Morning Brew Daily - Elon is $20B Richer After the Election & TGI Fridays Owes $50M in Gifts

Episode Date: November 7, 2024

Episode 448: Neal and Toby continue discussing the aftermath of Trump’s return trip to the White House, starting with Elon Musk, who just got a generous wealth bump after Tesla stocks jumped. Then, Harris calls Trump to concede, more stock market reactions, the latest on the House, and how polls got it wrong. Next, M&As may be getting a resurgence after Trump vowed to remove regulatory red tape under his administration. Plus, it’s Neal’s Numbers on economy as the No. 1 issue, Polymarket payout, and TGI Friday’s potential gift card bomb. Lastly, more headlines you should know about Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Download the Yahoo! Finance App (on the Play and App store) for real-time alerts on news and insights tailored to your portfolio and stock watchlists. Get your Morning Brew Daily T-Shirt HERE: https://shop.morningbrew.com/products/morning-brew-radio-t-shirt?_pos=1&_sid=6b0bc409d&_ss=r&variant=45353879044316  Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Presidential Transition  02:50 - Elon Musk $$$ Gains 08:30 - CEOs Praise Trump Win 09:40 - State of the Stock Market 11:00 - M&A Regulation  17:00 - Neal’s Numbers  24:00 - Headlines  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning, Bird Daily Show. Phil Freyman. And I'm Toby Howell. Today, just how friendly to business will a second Trump presidency be? Then how Elon Musk stands to cash in from his seat at the government table. It's Thursday, November 7th. Let's ride. Well, we are officially in a transition period between administrations. Kamala Harris conceded her election loss yesterday, addressing supporters at Howard University, her alma mater, and where she hoped would be the site of her victory speech. She spoke about the importance of a peaceful transition of power, and also said she talked on the phone to the president-elect Trump to congratulate him on the win and formally concede the race.

Yeah, now there is a 75-day transition period where Trump and his group of allies is going to need to create essentially an entirely new government and higher 4,000 government positions to fill his cabinets and things all the way down. Last time, in 2016, that transition was led by the former New Jersey. governor Chris Christie before Trump and Christie had a falling out. Then he gave it to his future vice president, Mike Pence. This year's transition co-chairs are the CEO of Canter Fitzgerald, Howard Lutnik, who's been a big Trump supporter and the W.W.E. Mogul, Linda McMahon. It's truly becoming the wrestling White House at this point. Now a word from our sponsor, Yahoo Finance.

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But perhaps none of his bets were as big or as risky as going all in on trying to get Donald Trump re-elected this year. Musk spent $130 million through his political action committee to help elect Donald Trump, but he is already seeing that bet pay off tenfold. shares of Tesla rose 15% yesterday to reach a new high this year. He added $20 billion to his net worth since Wednesday. And perhaps most coveted of all, he's more than likely landed himself a seat at the table as ahead of Doge, the Department of Government Efficiency.

And more gains lie ahead. Musk's empire of businesses are heavily entangled with the U.S. government. SpaceX is a critical partner to NASA and the Defense Department. Tesla needs a favorable regulatory environment to help its autonomous Robotaxy dream. become a reality. Plus, he owns X and Neurrelink, which have received scrutiny from the FDC and the FDA. So now Musk

sits at this uniquely powerful confluence of business and government, where he'll likely get a chance to advocate for his interest in Washington. Neil, he went all in, and it seems like he has won again. Yeah, there are two perspectives here. Supporters of Trump and Musk are looking at this as an incredible opportunity. I mean,

this is a guy who caught a falling rocket with mechanical chopsticks, and now he's to play our role in Washington, D.C., in the federal government, which many view as ancient and full of cobwebs and full of bloat. So having a person who has this business track record who's built companies that are worth $800 billion in Tesla, $200 billion in SpaceX, is an incredible opportunity. They're super excited to see what Elon Musk can do as a part of the federal government or playing a role in there. Then you have the detractors, the critics of

Musk, who are very concerned, first of all, with his politics and his right-word turn and is misleading information that he's promoted on X, but also the numerous conflicts of interest that arise when a businessman who owns so many of these companies that are entangled, as you mentioned, with the federal government that are involved in investigations that compete for contracts, what might happen there in terms of how Musk could use this $130 million bet to enrich himself even more in a Trump administration? Yeah, I mean, Musk has promised to cut $2 trillion from the federal debt, and he hasn't been very specifically at where that might come from.

But I need to cut $2 trillion. Should it come from the contracts handed out to SpaceX? Or should it come from something else? Remember, SpaceX has signed more than $15 billion in government contracts over the past decades. So, again, conflict of interest. Maybe we'll do cuts somewhere else. Also, another place that we think that there could be some conflict of interest is that

Starlink is trying to get in on this $42 billion internet expansion. campaign that was rolled out under the Biden administration. It was supposed to put fixed fiber optic lines to reach rural America, but Elon Musk has long said maybe Starlink's a better option to reach those rural areas, which very well might be true. But again, the conflict of interest there is hard to overstate if Elon is having a seat at the table that does give out contracts to SpaceX, to Starlink. Of course, that is a conflict of interest. And then one other area where I think this is going to be most important Elon's role here is an autonomous vehicle regulation. Tesla has changed its course recently from producing electric vehicles to compete with the legacy car makers to go all in on autonomy.

And Elon has said in the past that he wants to use his role in the White House to create more streamlined regulations for autonomous vehicles. And his entire company is staked on that future. So I think that will be a very key regulation, just area of focus to watch autonomous vehicles, how to get them out on the road. because there are very hardcore regulations right now about what you can do in terms of rolling out, you know, self-driving cars. So if that is what the future of Tesla is staked on and it is, then that is something Elon will have a big role in. But speaking of electric vehicles, it's not like, it is a little bit counterintuitive because one thing that the Trump administration has spoke about is potentially rolling back the

inflation reduction act, the IRA, which did grant all these subsidies to the EV industry. And so you might think that is negative for Tesla. On the contrary, Tesla is much more established than some of the other nascent electric vehicle programs at Legacy Automakers like GM, like Ford. And so they have the scale. They have the kind of margins in order to continue to operate profitably even without those tax credits. So what it would do is actually make it an even – they would be more competitive in the

market than they are with these tax credit there. So it probably helps Tesla overall. One thing that could hurt Tesla, though, is that Trump has promised to put heavy tariffs on China. Tesla has a Shanghai factory over there that does a significant portion of its EV deliveries. But again, on the flip side, the tariffs could end up just hurting its competitors, BYD, a lot more than Tesla. So even when you are looking at the things that could hurt Tesla's business, they still kind of loop around and end up helping it. Meanwhile, people in fields not even closely related to electric vehicles or space or anything

that Musk is involved in is excited about the prospect of Musk getting in government and doing some deal-making. Roy McElroy, the golfer, said yesterday that he was excited about Elon Musk coming into government because he thinks he could finally close the deal on a live golf PGA tour merger that has been brokered by the Saudi sovereign investment fund. And so he said, you know, I think Elon Musk is the smartest man in the world. I'm glad he's in the government because now I, you know, now I'm hoping that he can finally close this deal. I know he knows nothing about golf, but he is a, you know, Rory McElroy, thinks he's a smart guy. So he's hoping he can finally get this deal done that has been languishing since 2023. And then let's just run down some names

from the tech world that also congratulated President Trump on his win. Jeff Bezos weighed in. He tweeted big congratulations to our 45th and now 47th president, which if you go through Jeff Bezos's Twitter feed, he's only tweeted two times in the last year. The first time was wishing Trump well after the assassination temp. So Jeff Bezos is kind of cozying up to this new administration because we talk about those government contracts. Jeff Bezos has a space company. He probably wants to get in on that as well. And then also some other tech leaders, I'll just run through them really quickly. Zuck, who has had a rocky history with the Trump administration, congratulated him on threads. Tim Cook tweeted out a congratulations, Sundar Pichai,

tweeted out a Google election map and said, congrats to Trump. Satya Nadella also waved in, Darakas Rashi Shahi. So you're seeing kind of this mobilization from the tech industry, trying to position themselves and see what this new Trump administration brings, but trying to start it off on the right foot. Meanwhile, the stock market went bananas yesterday. The S&P 500 climbed 2.5%, which is the best post-election day in its history. It closed at a record. Speaking of the other two market major stock indexes as well, the Dow shot up 1,500 points, which was its best day since November 22. it closed at a record, and the NASDAQ climbed almost 3% to have a record of its own. So all three stock indexes, which typically go up the day after a presidential election, did so this year. And then diving into some of the more granular industries that were affected by a Trump win.

Bitcoin hit an all-time high as Trump looks to be a more crypto-friendly president. Coinbase also jumped 31%. It's the biggest crypto exchange in the United States. And then big banks as well, looking forward to maybe a more-rength. lenient regulatory environment, also had a great day. J.P. Morgan, Wells Fargo, they were all up double digits. So you can see kind of the industries that were jumping for joy the most after this Trump presidency win. And then the ones that were flopping were more of the renewable energy ones that might not benefit. The Invesco Solar ETF, which is a group of solar companies fell almost

11%. And then cannabis stocks also got crushed after Florida rejected that proposal that would legalized recreational marijuana in the state. Let's move on to talk monopolies and mergers in a second Trump administration. For the past three years, the Biden administration, spearheaded by the antitrust crusader FDC Chair Lena Khan have unleashed a historic crackdown on companies they accuse of being monopolies. They viewed market concentration as a central force, driving up prices and boxing out little guys from competing. So what changes will a new Trump administration bring? Probably a more relaxed approach to antitrust. Trump has already signaled. that he'd be less harsh on big tech companies.

For instance, he's been skeptical of a government proposal to break up Google, which was found to maintain a monopoly with its search engine. Back in October, Trump said, if you do that, are you going to destroy the company? What you can do without breaking it up is make sure it's more fair. So, more hesitant to get tough on tech. And as far as mergers go, it looks like the floodgates could be opened. Trump is expected to oust Lena Khan as chair of the FDC, who has blocked many deals from being completed, leading to a wave of.

M&A, and that was clear as day from the surging stocks of Capital One and Discovery yesterday. Remember, these credit card companies are planning to merge in a $35 billion mega deal, but the Biden administration was expected to challenge it. Now they've gotten the green flag. Discover popped 20 percent and Capital One rose 15 percent. Yeah, I mean, you look at some of these investors, these big name investors, Carl Icon, for instance, said that he thinks mergers and acquisitions will skyrocket under Donald Trump.

He said a lot of these murders have been thwarted by the current administration if he wins. not going to happen anymore. Lena Con has been this rising star under the Biden administration. We spoke about what even Kamala Harris was being a little flip-floppy on if she would bring her back just because of how much of a force she has been in pushing back against these big mergers against these big antitrust suits. Now it looks like she's on the outs. And so big businesses and big tech kind of up and down the antitrust landscape are cheering

now because their biggest foe is now looks to be heading out. All that being said, though, you have to remember that under the first Trump presidency, antitrust wasn't some toothless thing. I mean, in his first term, a Trump DOJ actually fought to block AT&T from buying Time Warner. They applied these big divestiture requirements for T-Mobile's deal for buying Sprint. And then in tech, Broadcom was back from buying Qualcomm. And the FTC, under last Trump administration, actually was the one who sued Google for acting as a search monopoly. so it wasn't like some completely, you know, utopian place for these M&A's deals.

There definitely were still some teeth under the first Trump administration. Absolutely. I think people are having short memory. In fact, deals activity was higher during the Biden administration than the Trump administration. There was a lot of unpredictability you get with Trump. He could not like you. Like he didn't like CNN. And that's why they tried to block AT&T from buying Time Warner.

He's against Nippon Steel buying U.S. There are a lot of times where he's been against companies for certain reasons that we can't explain, but maybe they've slighted him. Maybe he feels that it's not good for the United States. But it certainly was not this M&A utopian. You're seeing investors react like it will. Maybe that is in reaction to, you know, Lena Khan going and her counterpart at the DOJ leaving in a new Trump administration.

But absolutely, I think there's a lot of unpredictability you get with Trump. and in the past, there wasn't a lot of M&A. So it might not be this paradise for corporations and they'll learn the hard way. One tech company that probably is pretty happy with the Trump victory, though, is bite dance who owns TikTok. Remember, this TikTok ban bill was passed by Congress and signed into law this year. By January, TikTok is supposed to divest or sell off its U.S. operations or face a nationwide ban. That might not happen under Trump, though, because even though he spent most of his first chairman office trying to ban TikTok, he kind of did a 180 and flip-flopped on that. changed his mind, and he has pledged to save TikTok in the United States.

So that is one company that definitely could benefit from a Trump administration if he does follow through on his word and fight to protect TikTok in the U.S. Up next, yes, the election is important, but you know what else is important? Neal's numbers! We're the Hartford, with decades of experience ensuring millions of unique small businesses when it comes to your small business insurance. Thank you. One size, absolutely.

not fit all. Get a quote or find an agent today at thehartford.com slash small business. 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. through May 6th. Exclusion supplies, see HomeDibar.com slash price match for details. Welcome to Neal's numbers, the segment where I share three stats from the week's news that will

help you fill those five minutes of awkward silence at the start of a Zoom call. My first number helps explain that decisive Trump victory on Tuesday, as political strategist James Carville famously said, it's the economy stupid. According to a network of exit polls, two-thirds of voters rated the economy as not so good or poor compared to one-third who rated it as excellent or good. And of those voters who rated the economy negatively, nearly 70% opted for Trump, a margin that fueled his reelection. But as we've talked about on the show, many times, the U.S. economy is doing better than it has in decades, with low unemployment, strong job growth month after month and rising output. It's the envy of the world. So what gives? The pain of inflation,

feeling your wallet gets stretched then, appear to be more salient than those other macroeconomic indicators. Just two years ago, Americans face 9% inflation, the fastest rise in 40 years. While inflation has come down to more normal levels, voters are still paying more for those daily necessities like food and housing than they used to, and they rejected, fired really, the people who were in power during those price hikes. And this is not just an American story. It's important to have some global context. Leaders all over the world who were in charge during high inflation, such as the UK's Rishi-Sunek, Macron in France, Kishita in Japan, all faced electoral defeats this year. As the Wall Street Journal's, Greg, it put it,

inflation has been an incumbent killer everywhere. Yeah, economy is doing well. Overall, you can look at GDP growth. You can look at unemployment being low. You can look at the job market. But really what people are looking at is their grocery braille prices are about 20% higher now than they were when Biden first took office. And then you mentioned home prices well.

Home prices have reached new record highs for 15 straight months. So again, you can point to any data point and say, oh, no, wait, we're doing great. people can also counterback with another data point that's saying, never mind, it's the economy is stinging in ways that you kind of aren't looking at. But perception often is reality. You said Republicans are three times more likely to think the economy is good when a Republican is office. Democrats, then when a Democrat is in office, the same is true for vice versa. So a lot of it just comes down to who your political affiliations are and who is in office.

Who is in office? That usually kind of belies how you're going to think about how the economy is, regardless of maybe what the actual macro economic data shows. For my second number, investors who correctly placed bets on Trump to be reelected are set for a major windfall, the thousands of people who gambled on the election, and one, can look forward to a potential payout of about $450 million from online gambling sites after the election. $287 million of that payout is arriving from the crypto platform polymarket, which doesn't allow U.S. users, and a pot of $159 million will hit bank accounts from the U.S.

platform Kalshi. One gambler in particular probably won't clock into work for a while. A French trader known as the Polly Market Whale made a total profit of $48 million wagering on Trump to win the election. Toby, prediction markets have gone from a niche tool used by academics and degenerates to mainstream adoption. Kalshi and Polly Market were the most downloaded free apps on the Apple App Store yesterday. Yeah, I mean, we mentioned that Polly Market, prediction markets and Kalshi were winners because of how accurate they turned out to be, but also the there were real winners who bet on the election as well that are getting these big payouts. I do just want to dig into that French Whales story a little bit because this guy

wagered almost $30 million on Pauley Market. So what was his big insight here? He noticed that there is a difference in polls asking who are your neighbors voting for versus who are you voting for that had Trump overperforming. So it was maybe one of those things where even amongst when people were getting pulled, they didn't want to say that they were voting for Trump. But the neighbor poll, he commissioned his own neighbor. So he did do like a little bit of digging, thought that he found like this arbitrage opportunity and went very, very big, which is only allowed recently because of the rise of these prediction markets. And he's walking away with, yeah, nearly $50 million because of it.

And I just want to put just the numbers in context here. So Americans wagered $123 million on Kalshi in the days leading up to the election. Compared to sports betting, that's a not a lot. $2.7 billion were wagered on March Madness. year, $23 billion was wagered on the Super Bowl. So this is a tiny market now. It's still, I know I said it's mainstream, but I still think it's pretty niche. But after this election, I think its role will only grow going forward. For my final number, TGI Fridays has a $50 million gift card problem. The restaurant chain, which went bankrupt over the weekend, is staring down the inconvenient fact that people are in possession of $49.7 million worth of unredeemed gift cards that never expire. And if you just went, wait, what? So did the judge overseeing this case.

Bankruptcy Judge Stacey Jernigan acknowledged, quote, I did a double take on that, noting that some of the gift cards date back to 2003. For a financially strapped company like TGI Fridays, the prospect of having to pay $50 million to gift card holders is as daunting as ordering a refill of a Long Island iced tea. It's especially alarming for its franchisees on the front lines. Most TGI Fridays are franchises, and they rely on the parent company to reimburse them for redeemed gift cards. It's doubtful that TGI Friday's corporate, even with a loan of $5.9 million, has enough money to cover them. Toby, this company is praying that most of these gift cards are buried so far inside someone's purse that they're gone forever. I can't imagine across the country right now.

There's a rush to find TGI gift cards checking under beds, checking in wallets. But I was doing some digging on if this happens to other bankrupt companies. And it absolutely does. Borders when it went bankrupt in 2011. It gave gift cards only a short window to redeem their gift cards. In 2015, Radio Shack actually stopped accepting gift cards. But then under pressure from State Attorney's General, they actually had to honor them going forward for a limited time.

Same thing happened with Sharper Image. These are names from my childhood, by the way. Sharper Image went bankrupt in 2008. Same thing, State Attorney General jumped in and made them allow limited gift cards. So there are a long history of companies trying to wriggle out. out of allowing people to redeem their gift cards. I don't know if TGI Fridays is going to try something similar, but it is not easy to say, like, hey, you cannot use these because we are going through bankruptcy.

Usually you have to allow, like, a certain limited period where customers can't do that. Yeah, TGI Friday says it does plan to continue to honor the gift cards and the judge allowed it to proceed. So it looks like if you do find this gift card, you know, just go to a TGI Fridays, but know that the franchisees might be on the hook because the corporate parent might not be able to pay it, just a wild story. All right, let's sprint to the finish with some final headlines. On Sunday, Mariah Carey declared it's time to start celebrating the holidays.

Today, Starbucks is declaring its time by rolling out its annual seasonal cups and holiday menu. Beginning today, customers at U.S. Starbucks locations will get their hot drinks served in one of those four festive cups as part of an annual tradition dating back to 1997. Of course, any promotion Starbucks does these days takes on heightened. significance and needs to get more people in the door. Sales have dropped for three straight quarters and new CEO Brian Nicol dubbed the messy of the restaurant industry is promising dramatic changes to turn things around. So all of these holiday cups do have these little badges on the

back of cups for baristas to write a message on them. That is part of CEO Brian Nichols' turnaround plan. He wants to reintroduce that human touch. He is saying that handwritten names via Sharpies on drinks will be a new part of this shift back to making. Starbucks a more warm, less corporate place. So when you go get your holiday drink, maybe ask for a little message there, because that is part of the strategy to turn things around. Also, I was looking at the holiday menu this time around. Starbucks is introducing a cranberry orange drink under like its refresher brand, which doesn't sound great, but cranberry orange juice might sound pretty good. A turkey sage Danish would sounds decadent, snowman cake pop, and then obviously

a penguin-shaped cookie. So go check out Starbucks's holiday menu. Right, we also have drama in the running world. Matt Choi, a famous running influencer, is in big trouble with the running community for bringing two people out on electric bicycles to film him while running the New York City Marathon. This is a big no-no because NYC is a crowded marathon, and it is dangerous to have bikers on the course with so many runners going through existential crises around them. Plus, it is expressly forbidden by New York Roadrunner's own rulebook. In the end, logic did prevail, though.

and Choi was disqualified from the race and banned from all future NYRR events by the race organizer. Yeah, Choi apologized profusely, said the New York City Marathon was being about everyone else in the community and I made it about myself. So he fully owned up to this. But I am curious is, you know,

when influencers are, you ran it, did you see a lot of influencers being filmed? Is that a big part of marathons now? Well, most influencers should just pull their phone out and use their own camera and do it themselves. That's why everyone was so mad. why does he think that he is so important that he needs to bring out two bikes on the course endangering other runners when you can very well get perfectly fine footage just filming yourself

this is not the first time he's done it too he's done it at other marathons one time he did get approval from the race organizers another time he didn't get approval it is just a dangerous thing like these bikes are huge you're not paying attention going through those water stations too and that was the most crazy experience of my life it feels like there's there's water being thrown at you're getting clipped from behind, so I can't imagine having two bikers going through as well. So a ton of pushback. This was like such a mini eruption in the running community that actually expanded to the New York Times wrote about it, the AP wrote about, the Wall Street Journal wrote about it. So just kind of funny to see this niche running kind of community beef expand

into a wider thing. And we do know now that 50, more than 56,000 people crossed the finish line. It was the world's biggest marathon ever. That is the all the time we have. Thanks so much for spending your morning with us and have a wonderful Thursday. For any questions, comments, or feedback, send an email to Morning Brew Daily at morningbrew.com. And to be very clear with you all, we saw a spike in listenership during our show yesterday that recap the presidential election results. If you know people who want to learn more about these big changes, but generally tune out

the news, tell them to give Morning Brew Daily a try and share the pod. Yeah, and I also just want you to share the podcast with someone who could use a little bit of joy in their day to, send them the pod, tell me to go outside, take a walk. maybe basking the joy of some Neal's numbers. Let's roll the credits. Emily Milliron is our executive producer. Raymond Loo is our producer. Olivia Graham is our associate producer.

Echenawa Ogu is our technical director. Billy Minino is on audio. Hair and makeup is flipping over cushions looking for TGI Friday's gift cards. 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.