Morning Brew Daily - Market Reactions to Trump Shooting & Will the AI Bubble Burst?

Episode Date: July 15, 2024

Episode 365: Neal and Toby recap the assassination attempt at a rally in PA that grazed but ultimately missed former President Trump and how the markets are reacting. Then, a group of Goldman Sachs strategists are concerned the AI tech boom may actually be a bubble that could burst, leaving investors skeptical about its true payoffs. Next, the weekend’s winners: Alec Baldwin and Spain. Plus, a stegosaurus up for auction is drawing much attention – and criticism. Meanwhile, the Seine River is becoming a symbol of Paris’ readiness to take on the Olympics. Lastly, the biggest news you need to know this week.  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 - Get your MBD Shirt! 2:00 - Assassination attempt on Trump 7:00 - Is AI a bubble about to burst? 11:20 - Weekend winners: Alec Baldwin & Spain 17:10 - Dinosaur market booming 21:00 - Seine River clean up 23:45 - Week ahead Learn more about your ad choices. Visit megaphone.fm/adchoices

Many employees can't afford a hefty medical bill that pops up out of the blue, but it happens. And employees who are financially stressed are, understandably, more likely to be distracted at work, costing their employers greatly in lost productivity. Luckily, AFLAQ plans help with out-of-pocket expenses not covered by health insurance and can be offered at no direct cost to businesses. Learn more at aflac.com slash morningbrewerdaily. That's aflac.com slash morning brew daily. Good morning brew daily show. I'm Neil Fryman.

And I'm Toby Howell. Today, Goldman Sachs says AI could be a giant bubble. But what does Chad GPT think? Then former President Trump survived an assassination attempt at a rally this weekend. What comes next? It's Monday, July 15th. Let's ride. Neil, may I just say that you are looking very spiffy to start the show today?

Thank you, Toby. Perhaps it's this new Morning Brew Daily T-shirt. I'm wearing. I think it just might be. Wow, it is a bute. Give our audio listeners a tour. Well, we got in the lab with the artis on the morning brew design team and cooked up a retro vibe for this merch drop. First, it's got a cool alt logo where the coffee mug handle is the D in MBD. Then on the back. Oh yeah, give us a twirl. I'll narrate it so you can turn away from your mic. The back has this retro radio tower with a very nice city skyline, a lovely muted alternative. color palette as well. Very summary, very classy. I am underselling this, though. So, Neil,

tell the people where they can snag this beautiful t-shirt. Yeah, you can go to shop.mortmourningbrew.com to get the Morningbrew Daily tea, and we'll be posting some picks and a link on our social if you want to see me and Toby in our modeling eras. Oh yeah, get your blue steel on, Neil. Well, it was a wild weekend for U.S. politics as multiple gunshots were fired at a Trump rally in Pennsylvania on Saturday. Federal authorities say the shooting was an assassination attempt, but Trump escaped with minimal injuries and plans to speak at a GOP convention later this week. However, one spectator was killed and two others were critically injured according to the Secret Service. The Secret Service also confirmed that the suspected gunman, who has been identified

as 20-year-old Thomas Matthew Crooks, is dead, and authorities found explosives in his car he drove to the event. This was impossible to miss on social media. two, with multiple photos going viral of Trump stopping and putting his fist in the air with blood steel streaming from his injured ear. Neil, lots to dig in here from a fundraising perspective to how it impacts his reelection chances, but let's start with the reaction from the business world. Right. So top U.S. business leaders, they all posted on social media condemning the violence.

Tim Cook, Jeff Bezos, came out of hibernation on X to say political violence has no place in America. some very interesting developments, though, related to two billionaires. Elon Musk, who's been, there's been speculation about whether he would actually fully endorse Trump. He is criticized Biden a lot. But after the assassination attempt, he wrote on his platform X, I fully endorse President Trump and hope for his rapid recovery. It wasn't exactly a surprise because just a few days earlier, Bloomberg reported that Musk donated to a super PAC working to re-elect Trump. So that will be a big narrative.

going forward. Elon Musk, richest person in the world, $250 billion net worth. He could really put his thumb on the scale in this election. And then there's another billionaire hedge fund manager, Bill Ackman, who also had been rumored to potentially support Trump, even though he supported Biden in 2020. He formally endorsed Trump on social media and then promised a long form post to explain his thinking, because Bill Ackman is known for one thing, and that is posting very long threads on Twitter. He loves his awardee posts. You also have to look at how does this affect his Trump's re-election chances as well. Of course, we are still many months away from the actual election, but you look at how the prediction markets are evaluating his

chances to win now. Polly Market, which is one of the bigger prediction markets out there, priced his chances of winning at around 70 percent. That is at an all-time high. And you also can look back through history to see what happens when other presidential candidates or presidents had an attempt on their life. Ronald Reagan is one that comes to mind. His approval rating immediately jumped eight to ten points in the aftermath of the attempt on his life. So usually there is this ground selling of support from supporters and other people when something like this happens to a political candidate. And a big reason why, especially now, is we are in the first assassination attempt of the

social media era. And it was absolutely everywhere on social media there was that iconic image that, of course, eventually got turned into merch and T-shirts on the Wildwood, New Jersey boardwild. and in other places. So that has become a part of the Trump iconography. Meanwhile, social media, one thing leads to another. And obviously there's a million conspiracy theories going around. The word staged was trending on Twitter for many hours following the assassination attempt.

So it was really interesting to see this play out in real time on our new technology platforms. And Reuters talked to a lot of investors and analysts after it happened to just try to get a poll for. What does this mean for the market and the general consensus is there is no real general consensus. Some people have called out Bitcoin as potentially one of these safe haven assets that people rally to in times of political instability. It's up around 8% in the last five days. It just crossed 60,000 again. So maybe Bitcoin is a trade that people are looking at.

It is hard to tell, though, because one thing that the markets don't like is uncertainty, though. So you could say that if this boosts Trump's reelection chances, then the markets are seeing a more certain future. It takes some of the uncertainty out of the election. Again, we're very far away from the actual election day. So tough to say what it actually means for the markets and we'll actually get a better sense when they open today after our show posts. Right. And two things to look for it for the week ahead. We have the RNC, the Republican National Convention in Milwaukee. Trump says he's going to speak on Thursday and he's there. Now that is the formal nominating

venue for Trump and for the Republican nominee. And also there will be very very very tough questions asked of the Secret Service about how this guy got a clean shot at a presidential candidate from just a few hundred feet away. If you listen to people like Sam Altman of Open AI, Jensen Huang of Nvidia, or really anyone in tech right now, you'd be under the impression that generative artificial intelligence is the next industrial revolution, a technological innovation as radical in paradigm shifting as the printing press or the internet. But what if it's not? What if generative AI ends up being a bunch of chatbots that get stuff wrong or robot McDonald's clerks that give you 100 McNuggets when you ordered six?

What if it's just a bubble waiting to pop? That's the scenario explored in a new 31-page note by Goldman Sachs, which raised some tough but fair questions around the AI boom sweeping tech. Specifically, is AI worth the investment? Can you actually make money from it? Will it increase worker productivity? These are one trillion dollar questions because that's how much tech giants are set to spend on developing AI in the coming years. Two respected experts interviewed by Goldman,

MIT's Daron Asim Moglu, and its own head of global equity research, Jim Covello, are skeptical that AI will be as transformative as promised. Their argument can be summed up by a simple prompt. If generative AI will cost a trillion dollars, what trillion dollar problem will AI solve? Yeah, one thing they did is just ask you to confront how AI impacts your life right now. You might see those AI blurbs at the top of your Google search results. You might hear some AI generated songs as you scrolls through social media, but is yet to change people's day to day. What problem, what big question is it solving in people's lives? That was one of like the fundamental things that this report was getting at is how does it solve a crucial problem that is going to lead

to a recouping of the investment that of these companies are pouring into AI right now. Right. How much will it actually boost worker productivity? How much will it take work off your hand so you can work on higher value things. How much will it contribute to the U.S. economy? Are the big questions? These are the one trillion dollar questions. Goldman Sachs itself, Goldman Sachs economists, they predict that generative AI could boost global GDP by 7% over the next 10 years. But Daron S. Osamoglu, who's an MIT labor economist, suggests that it will only raise economic output by less than 1% over the next decade. He thinks that there are just not that many use cases to what are essentially large language models, these chatbots, these chat

GPT, it's not going to actually replace or contribute to worker productivity. And that's where he's landed and the guy, Global Equity's head researcher for Goldman Sachs agrees with him. Two other points that this report bought up is the sheer lack of training data and the sheer amount of data that AI is currently burning through. Companies are already running out of data needed to iterate on their AI models. So if you are, I mean, Open AI, CTO, Mira, Narati said that the models that the company currently has and works are not all that much more advanced than the models currently out there because they've just already hoovered up all the available data.

And then the other limiting factor around AI is just sheer lack of training power. We are literally rebuilding electric grids, power grids across the country, across the world to satisfy AI's demands. Utility companies are predicted to spend nearly 40% more in the next three years to keep up with the demand from generative AI. So those are two limiting factors that are kind of putting an upper bound on how good or how quickly we can reach artificial, general intelligence, general superintelligence, whatever you want to call it. Yeah, I mean, we'll see what happens with AI. The difference with this and with the internet is the internet was much lower cost.

AI just costs so much to run. And every single time you query anything on chat GPT, it costs these companies money for tech companies spent nearly $400 billion. last year alone in CapEx on AI. So just the major questions here is, is AI worth the squeeze? Are you going to see a return on investment? These two people interviewed by Goldman Sachs don't think so, and they do think it is a bubble waiting to pop in the next 12 to 18 months. But, you know, other people disagree with that. And they say, AI is completely transformative. And these language models will only get better and transform our labor market. So who's to say? This is just interesting to think about.

Right. It is just one report in the grand scheme of things. But yeah, it is interesting to think about. Now let's head to our winners of the weekend segment where we bring you two news stories that had a better weekend than you walking into an air-conditioned room after a long day outside. Neil, you won the pre-show game of who can name the most Summer Olympics host cities. Good poll with St. Louis in 1904. So you're up first. Who's your winner of the weekend?

My winner is Alec Baldwin because in a stunning turn of events on Friday, the involuntary manslaughter case against him was dismissed and it can never be filed again. For a refresher, Baldwin was charged in the shooting death of a cinematographer on the set of his movie Rust in 2021 and faced 18 months in prison. Prosecutors in New Mexico said he was negligent with his use of the gun, which contained a live round, while he says he never pulled the trigger and was just following established protocol on movie sets. The case had plot twist after plot twist. Then last week, just days after the trial began, it offered its final. final bombshell. The judge was presented with a manila envelope containing ammunition that she said

amounted to the withholding of evidence from the defense. That impacted the fundamental fairness of the trial, according to the judge. So she dismissed it with prejudice, meaning that the long and winding prosecution of Baldwin is over. He wept and hugged his wife after hearing the news. Now, attention will turn to the Santa Fe prosecutors to examine how they bungled this case so spectacularly. Right. It was almost a literal silver bullet that saved Baldwin. There There was this introduction of evidence at the last minute, and the judge was simply saying that we don't think that we can have a fair trial without this evidence being considered. There was already an uphill battle for the prosecution here because Baldwin's legal team

scored this very crucial early legal victory where the judge said that his role as a producer of Rust of the movie was not relevant to the actual involuntary manslaughter that he was on trial for because his role as a producer would lead to more culpability because technically he allowed those things to happen on set. The judge immediately said, like, we're not going to try him as a producer. We're going to try him as an actor, which made it so that the case was going to be an uphill battle for them. But then this dismissed with prejudice really was the final nail on the coffin.

My winner of the weekend is total el pais de Spain. Tuveran, three ganadores separados, one of golf, another of tennis, and other of football. Oh, sorry, I didn't even realize I had slipped into Spanish there. But yes, my winner of the weekend is the entire country. of Spain because they had three separate winners, one in golf, one in tennis, and one in soccer. First, Sergio Garcia won a live golf event,

which no one really cares about. But the tennis and the soccer, those matter. Carlos Alcaraz beat Novak Djokovic to win his second consecutive Wimbledon title, while Spain won a record-breaking fourth European championship, beating England in the final. Neal, that

very well could have been the best day for a single country ever in sports. The only thing that could have better is if they won the 4th of July hot dog eating contest or El Perrito Caliente eating contest. Let's talk about these two superstars on Spain, Lamin,

Yamal, who just turned 17 and Nico Williams, who's a 22-year-old. They are really the stars of this new Spanish squad, and the reason they are in Spain is due to immigration. It's a sign of Spanish multiculturalism. Yamal's mother is from Equatorial Guinea. His father is from Morocco, and then

Williams has Ghanaian parents. They made the journey to France through the Sahara Desert. And he said, I am here because of what my parents went through, and they sort of suffered and immigrated to Spain. And now I have, you know, the opportunity to represent my country. So it's really this, you know, amazing multicultural soup of Spain that has led to them just being possibly one of the best Euro squads we've ever seen.

Meanwhile, on the tennis side of things, Al-Kraz is just 21 years old as well. Imagine you're a tennis player and you just survived this era of Federer, Nadal, Djokovic, Nadal finally has aged out a little bit, and now a new Nadal just spawns up equally as good, equally as dominant. There is just an absolute youth movement going on in tennis as well. Finally, just to tie a bow on the sporting weekend that we had, the Copra America final was last night in Miami between Columbia and Argentina. Absolute chaos at the stadium. Fans overwhelmed the security. There were tickets started at $2,000, but there were multiple reports that some ticketed and non-ticketed fans push-patchezed.

security. It led to the start time being delayed by over an hour. Argentina eventually won the game, but a little bit of a shaky debut for the U.S. as it's looking forward to hosting the World Cup in 2026 as well. So it wasn't a great final

for the actual event organizers, but congrats to Argentina on winning. Up next, how much would you pay for a one-of-a-kind Stegasaurus fossil? More than 150 million years ago, the mighty Stegosaurus roamed the earth, and later this week, it could be the missing piece that ties

your living room together. On Wednesday, Sotheby's is auctioning off Apex, a 161 million-year-old stegosaurus fossil that is expected to sell for up to $6 million. This is no ordinary dinosaur skeleton discovered in Colorado in 2022. It's an astonishing 80% complete and is considered one of the best stegosaurus, if not dinosaurs, ever found. But not everyone is happy about the sale of Apex, academics worried that the surge in private dinosaur fossil collecting, and it is surging, will stymie scientific research and price out museums from acquiring important materials. And dinosaurs might not even be the smartest investment anyway. Some countries have strict exporting laws, as Nicholas Cage found, when he was forced to return

a dinosaur school that was stolen from Mongolia. And because there is such a small amount of comparative data, dinosaur skeletons as an asset class are more volatile than Bitcoin, according to one broker. Toby, are you in or out on investing in fossilized dinosaurs? I am in specifically on this skeleton because it is absolutely a beaut. This is also one thing about sagasaurus is that they use their spines on the back, like their iconic plates, to defend themselves in combat. But this particular skeleton has very little signs of combat.

It actually has signs of arthritis in it, which shows that the skeleton lived to an advanced age. I think in terms of the dinosaur collecting world, you could do worse than getting your hands on apex. Yeah, so let's talk about the dinosaur collecting world because it is surging. This is actually the third wave of dinosaur private collections. The first wave was in the late 19th century when pioneers moved out to the west and were building railways. And in states of like Wyoming, Colorado, that's really like dinosaur alley. If you go to Colorado, there's a ton of dinosaur fossil exhibits and they found a lot there.

and that led to the first wave. Second wave started with Jurassic Park in the 90s, and a bunch of dinosaurs were sold then, and there was an uptick in interest. And now there is a third wave, which is driven by new money investors who are looking for alternative asset classes. Maybe it's the same kind of interest

that sparked in Bitcoin and crypto and in watches and various collectibles that we've talked about over the past few years. But it's really become this big thing where you have celebrities in these bidding wars. I mean, Leonardo DiCaprio and Nicholas Cage We're going at it for the skull of a dinosaur, and that was what I referenced earlier.

Cage eventually won that fight, but it was turned out that it was stolen from Mongolia, so he had to give it back. So we're in this really big third wave of dinosaur collection. Not everyone's happy about it. I think that $4 to $6 million, though, seems like a bargain for the Stegosaurus because one of just how complete it is,

but also a Tyrannosaurus rex skeleton nickname Stan sold for $31.8 million back in 2020. I do think name recognition matters, in the dinosaur world too, because a similar skeleton of a yet-to-be-classified species, so no one really knew what it was at the time, sold for only two million euros two years earlier. So I do think that you do need to be one of those big-named dinosaurs like a T-Rex, like a Stegasaurus, like a triceratops. I will say, too, that one of the reasons why dinosaur prices are inflating is because

institutions are skewing sales as well. That sale of the T-Rex went to Abu Dhabi's Natural History Museum. they spent more than $30 million just to snag this T-Rex. So museums are also getting into it as well. I would bite it on Apex, though, if I could. Don't really have the space to fit in my apartment. It is rather large, but it is a beaut. Final Dinosaur fun fact.

We live closer to the T-Rex than T-Rex live to the Stegasaurus. Crazy to wrap your mind around right there. Thanks for that fun fact, Neil. Athletes from all over the world are beginning to arrive in Paris ahead of the Olympics kicking off, and nerves are starting to build up as the July 26th start date draws closer. But if you're an athlete competing in the triathlon or a distance swimming event,

you are nervous for another reason beyond competitive jitters, and that is water quality. Those two disciplines are expected to be held in the River Sen that flows through the heart of Paris, while no doubt be cool to take a breath while swimming and also taking the seventh around Desmond. The river's location also means

it's not the cleanest of settings for professional athletes. Paris officials have been scrambling to clean up the first. river, especially E. coli levels before the athletes arrive. And over the weekend, the French sports minister took a symbolic dip into the river to hopefully ease concerns about water quality. Neil, swimming in the Sen has been banned since 1923 due to pollution levels. And multiple politicians have promised to clean it up in the past. But this latest effort appears to have been a success. Yeah, it's like the Boeing CEO going on, a 737 max two, calm fears. But this river, it is gorgeous.

it is romantic. You can say so many things about it. One thing you cannot say about it is that it is clean. A study in the 90s considered the stretch running through Paris as having one of the highest heavy metal levels in the world. And that's not even talking about the fecal matter, which is a major problem because Paris has this ancient sewer system. And when it rains, all this sewage comes and drains into the river itself, which is why they haven't allowed swimming in it since 1923 because it is very unsafe. and Paris has spent $1.5 billion on a new sewage system to collect water from sewage before it goes into the river in order to not only make swimming events available for the Olympics,

but create 20 different swimming areas for regular Parisians in 2025. We'll see if that actually happens, and I hope this sports minister is okay. Me too. There is still a chance that the river won't be ready for the big stage, though. There are backup plans. in the worst case scenario, the worst case scenario is if heavy rains come and kind of overflow those new sewage systems and cause those increases in bacteria levels. What could happen, though, is a triathlon could be changed to a duathlon, which is you

just take away the swimming portion, which I would be very disappointed to see, but also as a competitor to at a triathlon who has had a swim canceled, there's no better feeling I don't like to swim whatsoever. So turning to a duathlon, very, very fun. And then the marathon swimming would be moved to a different location as well. So there are backups, but hopefully it would be very cool to see them swimming through the heart of Paris. It would be very cool. So we just have to hope for sunny weather and no rain.

Finally, here's your preview of the week ahead. Shoppers rejoice because Amazon Prime Day is here. The company's version of Festivist arrives tomorrow and lasts for two days, sparking a midsummer spending spree on discounted items. People are expected to shell out $13.3 billion over Tuesday and Wednesday, a 6% increase from last year's event. And Amazon is entering Prime Day, riding a wave of momentum.

Enthusiasm for its cloud and advertising units has sent stock price to a record high and above a $2 trillion market cap. I don't know what it is about Prime Day, but as soon as it rolls around, I forget everything that I wanted to buy. I swear I built up this list throughout the year. So just totally blank.

So if you're listening to this, write down what you need for Prime Day and make sure you take advantage of those deals. After Big Banks kicked off Q2 earnings season on Friday, the floodgates are not. now open. Some of the bigger reports coming this week include Goldman Sachs, United Health, Johnson, and Johnson, Netflix, and Amex. I'm excited for the X's Netflix and Amex. Can Netflix maintain its position as the Apex streamer, another X right there, even as all this bundling

happens around it. And then for Amex, remember, they have been bringing in millennial and Gen Z consumers like crazy. Those two cohorts accounted for 60% of new consumer account acquisitions globally in Q1. Can they keep the momentum rolling with the, with the, with the, Youths. Starting today, your next purchase of milk, graphic teas, and a barrel accent chair from Target will have to be made with something other than a check. And that's because the retailer is no longer accepting personal checks as of July 15th today, saying it already receives extremely low volumes of checks and wants to get people out the door faster. And here's what they mean by low volumes. Americans wrote $3.4 billion billion checks in 2022. That's down from nearly $19 billion in 1990.

When was the last time you wrote a check? the chance to write a check. The only checks I get is on my birthday. My grandma does send me a nice check. And I love it. It is nice to get it, but that's definitely a bygone era that I never really got to participate in. Sports gamers have been waiting on this for a long time. E.A's college football 25 launches on Friday the first time since 2014 that the company is releasing a college football video game. This marketing has been insane. It's been insane. I've seen it everywhere. I can't believe the game's not out yet. But also, I'm thinking about whatever productivity boost AI is promising.

I think they're going to be negated by the amount of people play in this video game because judging on social media, it's going to be a lot of people. The MLB is in its all-star break. The home run derby will be held tonight while the all-star game is tomorrow. And then the British opening golf begins on Thursday at Royal Trune in Scotland. Okay. Usually I get cute with my picks for these majors, but today I'm picking someone who I think might actually win.

And that is Ludwig Aberg. The sweet is hot. He's going to win. And then finally, Saturday marks the 55th. anniversary of the Apollo 11 mission that landed Neil Armstrong and Buzz Altran on the moon. Maybe. Okay. That is a wrap on today's show.

Thanks so much for starting your day with us and have an amazing week ahead. For any questions or thoughts on the show, send an email to Morning Brew Daily at Morningbrew.com, but make sure you put it in a feedback sandwich. So positive comment, followed by constructive feedback, followed by closing statement, reinforcing the positive comment. Let's roll the credits. Emily Milliron is our executive producer, Raymond Lou. is our producer. Olivia Graham is our associate producer.

Yucheno Ogu is our technical director. Billy Minino is on audio, hair and makeup is cooling off in the Sen. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great. Saturday, Neil, let's run it back tomorrow.