Morning Brew Daily - Inflation Keeps Going Down (Whew) & Tucker Carlson's Twitter Show

Episode Date: May 10, 2023

Episode 56: Kelsey Sutton has returned! She and Neal get into the latest news out of DC, including the inflation report that fell below expectations and why McCarthy and Biden couldn't agree on a Debt Ceiling deal. Plus, Tucker Carlson is launch a new show on twitter; will this be good or bad for the social media platform? Also, the stock market loves AI and the billion dollar mattress deal. Plus, why rats are taking over malls and the black market for fruit roll-ups. 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

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Good morning, Brew Daily show. I am Neil Fryman. And I am Kelsey Sutton. Kelsey, on today's show, the two words you need to mention as a CEO to get your stock price higher in 2023. And you will never guess what people are smuggling into Israel and why. We're also going to be talking about your favorite platform and... How did you know? And the creator who's joining that platform.

And we're also going to be talking about mall rats, but not the type of mall rats you might expect. All right. Let's ride. So Kelsey is a reporter for marketing brew, and she's graciously been subbing in for Toby while he's out, setting the alarm clock maybe a little bit earlier than usual. Yeah, I don't know if I'm doing a good job pretending to be Toby, but I'm doing my best. Our philosophy is you and Kyle who have been summing in are certainly not Toby, and we're just embracing that. I do have to say I got very self-conscious about our audience saying that I wear the same morning brew sweatshirt for the entire, for every So I went with this quiet luxury piece.

Uh-huh. Very high-quality fabric, muted tones. It was, what, $1,200? $1,200 on sale. Yes, we just talked about quiet luxury yesterday, and that's all I've been thinking about. So what listeners and watchers may not know, viewers may not know, is that Neil actually lives here. He's never left this studio. And so he does have to cycle through this.

So we had to bring this shirt in for you because you never leave. No, that is almost too true. Okay, let's get to the news. We're going to start in Washington, D.C., which had one of the busiest 24-hour periods of news in a long time. I'm sure all this stuff will be talked about in Happy Hour in D.C. We know they love it there. So I'm just going to rip through some of the big picture economic and government headlines that have come out over the past day or so. Let's start this morning.

The Consumer Price Index report was dropped just a few minutes ago. and that's the monthly inflation reading, it was good news. So consumer prices rose at 4.9% annually, which was less than expectations. It's the 10th straight month of declines in inflation and the lowest annual price growth since 2021. Obviously, 4.9% is still higher than the target of 2%, but rate hikes have now cut inflation almost in half. It peaked at 9% last June. Yeah, and I think that's for inflation has been the big story.

So for consumers, like any amount of relief is good. So, I mean, it's kind of, it's one of those things when you see it. It's like, it's not the best news ever, but it's way better than it could have been. And it's probably good news for Jerome Powell, too, the Fed Chair, whose approval rating, we got this new poll out earlier this week, just hit the lowest level of any Fed Chair since they started keeping track in 2001. So he's not great for. He's punched in the air this morning. Let's go on to the debt ceiling.

President Biden, GOP, House Speaker Kevin McCarthy and other congressional leaders held their first talks at the White House yesterday to try to reach a deal to raise the debt ceiling and avoid economic catastrophe. They still seem pretty far apart, but they'll continue talking and have scheduled another meeting on Friday. Hopefully it's not like a 4 p.m. Friday situation. That is not usually productive. And just to recap here, Republicans want to raise the debt ceiling along with some of their other. priorities like spending cuts and restrictions on things like food stamps. Democrats obviously don't want any of that and they're just trying to raise the debt limit without any tie-ins.

Punch Bowl News, which is one of the most insidery DC publications out there. They wrote a headline this morning that said, you should be way more worried about the debt ceiling. Okay. And I was like, I'm already worried. I don't know how much more worried I can get. Well, and I think it's interesting, though, because this is kind of the familiar story right whenever there is kind of a debt ceiling or a passing of a budget right this is where these big

ideological economic issues and differences really really come to the forefront and it is you know we're going to have to see this is why people hate politics it's because they're just trying to stuff in their priorities with this thing that could tank our economy and all of us regular people are just like can you just figure something out so you know my portfolio doesn't tank So we'll see that we'll see what happens. The clock is ticking. As we know, Janet Yellen said June 1st is the soonest that we could default on our debt. Finally, there are some Republicans in some legal due to.

Donald Trump was found liable for sexual abuse and defamation against a magazine columnist E. Gene Carroll. He was ordered to pay her $5 million in damages. This only adds to his legal problems as he tries to recapture the White House in 2024. You can bet he will be asked about all. of this tonight when he does a town hall on CNN. This surprised pretty much everyone that he agreed, that both he and CNN agreed to do a town hall together. But, you know, we had just been talking this week about how CNN's ratings were down. And I don't think anything can boost your ratings

by kind of holding an interview with Donald Trump. Yeah. And we'll also see because part of this was the defamation as, as you mentioned. And so, you know, there is what are, how, how do you actually move through that again? We will see what happens. I will be, I think I'm definitely going to watch. So you mentioned, you mentioned Donald Trump in this suit, and we're going to move on and talk about someone who is a fan of Donald Trump, who is former Fox News host Tucker Carlson, who, as you might remember, Neil left Fox News late last month. They parted ways. A.k.A. Fired. So Tuesday afternoon, Tucker Carlson, who has been, of course, gone from the airwaves, posted a video on Twitter that he is going to be launching a new version of his television show on Twitter.

So it's kind of interesting for a lot of reasons. One of the reasons is that according to Puck News, this means that Carlson is going to have to forego around $25 million from Fox as part of his kind of departure, his severance. package to actually come on to Twitter, but we also know that, you know, Tucker Carlson needs and wants an audience. And so is not able to have that if he's just completely gone. But it's, so it's going to be kind of interesting to see what plays out there. But I think the other thing that's really interesting here is that Twitter owner, Elon Musk, of course, has been kind of struggling in the last couple of years to, to keep advertisers around, particularly as some of these policies have changed around, like, what kind of content is allowed, a lot of big brand,

advertisers, national advertisers have kind of backed out because they're like, this is really toxic. And Tugrell Carlson is not particularly brand advertiser friendly. Now, we know this just based on kind of these various advertiser exodus that happened at Fox News and in his time slot, particularly advertisers said, we don't want to be there. We don't want to be in that 8 p.m. slot. And so now the question is like, what does that actually mean for Twitter? Because Elon Musk has been trying to court advertisers, lots of discounts, et cetera. And the numbers are not looking great. I think right now, Twitter advertising revenue is down of March 2020 forecast from insider intelligence. Predicted that Twitter is going to, is looking at around $2.9 billion in ad revenue in

2023. It had initially forecast that that would, that number would be $4.74 billion. So you do the math, Neil. Like, that is not, that's a pretty precipitous drop. And, you know, we, so, so I think the question is just, what does that actually mean? Elon Musk has said, this is not like an official deal. This is just, Tucker is going to make it on, he has to make it on his own, just like any other creator. But Twitter doesn't really have the monetization tools that other social platforms have. You know, you can make a pretty good living as a solo creator on a, on YouTube, Instagram, TikTok, but Twitter. has a subscription module that you can subscribe to various creators.

I just looked this morning. I can pay Elon Musk $4 a month to subscribe. So I'm sure people will do that for Tucker. And Twitter has also tried to roll out an ad revenue share. But even Elon Musk in his post about Tucker said that the software wasn't ready for to kind of turn this on yet. So I don't think Tucker Carlson is going to make even close to as much money as he.

was making on Fox with this Twitter thing, which makes me believe this is sort of a stopgap measure. For now, I don't think he's going to just stay on Twitter forever. I think, you know, all of these other conservative news outlets, OAN, Newsmax, are probably, you know, ready to write huge checks to him. And I think we'll see if this goes successfully, but I doubt it will for various reasons. and I can see them moving to another conservative news outlet once this legal fracas with Fox kind of plays out. Yeah, exactly. I mean, I think the big takeaway here is like you need an audience to stay relevant. And so like wherever you can get that as whether it's a stopgap or not, it kind of remains to be seen. But of course, you know, Twitter is having all these issues with content moderation and the type of audiences that it's attracting.

So, you know, big question mark as to what that's going to mean. I mean, who's going to come out on top, probably Tucker Carlson will be fine. Maybe. Yeah. But certainly. You know, I wonder if this is a positive or a negative for Twitter. Because any social platform would, you know, die for a creator, you know, the as popular as Tucker Carlson to come onto your platform. That's the entire name of the game because that drives more people to come on.

And theoretically, that drives more advertisers to come on. But there's also this other side of the coin with this person specifically. So we'll see how that nets out. You have liberals saying that Tucker Carlson's move to Twitter will only lead it to devolve more into a conservative right-wing parlor-type app. But I still see all of them posting all the time anyway. Yeah, I mean, so I guess the big question is blue sky.

Like who's, you know, like who comes in? There's no alternative still. When the Met Gala happens, when the coronation happens, everyone just goes on Twitter to make jokes. And there's no real alternative. So I don't know if Tucker, why can I say his name? Tucker Carlson will change the equation. Let's move on to the stock market.

So in 2023, companies that are publicly listed are, have been living or dying by mentioning generative AI. And that should not really come as a surprise. But if you hype up your use of the technology, you will be grandly rewarded by investors. And if it seems like you're falling behind, they will throw tomatoes at you. So the latest example of this is Palantir, which is this big data firm co-founded by Peter Thiel. After it talked up demand for its new AI platform on Monday, its stock shut up 23% yesterday. So what's going on here is pretty simple. Investors see generative AI as this revolutionary iPhone moment that disrupts entire industries and unlocks trillions of dollars in economic value that could be captured by these companies.

So if a company looks like it's set to lead in at least some segment of the market, investors are piling in. So we have like anecdotal data, but there is some, there's a new academic research paper out that shows that AI makes your stock go up and to the right. So a study was just published in the National Bureau of Economic Research. It shows that companies embracing generative AI have been earning shareholders 0.4% more each day than those with less exposure to the tech in the months after chat GPT was released. This is actually why I changed, legally changed my middle name to degenerative AI. And my personal net worth just skyrocketed. I do think it's really interesting because, you know, you see this all the time. Like I think there are other examples we could

point to here of using kind of a buzzword. And that you get the investors really, really excited. Again, you said could be. And I feel like that that is really kind of the thing to home in on here is it's kind of anybody's guess as to to what degree will this be effective. But, you know, people see that. It seems like it has more legs than the Metaverse, which literally no one was using. But the Metaverse is definitely the last kind of tech buzzword where a company just had, you know, basically had to say it on their earnings call to appease investors. And look, we see all Microsoft is obviously one of the big beneficiaries of AI.

But I was looking back in 2021 when the Metaverse was. this what was happening to what's going on right now and satya nadella Microsoft CEO said in 2021 that he couldn't overstate how much of a breakthrough the metaverse was for his company and that sounds a lot like what he's saying about AI i think we were all a little more skeptical of the metaverse than i but it is kind of jarring to see him use very similar language to describe the metaverse as well as AI. And I think maybe he just got caught up a little too much in the Metaverse. Yeah. Well, and I do think there, you know, to be fair, there's definitely a big difference between like generative AI is a, is a tool that is people use. And the Metaverse is like a

concept more than any, it's not really like a, it's not really something that you can implement. It's like a conceptual idea. So let's talk about this, Neil. Is the Metaverse dead RIP to the Metaverse? There was this insider article written about this week by Ed Zittron who proclaimed the Metaverse dead. I think it's way too early. You can't declare it dead after two years after everyone started talking about. These things take a long time to grow and obviously the tech is very hard and the hardware is not there. You still have these clunky AR and VR glasses. But Apple is releasing a mixed reality headset and I kind of trust Tim Cook a little bit. to kind of predict the future.

I don't think it will happen with the speed at which Mark Zuckerberg and other industry analysts and other Metaverse Bulls will want it to happen. I mean, Gartner, the consulting firm, claim that 25% of people would spend at least one hour a day in the Metaverse by 2026, which is basically tomorrow. And I think we can all agree that won't happen. But we saw it with the dot com bubble, right?

Like all of those companies went bust, but eventually the, the, what we know is the internet emerged from that rubble. And I'm not ready to write off the Metaverse. Yeah. This reminds me of the blockchain. Do you remember when that was like, I feel that was like the buzz word? And of course, now the blockchain is kind of everywhere, but it's more like a, just like a

humble technology that kind of underpins a lot of things. But, you know, it's, again, it's the hype versus the reality. But if you make the right bet on generative AI and then it turns out to be this, you know, multi-trillion dollar industry that changes everything about economic life and valuation of companies then you're going to make a lot of money going back to the blockchain thing i just a very distinct memory from my early days at morning brew this company named long island ice tea changed it in the in the huge hype around all these alt coins and icos change its names to long blockchain corporation and its share shut up 300 percent and i'll never forget that

then I think it was charged for fraud. Okay, before we move on, let's 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. Now through May 6th. Exclusion supplies, see Home Depot.com slash price match for details.

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If you open up a business textbook, this is a classic example of what is known as vertical integration. You have Tempers-Sealy, which is the world's largest mattress manufacturer. And mattress firm is the largest U.S. specialty mattress retailer. It has 2,300 stores across 49 states. When I saw that set, I was like, which is the state where there is not a mattress firm? I guess I'm going to go with Alaska or Hawaii. It accounts for 20% of the $18 billion U.S. retail mattress industry. So mattress firm is partially owned by this South African firm Steinhoff International Holdings.

And it was basically the industry's worst kept secret that Steinhoff wanted to unload mattress firm to pay down its big debt load. What do you think of this merger? So, okay, the thing that's so interesting to me is I didn't realize how big the mattress business was. Everyone's got to have one. People have to sleep, Neil, ultimately. But the thing that's so interesting is that, you know, in recent quarters, we've really seen the mattress companies kind of struggle because people, you know, it was March 2020. People are like, I'm home. Oh, my gosh, I'm sitting on my bed 24 hours a day.

Seven days a week. And so, you know, you're not buying a new mattress once a year, probably. So, you know, now it's kind of like there's the effects of having everyone having kind of maybe refurnished their homes. but it's the the kind of ubiquity of the mattress store is like the is a little weird yeah um so and mattress prices are actually like the mattress business is not a bad business like you said everybody has to sleep um and mattress spices are commonly marked up by like 50 percent maybe more than that so it's not the fact that we have mattress stores all over the u.s you only have to sell like 20 mattresses on average to cover your monthly cost. All of the staff members are on commission.

You don't keep any inventory in stores. You have them in warehouses. So it's this showroom. And that's why they are in every strip mall that you can imagine. And this is why you think that every mattress store is actually a front. And it's because they literally don't have to sell anything. But you're right. This is like textbook vertical integration. Like let's combine and conquer. And I don't know. Well, that means the FDC is going to look into it. When I first saw this headline pop up I was like antitrust maybe and it does seem like this is going to be investigated by regulators for maybe creating a mattress monopoly FDC does not like vertical integrations I think the best example of this is Microsoft and Activision it's

taken aim at that Microsoft has sort of the distribution of video games the console and then Activision Blizzard makes the video games like Call of Duty and so the FTC has sued to block that deal or wants to block that deal. And I know they could not be any more different industries, but it's kind of the same economic principle of combining distribution and production, which could give you an unfair leg up. So we'll see what happens in the mattress industry. Absolutely. So now in other retailer news, I want to talk about the humble mall, which has had a little bit of a rough time. That's kind of the understatement of the show. But something that's really interesting is happening in malls, which is that shopping centers are offering rescue animal groups,

empty storefronts, whether for free or at a humongous discount. And so this is having a really kind of incredible effect on adoption of rescue animals. So the New York Times ran a great story in its style section called Can Actual Rats Save the Mall? We love a question headline. And we love, we love talking about literal rats. We love hyperbole. So the, the, some of the, the information we're, we're kind of seeing is that, um, these, these animal rescue organizations are, are really able to, um, really able to capitalize because, again, like there's no, they need a space because people walk in and they walk out with a

kitten or a dog or a rat or a gerbil. So you had a pet rat, right? I did have a, I did briefly have a pet rat. I did not get her from a rescue. I got her from my fourth grade teacher. And she was my favorite. I loved her. My mom did not love her as much.

So the New York Times talked to L.A. love and leashes. They're an organization in L.A. And they have found homes for more than 3,000 pets since they relocated to a shopping center in 2021. Yeah. more than doubled yearly adoption rates. So ultimately, if you walk past an animal, like your heart immediately melts, you adopt it. We're seeing this story all over the country. So in Illinois, there was a rescue organization called Orphans of the Storm.

They got homes out of their two-mile locations. Neil, I want to hear, like, so we're seeing kind of like this re, this just total changing of the guard in the mall. And I want to like hear your thoughts about this. I am going to have a little bit of a contrarian hot take here in that malls are doing great. And the suburban retail is absolutely booming right now compared to downtowns because people are not commuting to the office five days a week and where are they going to do their shopping instead of the sweet green in, you know, on Fifth Avenue and 18th Street here, they're doing it in their local mall. And the data is bearing this out. So this is pretty crazy. You think of when you think of sweet green specifically, you think of, you know, urban center.

the office worker is going to, you know, go get their sad desk salad. But actually, 50% of all sweet greens are in the suburbs. And there are, there's just very little vacancy in suburban retail right now. You have mall landlords saying they saw a record high leasing in the first quarter. Another one said its portfolio is 98% lease. So I'm not sure there's going to be any space for these animal shelters anymore. No, obviously, like, obviously I think there's going to be a big discrepancy in, you know, these higher class malls with nicer space might do well than sort of the falling apart malls

in less desirable areas. But I do think you're going to see just like a bigger boom in the suburbs. And I just hope these rescue shelters will be able to stake out a claim still. Absolutely. I really, I just, we just want to get all those animals adopted into loving homes. So wherever they can find storefront, we're good. All right. We'll keep an eye on what happens in malls.

I don't think I will go to one. Anyway, there is a, for a final story, there's a major smuggling operation going on by Americans. They are trying to get fruit roll-ups into Israel. So earlier this month, 661 pounds of fruit roll-ups have been confiscated from two American couples entering the country. That is equivalent to 21,000 fruit roll-ups. And then other visitors have been showing up to Ben-Gurion Airport with multiple suitcases. full of fruit roll-ups. Why is this happening?

Okay, I'm going to take a pause so listeners can just make a guess themselves just for three seconds. Just think about why people are smuggling fruit roll-ups in Israel. All right. Your gut feeling is probably correct. It is TikTok. When in doubt.

When in doubt, it's always TikTok. If there's something weird happening in this world, you're just like, okay, it's that TikTok app. Tick-tokers have been doing all sorts of weird things with fruit roll-ups, like turning them into dumplings and wrapping them around ice cream. So, of course, if you watch someone wrapping a fruit roll-up around ice cream, then you have to try it out as well. That's just human nature 101.

And ultimately, we love an entrepreneur. We love someone who decides to stuff their suitcases full of fruit roll-ups because they're trying to make a buck. Honestly, you have to respect it. Yeah, I mean, so if you're trying to copy a TikToker and you're in Israel, you can't really get your hands on fruit roll-ups like we do. in the United States. Here, a 72-count box goes for about $27.

In Israel, where supply is super tight, they're going on the black market for $6 for a single roll-up. And you know what? All this talk is making me really want to kind of make this myself meal. So it might be a little unfair for those who maybe don't have fruit roll-ups at their fingertips, but you just get a scoop of, I think, vanilla ice cream or whatever and roll it up. I don't think I can handle that.

So, well, next time I'm on, we'll talk about if it was good or not. All right, Kelsey, well, you are invited all the time. That is our show for today. Thanks for joining everyone. Can feel free to reach us at Morning Brew Daily at Morningbrew.com with your thoughts or any fruit roll-up concoctions. Big thanks to everyone who makes our show possible. Our producer and editor is Emily Milliron. Our technical director is Euchenna Wa Ogu.

Samantha Velas is our associate producer. Billy Menino is on audio, hair and makeup called in sick and I suspect it was from eating too many fruit roll-up ice cream combos. Devin Emery is our chief content officer and our show is a production of Morning Brew. Thanks, Neil. Thanks, Kelsey. Have a good one. Yamava Resort and Casino at San Manuel is California's number one entertainment destination

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