Morning Brew Daily - OnlyFans Rakes In Almost $7B & US Gas Prices Fall to Nearly $3?

Episode Date: September 9, 2024

Episode 405: Neal and Toby discuss the whisperings of the US government working on a sovereign wealth fund to invest in national security projects. An idea that both Trump and Biden are warming up to. Then, last Friday’s jobs report gives closer assurance of a Fed rate cut, but has spooked investors as Wall Street has another rough week. Next, OnlyFans’ quiet success has made tons of money for its majority stake owner. What has been the key to their success? Also, Selena Gomez is a billionaire and American drivers are happy about low gas prices. Lastly, what to know in the coming week ahead. Visit https://www.massmutual.com/ for all your financial planning needs 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 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. Today, only fans may not be safe for work, but its business model is the envy of the world. Then a former Disney Channel star has reached billionaire status. Try to pick which member of Wizards of Waverly Place you think made it to the three comic club. It's Monday, September 9th.

Let's ride. Happy Monday. Hope you're easing yourself back into the work week. Today is a special day, September 9th or 9-9. So we have to start off the show by celebrating the number nine. If you play Sudoku, you know the game forms a nine-by-nine grid, which is why today is Sudoku Day. There are nine episodes of Star Wars and nine members of the Fellowship in the Lord of the Rings. You've got nine players on a baseball field, nine lives for a cat, and nine muses in Greek mythology.

But here's one I never thought of before. There are nine rooms in the game of Clue. Toby, you think you can name them? So you did tip me off beforehand. and say, I'm going to ask you this. So I did not cheat, but I did write down my list. And here's what I got. Billiards room, kitchen, observatory, lounge, hallway, bedroom, greenhouse parlor, and then smoke room.

Close. I think you got maybe five or six. Let's go. The study, the library, the billiard room, the conservatory, the ballroom, the kitchen, the dining room, the lounge, and the hall. There's no greenhouse. And smoke room. There's no smoke room. That's not even a house, a room in a normal house.

So I think I got three out of nine. So thank you for the extra credit there. But yeah, that's a fun fact. Thank you for that. Now let's hear a word from our sponsor, Mass Mutual. Neil, do you ever find yourself lying awake at night worrying about your financial future? Oh, absolutely. It's like the moment my head hits the pillow, all the what if starts swirling.

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Details at Yamava.com must be 21-20. Please gamble responsibly. Monopoly is a trademark of Hasbro. Hasbro is not a sponsor of this promotion. The United States is not afraid to take ideas from other countries. We borrow democracy from Greece, hockey from Canada, and even apple pie from Britain. But what about the idea of a sovereign wealth fund? The concept of the U.S. establishing a wealth fund similar to Norway's or Abu Dhabis gained momentum in the last week across the political spectrum. Former President Trump endorsed one during a speech on his economic policy agenda and then, the Biden administration has been quietly sheffing up a proposal for a wealth fund over the past

several months, Bloomberg reported on Friday. So what even is a sovereign wealth fund? It's basically an investment fund run by the government. Similar to a hedge fund or a private equity firm, the government sets aside a pot of money and invests it in assets such as stocks, bonds, startups, real estate, and more. And why would the U.S. want one? Both Trump and Biden officials described it as a key tool the country could deploy to win the technological arms race and better compete against geopolitical rivals like China. For example, the wealth fund could finance sectors with high barriers to entry, such as shipbuilding, nuclear fission, and quantum cryptography that don't offer near-term

returns for private investors. But Toby, just because we could create a sovereign wealth fund doesn't mean we should. Right. The U.S. has one huge budget and trade deficits, and then two pretty deep, private markets are ready. So those aren't the usual makeup of a country that would need a sovereign wealth fund. Put another way, there is just no money to fund this thing. The U.S. has spent more than it takes in every single year since 2001. We're currently running with a debt load of more than $35 trillion. So a lot of people solve this proposal leaking out and going, where are,

where's the money coming from from this? We're already running this massive deficit. And if you want to get a little bit more nuance. We do produce a lot of natural resources like oil, like gas, that usually fund these other sovereign wealth funds, but they tend to actually be controlled by states if they are government controlled at all. And the U.S. already has 23 state-level sovereign wealth funds. So you might be thinking, why do we need to actually roll it up into a national fund if we have state funds doing essentially the same thing on a smaller scale? Yeah, and a lot of critics are like, there is no problem that this is solving. It's instructive to look at the countries that do have sovereign wealth funds to show why this is maybe a

quirk and not a feature of, you know, fiscal policy around the world. Some of the most famous sovereign wealth funds are Abu Dhabi, Kuwait, Saudi Arabia. And then the biggest one of all is Norway, which has a $1.7 trillion sovereign wealth fund. That's the biggest one in the world. All of those have a very specific trait. They made more money than God on oil, and they have all this money. They don't know exactly what to do with it. They know the oil is going to run out someday. We're going to tap all this oil. And they want to help fund future generations of Norwegians, of Abu Dhabians.

I don't know if that's the correct term. But they know that this natural resource is going to run out. So they put it in this investment fund. And then they create future wealth when those natural resources come out. The U.S. just doesn't have that particular trait. We do produce a lot of oil. But we have a very robust and diversified economy. me. But you can also see why the former President Trump and the Biden administration might be

interested in the sovereign wealth fund because this global technological arms race is heating up. We want to grab these critical materials. We want to advance semiconductors and things like quantum where private investors might just be. I'm not seeing a return there in any sort of horizon from five to 10 to 15 years. And the government has a lot more leeway to invest in longer term things. But again, it sounds sexy like sovereign wealth fund. Everyone wants a big national fund that you can deploy to do those things you were talking about. But if you actually drill down into it, we already have a lot of money going towards those things like infrastructure, like technology. I mean, just think about the Inflation Reduction Act. Think about the Chips

Act. These are smaller bills that were passed to feed money into these industries rather than just having it be this big monolithic thing. But I see the appeal of it because like who wouldn't want a sovereign wealth fund and national fund going towards these things. I do have one final trivia for you. Do you know who has the best performing sovereign wealth fund in the world? It's not biggest because that is Norway, but best performing over the last 10 years. Yeah, I don't know. I would say like a small island country that has a lot of oil. So it's not an island, but like Brunei or something. It's actually New Zealand. It is, it posted a 14.9% return in the last financial year. It's now $47 billion. Over the last 10 years, it's had a nice 12.1 annualized return for

that period. Best in the world. So New Zealand is just popping off recently, even though it doesn't quite fit what you'd expect from a big sovereign wealth fund. Well, we made a really big deal about it if you listen to the show on Friday, but August jobs numbers came out just after we recorded, so it's time to circle back and see how they were. Remember, this is the last employment data, Jerome Powell and Co. Get to parse through before the Fed decides how much to cut interest rates by later this month. So everyone was really long. in, and they were just okay. The economy added 142,000 jobs in August, which was fewer than economists expected, but the unemployment rate did tick down to 4.2%, which was the first

decrease we've seen in months. As expected, the market did not react too fondly to the readings and capped off its worst week in 18 months, with all three major indexes finishing in the red. Neil, these numbers confirmed that the labor market is weakening, but they weren't catastrophic. What do you think Jerome Powell is seeing now when he shakes his magic rate cut eight ball? I think he's watching Inception and because there was so much drama, there was so much hype leading into this jobs report. It was supposed to give us clarity on whether we're going to be the soft landing or we were headed toward a recession. In the end, that top just kept on spinning when everything went to black. So we're still just, there's a lot of murkiness and uncertainty going on in the labor market.

You can find any data point within this jobs report to confirm whether you think we are in a major slowdown or we are doing just fine. Like you said that unemployment rate went down to 4.2% from 4.3%, which confirmed all the economists who said that the July jobs report unemployment rate that went very alarmingly up to 4.3% was just a quirk of the extreme weather in the summer and some random temporary layoffs in the auto dealership. industry. And then again, you look at the jobs numbers, and they came in much lower than expectations, 142K versus 161K. So it's very clear that we are in a cooling labor market where firms just aren't hiring right now. So pick your poison. I know. And I'll continue to pick my poison because you're right. Unemployment rate down. Good. Only adding 142,000 jobs, bad. U.S. hourly wages rose 0.4%. Still appear to be outplacing infiation. Good. August saw the weakest private payroll's growth in three years, bad, but it was up from July, so it's

good. So you really could just go down the list and just find whichever data that you want. Let's dig into where these jobs were being added, where the industries that did well here. Construction industry started cranking up a little bit, added 34,000 employees. Leisure and hospitality gained 46,000. Meanwhile, manufacturing and retail, those actually lost jobs, K and 11K jobs respectively. So again, maybe you look at construction saying, like, that's good. That means like we're ramping back economic activity. But then manufacturing is ramping down a little bit.

So pick your poison. Oh, this whole uncertainty is just absolutely wrecking markets. I mean, please don't look at your 401k of your Robin Hood account because it is bad. The S&P 500 had its worst week since Silicon Valley Bank imploded 18 months ago. The NASDAQ, which is focused on tech stocks, had its worst week since 2000. 2022. So despite the S&P 500 being up 13% this year, and it's still only less than 5% away from its record high, it does not feel like it because the last few weeks, ever since the beginning of August and the job report from the month before it came out, we've just been an absolute

tailspin in the markets. So Circle September 17th and 18th, that's when policymakers are going to come together. They will make the decision. The big decision is if it's a 0.25% rate cut. or a 50 basis point rate cut. That could go either way. You might say the bigger rate cut's good for the markets, but it could spook people too because they are over-correcting and panicking. So those are the dates that you need to circle,

and we'll be right here, kind of breaking it down for you all. Some buzzy tech companies that experienced a boom during the pandemic have since returned to Earth, but not only fans. The company that lets you pay creators for access to their spicy content has been raking in the cash

according to documents made public just before the weekend. Its parent company grew its revenue by over $200 million to top $1.3 billion. That money comes from the 20% share of the revenue the platform takes in to enable payments to creators. For those doing the math, that means fans who use the site spent $6.6 billion engaging with creators up a cool billion from the year prior. But perhaps the most remarkable aspect of only fans is its only owner. Leo Ridski, who bought the site back in 2018, paid himself a dividend of $472 million in 2023. It brings his total earnings over the last three years to $1 billion. Neil, what a business this is. This is an incredible business. I think

it will eventually show up in case studies at Harvard Business School. I'm not even joking because the one number you have to pay attention to is their operas. operating profits. Okay. Their margin for profits at OnlyFans is 50%. That is much higher than Meta, 35%, and Google at 27%. And Meta and Google are considered to print money. Like, these are considered incredible businesses with very high profit margins.

And OnlyFans is absolutely lapping them. They only have 41 employees at OnlyFans, so it should be only 41 employees, which shows just how low their costs are and how much this owner, this Leo guy, can pay himself. And they just run an incredible business model that is geared toward user-generated content. They have their creators getting paid by their customers, and then OnlyFans just skims off 20% off the top of that. And that is enough to create an extremely profitable and booming business here. The other reason why I think there might be Harvard business case studies is that it's a counterintuitive business,

if you put forth the idea that people would pay for this adult content when there's so much free adult content on the internet, you just wouldn't think it would work. But I mean, if you look at the other places that this content lives on the internet, browsers, porn hub, these companies owned by Mind Geek, they only do half as much revenue as Onlyfans does. So that is like the free model. They found this pay direct to interact with a creator model. And it's just far more profitable. It is insane that we are talking about this company that is essentially offers pornographic content. And it is one of the best tech companies to emerge over the last 10 years and especially emerged from that pandemic era boom of all these startups. OnlyFans has been

the only one with staying power. And they are trying to diversify from adult content. They released a Safe for Work TV streaming service called OFTV, OnlyFans TV, that include, Creators in a number of different areas, including fitness, music, and comedy. That was launched last year. Up next, the surprising new face joining the self-made billionaire club. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill three-burner gas grill, or get $50 off a select Weber Spirit grill and bring big flavor to your backyard.

then set the scene with Hampton Bay string lights that bring it all together. Shop spring backyard days for seven days at the Home Depot. Now through May 6th. Exclusion supplies to homebigh.com slash price match for details. Welcome to our winners of the weekend, this Monday segment where Toby and I pick two people that had a better weekend than anyone with Seekwon Barkley on their fantasy team. Toby, you won the pre-show bird watching competition. Nice spot on that yellow rumped warbler.

So you get to go first. You can describe Selena Gomez in a lot of ways. Disney Channel star singer, actress, cosmetics mogul, but it's time to add one more descriptor to the list, billionaire. Bloomberg crowned her one of the youngest self-made billionaires before the weekend, thanks in most part to her majority stake in rare beauty, the makeup company she founded five years ago. While there is no shortage of celebrities trying to jump on the makeup industry bandwagon,

Gomez's brand has been an outlet. liar, thanks in no small part to the fact that she is quietly the third most followed person on Instagram. Albums, acting, streaming royalties, and real estate collectively account for less than 5% of Gomez's $1.3 billion net worth. But all you need is one hit to make it into the three common club. Neil, I had no idea she was sneaking up on billionaire status like this. Well, you haven't been paying attention to Selena.

Come on, Toby. She is an amazing businesswoman who has a lot of diversified projects. I mean, most people may know her as a musician or a musical artist, but music tours only accounted for less than 5% of her wealth, an album and record sales for less than 2%. This is just not a big part of her business portfolio. And one reason why she doesn't write her own songs like Taylor Swift, and you can make a lot of money on those songs when you actually write them. But that is, you know, let's not even talk about the music.

Let's talk about this beauty business. She owns more than 80% of her wealth comes from this. beauty business, which only started in 2022 and now does $350 million in annual revenue. It combines this celebrity, this impact focus mission, which we can talk about, and just quality products. And I think that triumvirate right there is an absolute recipe for success. Right, because it is not easy to make it in the celebrity makeup business. You might say, like, oh, of course, she's the third most followed person on Instagram.

Of course your brand is going to do well. But you go down the list of kind of the graveyard of celebrity-backed or celebrity started beauty industry. Christian Bell shut down her skin care line last year. Sephora recently dropped the brands that TikTok celebrity Addison Ray started. Ariana Grande actually paid $15 million to get the physical assets of the company. She started at REM Beauty back from this conglomerate who bet big on celebrity brands and actually ended up going bankrupt. up. So the list is long and full when you, even though you think that, okay, of course it makes sense. Maybe the Kardashians and Kylie Jenner pioneered it and you hear about Rihanna as well

with this very successful Fenty Beauty. But it is not easy to turn it into a multi-billion dollar business like Selena Gomez has. And I think it's her authenticity in the way she comes across on social media. She's talked a lot about her bipolar disorder. And 1% of all those cosmetic sales from Rare Beauty, go to the Rare Impact Fund, which goes to mental health organizations across the world. Toby, before we end this segment, I got to ask you, what is your favorite Selena Gomez song? I can't keep my hands to myself, which was, I don't know why, but that song just hit for me for a while. I think my sister introduced me to it. So I'm a Selena fan.

I like the vibe that her music brings. Yeah, and if you watch Onlymers in the Building, she is a budding actress, and she makes $6 million per season on only murders in the building, the fourth season of which just started up again. My winner is anyone who drives while listening to Morning Brew Daily, and that's because filling up your tank of gas is the cheapest it's been in six months. You might have noticed prices coming down at your local mobile station, but here are some numbers to back it up. The average U.S. gas price is $3.31 a gallon, 50 cents lower than this point last year. And if you live in Texas, Kentucky, Kansas, or seven other states, you are,

paying less than $3 a gallon on average. The reason you're seeing this decline is because gas prices respond to oil prices and oil prices are tanking, no pun intended. U.S. crude oil closed Friday at less than $70 a barrel, the lowest closing price since last December. And it's a simple supply demand equation. Supply is plentiful with the U.S. producing the most oil now than it ever has. Meanwhile, demand for fuel has softened, mainly thanks to economic growing pains in China. More supply, less demand, means cheaper gas prices for Americans. The even better news is gas prices are expected to fall even further. By the time you drive to your parents for Thanksgiving, about 35 to 40 states could see average prices below $3 a gallon, according to gas, buddy.

Toby, are you think of what I'm thinking? Road trip. No, I'm not thinking that. I love public transportation. We live in New York. But how about this stat? A year ago at this time, there were barely 100 gas stations nationwide that had gas below $3. Now there are nearly 41,000 stations. That's nearly one out of every three that are already challenging less than $3 a gallon for regular gas. Pretty staggering numbers, too. Also staggering when you think about we're heading into an election year two,

gas prices are always a very hot button issue where maybe the incumbent gets attacked for high gas prices under their administration. So now maybe that attack vector is softening a little bit because we are seeing pretty much these gas prices we haven't seen in years right now. So very interesting to see how this is going to affect just everything from the presidential race to your weekend or weekend road trip or your road trip back to your parents' house for Thanksgiving. All right. Finally, let's head to our weekly preview of what you need to know this week. it is chunky with big events. Apple is holding its biggest event of the year today when it'll unveil the iPhone 16 and more new gadgets. But the real start of the show will be Apple Intelligence, the company's suite of AI features designed to bring the latest iPhone into the future

and spur customers to trade in their old phones for the new one. Eventually, Apple Intelligence will be integrated into apps like notes and mail and give Siri a much-needed upgrade. but you'll need to be patient because many of those features won't be released until later this year or early next year. So it's appropriate that this event begins at 1 p.m. Eastern because Apple Intelligence doesn't seem ready for prime time. Not quite yet, but I am still extremely excited for these updates, mainly to Siri. Siri has for a long time been the dumbest smart assistant out there, but there's improvements in the pipeline that do get me excited. One, you can interact with it via text, not just voice. it's better at responding to natural language, so it can parse through the ums and the pauses that

just normal speech has. It can understand when you're asking a follow-up question. That is a big one having that ability to have context in your conversation. It can also take action on your behalf, see what's on your screen at the time that you're using it as well. So this has always been something that I feel like Apple has dropped the ball on. Siri has not really improved over the last five to 10 years. So I think Apple intelligence is going to give that a massive to part of the pun, glow up, and will be a really big deal on this specific event. Right, and the pun is a reference to glow time, which is the name of the event. But it's happening later today. We'll definitely talk about this tomorrow and all the things

that they release. All right, Google and the DOJ are returning to court for an antitrust rematch. Earlier this summer, the DOJ won a landmark case against Google when a judge ruled the company held in a legal monopoly on the online search market. Well, regulators are presenting a similar argument about Google's advertising. tech in a second antitrust trial beginning today. They'll try to prove that Google used monopolistic tactics to drive up prices for customers, lock in publishers and advertisers to its products, and force websites to develop workarounds in response. Toby, can Google afford

another loss to the DOJ? No, because some analysts have estimated that a loss in the suit could result in Google having to pay out $100 billion in damages to advertisers. If you thought you had a bad case of the Sunday Scaries developing. Imagine being Google looking at a potential $100 billion lawsuit brewing. Obviously, there's a long way to go before any punishments are determined. The company will definitely appeal at some point as well. But Google also has other stuff to worry about on the antitrust front. Yelp just filed an antitrust lawsuit saying it was unfairly excluded from local search results. So a lot of bills piling up for Google right now. it's a tough time to be, you know, the search provider.

Yeah, I mean, but this is a very confusing case. I mean, I'm just going to be serious. It involves the intricacies of ad technology and how the ads that you see when you do Google search or you visit any website are served to you. And the government's case is that Google owns all sides of the market, the supply side, the demand side, and the exchange that operates in the middle.

So experts are saying a lot of this is really going to come down to who is the better storyteller, because of how complex this case actually is on the actual technicalities. Finally, Donald Trump and Kamala Harris will debate on Tuesday night in their only scheduled debate before the presidential election in November. As for the rules, Harris and Trump will have their microphones turned off when the other person is speaking. And there will be no live audience, which is a real shame because the debate is taking

place in Philadelphia. That is the most disappointing part because Philly would have represented. But yes, feels like a totally different timeline we're living in now compared to the last debate. We'll see if anything else. Major shifts happened after this one, which is unlikely considering what happened after the last debate. All right, let's wrap it up there. Thanks so much for starting your morning with us and have a wonderful start to the week. It's going to be absolutely beautiful here in New York.

For any feedback questions or comments on the show, send an email to Morningbrewdaily at morningbrew.com. We would also super appreciate if you shared Morningbrewdaily with your friend. friends, family, and coworkers, so you don't have to explain the concept of what a sovereign wealth fund is to them. If you need some inspo, Toby will give you an idea. I want you to share today's podcast with a friend who lives in a different state from you, but you want them to come visit. I recently just had an out-of-town friend come to New York, and it was so lovely, so I want you all to stoke the fires of friendship in a similar way. Let's roll these credits. Emily Milliron is our executive producer. Raymond Lou is our producer.

Olivia Graham is our associate producer. Yuchina Ogu is our technical director. Billy Menino is on audio. Hair and makeup is catching up on only murders in the building. No spoilers. 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.