Morning Brew Daily - Fed Hikes Rates Despite Banking Woes, AirBnB Room Rentals & NY Out On Gas Stoves

Episode Date: May 4, 2023

Episode 52: Neal and Toby discuss the Federal Reserves decision to raise interest rates by a quarter point and what it could mean for the future of the banking sector. Plus, AirBNB goes all-in on single room rentals and New York is out on gas stoves. Neal gets into the spirit of May the 4th with some Star Wars themed numbers and... astronomers saw a star swallow a planet? Learn more about our sponsor, Fidelity: https://fidelity.com/stocksbytheslice Listen Here: https://link.chtbl.com/MBD Watch Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

Consider this comparison. PWC data found the percentage of CEOs who report revenue gains or cost reductions from AI is almost equal to the percentage who say they're still stuck. What separates these two groups? PWC points to a clarity issue. Even for CEOs, it's hard to tell what's AI hype, what's reality, and where this tech can make a tangible difference. Learn where AI can actually make an impact and what successful adoption looks like at

pwc.com slash U.S. slash brew AI. That's pwc.com slash us slash brew AI. Good morning brew daily show. I am Neil Fryman.

And I'm Toby Howell. Today we have a special May the fourth be with you Star Wars Day episode and we're going to talk about the Fed hikes interest rates again

but for the last time could it be? Yes. No longer cooking with gas New York is. Oh my gosh. I didn't know we were doing Yoda speak.

Also I need a little grumble in your in your tone there but wow that's going to be tough to follow um we'll also be talking about some of the changes Airbnb is making because it heard some of the youths were actually booking hotels and then before finishing up with a super nerdy story about a star consuming a planet Neil it's Thursday May 4th may the 4th be with you okay real quick off the top of the show I have some news to share I will be out of town starting tomorrow and also the entire of next week. I know it's very bad. I'm going to Spain with my girlfriend and her family, but there will be plenty of awesome guest hosts to fill in my place. I don't know if any of them

have blonde hair, though, Neil, so you're going to be all right without looking over. We're going to be great without you. I just want, we're just worried about you. I want you to share your itinerary with, you know, all of us and hope we have a good time. We're going to Marbeah. We're going to go to a Real Madrid game. So I'll come back with some stories and hopefully a little tan. I will be here in New York where I always am. Holding down the fort. I need to go somewhere really, really desperately. Let's move on to the news. So yesterday, we might have just seen our last interest rate hike for a while. Yesterday, Jerome Powell, the Fed chair, raised interest rates for the 10th straight meeting to try to bring down inflation

for good. To give you some context on how gigantic these rate hikes have been, we went from near zero interest rates just last year to above 5% now. So now the benchmark interest rate that the Fed controls is the highest it's been in 16 years. But yesterday, Powell suggested that with inflation may be coming down and the banking crisis doing the Fed's job for it and dragging down the economy, it might be time to say, my work here is done and hit pause. Yeah, as always, everyone was hanging on every word from Jerome Powell. And one of the big deal. of yesterday's kind of announcement was that he kind of acknowledged that this could be the end. They took out language previously released in other reports saying that, oh, yeah, we're definitely

going to keep hiking rates. That language was kind of removed, and that was a big deal to a lot of people because light at the end of the tunnel, we feel like this might be the last rate hike for a little bit. Yeah, and let's talk about the role of the regional banking crisis in that. So four U.S. banks have collapsed since early March, and that's tightened credit conditions. led to a slowing of the economy that the Fed was trying to do. So, I mean, Powell mentioned it basically in his press conference yesterday saying, like, I don't know, he uses crazy phrase that you can read to us, but no, this is word for word what he said. He said, in principle, we won't have to raise rates quite as high as we would have if it hadn't happened with it, meaning the banking crisis.

So that reminds me of Signora Alvarez in ninth grade teaching me the subjective tense. I know. Literally, I feel like I have to die. agree on that sentence. It's bringing me back to English class as well. But essentially, if I had decode it a little bit, he said if the banking crisis hadn't happened, then we probably would have had to raise rates more. So again, it's this really weird thing where somehow the banking crisis has these positive aspects and has kind of done the job of the Fed for it a little bit. It feels weird to say that, though. But people still criticize Powell. He can not have, you know, People just hate on him every single time that he does something.

Some folks were saying the Fed should have not hiked interest rates this time around because all of the economic data they're looking to is a lagging indicator. And, you know, they're saying inflation's coming down. The labor market is cooling down. The regional banking crisis still hasn't seeped into the broader economy. So you're just behind the curve and you're going to induce a recession here. And then others say that he shouldn't have been so direct in saying that they were going to pause. Because what if inflation still keeps ripping the next time the job market is still.

super hot. All of these economic indicators don't go down, as they're saying. And then the Fed does a surprise interest rate hike and people and investors. That's the last thing they want from the Fed. The Fed is supposed to give a very clear signal and vision about what it's going to do in the future. And any surprise gets investors really antsy. Riled up. Yeah. To be fair, he did say that the case for avoiding a recession is in his view more likely than having a recession. But of course, A lot of people disagree with that. Yeah, but of course, he kind of has to say that. Honestly, he can't say like, yeah, we're definitely plunging the economy in the recession.

Right. But, I mean, that's what rate hikes are designed to do. They're designed to slow the economy down, slow growth. So it's not exactly going to be out of left field if we do enter a little bit of a recessionary period. So that was a lot. But the big picture here is that the Fed, by sort of pausing interest rate hikes, is showing that maybe the past for years, the biggest concern here was inflation. and now the biggest risk or the biggest concern for the economy is a recession and more banks failing. Yeah, it's definitely, that's the macro environment we live in.

Very confusing. Inflation is still around. I don't get that people are saying, like, it's coming down. Like, it is still above 5%. Hey, believe me, I just had a sweet green salad. Almost 20 bucks. Oh, my God. I know.

Okay. All right, Neil, let's talk Airbnb. Anyone who has booked an Airbnb in the last few years has probably had a similar complaint and experience. Prices were way too high, and it all comes back to those hidden, like, cleaning fees and whatever fees that they make up. So that's been a big complaint. It got so bad that a lot of people gasped, just anecdotally speaking here, started looking at hotels when they were traveling, like a wild concept to a lot of young people. So Brian Chesky heard all of us, and yesterday dropped kind of the mother of all product updates. He listed 50 of the

most commonly complained about aspects of Airbnb, then described in detail how the company was addressing each one. So I won't go through all 50 because there was a lot. But the one that stood out to a lot of people was this update called Airbnb Rooms. So Rooms basically facilitates the renting of these cheaper single rooms in shared homes. So this has always been an option on Airbnb, honestly, but now they're giving it its own real estate in the app and they're just kind of prioritizing it a little bit more. And obviously, the price point is the biggest seller here. So the average room that you're sharing in a larger house runs you about $67 a night. The average daily rate over the last year has been $153 a night. So that's the big selling point

here is they're trying to bring down those costs that a lot of people are really mad about. Yeah, it feels like $100 is that threshold where you're like, I really don't want to pay over $100 a night for a room. But this goes back to their, I think they called it their sole, like the original Airbnb mission, which was, you know, Brian Chescue, who's the CEO, Joe Gebbya, who founded Airbnb, started renting out a room in their San Francisco apartment in 2007 to pay, to help pay their rent. And that's how Airbnb started. And so they're kind of going back to their roots here with rooms in this very inflationary environment. But they acknowledged that people were choosing hotels over Airbnb. And yeah, again, anecdotally, I was going to Philadelphia and I was like, I'll book,

hey guys, don't worry about it. I'll book the Airbnb. And they were like, actually, I kind of prefer hotels. And I was kind of shell-shocked. But, but, and it goes to this other product update, that was the other big one, which was the checkout list. Yeah. People were, I mean, Morning Brew literally made a video about this. How absurd the checkout list became at Airbnb's where you were like, do the laundry, like, pull the towel. Mo the lawn. Take out my dog. Reconnect with my estranged child. It became a meme. Yeah, truly.

And Chesky acknowledged, he's like, we need to stop this from becoming a meme. I've seen, he's like, I'm on the internet too. I've seen you all making fun of these ridiculous checkout lists. So they're making changes to make it more transparent around, you know, you can look at the checkout list before you book a book a listing. Right. One other angle of this that I think is very interesting is that VRBO, which is owned by Expedia, it's a big competitor to Airbnb, they're taking a totally different tact. And they're basically, their main selling point is that we're only renting out entire houses. So their whole thing is

like privacy. You get your own space while Airbnb is doing a 180 and saying, listen, it's not that bad to stay with other people because it's cheaper. So we're going to see kind of like these two differing philosophies play out. And we'll kind of see who emerges as a winner down the line. Yeah. Uber is also leaning into the like reemergence of the, the sharing economy that kind of disappeared during COVID when everyone wanted to be by themselves. Yeah. So they're incentivizing Uber pools now. They're offering discounts that happened the same day that Uber or Airbnb just rolled out their product update.

So they kind of want to smush people back together again post-COVID. Right. We're in a, we're in a, you wanted to avoid people and now everyone wants to be with people again. But you'll see. That is interesting, the contrast with the RBO and we'll see what people sort of gravitate to. and there might be different customer segments. For sure. All right.

Next story, there is one New York celeb that won't be shown on the Madison Square Garden JumboTron anytime soon. And that is gas stoves. New York became the first state to ban hookups of natural gas and other fossil fuels in most new buildings and an effort to curb greenhouse gas emissions. So by doing this, New York is inserting itself into this bitter nationwide debate that turned the kitchen into a battlefield this year. If you remember, there was this uproar in January after a consumer product safety commissioner suggested that the agency could eventually ban gas stoves in new homes. And this started this massive culture war with many Republicans saying, you know, get your hands off my gas stoves.

And the commissioner eventually walked it back. But New York just kept going. It said, look, buildings account for 32 percent of our planet warming emissions in the state. And they also have potentially other dangerous effects for kids and leading to asthma. so we need to get these things out of our buildings, and so it's doing that over the next few years in new buildings. Yeah, I mean, first of all, the governor of New York wanted to be very clear because obviously this is a culture war,

and they're saying that I'm not taking away existing gas stoves. I'm just banning future hookups in residential buildings specifically. So, again, it will be, like, blown out of proportion again because for some reason this has become a central piece of a culture war. but your existing gas stove will stay. I also do think it's funny. Like we got this report. It is bad for children.

Like 12% of asthma cases in childhood asthma cases come from indoor pollution, these gas stove. So I always thought it was so weird that people were so against it because like it's truly breathing in bad fumes for you. And especially if you're a kid. People have very personal attachments to their stoves. I do. I know. It is. There's something very visceral.

about a flame pop up. You're not a fan of electric stoves because... I mean, I haven't used one in a while, but I'm just remembering it. And there were many problems. It took a while to heat up and a while to cool down. So the surface was hot, right? And it's just, yeah, people were saying, like, the UX of a gas stove is just absolutely gorgeous. And now that we're watching all these cooking people, these chefs on TikTok and on TV, like just over the flame, you know, sizzling up something with, You get these blue lights going. It's just aesthetically beautiful and you feel like you're a god in the kitchen.

So I can see why people are like, get your hands off my gas stove. Like I love this thing. I'm not really seeing the total impacts of this because, you know, maybe I don't have kids or, you know, I feel like it's not a major contributor to global warming. Methane dissipates quickly. So, I mean, it was just kind of funny. And then we looked up how there's actually been a crazy PR campaign by the gas industry, very similar. to the got milk thing of the past couple decades. So did you know that a person, a PR person for the American Gas Association coined the slogan, now we're cooking with gas?

Unbelievable. This kind of blew your mind. It absolutely blow my mind because I've definitely said that before. We've all said that before. I said it like 10 minutes ago. I know. And it turns out that we I've just been influenced by PR campaigns. Like it truly was the got milk campaign of the gas association because they were trying to make it. cooking with gas seem hip and cool because people were cooking with wood at the time. So they wanted to transition the country to this hip, new, technological, advanced way of cooking. And now we're all just like sheep who repeat the terms that we were incepted into our brains. I'm a very happy sheep, when I look at a Viking range, I'm just like, oh, yeah.

Love that. Oh, my God. They're beautiful. They're beautiful. They really are. But apparently it's only an American phenomenon because in Germany, less than 3% of people cook, with gas stoves. So it's possible.

It's just... We love our fire. We love our fire. Yeah. All right, 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. Exclusion supplies to homedipo.com slash price match for details. Own it all. Pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly

Big Board Buckslot Machine by Aristocrat Gaming, Yamava Resort and Casino at San Manuel is giving one person a $1.6 million dream package. The biggest prize in Yamaba's history. Club Serrano members can earn daily instant prizes and secure a spot in the finale May 29th. And own it all. Only at Yamava, celebrating its 40th anniversary. UN. Details at yamava.com must be 21-20. Please gamble responsibly. Monopoly is a trademark of

Hasbro. Hasbro is not a sponsor of this promotion. Neil, on Wednesday, the FDA approved a vaccine targeting the RSV virus. It's made by drug maker GlaxoSmithKline and is designed to be given as a single shots to adults over 60 years old. So what is RSV and why is this a big deal? RSV is a respiratory virus that most people, it affects them as a little cough and some light flu-like systems, but to seniors and babies, it actually can be quite deadly. In the U.S., around 159,000 adults 65 and older are hospitalized each year, 10 to 13 of those die each year as a result of their infections. But I also want to take you through the scientific advancement that kind of powered this new vaccine because it was awesome. So the way that the RSV virus works is it has this little protrusion on it on the surface that it's called the protrusion, sorry.

It's called the F protein, which helps it stick to and infect cells. So normally the F protein, and I quote the scientific literature here, is wiggly. So that means it's flipping back and forth and it's generally pretty hard to pin down before it fuses to a cell. So researchers figured out how to freeze that wiggly F protein in place and the shape that it's, normally takes right before it fuses onto its cell. The body recognizes that shape as something naughty, it doesn't like, and basically starts cranking out antibodies, which is what you want a vaccine to do. So I thought that was pretty cool.

You're going to be a science teacher in your future life. I know. Well, I just love that the fact that Wiggly is like the technical term for describing this protein. Can't be Wiggly. But I feel like we didn't know about RSV before last year. I hadn't heard of it. And then all of a sudden it blew up.

in the news stories because it was a part of this triple demic where you had COVID, flu, and RSV sending people to the hospitals last winter in huge rates. And you had all these kids going to the hospital and people were like, what the hell is going on? And then everyone's like, oh, this is RSV. It's a thing. And then they just approved the first ever vaccine. Yeah. Which is remarkable.

And what is more remarkable is the backstory of this vaccine because they've been trying to do this for 60 years. but the first time in the 60s that they tried it, they actually killed two infants when they gave them a vaccine for RSV. Yeah, it was not a good look for RSV because they had done animal trials. They said, they thought it was safe and then they started human trials. And then it turns out that once like RSV season hit, the vaccine did not work as planned. It actually amplified RSV in some patients, which resulted in the death.

It wasn't like they were stuck. Right, right. They died. it ended up not preventing and actually amplifying RSV. So yeah, big black mark on the entire RSV vaccine industry, but weirdly looking back, now you can say that some of the advancements in some of the regulations put in place around that kind of tragedy has led us to this today. So it has been like this very long journey that has a happy ending as of yesterday.

Yeah, and now there's a flood. The floodgates have opened. So every pharmaceutical company, you can. think of is launching an RSV vaccine for older people or infants. You have Pfizer's, Pfizer's vaccine could be approved this month. Moderna should be in the first half of the year. Those are for older people. And then for infants under two years old, you have AstraZeneca and Sanify are making a treatment for this. So the floodgates have opened. And I was just thinking about this. Our vaccine is the most important invention ever. Yeah. I mean, well, what was interesting

to me is I thought it was going to be some advancement in COVID research. unlocked RSV, but it was actually the other way around. So the RSV, this idea of locking this protein in place actually helped researchers develop the COVID-19 vaccine. So RSV has been this long, slow burn. Obviously, the COVID vaccine was like, it was Operation Warpsuit. There was this giant sprint. So all those decades of knowledge built up around the RSV research helped propel. So it's crazy how things work out like that. And we're just here hosting a podcast. I know. That did make me, like, we started about Fed rate hikes and now we're talking about, like, these things that... Yeah.

I'm just saying they're saving lives and where we're talking to a microphone, but it's okay. Let's move on to something even more important than that, which is Neil's numbers. Love it. Which is three interesting facts from the week's news, but I'm not going to do that this week or today because it is Star Wars Day. It's May the 4th. So I am going to do three really weird numbers or bizarre numbers from the Star Wars universe, okay? Let's start with $690 quintillion dollars. Jeez.

And nobody has any idea what I'm referring to, but you'll hear in a sec. That is how much money you would take to battle out the banks and save the economy at the end of return of the Jedi. So how do we know this? There's this guy, Zach Feinstein, an absolute legend and associate professor at Washew wrote a paper in 2015 where he analyzed the state of the galactic economy during a period of economic crisis. Let me just paint the picture for you. The empire had just collapsed. The Death Star, which was a massive government project that cost it $419 quintillion was destroyed. So Feinstein concluded that the Rebel Alliance needed to spend at least 15% of gross galactic product

to bail out the 17500 banks that were systemically important in this galaxy and stave off economic catastrophe. We know how important it is to bail out the banks, right? So with gross galactic products at $4.6.6 trillion, this amounts to a $6.90 quintillion bail. out. So this just puts our own banking problems in perspective, right? Yeah, drop in the bucket. Drop in the bucket. FDIC spent just $20 billion to make SBB depositors whole. And meanwhile, the Rebel Alliance central government, the Jerome Powell of the Rebel Alliance is going to have to shell out 690 quintillion.

Is Palpatine the Jerome Powell of Star Wars? He died. That's what sparked this. Oh, true, true. Sorry, I need to brush up on my Star Wars lore. Wow. Those are some big numbers. Big numbers. Let's go to another one. The amount of Star Wars. Wars content made for TV dwarfs the amount of Star Wars movies. So there are almost 11,000 minutes of Star Wars TV shows and just 1,700 minutes of Star Wars movies. That means for every one minute of Star Wars movies, there are six minutes of Star Wars TV.

So this is kind of showing that so much Star Wars content has been made in the last couple years just for TV. Yeah. I don't know if it's any good. Have you watched any of them? I watched the first season of Mandalorian and I did not like it. I thought it was just super boring. and and I've heard good things about Andor.

Andor is fantastic. And then Clone Wars, the animated series, also pretty good. That makes up the bulk actually of the TV. Surprisingly compelling. Yeah. No,

I heard it was good. All right, our final number is, you know, James Earl Jones, the amazing actor, was paid just $7,000 to voice Darth Vader in the first movie,

A New Hope. But it took him just 2.5 hours in one day to record all of the lines. So his rate comes out to about $3,000 an hour for that movie, which is not bad. That's interesting, but the reason I'm bringing this up mostly is that Jones retired last

year from voicing Darth Vader, and he's allowing an AI company to use previous recordings of him for future movies and shows where Vader appears. Interesting. So he is getting out ahead of it, basically, and saying, like, yeah, use me. Yeah. It's one of the most iconic voices all the time, so it definitely makes sense. It's pretty interesting. There's been, like, a very growing, you know, use of AI-generated.

voices. For voiceovers, I remember this was a big thing in the Anthony Bordane documentary. Right, right. But it's all about consent, right? So this is, he's very vocally giving his voice up to AI for future permutations and to literally create dialogue where I think the case with Anthony Bordane using his voice from the grave was they didn't kind of work out the, the kinks with what a world with his estate. Yeah, that's that's crazy. But I'm excited for future editions of, of Darth Vader. Okay, let's move on to our last story. It's about stars as well. We didn't actually plan this.

But you know when you have one of those bad dreams where you swear you're like watching your own demise play out? Is that just me? Have you ever had one of them? Maybe a couple times. Yeah. Well, astronomers had that same feeling yesterday or this past month when they watched a star engulf a planet, which some think is the way that Earth might eventually go five billion years down the line. So this was very exciting for scientists. They had long kind of posited that this is potentially how some planets eventually died,

but they never seen it happen live or whatever live means when you're on a 15,000 light year delay. But this was a huge, huge planet that got eaten. The planet was anywhere between three to ten times the mass of Jupiter. So, so big. So basically how this goes down is when a star gets old, it kind of puffs up and bloats a little bit, and that expands its atmosphere. And nearby orbiting planets kind of start bumping into that atmosphere, which actually causes dust to, like, stellar dust to happen.

And so all this stellar dust actually creates drag, believe it or not, in space. And so once that orbiting planet starts experiencing drag, the orbit starts to tighten, the gravitational pull gets harder and harder. And then it's a runaway train, and it eventually orbits so fast that it slams into the planet. And it causes this big, like, solar eruption. and then the sun just eats it, basically. Scientists Toby strikes again. It's so exciting, though, this stuff.

Exciting is one way to talk about a star eating a planet. But it's just crazy to me that we know now. Like, we know definitively that Earth is going to be destroyed one day. But yeah, we know definitively, but there's actually two ways we could go. So one is this way where the sun eventually blows up and, like, we get eaten by it after Venus and Mercury. Those will be the first to go. Or the other way is it. blows up and it loses some of its gravitational pull and we just slowly drift away from the sun.

So one way is a lot more fiery and exciting. One is just kind of a sad drift out into the world. But either way, we won't be a real. We won't. Chat GPT will have killed us by all by then, maybe just in the next 50 years. That is our show. Toby, we're going to miss you. Thanks for dropping all that silence knowledge on us before you go and have a great time in Spain. Remember listeners and watchers. You can always reach us at Morning Brew Daily at Morningbrew.com. Big thanks to everyone who made this show possible. The show's producer and editor is Emily Milliron. Our technical director is Justin Orlando. Welcome back. Samantha Vela's and Raymond Lua are our associate producers. Billy Minino is on audio. Hair and makeup turned to the dark side. 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 in a week when I'm back. Adios. Adios. Adlas Spanish? to George. Can do nook? If you used Babel, you would. Babel's conversation-based techniques teaches you useful words and phrases to get you speaking quickly

about the things you actually talk about in the real world, with lessons handcrafted by over 200 language experts and voiced by real native speakers. Babel is like having a private tutor in your pocket. Start speaking with Babel today. Get up to 55% off your Babel subscription right now at babel.com slash Spotify.

Spelled B-A-B-B-B-B-B-E-L-S-Podify. Rules and restrictions may apply.