Morning Brew Daily - LA Wildfire Victims Fight Price Gouging & RTO Brings Fresh Office Fits

Episode Date: January 14, 2025

Episode 496: Neal and Toby chat about LA wildfire evacuees and authorities battling against price gouging that are looking to take advantage of desperate victims. Then, the shift towards strict Return-to-Office policies by companies have led to workers shopping for a new office wardrobe. Also, China announces a trade surplus that has reached nearly $1 trillion. Meanwhile, Toby dives into the trend of ghost jobs that are plaguing job sites and job seekers. Lastly, a roundup of the biggest headlines for the day. 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. Checkout public.com/morningbrew for more Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Cryptocurrency trading services are offered by Bakkt Crypto Solutions, LLC (NMLS ID 1890144), which is licensed to engage in virtual currency business activity by the NYSDFS. Cryptocurrency is highly speculative, involves a high degree of risk, and has the potential for loss of the entire amount of an investment. Cryptocurrency holdings are not protected by the FDIC or SIPC.  Alpha is an AI research tool powered by GPT-4.  Alpha is experimental and may generate inaccurate responses.  Output from Alpha should not be construed as investment research or recommendations, and should not serve as the basis for any investment decision. Public makes no warranties about its accuracy, completeness, quality, or timeliness of any Alpha out. Please independently evaluate and verify any such output for your own use case. APY as of 1/9/25, offered by Public Investing, member FINRA/SIPC. Rate subject to change. 00:00 - ‘Inner Excellence’ Goes Viral  02:40 - LA Price Gouging  07:48 - Retail Boom for RTO  11:40 - China Trade Surplus 17:15 - Toby’s Trends: Ghost Jobs 20:20 - Headlines  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

at pwc.com slash US slash brew AI. That's pwc.com slash us slash brewAI. Good morning brew daily show. I'm Neil Framman. And I'm Toby Howell. Today, reports of price gouging by Los Angeles landlords threatened to escalate the city's housing crisis.

Then people are finally revamping their wardrobes in retailers like Lou Lemon and Abercombe are cashing in. It's Tuesday, January 14th. Let's ride. Toby, have you found your inner excellence? No what, Neil, I'm still working on it. Well, maybe I can help. You see, there's this book called Inner Excellence,

and although no one had heard of it two days ago, it was the number one bestseller on Amazon yesterday. It's all because of a viral clip from a football game. On Sunday, Eagles wide receiver, A.J. Brown was caught on camera flipping through a book on the sidelines during the Eagles playoff game, and commentator Tom Brady remarked he had never seen that before in all of his playing days. That book was discovered to be Inner Excellence written by Performance Coach Jim Murphy. and it spiked to the top of the charts.

Brown says he loves this book and brings it to every single game to give him a sense of peace. Toby, you played college soccer. Did you have a book you turned to to get in the right mental state? Neil, Neil, Neil, Neil. I was never on the bench

with time to read a book. I actually did have a book, though. I used to read Inner Game of Tennis before every soccer game because one of my assistant coaches gave it to me before one of my first starts ever. I scored a goal in that game, so then it just became a ritual

beforehand. What I'm most excited about, though, is that all these toxic Philadelphia fans are suddenly going to become the most, you know, positive, selfless people because they're going to follow in A.J. Brown's footsteps. So I'm just happy for the city of Philadelphia. Maybe they're actually going to live up to their name as city of brotherly love. Now word from our sponsor, public.com. Neil, remember when TV remotes had like 45 buttons on them, none of which worked? I do. Well, old school investing platforms are kind of of like that. But Public, it's like having the ultimate universal remote. Right. Stocks, bonds, crypto, options, all at your fingertips without jumping between different apps.

And their AI assistant alpha is like having a personal investment channel guide, giving you insights on any stock you're curious about. Plus, that 4.1% APY high-yield cash account is like finding your favorite show is always on. To upgrade your investment experience, check out public.com slash morning brew. It's investing made easy. paid for by public investing full disclosures in podcast description. For his day job, Jason Oppenheim owns a luxury real estate brokerage that's the focus of the Netflix reality show, selling sunset. Now, in the aftermath of the wildfires that devastated LA neighborhoods, he's calling out a practice many of those who lost their homes are dealing with, price gouging. In an interview over the weekend, Oppenheim accused landlords of illegally jacking up

prices on rental homes to take advantage of desperate people looking for a roof over their heads. He mentioned sending a client to visit a property that had previously been listed for rent of $13,000 a month. When the client got there, the landlord demanded $23,000. There have been numerous reports like this corroborated by California's Attorney General Rob Bonta, who said he's seen businesses and landlords raise prices above the legal limit. That legal limit is 10% above the pre-disaster cost as part of a price-gouging law California implemented when it declared a state of emergency last Tuesday. Banto warned that he and other authorities would eagerly prosecute anyone who hiked rents for vulnerable people and go after others participating in white-collar scams.

Toby, these fires have so far destroyed more than 12,000 structures, many of them homes, leaving tens of thousands of people seeking temporary places to live. It's an unprecedented housing crisis on top of an existing housing crisis in Los Angeles. Yeah, people are pretty desperate to get into a house right now, so a lot of them just end up throwing money out of place. They'll go see any place just to get a roof over their head. And of course, unfortunately, you have people taking advantage of this, despite what California laws actually say.

And you mentioned that L.A. County was already facing a housing crisis. That was even before you factor in these estimated 12,000 structures burning down. Part of it is just California's a very expensive place to live. There's not a lot of land. there's a very strict regulatory environment in a limited housing supply. So if you just look at rents across Los Angeles, they're averaging $2,820 on Zillow. And it all combines to send rents in Los Angeles to be much higher than the national average. Rent in Los Angeles averages $2,820, which is higher than the national average of $1983, 33% higher than the national average.

And then you toss in rebuilding factors as well. That brings in a whole host of. a new problem. So they're not just getting rent-gouged when they're trying to find a roof over their head, but also you're looking ahead and kind of staring down a lot of rebuilding issues as well. Yeah, I just want to put a point on the price gouging. Let's talk about the reports that have been mentioned. There was one real estate broker who pulled 400 listings from their agents listing service in central Los Angeles and San Fernando Valley. Of more than 400 listings that they pulled, About 100 has had raised rent more than 10% since Tuesday.

The LA Times found a property in Encino that had been listed for $9,000 a month earlier in January after the fires. It was now on Zillow for 11,500. The news outlet LA list found a property in Bell Air listed on Zillow for $30,000 a month as of 11 January 11th, which was three days ago. That was almost double the $16,000 a month at the price. property was listed at in September. So this is a widespread practice. And once these news outlets find it and call it out, it seems like they kind of disappear from Zillow or they go back down to the 10% threshold.

It's unclear whether the algorithms behind pricing are driving, you know, are driving this increase because they respond to demand or landlords are doing this knowingly. So either way, it is illegal. But you did mention rebuilding in LA, California Governor Gavin Newsom has talked about is already talking about L.A. 2.0. There are huge events happening in Los Angeles in the coming years. You have the World Cup. They're hosting a bunch of games in the World Cup next year.

And then they have the Olympics in 2028. So there is a huge rebuilding plan. One thing he did do was sign an executive order that limits, that scraps or suspends some of those harshest environmental regulations that have constricted housing in California and led to it being the costliest and longest place to get. a building project done. Yeah, there's definitely some question marks about LA 2.0 because the group behind the Olympic Games has set a budget of around $7 billion. Taxpayers, though, would be on the hook if you do go above for any cost overruns above that $7 billion threshold. So that obligation and

the fact that maybe taxpayers could be on the hook for even more costs in the future, even as they're trying to rebuild, has called some, has prompted some people to say that L.A. should pull itself out of the Olympics. They have enough to deal with with rebuilding from these fires. Maybe the International Olympic Committee isn't something that they need to deal with at the current moment. And then not even to mention the World Cup that comes even before the Olympics in 2028. So LA 2.0 is going to have some challenges, but already Gavin Newsome and many in California

are looking ahead trying to figure out how to plot a way forward from this tragedy. People are finally trading in their COVID-era sweats for new chinos in recent. retailers are cashing in. Lulu Lemon and Abercombe reported tasty earnings yesterday, with both raising their guidance for the year ahead, forecasting that shoppers will keep spending into the new year. Credit card networks corroborated this, seeing a jump in clothes shopping with Visa and MasterCard, both reporting an over 5% bump in the category over the holiday period. But a solid quarter wasn't enough to impress Wall Street. Lulu and Abercomby ended up trading lower yesterday, with Abercomby falling as much as 18% as traders digested the good but not great forecasts and worried that

sales increases have been powered by discounts that eat into profit margins. Despite trading in the red, it does look like wardrobe revamps are ticking upwards as return to office mandates for major employees like Amazon and JP Morgan prompt shoppers to trade in their sweatpants for something more work appropriate. Neil, people are trying to get their style identities back. They really are. I mean, if you bought a holiday gift for someone while you were shopping, you probably picked out a piece of clothing for yourself. Apparel spending over the holiday season was essentially on par with electronics. I think this does have a lot to do with those discounts that retailers rolled out. It was just cheap to buy clothes. The apparel category had the

highest discount rate in the U.S. of any category at about 33% this holiday season. And then if you look at broader inflation over the past couple of years, Apparel has stayed pretty flat relative to the overall trends. Clothing prices have rose just 1.1% between November 2020, 23 and November 2024. The overall rate was 2.7% footwear has just basically stayed flat. It's budged up 0.7%. And then you have all of these discounts rolling out as well. So I think people just found value.

They bought those three for $50 t-shirts or whatever they needed to do to maybe perhaps it's going back to work because we know Amazon, JPMorgan, a bunch of other big corporations have pulled people back to the office and you can't go in your sweats anymore. And just anecdotally, NBC talked to a few personal stylists who have said that they are hearing more clients, ask for back-to-office outfits. One stylist NBC talked to estimated that a quarter of new clients are coming in, asking her for help, putting together an outfit for work.

I think we could use a little help as well, Neil, looking at our... Aaron Mago is not doing their job. They're not doing their job. It is interesting, though, because I said that a lot of those companies reported strong earnings, but you saw their stocks fell. Abrecambi is one of those big names that fell a lot yesterday, and it's almost like they're a victim of their own success. They have had blowout quarter after blowout quarter.

They've had this big renaissance that we've talked about multiple times on this show, and it's just tough to keep that momentum going, even though they are forecasting over 15% sales growth in the new year. That's just not enough for investment. at this point. Some other winners of potentially this back-to-office shopping boom, Gap raised its full-year outlook after a strong start to this season. Norstrom said it was seeing shoppers snag more clothes in the under that $100 threshold looking for a good value as well. Lulu Lemon expects sales to grow between 11 and 12 percent, which was a slight revision upwards. And then urban outfitters actually released their holiday results and said that they grew 10 percent

compared to a year ago. So we are seeing these modest, not blowout increases, maybe like we saw coming out of COVID, but still increases as people are trying to, you know, revamp and refresh in their wardrobes. I'm excited to see all of your new fits. All right, Maiden China tags are taking over the world. China is making so much stuff and selling it abroad that it ran a trade surplus last year that's almost unheard of in modern history. That surplus, which came out to nearly one trillion dollars for 2024 mean China's factories are dominating the world's manufacturing at levels not seen since the U.S. post-World War II, according to the New York Times. Let's quickly define our terms.

A trade surplus is the value of a country's exports minus the value of its imports. Last year, China exported $3.6 trillion worth of goods and services and imported $2.6 trillion. That gap, when adjusted for inflation, dwarfs the export numbers put up by manufacturing powerhouses like Germany, Japan, and the U.S. over the last century. It reminds me of what NBA player Clay Thompson said Sunday night after scoring his 16,000th career point, an incredible accomplishment. But when asked about it after the game, he remarked, it's cool, but it makes you realize how ridiculous it is that LeBron has 40,000.

It's insane. In terms of exports, the rest of the world is clay. China is LeBron. Yeah. Sorry, I know your mind is scrambled right now. assessing that Clay LeBron metaphor right there. One thing that did propel it to this record year was a very strong December, too, because a lot of shipments were rushed to the United States because what is coming, the incoming

presidential administration, Donald Trump, before he can start take office and start raising tariffs on China, a lot of brands and companies imported goods to get out ahead of those tariffs. So that led to a new single month record surplus of $1,000. billion dollars. It is just truly domination at this point. Some of the industries that China dominates the most are things like cars, solar panels. They have been flooding the global market with these things leading to an economic banza for the country, but also potentially it's too much of a good thing, depressing some of the prices of these cheap goods. It has led to a rising tide

floats all boats, all boats within the country, though, because exports create jobs not only in the factories, but also you have to have these high-earning designers, these high-earning engineers, research scientists as well. So it really has been an economic boom for China. Of course, it's going to be a boom because when you're running this much of a surplus. It is a boom for factories, but I think it points to underlying weakness in Chinese consumers, which has been the main problem. When you're exporting so much more than you're importing, it means that your people are not buying as much stuff. And the problem with making so much stuff is there's an overcapacity.

They're making two to three times as many products as their own people can consume. So they're shipping them abroad. They're lowering prices because when there's more supply prices go down. The volume of China's exports has been rising more than 12% a year. The dollar value of its exports has been growing at half that pace. That shows that there's a price war going on. to lower prices. And that's inviting a ton of backlash from the U.S., but a ton of other countries as well, like the EU and Brazil. And the U.S. is gearing up to slap more tariffs on Chinese goods.

And so are Europe, Brazil, India, all these other nations that are saying, well, we want our own manufacturing to do well, but you're flooding our markets with really cheap goods. We're not going to stand for that. So it also exposes a vulnerability in China. So we'll see. I mean, just this, it's a staggering amount of stuff that they're making. I mean, especially in cars. I mean, China was an importer of cars for its entire history. Now it's exporting more than the United States, Japan, Germany, all of these legacy, you know, powerhouses in the auto sector. So it's quite staggering what these factories are turning out. The question now becomes, can China maintain its huge lead on the rest of the world if these raising tariffs do come

to fruition like it is likely to do so? Up next, it is time for Toby's trends. A job listing that looks too good to be true, an application sent off into the void with no response, a sneaking suspicion that maybe this job opening isn't even real. If you've applied to a job in recent years, you may have been haunted by so-called ghost job posting. And it's these rise of spooky listings that I want to talk about on today's edition of Toby's trends. Ghost jobs are roles that companies toss up on jobs boards and advertise online, but have no real intention of actually filling. By hiring platform greenhouse's estimate, these types of roles account for up to 22% of all jobs advertise online. But why do companies have roles up with little intention of filling them?

One potential reason is to make it seem like they are still growing even when they aren't. Another reason they keep the fishing lines out is the slim hope of landing an albatross hire, someone too good to pass up. Some companies do it to comply with federal law, posting about a role publicly, even if Gary the CEO's son has already been tapped for the job. Whatever the reason, it's a growing problem that can make the employment market feel even more hopeless for potential job seekers. Neil, there's already enough ghosting in the dating market. Now you have to battle it in the job market too. Yeah, I mean, you mentioned that this is a growing problem, and it really is over the past five years, the company Ravellio Labs found that

the rate of hires per job posting has been cut in half. In 2019, there were eight hires for every 10 job posting. So not as much ghosting going on by 2024. That number had dropped to four hires per 10 job postings. It feels like what we've seen across the internet now is the rise of slop and things that necessarily aren't real or backed up by evidence. And now it's happening in the job market. It's a problem that's leading to big inefficiencies for the labor market. And it may help explain why even though the hiring numbers are so good for the US economy, people feel like the job market is against them and they can't find a position. It's because they're applying to hundreds of jobs, half of which are never going to be filled in the first place.

Yeah, one of the craziest reasons why companies do this is to instill fear in their current employees. 62% of respondents to a survey said that they posted ghost jobs expressly to make their employees feel, quote, replaceable. So you're trying to create the sense of unease. If you are an employee and you see a job posting for your very role, you maybe will work. harder because you're like, wait a second, they could just bring someone in at any moment to replace me, which is a really dark way of looking at the employment market, but it's something that survey respondents are saying that they're doing management, is saying that they are doing. Another reason that these companies have them up to is that they just want to have this sort

of optimism going forward if it looks like you are growing. Like, that makes your company a more desirable place to be. Maybe they're hedging their bets. They hired someone, but they're not sure if they want to come. commit to that person, so they leave a job opening up. There's a lot of reasons, and a lot of them end up contributing to this feeling of hopelessness that some job seekers are feeling right now. Let's sprint to the finish with some final headlines. Dementia cases in the U.S. could double each year over the next 35 years to reach one million annually by 2060. That's according to

a sobering new study published in nature medicine yesterday. The researchers found that adults over 55 had a 42% lifetime risk of developing dementia much higher than previous lifetime risk estimates. The main reason, people are living longer. The U.S. has an aging population, and older age is the biggest risk factor for dementia. It's not going to affect everyone equally, though, for reasons experts still don't have a firm grasp on. Black Americans are more at risk, and so are women compared to men. Yeah, by 2040, all baby boomers, which is the oldest generation right now, will be at least 75 years old, and that is an age after which dementia diagnosis really increased substantially. So you're right, it is an aging population,

but then also the shifting racial makeup of the U.S. population by 2045, high-risk minority groups are expected to be more than half of the U.S. population, and you said, for reasons that experts aren't quite sure of right now, these minority populations are at greater risk of, you know, getting dementia. So those two reasons combining together are why you saw kind of these sobering figures come out of this latest study. As a CEO of a major company, words like disastrous are not something you want associated with your tenure. But Patrick Spence, the now former CEO of Sonos, can't seem to escape the word. Spence resigned yesterday as CEO of the high-end audio company following a disastrous app redesigned back in May of last year that baffled consumers,

as to just how bad it was. The new app was buggy, rushed, and had crucial features missing at launch. Quite simply, customers hated it. And it led to huge problems at Sonos, including a 16% revenue decline in the fourth quarter, a 13% decline in its share price, and ultimately cost spends his job. Let's talk about this new guy who's coming in. He's probably not going to be the permanent CEO, but he is a very interesting figure. Tom Conrad.

He has a tattoo of the Sonos headphones on his left forearm. He's been on the board since 2017. He was one of the creators of Pandora, the music service, a vice president of Snap, and then the chief product officer of Quibi, the short form video service that barely lasted a year. So he's going to move into this position. Sonos is kind of a house on fire right now. We'll see if he can hold it over until they hire a new CEO. The chief product officer, though, that was behind the rollout of the app is still on board, though.

So a lot of people internally are grumbling, like, it's not just the CEO's fault. This guy is still there as well and led kind of the worst app redesign in history. So Tom Conrad does have his work cut out for him. But yeah, co-creator of Pandora Music Service, that is someone who I'd want in charge of my company, because that stuff was great when it came out. Walmart got itself a facelift. It unveiled a refreshed logo yesterday. its first significant branding update in nearly 20 years.

The new design features a chunkier bold font along with a deeper blue color to go alongside its familiar yellow. There will also be a greater emphasis on its yellow Spark logo as a stand-alone asset. The redesign is part of Walmart strategy to position itself as a tech-driven Omni-Channel retailer because nothing says tech-driven Omnichannel retailer like a slightly bolder typeface. Overall, this is more of an update than a big revamp. The brand still looks very similar, which is probably a good thing because business is booming for Walmart right now.

Sales at its U.S. stores grew about 5% last quarter compared with the year prior, outpacing rivals like Target. Apparently, it was inspired by a trucker cap that was worn by founder Sam Walton, and it was written in the typeface antique olive, which Walmart had used from the, the 1980s through the early 2000. So I guess you've got to get inspiration somewhere. But for many people, I mean, if you should go to Morning Brew's X page and look at the difference, it's hard to tell the difference.

It's very much like Apple's iPhone updates from 14 to 15. They put a fresh coat of paint on it. But I guess, you know, I'm not a designer branding expert. Apparently you have to refresh your logo every few decades to remind people that you exist. Not that Walmart has to remind people that it exists. But it's doing this from a position of strength. It certainly is. It didn't reinvent the wheel here. But I will say it is good. Like, Boulder is better. I like the deeper blue a little bit like that. But I think they are doing it in order to tell the story that like, hey, we are this new Omni Channel retailer. We do have a very big online business. So let's do a slight logo tweak, a slight color update to let people know that we are a new Walmart. So yeah, it's not all about the actual visual interpretation of the business. Part of it is the brand storytelling as well. A's are much, the A's are cool now. I like it. Like, I actually do. It is a slight tweak, but I agree

with you. I think it looks better. The world's largest gathering of humanity kicked off yesterday. No, it's not a Zen giveaway in Murray Hill. It's the Mahakumela, a Hindu festival that occurs once every 12 years. Over the next six weeks, over 400 million people, greater than the total U.S. population, will travel to a city in northern India to bathe in the confluence of three rivers sacred to Hindus, two physical, one mythical. This is a logistical challenge that will put your Super Bowl party to shame. To prepare for the onslaught of people, authorities have constructed 150,000 tents for a makeshift city that will have roads, electricity, water, communication towers, and 11 hospitals. They've also set up 145,000 restrooms and 99 parking lots.

Toby, is that even enough? It's 400 million people. That's what I was thinking. It doesn't feel like enough. 400 million people is just so hard to wrap your mind around. Obviously, it's bigger than the entire U.S. population. But also, that is 200 times the 2 million people that make the typical pilgrimages to Muslim holy cities of Mecca every year. So 400 million people is just a vast amount of people. It also got me thinking, what's the largest mass of humanity that I have ever been around?

And I think it was the New York Marathon last year. That seemed like a logistical, you know, in. insane thing to pull off with just these sheer amount of porta-potties. That was only 50,000 people. So I can't imagine seeing what the porta-pottie lines look like at, you know, this festival. I think mine was the, like, some of the inaugurations. When I went to Maryland, we would just hop down to D.C. For the inaugurations in 2008, 2012.

And there was so many people there. I couldn't think of anything that could be bigger than that because the subway stations are swamped. You can't see anything. Self-service is down. So kudos to these. organizers because to pull off an event with 400 million people is actually mind-boggling. Let's wrap it up there. Thanks for starting your morning with us and have a wonderful Tuesday for any questions, comments, or feedback. Send an email to Morningbrewdaily at morningbrew.com. And don't forget

in all the hecticness of your day to share the podcast, friends don't let friends be ignorant about China's trade surplus. For a more specific sharing recommendation, Toby spent all night brainstorming and now he has an idea. I want you to share the podcast with someone who could work on their inner excellence, maybe send them the book and then also send them this podcast episode to go alongside of it. It is a great one to punch. Let's roll the credits. Emily Milliron is our executive producer. Raymond Loo is our producer. Olivia Graham is our associate producer. Eugenwa Ogu is our technical director. Billimanino is on audio. Despite rumors, hair and makeup is not a ghost job. Devin Emery is our chief content officer and our show is a production of Morning

Group. Great show, Danielle. Let's run it back tomorrow.