fed does something, then the European Central Bank does something,

then the Bank of England does something. It's kind of everyone kind of follows the herd a lot. The Bank of Japan has always been zinging where others have zagged or zag where others have zigged. That's because it's just been a laboratory for weird monetary policy experiments. So the Bank of Japan is known for doing these really far out things that not necessarily the world, the rest of the world is doing. And when it did this negative interest rate, the whole world was watching to see what would happen. Would the U.S. do it? And I think this came into question in 2020 when the U.S.

The COVID pandemic hit and the Fed was like, what should we do? We need to kickstart growth. The Fed chair, Jerome Powell, said he considered it, but eventually did not do negative interest rates because it's not considered. The legacy of negative interest rates is not that great. People don't necessarily think it should happen or ever happen again. Yeah. The real question is, did it actually work? Is negative interest rates to kind of, should we give it its laurels for helping boosting Japan's economy?

but or is it more of a combination of some of the supply chain shocks at the COVID-19 pandemic kind of rot on Japan. Also, the Russia war in Ukraine ended up driving up prices. So if we're looking at that inflation number in particular, maybe the rising cost of the imports of everything of energy to food to materials is more to thank or to blame whatever perspective you want to take than the actual negative interest rates itself. So even though you might be saying this is celebration for Japan's central bank, the jury is still out on if they actually worked or not. Yeah, and meanwhile, more central bank news today, the Fed is meeting, and Jerome Powell will give his dramatic press conference that you alluded to. But it will be dramatic, actually, because investors will be looking to see the forecast for future rate cuts this year. The big question is whether we'll get two or three rate cuts over the rest of the year for 2024.

I don't think we're going negative. I can say that much. Definitely not going negative. Our interest rates are at 5%. Yeah. After a 24-year run, Unilever and Ben and Jerry's are parting ways, the chocolate and vanilla size of a pint of half-baked. It's been a relatively rocky road recently for the two companies. Unilever's ice cream division, which also includes brands like Magnum, pulled in $8.6 billion in 2023, but its profit margins are less than half of that of the company's personal care unit. As such, Ben and Jerry's was put on the chopping block by new CEO Hein Schumacher, who has been trying to slim down the consumer goods giant in the nine months he's been at the helm. Schumacher especially called out the ice cream arm as being problematic in a recent call to reporters.

He said, quote, ice cream is truly a different business. It is already managed separately than our other activities. And most of that is because the cold supply chain is just such a nightmare. There's also been some political headaches along the way. So it looks like Unilever just wanted to be done with the brain freezes caused by Ben and Jerry's. Yeah, totally. And they own Briars too. And listen, Unilever, if you need a buyer for Briars,

I'm the biggest fan of Breyer, so I will buy it from you. I probably already account for 50% of global sales. But Unilever's ice cream business is kind of huge for it. It's 16% of global sales. They've had an ice cream business since 1922. They have five of the top 10 global brands by sales. So this is not a small decision. This is a big part of their business, but it just got to be too much of a headache.

Like you said, the ice cream business, when you read into the details about what it takes to run a ice cream business and get cold things. from one place to another and you always need to have them frozen. Sounds like an absolute nightmare. Yeah, the supply chain is super delicate because you have to keep at temperature control to ensue that the product quality basically because you need to keep it out consistently below freezing temperatures to maintain the texture and the creaminess of ice cream. We don't want those ice crystals forming after you unfreeze and refreeze something.

So just a nightmare that makes even, remember we talked about the cold supply chain during the pandemic because vaccines need to be kept very cold. Unilever deals with that on a daily basis. Also, I was reading into the fact that ice cream is a rather seasonal business. Of course, we can wrap our heads around. You don't want to eat it during the winter when it's going on. I'm glad you learned that, Toby. No, but this is the insight here is that during the summer, if it's too hot, people also don't

like ice cream. They see falling sails, and we were experiencing record heat waves last summer. So Unilever was saying that people actually move on from eating ice cream to just drinking like a more cold, refreshing drink. So there is such a thing as it being too hot for ice cream. So that's been another kind of thorn and Unilever's side as it's trying to manage this ice cream business. And ice cream is a very discretionary purchase. And we use that economic term a lot, but it just means it's very sensitive to price increases. So as inflation, it's kind of ravaged every sort of consumer good. Ice cream has been really hurt because when ice cream prices go

up, people buy a lot less ice cream. Underlying volumes for Unilever's ice cream business fell 6% as prices rose 9%. So you see it, people are very sensitive. When ice cream, it's true. Like, when I see Breyer's gallon gets the $7, I just don't buy it, even though I love it. You can buy Breyers. I am a Ben & Jerry's fan. I'm a fish food guy.

But do you find yourself being sensitive to price increases in ice cream? And really just the sensitive part for me is if I feel like I deserve a sweet treat or not at the end of the day. And sometimes I feel like I do. Other times, not so much. So this is in the big picture here. Unilever is a huge consumer package. goods company and it's trying to just focus on its higher margin business, as we've seen a bunch of other conglomerates do. Moving on, does anyone have about a half a billion dollars available they

could put up for Donald Trump before Monday? He's kind of in a tight spot. The Republican nominee for president must post an appeal bond for that amount by March 25th or else face a potential financial calamity with New York going after his assets to get what it's owed. Trump's predicament stems from a ruling earlier this year when a judge ordered him to pay $454 million for inflating his net worth to secure favorable loans from banks and insurers. He's appealing the ruling, but in the meantime, he does need to get someone to spot him that bond by a Monday deadline in case he's not able to pay. And in exchange, they'll require about $1 billion in cash and liquid securities from him

as collateral. Problem is, Trump's team hasn't found anyone to pay that bond. Monday, his lawyers said they approached 30 companies, including Chubb and Berkshire Hathaway, to secure a bond. But they got denied by every single one. Throwing their arms up, they said getting a bond of this size is a practical impossibility. So Trump is in desperation mode right now to figure something out. Yeah. On the surface, this felt kind of cut and dry because Trump's network is obviously far larger than the amount of the bond.

So shouldn't he be able to put up one of his properties, one of his real estate holdings as collateral and receive a bond from an insurance company. But since it is risky for an insurance company to issue a bond like this, the insurance company would want to be able to charge a rather large premium on that bond. Well, this is a surety bond, and it has regulations that don't allow that kind of business. Basically, it would be very risky for an insurance company to accept real estate as collateral because values unpredictable. It's not easy to sell a giant real estate property very quickly, so it wouldn't be able to become liquid cash in an easy manner. And so given that, Trump has to find liquid collateral for this.

And that getting a billion dollars of liquid collateral is obviously not very easy. Yeah, I don't know what his Robin Hood looks like. But the New York Times found that he just has a little over more than 350 million in cash in stocks and bonds. So he just does not have enough liquid cash available to sort of put up the collateral for this particular bond, Not helping matters. He has all of these other legal issues going on. He had to put up a $100 million bond for his defamation case against E. Jean Carroll. So that took another huge bite of his bank account. He can't put up his real estate assets. And by Monday, if he isn't able to secure this bond, then theoretically New York could go and seize his assets, which include 40 Wall Street, potentially Mar-a-Lago, all of these properties that were involved in this case. They could theoretically go seize. And it would be a big, you know, legal debacle, it would take a very long time for this to go through the courts. But in a theoretical world, in a hypothetical world, on Monday, if he doesn't pose this bond, then the New York could go after his properties. Yeah, just to reiterate the final options he has, he can get a benefactor

to pay, or he could try to stall some more, hopefully come into more money. He might sell his true social media company, or he could declare bankruptcy, but he obviously does not want to do that. It would be very bad for his brand, especially entering kind of like this election year, where a lot of his brand is wrapped up with his network. So that, apparently, that option is off the table for Trump, but his back is certainly against the wall, and unless he can find someone with a rather big Robin Hood account, then, yeah, it might get ugly. Up next, pour yourself another cup of coffee. We're going to discuss an insane return-to-office policy, an interesting longevity study in South Korean baseball right after this. Yamava Resort and Casino at San Manuel is California's

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Book it with Price Line. Download the Priceline app or visitpriceline.com. Actual prices may vary, limited time offer. There are companies that are against remote work, and then there is Dell. Dell, long known as a great place to work precisely because of their lenient hybrid work policies recently released a new policy that fully remote workers will not be eligible for promotions if they choose not to come into the office.

In terms of intense return to office measures, this one is up there. But not only is it super intense, it's also opposed to things Michael Dell, the founder and CEO, said just a few years ago. In 2021, he told reporters that Dell's expanded homework and culture was absolutely here to stay. And as recently as 2022, the company wanted 60% of its workforce to operate remotely on any given day. But when the economy soured a little bit, Dell got a little panicky and changed its tune. Neil, what's the logic behind a move like this? The logic is, I mean, we can only surmise, right? One of the theories of sort of creating a very stringent back-to-work policy or tying incentives of career growth to coming back to work is that essentially under the table, you want to

reduce your headcount, and the cringy term for this is quiet firing. But if you don't offer career advancement opportunities for remote workers, then eventually they're going to leave. So you have this sort of shaving of headcount that Delmey want to do. It did lay off 5% of its global workforce earlier this year. But, you know, this is a particular way to say, hey, like, we are not certainly in, like, growth mode here. We kind of want a decent amount of employees to leave, and maybe we should just choose the remote worker ones and sort of push them to politely to leave themselves.

Yeah, a quiet firing. You push employees out without actually laying off, which means you don't have to pay out severance. So it's not a very good thing for a company to do. And a lot of Dell employees were kind of anonymously talking to news outlets saying, like, we all know what's going on here. they are trying to push us out. The thing that makes no sense to me, though, is the fact that they talked to one of the senior person at Dell, and they said, I can't think of any team here that has everyone who lives in the same state.

So even though you're trying to foster in-person collaboration, get people to go back to the office, a lot of people are going to an office where their team doesn't even work in. So are you really trying to foster in-person collaboration if no one lives in the same state to begin with? So I think that that is another reason why employees are kind of seeing through what Dell is doing right here. And the hypocrisy. I mean, you can't boast about remote work two years ago and saying how coming back to the office is the stupidest idea and it doesn't do anything. And then reverse yourself two years later.

Just don't, that's why I just advocate for not making any blog posts where you're making very, you know, big pronouncements. Just keep your mouth shut. And then that gives you a little more flexibility in the future to change your policies. but Michael Dell dug himself in the sand, and now he's, you know, getting criticized for this particular thing. But overall, it's just very fascinating to watch how the remote work sort of in-person office politics is playing out. Because what Dell is doing right now and a bunch of other companies have done is create two classes of employees, essentially. You have one, you have upper class where you come into work at least three days a week, and you have career advancement opportunities. you're able to collaborate and meet your superiors and obviously get more promotional opportunities

that way. And then you have the remote workers who maybe they're mothers, new mothers, or parents, or there's a number of reasons why you might have to work from home. And they're a lower class. So you sort of see this sort of caste system emerging in various corporations. Yeah, it's not a good look any way you slice this. And it's never good when you also have the LinkedIn post, the receipts from your CEO, saying you're not. going to do any of the things you do. And then you basically hold people's careers hostage with this new policy. But it's not just Dell. I mean, across the board, remote workers are getting promoted less than people who go into work. Over last year, 5.6% of employees working full-time

in an office were promoted as opposed to just 3.9% of remote workers. Okay, I'm going to draw a really weird connection for our second to last story of the day. Recessions may be good for your health. That is the conclusion of a recent paper titled Lives versus Livelihoods from four economists published by Chicago Booth Review. The researchers found that during a recession, people tended to live longer and healthier lives. The question is why, of course. The study ruled out some options. People weren't using their free time to work out more. And infectious disease rates didn't suffer any noticeable drops. Turns out the answer is pollution. Pollution from industrial activity, electricity generation, and transportation tends to drop in periods of economic malaise.

The data was pretty cut and dry. During 2007 to 2009, age-adjusted mortality rates dropped 0.5% for every 1% bump in an area's unemployment rate, and counties hit the hardest by recession also experienced the greatest declines in pollution. Neil, what do you make of this connection? It's absolutely crazy. I mean, ask anyone, and you'll say, is a recession, go? or bad for people's health or longevity. It's probably say it's bad. I mean, they're unemployed. They're not doing anything.

There's just general depression going on across the economy. People don't have work. So you're probably like, oh, they'll probably die earlier. That seems fairly obvious. But the fact that a recession will extend your life is absolutely mind-blowing. This is an even crazier stat. One in 20-55-year-olds had an extra year of life, which amounts to hundreds of thousands of Americans because of the Great Recession.

This isn't to say recessions are bad. Maybe on net they are bad, but they're a lot less worse than we thought because of these longevity benefits. Yeah, it's definitely a counterintuitive that recessions improve the welfare benefits for some people because if you look at particularly old people as well who are no longer in the labor market, so they're not going to be as affected by a layoff or something like that, but they will be affected by the fact that the air might be cleaner. There's less pollution going on.

And so if you look deeper into this, though, if recess and save lives, does that mean boom times kind of cost lives? And technically, it's yes, according to the paper, because when you have an economy that's firing all cylinders, creating more jobs, it also is creating all sorts of these unseem harmful effects. And all you have to do is kind of look at the top countries right now with the worst air pollution in the world. That kills an estimated 7 million people per year worldwide. 100 of the most polluted cities are in Asia, with 83 of them being in India, in particular, a country that has experience a very fast-growing economy. So there's definitely trade-offs between economic growth and the health of the people in the economies. Yeah, but I refuse to believe that you want to put the brakes on economic growth for the sake of reducing pollution.

I think you can have it both ways. The biggest takeaway here is to regulate pollution more. Because if you regulate pollution more, then you have economic growth and people are. are healthier. But this goes to show just how bad pollution is for your health in general. So I think that's one of the main policy prescriptions that the authors took away. They said, we can have an economic growth. But the fact that we're not regulating pollution as much as we do is a big miss. And that's something we need to focus on going forward. Okay, our final story. The major league baseball season begins today with a game between the San Diego

Padres and the Los Angeles Dodgers. Who made the biggest splash of the offseason by signing superstar Shohei Otani to a $700 million contract. But baseball fans, you don't have to wait till tonight to watch Otani's Dodgers debut. In fact, the game is probably on right now as you listen to this. It started at 6 a.m. Eastern because the game is being played in South Korea as part of the MLB's push to expand its international audience. Baseball is big in South Korea. It has its own professional league, the KBO, which some of us remember from the dark days of

spring 2020 because it was the only active sports league on the planet and we'd wake up at 4 a.m. just to feel something. But MLB is on another level and tickets to see Otani and the Dodgers play in the league's first ever game in Korea sold out within an hour of going on sale. Yeah, South Korea loves baseball. It's domestic league, the KBO is known for having just this incredible atmosphere, this very great fan atmosphere where the fans actually have personalized fight songs for every single batter.

So it doesn't matter if you're the biggest. star or a young rookie, they're going to construct a song that kind of focuses in on your names. It's just an incredible environment. And a lot of MLB players have said that, like, they felt the love over there. And a lot of these cheerleaders are like literally the leaders of the cheering section have spent weeks like constructing chants that for Shohei Otani and the MLB player. So just a very, very cool fan environment. Right. I mean, we have walk-up songs in MLB where every player has a little walk-up song that they play for 30 seconds. But when you go up to bat in a Korean baseball game, they're literally chanting your name to some particular song that they crafted

the entire time. And they do this from the first out to the last out. So I highly encourage everyone to go to a KBO game if they haven't. I've known some people who go and they just say, it's just an amazing experience. One other really interesting thing about Korean sports fandom is that it is majority women. I don't know if there's any other place on the planet, but 55% of professional sports in South Korea are women compared to much less than half in the United States and about a quarter in Britain in Australia. And experts allude to the security at stadiums and the fact that South Korea has this very fan-oriented culture where they hold up, you know, K-pop stars and sports stars as national heroes as driving a lot of female fans. So it's a very

interesting sort of curveball to put a baseball metaphor on it. I like that, Neil. The one thing that I was curious about is that South Korea and Japan have some kind of bad sporting blood between the two because, I mean, if you go back as far as 2006, Itro Suzuki kind of said, I want to beat South Korea so badly that they'll never catch up for like the next 30 years. A South Korean pitcher ended up hitting Ittero Suzuki. So there really is like this bad line of bad blood that goes back for a long time. Back to colonial days. Yeah, and obviously back even further than that.

But Shoai Otani, they have kind of embraced them because. It's very hard to hate. He is the most charismatic day. Yeah, absolutely. All right, that is our show for this Wednesday. If the week was a camel, then we'd be right at the hump. Hey, they should really call it hump day. That'd be clever.

All right, have a strong opinion on something we talked about on today's show. Maybe you want to weigh in on Dell's decision to not promote anyone who's working remotely. Send us email to Morningbrewdaily at Morningbrew.com and let us know. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lou is our producer. Olivia Graham is our associate. producer. Yuchinawa Ogu is our technical director. Billy Minino is on audio, hair makeup,

you're never here, but you're still up for promotion. 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.