Morning Brew Daily - MrBeast, Tom Hanks Warn of AI Deepfakes & Why Mortgage Rates Keep Soaring

Episode Date: October 4, 2023

Episode 162: Neal and Toby discuss how record bond sales are the biggest factor in the market right now and are a huge reason mortgage rates have skyrocketed. Plus, celebrities like Tom Hanks and MrBeast are warning people of AI deepfakes as technology advances and why Chicago might do away with tipping. And narrative violation! Millennials are actually financially better off than we would have thought. Oh, and bedbugs are stronger than ever before. Finally, if you wanna watch mean girls you can just hop on TikTok. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily 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'm Neil Fryman. And I'm Toby Howell. A wave of AI deepfakes has Tom Hanks, Mr. Beast, and Gail King worried about how the technology is literally putting words in their mouth. Then, if you've been seeing some headlines about historically high yields in the bond market, but you're not really sure what that actually means, we got you covered. It's Wednesday, October 4th.

Let's ride. Toby, I am so proud of you. You got the day right today. I know, Neil. Thanks for bringing it up. But yes, I want to apologize to our listeners because yesterday, I said it was Monday, October 3rd. It was October 3rd, but it was not Monday, which I think means it's going to be a fast week

because in my mind we're already a day ahead of schedule. Toby, you are the voice. You are the source of information for tens of thousands of people to tell what day it is. So you have to take this responsibility seriously. I know. I'm so sorry. And it was Mean Girls Day, too, which means we specifically were calling out the date. So I apologize.

Thank you to everyone. You got it right today, though, right? I got it right today. I hope so. But before we jump in the news, we do have a quick word from our sponsor, Yahoo Finance. Neil, last night I was knee-deep on the purple streets of Yahoo Finance preparing for today's episode. Not to spoil anything, but I needed to get up to speed on the international bond market for a story today. And boy, was it nice to log on to Yahoo Finance and have some editorial perspectives, independent research, and helpful charts all in one place.

Yeah, one thing I found super helpful was a rundown of how the chaos from Kevin McCarthy, getting booted as House Speaker last night could impact markets. Yahoo Finance talked about how government dysfunction could weigh down the stock market and that the leadership vacuum among Republicans in Congress does raise the odds of a government shutdown in mid-November. Remember, we just skirted one last weekend. So this is a big deal. And Yahoo Finance did a great job of breaking down how what's going on in D.C. is going to impact Wall Street. Check out finance.com for all the tools and guidance you need. That's yahoo.finance. dot com. All right, Neil, I've teased it a couple of times, but to start the show today, we're

talking about bond yields. Hell yeah. Who's pumped? I am. And even though the bond market isn't the sexiest story we've ever led with on Morning Brew Daily, it is important to keep up to date with what's going on since it affects everything from the stock market to mortgage rates. And right now, what's going on is that the 10-year bond yields have hit a 16-year high, almost touching 5%, while 30-year U.S. Treasuries have zoomed past 5% for the first time since 2007. The jump in bond yields comes as many investors grapple with the fact that we're probably going to be seeing high interest rates for an extended period of time. So appetites for riskier investments like stocks are fading a little bit. A 5% yield on long-term U.S. Treasuries used to be relatively unthinkable in an era of cheap money

and ultra-low interest rates, but it's looking like the new normal these days as a massive bond sell-off has continued to gather steam, which has driven yields up to those historic levels. Remember, bond prices and yields are inversely related. As the price of a bond goes down, its yields goes up, and vice versa. So why does this matter to you? Well, long-term bond yields are a proxy for other super important numbers like mortgage rates. So when you're seeing yields goes up, that also means that the B-side bungalow you've been zillostocking just got a little tougher to buy.

Neil, bond yields touching levels not seen in almost 20 years. It ain't sexy, but it is a big deal. No, it is a huge deal. This is the number one story that's going on in the markets right now, and it has been for the past weeks and months, honestly. I just want to stress that the 10-year treasury note, it sounds wonky, but it is the literal bedrock of the global economy. Not only is it a reference point for things like mortgage rates, credit card rates,

business and personal loans, but nearly every asset on the planet is sensitive to moves in the 10-year yield, currencies, stocks, corporate debt, and other countries' government bonds, how much it costs for the U.S. government to borrow, which is what these government bonds are, is perhaps this single thing more than other that investors are paying attention to. And the dramatic moves of the kind we've been seeing are really rocking the markets' foundations. Yeah, I mean, you talked about it being the global bedrock of the financial system. That's not an exaggeration. And we're seeing these moves happen across other economies as well.

the 30-year German yield rose to 3.2%. That's the highest level since 2011, while the Italian 30-year yield also reaches highest level since 2012. That's above 5% as well. So you do see like this angst kind of spreading through the markets as, again, we're entering a new normal where interest rates that are higher than the normal, and it's making other riskier investment classes like, I don't know, instead of putting money into that Roboc stock you had your ions or that Pallantir stock, you had your eye on. You can just park it in a U.S. Treasury bond, which is much safer. You can pull in that 5% yield. And so all of a sudden, we're seeing these equity markets kind of getting hit a little bit. Right. And you have some analysts saying this is getting dangerous.

This could break markets, literally. This could lead to some sort of financial meltdown. This is what an equity strategist at J.P. Morgan said just last week. And why could that happen? well, a lot of companies have T-bills on their balance sheet. And if we go back to what happened in March, Silicon Valley Bank collapsed in large part because it had bought treasuries and bonds at very low yields. And now that they have skyrocketed and bonds have kind of collapsed in value, then these banks could go belly up. So this is actually a little frightening for people.

but it shows how the Fed's massive interest rate hikes are filtering through the economy. Yeah, and then just to final put a bow on it, we talked about mortgage rates. Mortgage rates are almost 8% now. And again, those two numbers kind of track each other, which essentially paralyzes the housing market a little bit. Just to put it in perspective, for a borrowing, borrower trying to purchase a $400,000 home, 20% down payment on a 30-year fixed loan. The monthly payment today is about $930,000. more than it was when interest rates were around 3% at the height of the pandemic. So again, that monthly payment being almost $1,000 more just shows the environment we're in

right now. Yep, moving on, on the internet in the past few days, you might have seen Tom Hanks star in an ad for a dental plan, Gail King promote a weight loss treatment, and Mr. B's giveaway iPhones for $2. Well, none of those were real. AID fakes of celebrities hawking products have spread across the internet recently, prompting them to issue warnings that it's not them who are in these ads, just a digital version that someone made to resemble them. In an Instagram post on Monday, Gail King told their followers,

I've never heard of this product or used it. Please don't be fooled by these AI videos. Tom Hanks also posted on Instagram about this dental plan ad saying, I have nothing to do with it. And Mr. Beast wrote, lots of people are getting this deepfake scam out of me. Are social platforms ready to handle the rise of AI deepfakes? And you know what? That is a great question, Mr. Beast.

The deep fake of him skirted by TikTok's filters to land on the platform and fool people. And Tom Hanks and Gail King's deepfakes found their way onto Meta's Instagram. Toby, it must be very eerie to see yourself say things that you never said and promote a message that you have nothing to do with. Feel like we've reached the tip of the iceberg here too. Yeah, we've been hearing whispers about the dangers of AI deepfakes, but it seems like we're reaching a crescendo. Those whispers are turning into shouts because also not to toot my own horn, but. I'm going to to do it. I have no idea where this is going.

I'm going to toot it. We did a Toby's trend back in the day on this show where we dove into a deep fake from Joe Rogan that was making his way around where he was promoting a supplement that he had no ties with as well. And now look at the other names that are involved. I mean, Tom Brady was also someone who was targeted for a deep fake. And then Robin Williams' daughter said she's been disturbed by attempts to recreate actors who cannot consent like her father. And so there is just this kind of crescendo of. suddenly people are grappling with the fact that we're living in a world where you can make someone say whatever you want, essentially, without their consent, and it opens up a very, very

dangerous. And it feels like promoting a dental company is the most benign thing that could happen. So who knows what could happen next? It was very interesting to me to read that some celebrities were trying to get ahead of this and register their likeness with certain startup AI companies. So there's one company called Metaphysic AI. that says it has taken Anne Hathaway, Octavia Spencer, and Tom Hanks, and done full body scans of their face and their voice to register them. So basically they have legal recourse when these defakes happen and they can sue the creators of them because they have registered their, I don't know what you call it, their biometric IP in this particular database.

Because without that, there's no way to sort of take these down or say that they're legally infringing on any copy. copyright. Yeah, you mentioned who knows what it might happen with this new era, but we actually do know what is going to happen in some cases because in Slovakia, these AI audio clips were circulating of one of the front-running candidates, and they made it sound like they were trying to double the price of beer and buy votes, and all of a sudden he lost his bid to become Prime Minister of Slovakia. So there was a case where it truly influenced the outcome of an international election. And then obviously SAG after the current Hollywood strike that's going on, one of the big deals is AI guardrails on, especially extras on a set. Can that kind of data be

drawn from their faces and then used in perpetuity forever without paying them going forward? They hope not. Yeah, that's the case that they're looking at. So everything from elections to promoting supplements to actually what the fabric. movie. Yeah, fabric of Hollywood is we're seeing it from all direction. This is definitely going to require a full court press by these social media companies like Meta and TikTok, the AI software companies like OpenAI that have these AI image generators, and also the government has been talking very loudly about regulating AI. So those three entities are going to have to come together and figure out a way to stop this because it's only going to grow. When are we going to

see us AI-ified? I hope not soon. Well, we'll know what we've made it. Yeah, when that happens. Neil, for our next story, I want to talk about tipping. Chicago lawmakers are looking to push through a new law today that requires restaurants to pay wait staff the city's standard minimum wage, regardless of how much they pull in in tips. Now, advocate of this change point to the fact that tipping is outdated, depends way too much on how a diner is feeling on that day,

and that restaurant operators can afford to pay workers more, but restaurateurs are pushing back on the rule change saying that, extra wages have to come from somewhere, and that somewhere is probably higher menu prices. An August survey of 315 restaurant owners by the Illinois Restaurant Association found that 80% intended to raise menu prices if the city got rid of the tipped wage system, and more than 40% say they would introduce new fees on checks or an automatic service charge. So now this has opened a larger debate on whether the system needed changing at all, given how deeply ingrained it is in our culture. How, yeah, tipping has stayed around for so long, even though everyone says they hate it.

And obviously, after the pandemic, there has been a huge debate around tipping the restaurant industry. I think you have to really view what happened to the restaurant industry and where it's going right now in the context of the pandemic. If you think back three years, they were completely obliterated. They had to close down. They had to lay off 90 to 100% of their workers. Things were terrible. Now they're coming out of it. But they have been shaken.

and I think the nightmare of what happened during the pandemic is still with them. And, you know, what Chicago did to get restaurant, they did get the restaurant industry on board, but they said, we'll phase this in over five years. And you have to hike wages by 8% each year. So it's this gradual improvement, this gradual wage growth to get to the point where you're at the minimum wage without tipping supplements. They're definitely not only keeping restauranteurs in mind, but also diners, because a lot of diners are not necessarily for, getting rid of tips because they really hate seeing extra fees or higher menu prices. Only 16% of over 1,200 Chicago diners pulled by the National Restaurant Association

said that they preferred higher menu prices overpaying a tip. So the vast majority of people are saying, listen, I actually do like rewarding my server with a tip is part of our culture. And I'd rather do it that way than see my cheeseburger cost $20 instead of $16. Research has shown, I was listening to this Freakonomics episode on tipping last night. which I encourage everyone to listen to. Research just showed that patrons actually feel better about their experience at the meal when they tip.

Because when they don't tip, they feel bad. Right, right. It's cultural. It truly is a thing. There's always that meme Europe versus America, but it's true. And there was Danny Meyer, who's this big shot in the restaurant industry. He's the former CEO of Union Square Hospitality Group. Shake Shack is a huge restaurateur.

He eliminated tipping in 2015 at his restaurants. Five years later, during the middle of the pandemic, he reversed that. And a lot of, it's because a lot of servers said they weren't making as much as they used to because the top performers were raking in cash, the bartenders. You can make a lot of money on tips. And they said that a lot of the best, most talented people were leaving the industry because there was kind of a more equitable arrangement, which makes sense in certain cases. But they were losing a lot of people after they eliminated tipping. And Danny Meyer reversed that. Man, we could talk tipping forever, but we have to take a quick break. But stick around because we've got a story about bedbugs coming up right after this.

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Today's narrative that we're going to violate is that of the Baroque millennial. The narrative goes something like this. Millennials are the first generation to be worse off financially than their parents. They're unable to afford homes. They are sagging under the weight of student debt. their job prospects were dim coming out of the Great Recession and their earnings have taken a hit as a result, and they killed tuna fish and American cheese along the way. But there is one spot where millennials are more financially secure than their parents or really any other generation alive today,

and that is saving for retirement. According to new data from Vanguard, when millennials earning a median salary reach their retirement, they'll be able to replace almost 60% of their pre-retirement income with Social Security and their savings from 401k and other retirement. accounts, that beats similar Gen Xers and boomers who are likely to replace only about half of their paychecks in retirement. So despite what you made here, millennials are really good at stocking way cash for their golden years. And one of the reasons is it's because a lot of millennials actually were auto enrolled in their 401k programs. So they've been contributing for longer than Gen X, then baby boomers. So that's an interesting wrinkle to it. Maybe it's not that millennials are these

ultra great savers, but they just kind of got lucky that everyone. got auto-enrollment numbers are crazy. I had no idea. But from in 2006, only 10% of employers, auto-enrolled employees into 401K plans. Now it's almost 60%. And there was a law that Congress passed in that year that encouraged the practice. But I had no idea with such a dramatic rise in the span of less than two decades. It is, it's for the best. And we're seeing those numbers play out. But also if we, I mean, this segment is called narrative violations. So let's violate the narrative even further. A lot of people associate millennials strictly with kind of that recessionary period of 2008 to 2010, right when a lot of them were exiting college and entering

the job market. But they've also lived through some incredible boom times as well. And so all generations go through these boom and bus cycles. But for some reason, this persistent idea that millennials were just dealt the worst hand possible. And they did. They were dealt a bad hand. But since then, the hand has gone. Yeah, exactly. Since then, by 2019, households have headed by millennials, we're making a lot more money than those headed by baby boomers and Gen X at the same age after adjusting for inflation. But when you pull millennials, they say they're miserable. So why is there this disconnect between millennials' relatively financially strong position and the way they think about their own financial position? There could be two

reasons. One of them could be social media. You're always on Instagram comparing yourself to other people who live maybe more extravagant lifestyles. And then there's just the drumming beat of bad news stories saying millennials are doing bad, millennials are worse off than their parents without much evidence to that. And that kind of just gets into your psyche and you think you're doing worse off. I know, Neil. Give yourself a pat on the back. Millennials deserve a little pound on them back. So here I am giving you the credit you deserve. All right, morning brew daily listeners. If you get the hebie-g-bees easily or suffer from insectophobia, pause the show right now because we're going to talk about a pest that'll make your skin crawl. That pest is bad bugs.

and they are apparently everywhere in Paris. The number of bedbug sightings has jumped over the last weeks, but it's also part of a broader upwards trend that goes back several years. First, bedbugs always increase at the tail end of summer because people have moved in the summer months and brought with them their luggage, which also contains bedbugs. But zoom out on a broader scale, and globalization is also bringing in more bedbugs,

given the rise of increased container trade, tourism, and immigration. but one of my favorite reasons why bedbugs are on the rise is that there's been a decline in cockroaches. Cockroaches are a bedbugs predator, but they've been harder to find as homes get cleaner in the city. But, Neil, Paris is freaking out about this right now because they are hosting the Olympics next summer. This is stressful. You do not want bedbugs crawling around the city when you're about to host a major international sport. There is a big debate going on in France right now over whether this is a real problem or collective psychosis. and everyone's just seeing bedbugs everywhere. You have people on the subway systems not sitting down because there could be bedbugs.

So this is not just confined to people's houses. This has been found in transit allegedly and in other transportation systems. So there is this thing where social media is really driving a collective freak out, but it does seem like the mayor and the French president, Emmanuel Macron, are taking this seriously because they've got this huge event coming up and they can't have people coming from all over the world fearing for their lives for bedbugs. You're so right, though. A lot of the damage it's doing is psychological

because once you believe there's bedbugs around, you can feel them crawling on your skin. You just want to be clean. You don't want to sit down. And there have been unsubstantiated reports of them in movie theaters. So suddenly, even in your leisure time, you're feeling that creepy crawly feeling on your legs.

And it's also, interestingly enough, a developed world thing. Bedbugs are a lot more common around the world than a lot of us think about on a daily basis. but since we've kind of lost kind of the collective memory of them in the developed word because things have gotten cleaner, houses in particular have gotten cleaner. But they're so common around the world that it's not as big. To me, it's like quicksand. Remember we grew up all being afraid of quicksand just because we've never really encountered it?

I think bedbugs occupy a similar mind share in developed countries. It's so interesting, though, the psychological toll it takes on people. Meanwhile, exterminators in France are raking it in. The phone is ringing off the hook. they cannot possibly satisfy all the demand, and they're charging up to $5,000 to clean your house. For our final story, yesterday was, of course, Mean Girls' Day, and Paramount pulled a bold marketing stunt to celebrate.

It released the 107-minute-long film on TikTok in 23 short clips between 2 and 7 minutes. The idea was to capitalize on the buzz around the holiday to get us millennials re-watching the 2004 movie and introduce it to younger generations for the first time. For a lot of people, this was a crucial. cringy, how do you do fellow kids moment for Paramount to seem cool with the youths. Over the past several years, TikTok has been blowing up with shorter clips from TV and movies.

Most of which were pirated and Paramount wanted to hop on the trend. But industry analysts looked at this 23-part Mean Girls and said, yep, that is smart. Giving away an iconic movie in a format that people have become familiar with hits the sweet spot of content and marketing at the same time. It reminded me of those Red Bull cars that drive around and hand out cans. And the numbers show that people were talking about Mean Girls and sharing the clips yesterday. The official TikTok feed for Mean Girls grew from just 700 followers at midnight to more than 133,000 in less than a day. And the one October 3rd clip that everyone references yesterday from the movie has gotten 10.3 million views. Toby, do you like this move or is it cringe?

I actually do like the move because the clipification of movies is so rampant on TikTok right now. And you mentioned briefly that a lot of them are pirated. the vast majority of these movies are pirated. And it's totally part of TikTok culture at this point. One of the jokes, too, is that the bottom half of the screen, while the top half of the screen is playing a movie, it will show something else visually stimulating like a Temple Run clip or a subway runner clip. And it just shows where we are at in terms of a tension span in our society that not only

are we chopping up longer movies into shorter clips, but we're also adding another clip below it to keep us stimulated. So even though I'm bearish on the fact. that this is where our brains are heading, I am bullish on the fact that Paramount did this because it is the native medium that a lot of people are consuming it in. There was a lot of criticism toward Paramount from the writers because they were saying this is a loophole that goes around the WGA contract that was just signed because the writers now are able to get more residuals, more royalty payments from streaming services. And of course, mean girls, you can stream it on Paramount

Plus, but by putting it on TikTok, that doesn't count as a stream. And, so writers are not seeing any of that income. So there was some criticism of Paramount there. But overall, I think it's a strong move that is just where we're going. You have to market your shows. You have to kind of give them away for free. Apple has been doing this with Silo. They put that there's a new sci-fi show that they put the first episode completely for

free on X. YouTube also has a lot of shows that studios promote at least the first or two episodes. So you can lure people in and eventually they'll get a subscription. I can already see the next kind of write. in Hollywood Strike Brewing, because if that starts to happen, then you're going to have to figure out another deal structure in order to compensate people. So it is interesting to see how technology and entertainment keep interacting in ways that make us kind of reframe the paradigm between how the two kind of interact with each other. One other thing is that this could be

to drum up enthusiasm because there is a musical, there's a movie version of the musical Mean Girls coming out in January. I'm sorry. They'd say want to stay top of mind for us. All right, we have to end there. Thanks for listening and have a wonderful Wednesday. Something about this show made you think, hey, that wasn't quite right. Or dang, what an insightful point, Neil. You can share your thoughts at Morning Brew Daily at Morningbrew.com. Let's roll the credits. Emily Milliron is our editor and producer. Sam Velas and Raymond Lou are associate producers. Eugenwa Ogu is our technical director.

Billy Minino is on audio, hair and makeup has bed bugs. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. Yamava Resort and Casino at San Manuel is California's number one entertainment destination for today's superstars. Catch the Jonas Brothers return to the Yamava Theater stage on April 30th, the powerful vocals of Demi Levato on May 17th, and the signature Southern Country Rock of Eric Church on July 19th. Tickets on sale now at Yamavatheater.com, only at Yamava Resort and Casino,

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