Morning Brew Daily - 'Catastrophic Implosion' Destroys Titanic Sub & Why Global Inflation Keeps Rising

Episode Date: June 23, 2023

Episode 88: Neal and Toby have the latest on the 'catastrophic implosion' that destroyed the Titan submersible. They also explain why inflation rates continue to rise around the world and how Overstock.com would find any value in purchasing Bed Bath & Beyond's IP for over $20 million. Plus, why Dominoes is up and Disney is down. And following last night's NBA Draft, European athletes are having their moment in major American sports. Finally the guys look ahead to the Gamestop meme stock movie, 'Dumb Money'. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning, Brew Daily Show. I'm Neil Fryman. And I am Toby Howell. On today's Friday show, you thought we were done with interest rate hikes? Inflation would like a word. And we'll hop in a time machine to meme stock mania of 2021 to hang with Seth Rogan, Pete Davidson, and Nick Offerman. Then the search and rescue operation for the Titan sub has unfortunately ended in tragedy. Plus, Bed Bath & Beyond might have a new lease on life, even if it doesn't actually have any leases. anymore. Neil, it's Friday, June 23rd. Let's ride. Neil, you plug this podcast at the top of the newsletter this morning, so I just want to give a quick shout out to any new listeners or watchers who are joining us for the first time. I also want to give them a little behind-the-scenes anecdote

to start off the show this morning. So every time that we hit a new daily downloads record, the CEO of Morning Brew, Austin Reef, sends Neil and I a gif of stone, Steve Austin, the WWE Star. I love this because we don't even have to look at the numbers anymore. I just wait around until 6 or 7 p.m. to see if we get that little gift from Austin. And luckily, this week, we got that gift right on schedule. I got a little Slack notification. So I guess the story, moral of the story, is share this pod with your friends so Austin can

keep sending us his little stone cold Steve Austin gifts. Yeah, it's been a nice growth trajectory. We're very grateful for everyone listening and watching. This has been so fun. And I don't even know how many episodes we've been doing. I know. Almost 100 now. We're coming in on 100.

Freaking crazy. Thanks, everyone for... 88, I'm being told. And do we start in the winter? Now it's the summer. Which is kind of nice because, you know, the sun comes up a little early. And when we go back to the winter, it'll be kind of interesting to see what it'll be like this early in the morning. We have a Friday tradition where we do this classic.

you know, small talk situation. So Toby, I got to ask you, was it a fast week or a slow week? This is like when you put an asterisk next to someone's sports title because some controversy happened. For me, it is obviously a fast week because I missed Tuesday. It was already a short week because of Juneteenth federal holiday. So obviously, it's a fast week for me. It was a fast week for me, too, but even normalized for the short week.

So like per capita, it was still a short week. Gotcha. It was very busy. We are speeding towards July 4th. So excited for another holiday. There you go. All right, Neil, let's jump into our top story of the day where, unfortunately, the saga of the missing Titan submersible

that lost contact while exploring the Titanic has come to a tragic end. We now know that all five passengers on board, including a Pakistani businessman in a sun, a British billionaire, a legendary Titanic explorer, and the CEO of Ocean Gate Stockton Rush have died. The news broke yesterday after pieces of the sub were found on the ocean floor near the Titanic and later confirmed by a statement from Ocean Gate, which was the company that managed the craft.

There are so many different parts of this story that we've already touched on, but I just want to briefly sum up one additional piece of information we learned in the past 24 hours. I think the biggest bombshell is that the U.S. Navy actually detected audio that sounded a lot like an implosion all the way back on Sunday right around the time that the craft lost communication with its mothership. But the sound wasn't definitive, and thus they allowed the search in rescue mission to continue over the past week. Only when the debris was found yesterday were officials ready to declare that the search was over. So, Neil, what are some of the biggest storylines that stand out to you now that we know the fate of the decision? Well, you know, when you talk about not

suffering when you die. This is the most instantaneous way you can go and go in possibly history. I was looking on Quora and they were talking this about a nuclear sub. When a submarine hole collapses, which is what happens here, happened here in the Titan disaster, it moves inward at about 1,500 miles per hour or 2,200 feet per second. A modern nuclear submarine's hole radius is about 20 feet. So the time required for complete collapse is a about one millisecond. And the human brain's rational response time is at best 150 milliseconds. So we were all wondering whether they were, you know, down there alive, gasping for breath with the oxygen tank dwindling. And this is not what happened here. Yeah. You saw a lot of people

saying that of the worst case scenarios, this is like the best of the worst case scenarios because it happened so quickly. We also got an appearance, a television interview appearance from James Cameron, who is the director of the Titanic movie. And his big quote was, I'm struck by the similarity of the Titanic disaster saying it was kind of the same thing where maybe the hubris of a pilot plowing forward into the unknown without giving the proper safety precautions.

Very similar parallels there. But he is a ton of credibility. He's not just the Titanic director. He is a underwater explorer, too. He's built his own submersibles. He's made 33 dives to the Titanic wreckage. And he kind of did a mic drop yesterday on all these interviews when he was like, I've been on the Titanic for more time than the actual captain of the Titanic. So he comes out of this looking really good.

He also criticized, yes, Ocean Gate, the company who seemed to, you know, ignore a lot of warnings from experts over the past few years for not getting their craft certified by this third party body of experts. Yeah. And then also just to quickly touch on kind of the Internet's reaction, this story. Wild. This was one of the more collective internet stories we've seen since we've been doing this podcast for sure. And there's so many angles, like you had the billionaire's stepson, Hamish Harding, who went to a blink 182 concert. Internet was kind of up in arms about that and his reaction to it. And then he also started just being kind of generally creepy and inappropriate on the internet. And then there was also like there was the orca angle too where we had just

heard about these orca attacks and people are saying, this is the ocean. kind of uprising. So there was a lot of different, like, jokes being made and then people saying, should we be joking about this? So just one of like the true internet stories of the year so far. And then you had the media kind of navel gazing being like, we're covering this so much. We're covering this wall to wall. Meanwhile, last week there was a huge migrant ship disaster where hundreds of people were killed

in the Mediterranean, one of the worst disasters ever. And that got, you know, a fraction of the coverage of this, which, look, people have are going to be more interested in this. That's just a fact of life. But the media is kind of being like, look at what we're doing and you saw a lot of pushback. I want to talk about a little bit about what's next for the adventure tourism industry, which

is this growing industry of taking really wealthy people to under-explore parts of the world like Titanic, Mount Everest, the South Pole, and obviously space. And this is a huge industry. It was going to grow to $1 trillion this year. I mean, the tickets for this particular voyage We're $250,000. So there's a lot of questions about, will there be more oversight of these extremely dangerous missions?

I mean, my take is that nothing is going to stop explorers from exploring. It's human nature, absolutely. And one final point on this topic, we did get some questions, what the heck were the banging noises? Because remember, there was a Canadian aircraft that detected banging noises that they thought sounded human because the regularity of them. And honestly, there's not a great answer for this. a lot of the theories are maybe it was just the wreckage itself hitting together. Maybe it was just wildlife. Like there are noises in the ocean.

So that was the big question I had. It was like, I thought we heard. The ocean is loud. Have you ever been to the beach? The ocean is loud. It's like 100 decibels. The ocean is very loud. Absolutely.

All right. Let's move on. Inflation, I have this comparison. Inflation is just like glitter. No matter how hard you try, you just can't get rid of it. And I'm not necessarily a glitter guy. But when you get it on you, you cannot get rid of it. That is for sure.

So central banks around the world have raised the alarm yet again that inflation is sticking around much longer than they expected. So they are jacking up interest rates even higher to stamp it out once and for all. The most significant move came yesterday when the Bank of England made the surprise move to jack up interest rates by half a percentage point, which shocked markets. England's inflation rate is still stuck at a much too high, 8.7. And the central bank is like, look, I know you're all sick and tired of these high interest rates and what it's doing to your mortgages and loans, but we still have a huge inflation problem on our hands. So we got to do something about it. But it's not just the Bank of England. The European Central Bank and the Central Banks of Australia, Canada, Switzerland and Norway have all announced rate hikes in the last few weeks, even Turkey, which had gone against the grain and lowered interest rates to combat inflation, which is not typically what you should do. They, Turkey yanked them up another 6.5% yesterday. So this is clearly a pattern. Yeah.

The central banks are in such a rock in a hard place right now because they need to decide if inflation really is stalled and they still have to keep hiking rates or if it's coming down and hiking rates would be disastrous if they are coming down. So it's a call that would either like send the world like the richer countries in the world into a deep recession or force it to like endure these high years, these years of high inflation. So it might. I don't rive. I don't envy anybody in the central banking systems.

It might sound very theoretical that, you know, the Bank of England or the European Central Bank or the Fed is meeting in their little offices to decide interest rate hikes. But it really will determine the course of the economy and a lot of, you know, your personal finances and why you're going to pay for homes. So this is a big decision. And it's going to happen here, too, it seems like. We know that the Fed paused interest rate hikes last meeting for the first time in 15 months. But Powell was like, I just want to warn you, this is a pause.

I am not stopping. And so he was on Capitol Hill this week saying, look, we're probably going to have to raise rates one or two more times this year. Inflation is still rising at 4%, which is double the Fed's 2% goal. Yeah. And if they raise it two more times, just big picture here to capital off, you would see U.S. rates at a 22-year high. It just goes to show you just how big, like, these rate hikes have been. And the economy is still ripping. We added 300,000 jobs last month.

It's paradox. So economists are like, what is going on? Like, have they already filtered through the economy? And we've just fundamentally changed our spending behavior? Yeah. Or do we still have to wait? It's very confusing. Yeah, wait for it to.

It is very confusing. Yeah. Thank God. We're in these chairs and not their chairs. All right, Neil. Our next story takes us to the corporate graveyard where an iconic company is coming back from the dead. Well, kind of. According to court documents released yesterday, Bed Bath, and Beyond's name IP in digital assets have been bought by Overstock.com for $21.5 million. So just to be clear,

this deal won't keep any of the Bed Bath & Beyond stores open, which are in the process of clothing after Bed Bath & Beyond filed for bankruptcy back in April. But, Neil, this feels like a pretty savvy move from Overstock, which is this big budget online retailer. There's stock jump 17% on the news that they did this. Their big thing was after they had this huge boom during the pandemic of these big ticket items, they're kind of going after these smaller home decor and home appliance offerings. And so adding that Bed Bath & Beyond brand helps them target that audience. So they now have the rights to Bed Bath and Beyond's brand, but they also have their eyes on some other parts of its portfolio. They are targeting Bed Bath & Beyond's vendors,

some of its real estate and then obviously some of its customers. So what do you make of this move from overstock? I guess I just don't know how you value the name of Beddath and Beyond. How do you know how much its IP is worth? Well, there are some like digital assets included too. So I'm sure there are some, but it feels like they, it's an iconic brand. And so $21.5 million to me felt like a good seal. I just don't know.

I guess the price is what someone is willing to pay for it. Yeah. But we've seen this happen before where these zombie retailers, they go bankrupt, and then you see these like vulture companies swoop in and pick off their carcasses and buy up their IP and their brand names and not necessarily the real estate. It happened with Circuit City, linen and things, dress barn, Radio Shack, Barnes & Noble bought the IP to Borders and now Borders.com redirects to Barnes & Noble. I love that. That's just dancing on their grave. Absolutely. But honestly, I don't love this move because we were looking into one of these companies that one of these vulture companies called Retail E-Commerce Ventures, R-E-V, or Rev.

It's owned by, it's run by Ty Lopez of all people and a partner. And they've got Pure One Imports and Radio Shack and Modell's sporting goods, which they paid $4 million for. But it does not seem like it's going well. I know. They are just saddled with all this debt. They bought up all these brands. I think it was more like,

there are social media influencers. And so having the credibility of saying we own these five brands sounded good at the time because they bought them at really distress rates during the pandemic. But now they have all these brands that no one really wants. Apparently their online store is selling merchandise from T.J. Max from 2021. And if you go to the Modell site in March, it said football season is right around the corner. And people were like, did you know the Super Bowl was just played? So it looks like they're not investing in these online marketplaces at all and just kind of letting them die.

They're truly zombies. Meanwhile, Rev is kind of taking money from unsabby investors and just lighting their money on fire. So it really does not seem like a great operation. And there are reports recently from the New York Post in the Wall Street Journal that Rev is going bankrupt itself. Sometimes zombie brands are better left dead, Neil. All right, before we jump into the next story, we're going to take a quick break. It's time to refresh your yard

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As always, Neil and I are just humble podcasters, so please note that none of this is financial advice. I've been on the dog train recently the last few weeks, so today I am kicking us off with the stock of the week, which isn't actually a stock at all. It's a crypto-measurial. It's a crypto-meet meme token called Pepecoin. It jumped over 40% in the 24 hours ending yesterday, and it's up over 70% in the last week. Now, meme tokens or meme coins are kind of this unofficial subset of the crypto ecosystem that first became big when Dogecoin went absolutely berserk during the pandemic. Pepe coin is similar in the sense that there's no real inherent value to this token at all. It serves no real purpose other than to be a vehicle of speculation and to be memed.

All that considered, it's still racked up $800 million in trading volume over the 24 hours yesterday. And part of the reason is because there's almost like this short squeeze going on, kind of what happened with GameStop back in the day. And the market is overall bearish long term on Pepecoin, which is forcing people. Surprise, surprise. But those bears have been getting wrecked recently. There was over $13 million in liquidations that occurred in the last week. and a liquidation happens when basically an exchange forcefully closes someone's position

because they over-leverage themselves and they can no longer afford to keep that position open. So I guess keep an eye on Pepe coin. Like, it sounds ridiculous to say, but Pepe coin. I don't know if I have anything to say. I know. It's honestly... Is there anything that sparked it besides the short squeeze? It was more like Pepe coin describes itself as the most memeable coin in existence.

Probably. And like they also said that dogs have had their day because Dogecoin had their day. So I don't know. It's more, it's kind of one of those things that when someone opened a huge position and they saw that they started making money and the rest of the ecosystem kind of turns their eyes to it. So it's pure speculation, but. Well, keep our eye on Pepe coin. Yeah.

I always keep my eye on Pepe coin. All right. Let's go to the dog of the week. So last week at this time, I was sitting in the same chair talking to Not Toby about how Disney's Pixar Animation Studio had maybe lost its magic. And sure enough, that turned out to be very true. Disney stock has fallen about 4% this week for a couple of reasons, including that Pixar's latest movie Elemental was a complete flop.

It had the second worst opening of a Pixar movie ever. And the worst was actually... I'm quizzing you. I know what it is. Toy Story one. Toy Story in 1995, but you can't really compare them because movie tickets were half the prices of what they are now. So essentially, there's no dispute that Elemental was easily the worst Pixar debut of all time, bringing in just $29.5 million at the domestic box office.

Meanwhile, there's an executive exodus going on at Disney. The company's CFO resigned last Friday. And this Wednesday, Disney's chief diversity officer left the company. So would not want to be Bob Eager, the CEO right now. You've got Pixar that's in a slump, a superhero franchise, and Marvel that's not pulling in the money it used to, softening growth in your parks business, a feud with a governor of the state you make a chunk of your money in, Florida,

and you're facing a lot of competition in streaming and an existential crisis with your longtime cash cow ESPN. Oh man, Pepecoin was so much more simple when you compared to that. But yeah, I'm kind of bummed because Elemental, it has 92% Rotten Tomatoes audience score, which it seemed like people generally kind of liked it,

but I guess, yeah, it just didn't have that interest that some of the other Pixar movies had. So investors are turning a little bearish on Disney because of all those things I just mentioned. And some are speculating that Apple could swoop in is not the first time, but maybe Apple could swoop in and buy it. All right, let's go to the NBA, where the Victor Wenban Yamma era has begun.

The 19-year-old French phenom, who is 7 foot 4 and has an 8-foot wingspan, was selected number one overall in the NBA draft last night by the San Antonio Spurs. This guy is an otherworldly talent. he's been called the greatest basketball prospect since LeBron, who was drafted 20 years ago. And he's also an unmistakable sign that the NBA is becoming dominated by foreign players,

especially Europeans. The last five MVP awards were given to three international players, Joelle Mbid. What's up? Recent NBA champ Nikola Yokic and Janus Ante Cumpo, which I nailed. Well done. Well done. So what accounts for the Euro takeover is an interesting question.

When Banjama has a few ideas, he started playing professional basketball in France when he was 15, and when most American basketball players are getting driven to their high school practice by their parents. And he thinks this exposure to high-level talent at an early age gives Europeans a leg up. Earlier this week, kind of made ways by saying that Europeans play at a higher level than American prospects. Yeah. I mean, I love, first of all, I just love that the NBA is one of the more stronger international leagues domestically because they also just have smarter rights rules than like the MLB, for instance,

which if you post a video of someone hitting a home run, they'll immediately strike it down. So they've been very lenient and have invested deeply in their international scene. But then I also kind of want to talk about how the college scene is being cannibalized a little bit by the international scene plus these kind of high school straight to the league pipelines. And so four out of the top five picks in this NBA draft did not actually play college basketball. And yeah, overtime elite is there's two of them, which is G League Ignite and overtime elite. Overtime Elite is this trade school where they're offering players a minimum of $100,000 to come.

And you learn social media skills. You learn financial literacy. You take some quasi-academic classes and you just play basketball and they train you to go to the NBA. And it's kind of disrupting the landscape. Meanwhile, college basketball is fighting back with NIL. And they're like, look, you can go to their overtime elite. or G-League Ignite, which is one of the other sort of prep things for basketball. Or you can come to us where you can be a god at like Ole Miss or Kentucky or Duke and also

make a lot of money from your image and likeness. So I think this is just the continuation of the professionalization of basketball because you can't enter the league until you're 19. So this age from 16 to 19, I think you're going to see a lot more kids making a lot more money from during that time span. I say good on it. Like, absolutely. They bring in a ton of eyeballs, a ton of views.

So I think they deserve to be compensated. All right. Let's move on to our final story. Remember back in 2021 when we called Stocks Stonks and they only went up even if they were worthless? Well, we got to relive those glory days once again because there is a movie coming out this fall about the meme stock craze called Dumb Money. And the first trailer was released yesterday.

It tells the story of how Keith Gill, also known as Roaring Kee, Kitty, a YouTuber, and a group of individual traders on Reddit took down the hedge fund Melvin Capital by driving the share price of GameStop to the moon. It's got quite the cast. Paul Dano as Roaring Kitty, Pete Davidson as his brother, which I don't know if it was actually a major character. They were just like, let's get Pete Davidson in there. Seth Rogan as Melvin Capital founder Gabe Plotkin and Nick Offerman as hedge fund Kingpin

Ken Griffin. And then you also... I'm just so excited for this. I mean, we talked about unique internet moments in history. and this was definitely one during the pandemic. It was just this cultural phenomenon. You don't often see these kind of insider finance stories just explode into the mainstream. So of course we're getting a Hollywood movie from it.

Of course, I'm going to go see it because we lived it. We lived it. I'm very excited for it. Yeah, it's very big shorty. Yeah. It's going to be interesting how they explain some of like how do you explain a short squeeze. Yeah. Remember big short literally had like Margo Robbie in a bathtub like cutaway.

like cutaway scenes. So I always wonder how like you approach these financial stories. And I think it's going to be great. We should host an MBD watch party for it. Absolutely. Let us know if you'd be down for that. That is our show for Friday. A lot of info. Wow. You can always reach us at morning brew daily at morningbrew.com with any questions, comments, concerns, praise, more praise. That would be great. And a huge thanks to our control room who puts the show together. Emily Milliron is our editor and producer, Samantha Vela's. Raymond Liu are the associate producers. Euchenna Wa Ogu is our technical director.

Billy Minino is on audio and big Kelly Clarkson fan apparently. Hair and makeup is on strike because we both wore hats today. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. I wish you all well. Spring is the season everyone refreshes everything except their blinds. People put it off because they think it's complicated. But at Blinds.com, we've spent 30 years proving it's not. Right now, you can save big during the spring Cyber Monday sale.

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