Morning Brew Daily - Biden's Plan to Help With Student Loans Launches & US Homes are Shrinking

Episode Date: August 23, 2023

Episode 131: Neal and Toby circle back and update some stories Morning Brew Daily has been following the last couple of weeks. Including Biden's plan to help student loan borrowers, Meta is launching 'Threads' on desktop, teamsters ratifying their new deal with UPS, and a South Korea power plant releasing radioactive water. Plus, Ikea goes all in on San Francisco and why America's homes are shrinking despite getting pricer. Finally, a cargo ship that runs on wind power sets sail and IBM is selling the weather channel. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Listen to Money with Katie Here: https://chartable.com/podcasts/the-money-with-katie-show 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. On today's pod, the UPS strike has officially been called off after employees ratified an agreement that gives them major pay raises. And Toby and I go Zillow surfing to uncover the latest trends in house design. Then IKEA is going against the grain by deciding to open a new store in a controversial city center. Plus, the shipping industry is testing out some brand new tech to get more efficient, which is actually centuries old. It's Wednesday, August 23rd.

Let's ride. Toby, I have some exciting news for our listeners. You will all be able to confirm that we are in fact real people. Yep, Morning Brew Daily is excited to announce our first live event. On September 11th here in New York City, we are going to be hosting a screening of the new movie Dumb Money, which chronicles the meme stock mania during winter 2021. When Reddit traders successfully took down a multi-billion dollar hedge fund that had shorted GameStop,

that Wall Street drama has been turned into a movie. starring Seth Rogan, Paul Dano, and Pete Davidson, and Morning Brew Daily listeners will have the opportunity to watch it all together and hear Toby and me interview the producers of the movie. We'll have more details on how you can get tickets in the coming weeks. But Toby, I am so excited for this and to finally learn how to trade stocks. I know. This moment in time is just so burned into my memory.

I had just kind of started working at Morning Brew. All hell broke loose. GameStop started going to the moon. And the movie itself looks amazing. I mean, Pete Davidson, Paul Dano. Like these are the best actor of our days. Yeah, big name people. But I am definitely most excited about getting the chance to meet some Morning Brew Daily listeners.

So far, the only Morning Brew Daily listener I really know is my mom and my grandma. So hopefully it's bigger than that. So I, we see your emails. We see your comments. But finally getting to meet you guys in person is going to be great. So yes, Neil, more info is coming. But for now, if you want to hang with us, catch the screening, maybe even meet hair and makeup. up, please send an email to Morningbrewdaily at Morningbrew.com indicating you're interested.

That is Morningbrewdaily at morningbrew.com. Sound like a radio guy. Thank you. Take us away, Neil. All right, let's get to the news. In the several months we've been doing this podcast, we've discussed some major stories, but like your high school friend who moved to the West Coast, we haven't really checked in on them a while. So in the first section of the show, we're going to circle back, and I'm so sorry for

using that jargon, to a few of those stories that have reached some sort of resolution this week. So first is the big student loan income driven repayment plan that the Biden administration released last month called Save. That opened for enrollment yesterday, and the White House says it will slash some borrower's monthly payments by 50 percent and eliminate all obligations for others. As for the typical student loan borrower, you could save $1,000 per year under the new plan, though some benefits won't kick in until next summer. Just to note, this is different than the broad student loan debt wipe out that Biden had proposed because that got blocked by the Supreme Court in June. This save plan is just a more generous version of existing income driven repayment

plans on the books. For example, it would reduce payments on undergrad loans to 5% of discretionary income down from 10 to 15% in plans currently available. So this is the Biden administration's way of saying, look, we may not have gotten our big cancellation plan through, but we're still looking out for you student borrowers. We know you collectively owe one. trillion dollars and we're trying to figure out a way to make that easier. Yeah, Biden's been ducking and weaving ever since the Supreme Court. The Supreme Court one was kind of a Hail Mary. This was the more dink and dunk, more sustainable plan from the beginning.

So I think this is going to be huge for a lot of people still because a lot of people's payments will go to zero and then also interest won't accumulate on a lot of different plans if your payment is near zero, which is huge because it was always interest. That was the thing that was, you could be making your payment and still 10 years later down the line. You'd have more outstanding debt than you started with. So getting something to reduce those interest payments is definitely going to be huge for a lot of Americans. Right. This has definitely been a piecemeal approach since that Supreme Court stuff was the Supreme Court blocked this big one.

But he's been, he has all these other programs going on too. I mean, they've wiped out $116 billion of relief for 3.4 million borrowers across a number of of different programs, the administration announced on Monday. So this is kind of, like you said, a dink-and-dunk approach, maybe like Andy Reid's, Eagles offense, just to lower some borrowers, but the borrower's payments. But obviously, the big thing looming on the horizon is the restarting of payments after more than three years,

which is going to happen in October. And no one really knows what's going to happen. But it might definitely squeeze a lot of people's wallets and retailers that have reported earnings over the past few weeks have definitely warned that they might see their sale. dip out of it. I'm really curious to see how retailers fair. We've been talking about it for a while. All right, Neil, our next story we want to circle back to is a name. I'm sure you haven't really

thought about much recently, and that is threats. Meta's text-based social media platform got off to a massive start, racking up hundreds of millions of sign-ups before daily active users fell off a cliff as the novelty kind of wore off. But yesterday, Meta started to make good on the promise that more would be coming on the threads front and rolled out a web version of the platform expanding access beyond just the mobile app. Neil, to this, I say, about time, but it also feels like a little too little too late for the supposed Twitter slash X killer. I don't think it's too late.

I think we live in this very, you know, immediate gratification society. This is going to be a long burn. I don't think it's, I think all they need to do is keep updating things. a few weeks, a few months, and people will come back. I don't think this is like something that they need to do everything ASAP. I think it's a very interesting case study in product development because sometimes the trap you fall into is push out a minimum viable product as soon as possible. Threads kind of recognize that Twitter was vulnerable for a moment and shipped this app that was very bare bones. And the logic is, yes, we'll add features and hopefully attract daily active

users back to the platform. But sometimes that's not the case. Once you lose their attention, you'll never get them back no matter how much you shift. So it's definitely going to be interesting to see if meta can win back. Because, I mean, the big headline stat here was that daily active Android users on threads peaked on July 7th at 49 million and then plummeted to 10.3 million just a month later. So we're seeing like this massive, massive drop-off in users. That's a specific cohort. Right, but that's my cohort, and I am one of those people that have dropped off because there hasn't been a desktop app. I go on social media on my desktop. I'm just on my laptop all day.

So now the fact that they have a desktop version means that I'm perhaps one of those daily users that might come back. So it's just fun seeing meta, like Zuck and these guys kind of behave like more of a startup. Like you said, that product development timeline that you just explained is very much indicative of a startup mentality where we're just going to ship something out. It may not be perfect. We're going to gather feedback from our users, and we're going to make changes super quickly. It seems like that's what they're doing. And Zuck is giving off a little bit more of his personality there.

He posted this picture of him at Harvard in 2004 building actual Facebook, and then the caption was actual footage of me building threads for web. So they're putting more of a face and a personality to this, while Elon kind of self-destructs over there on Twitter. Obviously, Twitter slash X has been way more. obstructible than anyone imagined and people are still using. Can't kill it. Well, have you, you know, you post on threads for Morning Brew?

Like, what have you seen in terms of, I mean, this is huge for me because I'm so annoyed about going to my phone every time I have to post because it's just less of an easy interface. And so I am extremely excited from this from a social media perspective, just because it's so much easier from your computer. Well, at least for one thing, Matt, you just made Toby's job a lot easier. Thank you. Let's move on to the next story we need to circle back on. The UPS strike that was predicted to devastate the economy is officially called off.

Yesterday, UPS members of the Teamsters Union ratified a new five-year labor contract with the company. That includes about $30 billion in new money. To illustrate just how excited employees are about this new deal, about 86% of them voted to approve it, which is the union's highest vote ever for a UPS contract. And we don't blame them. Over the past few weeks, social media threads and X has been, flooded with memes about just how much UPS workers will make under the new deal. Under this contract, an experienced driver will make $49 an hour in the final year of the deal,

bringing their total take-home pay, including wages and benefits, to about $175,000 a year. How much money is that? Well, according to Bloomberg opinions, Tyler Cowan, if these UPS drivers form their own city, it would be the UK's richest city by far, easily topping the London metro area. it would also be one of the wealthiest in the U.S. Big win for the workers, big win for the Teamsters, President Sean O'Brien. I guess big win for UPS because while they didn't get much of what they wanted, they're still avoiding a work stoppage.

And big win for other labor organizers who will use these UPS negotiations as a template going forward. Yeah, O'Brien literally said, this is the template for how workers should be paid and protected nationwide. And he actually specifically said in non-union companies like Amazon, better pay attention. He's coming for UPS and Amazon. Yeah, so he literally called out, called out Amazon in particular. Yeah, this contract's great. The other thing that was a big part of this negotiation was air conditioning,

because remember, UPS trucks aren't retrofitted with any air conditioning, and it gets hot in the back of those trucks. And so one of the parts of the deal was all new cars will be, all new delivery vehicles will be retrofitted with air conditioning, which, again, I just cannot imagine delivering packages. in the back of that cab where heat was getting crazy high. Also, though, this is expensive for UPS. It raised its labor cost by 3%, more than 3% a year.

But also, UPS has been absolutely crushing it recently. Adjusted net income rose 70% over the previous five years, so they can certainly afford it. So kind of looking like a win, win, win all around, if you ask me. If I'm Masterworks, I'm getting on the phone with Sean O'Brien, and I'm saying, teach a negotiation class on my platform. Oh, wait, is it? called masterwork? I think it is. No, it's a masterclass. Masterclass. If I'm masterclass, I'm

masterclass, I'm calling Sean O'Brien because he is, he is fierce. Yeah. All right, Neil, our final circle back story of the day. Tomorrow is the day that Fukushima nuclear power plant will start releasing treated radioactive wastewater back into the Pacific Ocean. Now, this is as controversial as it sounds. Hong Kong and Macau announced that they are banning products from Fukushima, while China has started to radiation test products from Japanese fisheries. But officials say the process is safe and will be treated and then diluted with seawater to level safer than international standards. Neil, tomorrow will only be day one of a 17-day release of 7,800 tons of treated water,

but the goal is to eventually release 31,200 tons. So we still have a long, long way to go in. This is going to take decades. But Japanese officials say it's a necessary step to do. decommissioned the plant that was completely melted down in the earthquake and tsunami in 2011. So we'll see what happens, but this is definitely controversial. It's causing all kinds of tension in the region. President Biden hosted both Japan and South Korea that had conflict for many decades at Camp David last week, and there was a sign that they were becoming a little friendlier,

and then all of a sudden Japan is doing this, which is raising tensions again. And the fisheries off the Japanese coast are feeling kind of blindsided because this wreck their industry in 2011 completely and they're having to go through everything again. China and South Korea banned imports from the area. Japan exported $2 billion worth of fish. As you know, Japanese fish is very popular, especially in that region. So we're going to have to wait and see. But the big thing here is tritium, which is a radioactive element that is not able to be filtered out of the water. You can only dilute it and opponents of the plan say it's dangerous even in small amounts and you have Japan on the other hand saying every like a bunch of other nuclear power plants around the world

also release treated wastewater with small amounts of tritium and it's plenty below international guidelines for drinking water yeah so they're gonna they're gonna continue to monitor this obviously you're going to test the seawater in marine life throughout literally day by day to see how it's going and we'll shut it down if anything uh kind of If anybody goes through it. Yeah, alarming. Yeah, alarming pops up. But yeah, definitely a controversial thing.

But yeah, that's... You gotta be a good neighbor. Like a good neighbor. I don't know about that. All right, Neil. Let's move on. We've talked a lot about San Francisco on this show and how it's downtown.

It's been struggling with everything from fleeing retailers to autonomous cars causing all sorts of havoc. But you know what they say? Everything is okay as long as you're eating a Swedish meatball. Okay, I totally just made up that saying, but it's what I imagine is going through IKEA's mind after the Swedish

Furniture Giant is set to open a new store in a downtown district of San Francisco later today. It's a new concept IKEA is testing, a paredown store aimed at more casual stop shoppers and office workers with a much smaller footprint than the traditional Librenthean layout it's known for. But Neil, it's certainly jarring to see a big-name retailer moving into San Francisco when the likes of Nordstrom and Banana Republic and Old Navy and Amazon Go and anthropology and Office Depot and I could go on have all packed up and moved out. Pretty crazy. It's pretty crazy, but IKEA, this is part of a huge push into the U.S. I think they're planning on opening 17 new stores spending $2.2 billion while we've seen Home Depot and other home furniture companies not doing well in this current

economic environment as people have already remodeled all their homes during COVID. IKEA is somehow still blowing it out of the water and it's because of their prices. I mean, I still think this is a very bold move, though, specifically betting on San Francisco because, I mean, all signs point to San Francisco's downtown not doing quite as well as other parts of the country. Activity this spring in downtown San Francisco, which is measured by mobile phone use, was 68% below its pre-pandemic levels. That's the largest decline of any U.S. city.

So there's simply just not that many people walking around downtown San Francisco. And I mean, if you look at the rest of the city, office vacancies are at a 30-year high, lots of people have permanently moved away. Its population declined more than 60,000 people from 2020 to 2022. So a lot of people saw this move from IKEA, and it's a little bit of a head scratcher, but they're kind of bullish on this concept and they're betting on themselves. As four other famous Swedes says, take a chance on me, you know? Oh, man.

I think having one anchor tenant like this is a, is a sign, you know, a way of saying, we believe in you. And then other retailers were looking come back. And so overall, I am bullish on San Francisco. It's been counted out so many times before. Yeah. After the dot-com bubble, after 9-11, in New York, we saw this with New York. There was so, how many articles were written?

New York is dead. And now rents are at a record high. I'm not counting out San Francisco. it's too beautiful. The environment is too good. The weather's too good. The smart people there, a lot of smart people haven't left. The ecosystem is still there for tech.

So I would buy so much stock in San Francisco if I could right now. Have you been there? It's just gorgeous. I know the downtown area is struggling right now, but it has too many existing assets. Plus, the AI boom is set to transform it even again. So 50% of all AI funding, AI startup, up funding in the first half of 2023 went to the Bay Area. It's so sticky. It's going to come back.

AI and IKEA are going to save San Francisco. You heard it here first. Okay, Neil, before we jump into our next story, we're going to take a quick break. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill three burner gas grill, or get $50 off a select Weber Spirit grill and bring big flavor to your backyard. Then set the scene with Hampton Bay string lights that bring it all together. Shop spring backyard days for seven days at the Home Depot. Now through May 6th.

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Learn more at Windows.com slash student offer. While supplies last ends June 30th, terms at AKA.m.m.S. College PC. We are back and Toby on Tuesdays you always give us a trend from the Gen Z world. Well, now I want to give you a trend from the millennial and Gen X worlds. And of course, there's nothing more us olds like to obsess over than houses. So what is going on in the house design world? Well, two big shifts I want to call out. First is the explosion of bedrooms. New research from the Census Bureau shows that of the one million new single-family houses completed in the U.S. last year, 48 percent, nearly half, had four bedrooms or

more, which is the highest share since they've been keeping track. For comparison, just 33 percent of existing homes have four bedrooms or more. The other trend, as the number of bedrooms increases, houses aren't getting any bigger to accommodate them. In fact, houses are getting smaller. The average unit size for new housing has fallen 10% nationally since 2018 as builders try to attract would-be homeowners who just want anything they can afford.

But nearly half of new homes have at least four bedrooms and houses are getting smaller. Kind of wild. It is definitely wild. So you look at what's going to the chopping block and things that are getting cut are dining areas, bathubs, and separate living rooms. secondary bedrooms and loft spaces are shrinking, but they're not necessarily disappearing. And then what's getting expanded, multi-use rooms like kitchens and living rooms,

and some Jack and Jill bathrooms, which are shared between two rooms. I hate though. Yeah, for siblings. Like, that makes you cringe right there. And then, yeah, also in some places, you're just cutting the entire dining room in, like, the kitchen island is the only place where people are eating. They just like me for real, for real. Yeah, exactly.

It's also what was so interesting to me is that this changed the game for furniture sales as well because now that you have more mixed use rooms you're also seeing items with multiple functions in furniture so like kitchen islands with drawers and wine racks pull out sofas you can sleep on and then smaller drop leaf dining room tables so it is interesting how all these effects

kind of compound into the broader market. I'd love to see IKEA's kind of multi-use. Well I think that these two stories play off each other really well, actually, because the IKEA store is a smaller store concept that's meant for smaller spaces, which is exactly what's happening. So I think somehow we managed to tie these two stories. Yeah, exactly. And then also just in terms of the broader market, it does seem like the hotter the market, the smaller the home is getting because Seattle area homes have shrunk the most over the last five years. They're 18% smaller than they were five years ago. And then Charlotte, North

Carolina and San Antonio both shrunk by 14%. So it does seem like in these super, super hot housing markets. Builders are just saying, we're going to create smaller homes, hopefully more affordable, even though they are still very expensive. So that's the kind of like the cause and effect that you're seeing in these really hot markets. And then as far as the bedroom proliferation has been concerned, why do people need four bedrooms if households are getting smaller? I mean, in 2022, 64% of households had just one or two people, which is up from 41% in 1960. So our households are getting smaller, but we have more bedrooms. And I think that's directly attributable to the work from home revolution. Right, right. Because a bedroom isn't really a bedroom these days.

A bedroom is where you put your peloton, and it's where you have your office. So maybe a misnomer to call it a bedroom. Okay, Neil, let's move on. And our next story is proof that sometimes the old way is the best way, because shipping companies are looking to days gone by to navigate the seas more efficiently in the modern era, I am, of course, talking about sails. Now, modern cargo ships are typically inefficient, dirty oil guzzlers, but a ship called the Pixus Ocean, operated by the biggest agricultural ship in the world, has just finished its maiden voyage with a new technology on board called wind wings. Wind wings are 123-foot-tall, solid wing sails that are made from the same material as wind turbines.

They are fitted to the deck of an existing cargo ship and are designed to reduce fuel consumption and carbon emissions by around 20 to 30% over the length of a voyage. Neil, this just makes too much sense to me. Why have we not been putting more sales on these giant cargo ships? I'll tell you why, because it doesn't work on container ships. They're so big and they're so difficult to attach, but it's so expensive. They're not, we have created these trade routes that don't rely on wind. Right? Like in the past, a couple hundred years ago, we, all of our roots that people designed to facilitate trade were based on trade wins, right? We have completely ditched that and we're just like, okay, we need to get from Shanghai to the port of Long Beach.

And so we don't rely on whatever happens to the wind anymore. So I am bearish on this. I think it, I'm not going to call it a stunt because it was expensive, super expensive, but I don't see this happening. You can't put it on a container ship with which contains most of cargo. this is on a bulk carrier, which is carrying like loose grains of stuff. So I don't mean to like shut this down. I think it's a fun idea. But I don't see it being a meaningful way to move cargo greenly.

Right. It's not exactly super cost effective as of now too, because Cargill, which is the shipping company that installed it on one of their ships, they say it will take at least seven to ten years for the fuel savings to surpass the cost of actually installing the sales. So it definitely is, I think this is the way. that the shipping industry is moving is like, we got to figure out how to reduce carbon emissions become more efficient and why not look back to sales.

I also think it's interesting that the company that makes these sales, they all have backgrounds in F1, too, and also the Americas up, which is like a very, very high-tech sailing race. And so I do think that these technologies will become better over time. Maybe we figure out a way to install them around cargo. I don't know exactly know how, but I don't know.

I'm bullish on this. You're bullish on San Francisco. I think we need to throw everything at the wall and see what sticks because the cargo, the shipping industry accounts for 3% of all global emissions. It is very dirty, as you said. So they need to try a bunch of different solutions to try to make this greener because it is a big pollutant. It does remind me of this professor I had in college who wrote an entire book on old transportation technologies that we can't possibly make better. So things like elephants used for war and transportation in like the jungles of Southeast Asia. Like, there's no better way to move goods than by using elephants, which they used thousands of years ago.

And then carrier pigeons were also seen as, like, a very useful way to transport things, even now that we have, you know, airplanes and helicopters and things like that. So I'm all for looking to the past for inspiration for the future. I think that's great. You got my mind going right now. Like, what else is efficient? So I'll have to read that book. I will send it to you. All right.

For our last story, we turned to a little M&A action. IBM is selling the weather channel to a private equity firm. I'll wait a second for you to digest that information. IBM, the tech giant, is selling the Weather Channel. Yes, as strange as it seems, IBM has had a weather unit since 2015 when it paid $2 billion for the weather company, which includes the Weather Channel mobile app and websites, weather.com, weather underground, and storm radar.

But IBM is trying to become a leaner, meaner software and AI company. So just like everyone else who's listening, it thinks it probably makes sense to not be in the weather business anymore. Toby, I know your jaw dropped to the floor when you learned that IBM owned the Weather Channel. It definitely did. Although I did start to do some digging into the logic behind this deal. They bought it for $2 billion a couple years ago. And over the last eight years, it's launched a number of new stuff on top of the weather company's properties. They've rolled out hyper-local forecast. COVID-19 maps was a big feature. And then also they've been leveraging data from aircraft and smartphones to have better weather data. So IBM is a data.

It is a cloud company. And so once I started putting the pieces together, I saw what they saw in the weather company. But now you're right. They're pairing down. It's no longer a core focus anymore. It's kind of sad to me, though, because I love when companies kind of take these asymmetric bets on things that seem outside of their scope. But yeah, now it's falling into the hands of private equity. But in selling the Weather Channel, they are losing the most trusted news source in America.

The weather channel, by like leaps and bounds, 30 to 40 points, is by far the most trusted news source from Republicans and Democrats. The one thing we can all agree on is that when the, which is funny because, you know, meteorologists are known to be quite wrong in certain circumstances. So, yeah, there was a recent poll that came out earlier this year that kind of dumbfounded everyone. It was like, all, well, we all can't agree on anything except that the weather channel will provide us trustworthy news. Yeah, it's the truly the only bipartisan thing that, like, we agree. on the next most trusted outlet is pvs which is uh only has a 30 percent 30 point advantage on trustworthiness the weather channel sitting at a 53 point margin so it's head and shoulders like you can trust you can trust the weather chain i would bet on the weather industry i mean think about the

news we've been talking about this entire summer wildfires air quality like indexes i mean i would bet on the weather industry and weather apps and weather technology i think it's just going to become even bigger yeah that is our show for today hope everyone has a humphers day to remember. If you want to write in and let us know how many bedrooms you'd want in your house, our email is Morning Brew Daily at Morningbrood.com. Also, send us an email if you want to watch a movie with Neil and I and confirm that we are, in fact, real people. All right, let's roll these credits. Emily Milliron is our editor and producer. Samantha Velas and Raymond Lou are associate producers. Euchenoa Ogu is our technical director. Billy Minino is on audio. Hair and makeup is

sailing away. Devin Emery is our chief content officer and our show a production of Morning Brew. Great, show today, Neil. Let's run it back tomorrow. All. Pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly, big board buck slot machine by aristocrat gaming, Yamava Resort and Casino at San Manuel is giving one person a $1.6 million dream package.

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