Morning Brew Daily - Record Travel Can't Save Airline Earnings & TX Town Sick From Bitcoin?

Episode Date: July 12, 2024

Episode 364: Neal and Toby recap the latest inflation report that might’ve sealed the deal on a Fed rate cut with a minor increase that shows signs of cooling down. Then, airline profits are underperforming despite record air travel. Plus, a Texas jury sides with a bitcoin miner that’s been making nearby residents sick from the loud data facilities. Next, Costco is the stock of the week and Tesla is the dog of the week. Meanwhile, the most star-studded Indian wedding that billions of money can afford. Lastly, the iconic Las Vegas casino The Mirage is closing its doors and needs to get rid of its prize money. Expand your world with Meta AI. Now on Instagram, WhatsApp, Facebook and Messenger. 00:00 - NYT Book List 3:00 - Inflation goin’ down 7:20 - Delta Air struggling 10:30 - Bitcoin mining is very noisy 14:00 - Dog: Tesla 17:20 - Stock: Costco 19:20 - The wedding to rule all weddings 22:00 - The Mirage closes shop Get your Morning Brew Daily Mug HERE: https://shop.morningbrew.com/products/morning-brew-daily-mug?utm_medium=youtube&utm_source=mbd&utm_campaign=mug 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

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 morningbrewdaily. That's aflack.com slash morning brew daily.

Good Morning Brew Daily Show. I'm Neil Fryman. And I'm Toby Howell. Today, what happens when a Bitcoin mine comes to your town? Hint, it is not good. Then a Las Vegas casino has to get rid of $1.6 million in prize money before closing next week. So, Vegas, anyone? It's Friday, July 12th. Let's ride.

So the talk of the Morning Brew office this week has been about a project the New York Times is putting out called the 100 Best Best. books of the 21st century. They've been releasing the list slowly in batches and they finally dropped the top 20 this morning. And Neil, I'm not going to lie, you've had this snobby air to you all week because it's clear you've read the most books from the list. So I'll give you a chance to Vampire. Give us your recommendations. I don't know. Well, if you just put a book by your bedside every night, you can crush 10 pages and then slowly but surely you can work your way through some books. The top book on their list for the 21st century was my brilliant friend.

by Elena Ferranti, and I can't argue with that. It is an excellent book. Part of a series that has become an HBO show. Some other books on the list that I can recommend. The Corrections by Jonathan Franzen. It's probably one of my favorite books of all time. Pichinko by Minjin Lee, also a TV show. The Known World by Edward P. Jones.

It's about a black slave owner, and I remember reading it in college and just being extremely moved for months and just constantly thinking about it. So I can definitely recommend that. Never Let Me Go by Ishiguro, The Last Samurai by Helen DeWitt, I just read. And then currently, I'm reading The Savage Detectives by Roberto Bologna, which was like 16 or 18 on their list. So TBD on that one. What are you reading right now, Toby? Well, I just read a court of Rose and Thorns, which is part of the Romanticie trend that we've been talking about.

And I think it's going to make the next list. Actually, you know what? Why? Wait, I'm going to make my own list because every single one of those books, I've heard of some of them. but I haven't read any of those, so I'm glad that at least one of us is well read in this podcast. Now, let's hear a word from our sponsor, Meta-I. So, as many of you know,

I've been training for marathons left and right, and I think I've rubbed off on Neil because he is now joining me for some runs in the morning. I am. I am catching the running bug, but one thing that I've been dealing with is that just training gets repetitive. I know.

Almost by accident, I discovered recently that meta-AI can help with this. I was searching for running. content on Reels, but then decided to ask MetaI for training recommendations. I was shocked to see it list out a few workouts that were honestly pretty great, and I immediately looped one into my training. So, Neil, today we're doing six by one mile at 5K pace, thanks to MetaAI. I don't know if I'm ready for that. I'm going to ask MetaAI for an easier one, but you can expand your world with MetaAI now on Instagram, WhatsApp, Facebook, and Messenger. 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 Lovato on May 17th and the signature Southern Country Rock of Eric Church on July 19th. Tickets on sale now at Yamavat Theater.com, only at Yamava Resort and Casino, celebrating its 40th anniversary. You in? Must be 21 to enter. Well, I haven't said this in a minute, so I might be a little rusty, but here goes nothing. Inflation went down. Yes, according to yesterday's Consumer Index report, prices declined on a monthly basis in June. And year over year, they only grew 3%, which was way below expectations and the lowest pace since June 2023.

Don't want to jinx it, but it might be time to hang the mission accomplished banner because this report indicates we have seemingly beaten inflation. the economic boogeyman that has eaten away at Americans' pocketbooks for years. Prices declining is obviously a relief, and maybe even better, they throw the door wide open for the Fed to cut interest rates in September. High interest rates have frozen over the housing market, and I've generally put a damper on economic growth, so lowering rates could add some lighter fluid to the economy's smoldering fire. Toby, unequivocally great news for consumers, businesses, the Fed, everyone, seems like

the only thing cool these days is that. inflation. Yeah, I do think that there's a little bit of psychological healing that has to be done, though, because if you think about the cumulative inflation that has piled up over the last few years, consumers are walking down the grocery aisle right now, and they're seeing things that they can still remember lower prices. So I don't think it's going to be some instantaneous thing where you're going to the grocery store and suddenly everything feels cheap again, because prices have gone up, even though prices fell 0.1%. We just have had this cumulative load of inflation. So definitely some, still some scarring from the last few years.

It's not going to be an instantaneous fix. Absolutely not. So what was the MVP of this last report? Really, it was shelter prices, what you pay for housing. They only climbed 0.2%, which is the smallest gain since August 2021. They are the largest category within the services basket in the consumer price index. We've been waiting for years for shelter prices to go down. Obviously, housing prices have skyrocketed.

And so that was probably the biggest sigh of relief for economists and everyone watching this to look at shelter prices and say, oh, my God, they only increased 0.2% over the entire year. That is huge news. And that's going a long way to bringing broader inflation down. Another place, though, that we're potentially seeing alarm bells is from the snack industry. PepsiCo just reported its earnings and reported a drop in U.S. sales because their interpretation of it was that inflation-wary shoppers are finally cutting back the price increases in the market.

in stuff like Cheetos, potato chips, have finally caught up to them, and they're just not buying those affordable treats that they used to. Remember, those actually weathered these last three years of inflationary environment pretty well because people pulled back from restaurants or bigger ticket spending instead, but kept going to the snack aisles in getting their Doritos in Lays fixed. But now prices for a 16-ounce bag of chips are up 30.6% since the end of 2020. That's outpacing the 20% cumulative price increases. from the broader consumer price index. So I think we're seeing some cracks forming in other parts of kind of consumer spending,

especially like the lower end of the snack industry. Yeah, and that's why Pepsi was like, well, we're probably going to have to stop price hikes because we've been jacking up prices for the last three years. So that is good news for inflation because they're going to stop hiking prices. But yeah, those cracks formings go back to something that Jerome Powell said earlier this week, which was in front of Congress. He said elevated inflation is not the only risk we fail. So he's taking his eye, one eye, he had two eyes on inflation.

Now, I think he has one eye on inflation, then one eye on the job market, where unemployment has increased for the past three months, which is why he's going to potentially likely cut rates in September. This, you know, we should talk about why cutting interest rates is so important. I mean, yes, it has frozen over the housing market. It's made buying everything more expensive because the U.S. economy runs on credit. And credit has gotten so much more expensive as the fifth. has hiked interest rates. So if those start to go down, then when I borrow from you,

it'll be a little bit cheaper and everything will just be a little more stimulated in the economy. So that's why investors have been waiting for more than a year for these interest rate cuts, which look like they could happen in just three months from now. I'm still trying to figure out which way Jerome Powell's eyes are facing right now. Does he have a third eye too facing somewhere else? Good for you, Jerome. Let's move on. Airlines are caught in a paradox right now. record-breaking amounts of people are traveling. Last Sunday, TSA screened its most passengers ever in a 24-hour period, and yet it's not showing up in their profits. Sky-high fuel prices, increased labor expenses, and an oversupply of seats and flights are eating into their bottom lines like it's a delicious Biskhoff cookie. Delta is the canary in the coal mine for the reclined chair in a hard place the industry finds itself in right now. It was the first airline to report its second quarter earnings yesterday, but just days after those records, TSA numbers, its profits came in down 29% from the previous year.

Neil, Delta was supposed to be faring better than its counterparts given its focus on international routes and premium seating. So if it underperforms, we could be in for a very ugly earning season for airlines. And that's why a bunch of all, a bunch of other airline stocks fell yesterday. The supply and demand situation in the airplane market is just out of whack. Coming out of the pandemic, everyone started traveling again. So airlines jacked up routes. They added more planes.

They added more routes. They added 6% more seats this summer than last summer. And so while there is record demand, they just added a little too much capacity, which means that they needed to start discounting flights. So that's why you're seeing a lot of cheaper airfares if you go on Google flights or kayak or whatever. So that is what's happening is there's just a two. There's an oversupply of seeds.

So maybe you have the middle seat open, which is great news for consumers. It's not good for airlines, which are seeing their profits drop a ton of hunt. And Delta was supposed to be pretty insulated from this. Over half of Delta's revenue comes from sources like its loyalty program, its premium ticket sales. Their sales of premium tickets grew a lot more quickly than those in just the normal economy main cabin. Other airlines don't have that great premium offering though. I mean, if you're a spirit, if you're a budget airline like Spirit or Southwest, you don't have those upgrades available to kind of pad your your profits. So So if Delta saw a 29% fall in its profits, like other airlines are sitting here going, they've

already cut their outlooks. They've tried to prepare the market for what is going to be a pretty ugly earnings season. But yeah, if Delta is showing these cracks, then think about what others are going to show. One of the most fascinating tidbits from Delta's earnings report was about the impact of the Paris Olympics. Now, Delta is very exposed between U.S., France flights because they have a partnership with Air France, and together, those two carriers own approximately 70% of the market chain. You're like, oh, this is going to be amazing for Delta. A lot of people are traveling to Paris for the Olympics. But instead, he said, the CEO Ed Bastion said that the Olympics are going to result in a $100 million hit to the airline because people who aren't going to the

Olympics in France are just not going to go to Paris at all. So you're going, you're basically going see a huge drying up in demand over the course of the summer. It's either you're going to the Olympics in Paris or you're not going to Paris at all. And so Delta is going to lose $100 billion because of the Olympics. Up next, the residents of a small town in Texas are getting fed up with their new noisy neighbor. No, it's not out of town New Yorkers or even fratros. It's far worse. A new Bitcoin mining facility that they say is making them sick. In a major investigation, Time Magazine spoke with more than 40 people. in the Granbury area who reported a medical ailment they believe is connected to the opening

of the Bitcoin mine two years ago. At least 10 people went to urgent care or the emergency room with symptoms such as hypertension, heart palpitations, chest pain, vertigo, migraines, and panic attacks. The big problem with the Bitcoin mine is that it's extremely loud. It's as if a lawnmower was constantly running even while you're trying to sleep. Like AI data centers, Bitcoin mines use up a ton of energy for heavy computing, and those computers, more than 30,000 of them, need to be cooled. Enter thousands of fans which emit a vicious buzz that terrorizes the town. Toby, this seems like an absolute nightmare, but it shows how the growth of data centers and Bitcoin mines across the country are running up against communities where actual people live. One local doctor compared it to imagine if you had a Vuvu Zela playing in your ear at all times, which is that really annoying.

horn from the South African World Cup a few years ago. And it's true. Sonic damage, there's an increasing body of scientific work that's showing that sonic damage, just having a constant loud noise assaulting your ears leads to very real health outcomes. A lot of cardiovascular outcomes are associated with sonic damage as well. So it's just something that you don't really think about until you have this massive decibel producing mind right in your backyard. Let's talk about what what are those decibels? So these people literally go out into the front porch with a recorder and figure out how loud it is coming from the Bitcoin mine. And they've recorded between 70 and 90 decibels, which is like a chainsaw lawnmower washing machine.

Just a constant buzz in your ear. It's insane. What about regulations? Is there, are there any regulations regarding noise? and they're not really. It's up to the local or state level to regulate it. New York City has a noise code, which caps restaurant, music, and air conditioning at 42 decibels. Meanwhile, the Bitcoin mine is emitting 70 to 90.

Texas has a law that limits noise to 85 decibels. It's the loudest state limit in the nation. And that is sort of a sign why all these Bitcoin mines and data centers and other things like that are going to Texas because they just generally have lax regulations, there's not many legal avenues for these residents to pursue even though, and we should say, there's no exact evidence that the mine is leading to their illnesses. They just accuse it of coming because they weren't sick two years ago and now they are. Yeah, and then usually what you hear about Bitcoin mines is just the energy that they suck up. I mean, the entire Bitcoin mining industry uses about the same amount of power as Switzerland does

in a year. There's been a large increase in commercial scale Bitcoin mining operations. Coming to the U.S., there's now at least 137 of these. So expect to see more of these classes between local communities and these buzzing behemists that are these Bitcoin mines. Up next, let's head to our Stock of the Week, Dog of the Week. 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 homedipo.com slash price match for details.

Wishing you could be there live for the big game, soaking up the atmosphere in the crowd. But too often, life gets busy. Or the price holds you back. Price line is here to help you make it happen. With millions of deals on flights, hotel, and rental cars, you can go see the game live. Don't just dream about the trip.

Book it with Priceline. Download the Priceline app or visit Priceline.com. Actual prices may vary, limited time offer. Costco is getting pricier. Tesla is breaking promises again, and we have a heck of a Stock of the Week, dog of the week segment coming your way today, where Neil and I bring you one perfectly medium rare stock

and one that resembles more of a hockey puck. Neil, you won the pre-show Somali A quiz, so you and your delicate, sophisticated taste palette are up first. Who is our dog of the week? I mean, there was obviously a Kianti. My dog of the week is Tesla. Tesla, Tesla, Tesla. You were this close to getting stock of the week.

Your shares had gained for 11 straight days, adding nearly 260 billion to your market cap and putting you in the green for the year. It was a breathtaking rally. But just like Toby's blonde hair, it was cut short. Yesterday, Tesla's stock tanked more than 8% after Bloomberg reported the company is pushing back its big Robotaxy reveal from August until October. None of you are shocked to learn that Elon Musk is delaying a product rollout. Happens all the time, but this one is a particularly big deal.

Tesla is betting the farm on the Robotaxi, prioritizing its development over a low-cost electric vehicle that could juice car sales. And those car sales could really use some juice earlier this week. a report found that Tesla's U.S. market share in electric vehicles fell below 50% for the first time ever, declining from 59.3% last year to just 49.7% now. Toby, investors clearly thought this delay was a big deal. Is it a sign of trouble or just a bump in the road to self-driving? I mean, let's talk about the bump in the road that came to our stock the week, dog at a week segment, because Tesla, you're right. We had it fully locked in or like 11 straight days. finally we get to talk about it rallying

and then you just had to go and delay this announcement. Just add it to the Robotaxy delay counter. I mean, Elon Musk has been promising shareholders to Robotaxis since literally 2015, he said, back then he said Tesla cars would achieve full autonomy within three years. 2016, he said he was going to push it back

to 2017. And then in 2019, he said on a call that Tesla would have one million Robo Taxis on the road by 2020. So again, we have been hurt before. We've been hurt time. time again, but it does seem to be a little bit more existential this time because a lot of the valuation is tied to this Robotaxie unit getting off the ground. You can only be scorned in line to or disappointed so many times before you start to get a little bit anxious, and I think

we saw that in the market's reaction yesterday. Right. And the shares had an incredible run-up for the past 11 days. That was due to that deliveries report that exceeded expectations. Tesla's battery business is growing fast and there was hype around the robotaxie because Elon has two possible avenues to go with. He can pursue the robotaxie or this low cost electric vehicle, which investors really want to see because their car sales, as I mentioned, are flagging compared to competitors. So he's going with a robo taxi, but that's getting delayed. So it's just a matter of whether this, it's like when you're at an airport and you see the first delay, you're like, uh-oh, like are we going to be in here for like four to five hours? Or it's just, you know, they just

have to clean up a little more, and we'll get off in a half hour after our flight delay. And I think that's what investors are weighing right now. Here is why we're also concerned about it is because Elon told us to be concerned. He said on an earnings call last quarter, if someone doesn't believe Tesla's going to solve autonomy, I think they should not be an investor in the company. So we're literally, investors are literally just listening to Elon right now. Let's go to the stock the week. And my stock the week is Costco, because for the first time in seven years, it is raising its membership prices. Basic membership will now cost you $65 a year up from 60, while its premium offer is getting bumped to $10 to $130 a year. But if you pull up the stock chart,

after a brief jump on the announcement on Wednesday, you'll see that Costco actually gave back most of its gains the next day. But that's pretty normal if you look at the historical data for the company. Analyst who cover the stock noted that the last three times Costco announced a fee increase, the stock fell the next day. while generally outpacing the market in the weeks leading up to the change, aka it's a classic case of buying the rumor and selling the news. So don't get your free samples in a twist over the dip. The stock is still up nearly 30% so far this year and is now pulling in more money through its memberships.

You know what? They're following the Netflix playbook, or should I say the Netflix is following the Costco playbook for the past few decades, which is just you jack up your subscription prices. You hope you don't lose too many people as members. and then in the end, you make more profits. And that's exactly what investors are hoping Costco's fee increase does. Costco has just been a huge winner during the pandemic, during inflation, because they have managed to keep prices low,

most notably with that $1.50 hot dog soda combo that isn't going anywhere. It's going to stay at $1.50. And they use these subscription, these membership fees to subsidize their products and keep it low. So when you go and you walk out with like a huge tub of pretzels, it's $3. Yeah, I would argue it's actually even a different playbook than Netflix because it is actively contributing to subsidizing the product that their consumers are buying. And you're right.

You mentioned the hot dog deal. They have the best get out of jail free card. They could announce the most disappointing earnings ever. They could announce their hiking membership freeze double. And as long as you lead it with the fact that you're keeping the hot dog deal, the same, everyone go, ah, good old Costco. Like, they get us. They understand that we want to be an affordable company.

The wedding of the century has arrived. Today, Anant Ambani, son of Asia's richest man, is tying the knot with Radika Merchant, also the daughter of a billionaire, and a wedding that will top any wedding you've ever been to or ever will. Former prime ministers, tech moguls, and celebrities are all in Mumbai for a colossal event that is expected to cost the family more than $150 million. It is the culmination of four months of pre-wedding parties kicking off in March with a bash that included Bill Gates and Mark Zucker, and a performance by Rihanna. Then the couple celebrated with a luxury cruise on the Mediterranean featuring performances

by the Backstreet Boys, Katie Perry, and Pitbull. But all of that is in the past and the wedding weekend has arrived. Wondering whether to pick chicken or salmon? You don't need to. Dozens of chefs are serving up 2,000 dishes from around the world. Not sure what to wear. Don't sweat it. The family has provided a 10-page dress code manual for all of the events,

which includes a jungle fever theme and Moulon Rouge-inspired house party. If this all seems way over the top, it is, and regular people in India have been grumbling at the spectacle for months for snarling traffic and flaunting their wealth in a country where economic inequality is extreme. Still, what this family wants, this family gets, and this weekend's festivities are going to be the stuff of paparazzi legend. Justin Bieber already was in for a private show. Would love to hear his rendition of shout. Me too, honestly. In India's domestic media, this is being approached as their... royal wedding wedding india's royal wedding they have obsessed over every single detail of this and i mean

if we're being honest we have as well because it's just crazy that this wedding hasn't happened yet i feel like we've been seeing a new crazy free for a new singer to come in and and there was that the mediterranean crew so it's just truly a spectacle in every sense of it i i was digging into a little bit about what is the reaction because of course there's going to be you said grumblings because it is a extravagant show of wealth. But Mukesh and Bonnie, the patriarch of the families looked at, is more of a self-made man in India. And so they view him as aspirational rather than a less well-liked billionaire. So he does have a little bit of leeway. But I do think the one thing that really gets people mad is just the traffic that everything is going to create. And the actual wedding

is going to create a traffic night. And this is sort of just a crystallization of Indian weddings in general. India spends more on weddings than any other country besides the United States. So I think we're in for a my big fat Indian wedding instead of a Greek one because they truly are the goats of weddings. They go all out. And I think the Ambani family, which owns Reliance Industries, just this massive conglomerate that brings in over $100 billion in revenue a year. It's just really the capstone of what we've been seeing over the past few decades of Indian weddings, just going all out. You know who I feel the worst for, though, is that their previous daughter got married in 2018. Beyonce came and performed. That was the most expensive wedding at the time.

around $100 million. This one is blowing it out of the water. So you got to be a little mad, but you did get Beyonce if you're the older sister. In a plot that sounds made up by the Ocean's 11 crew, a Las Vegas casino has to pay out $1.6 million in jackpots before it closes later this month. The Mirage Casino has been an institution on the strip

for the last 35 years, but it's closing down to reopen in 2027 as the hard rock Las Vegas. But Nevada gambling regulations require casinos to pay out their pretext. progressive jackpots before they shut their doors. Progressive jackpots are pools of money that slowly get bigger every time you play a game like slots.

They are yet another big flashy carrot casinos dangle as a siren call to lure you in. But now when you sit down at the morass, you know that there is a guarantee that the jackpots will be paid out by July 17th. Neil, this wrinkle has predicted to be led to totally rational behavior from Vegas gamblers. Of course not. People are already calling the cops complaining that other people are sitting in slot chairs for too long. it's a mess but hey that's Vegas baby you gotta love and everything must go sale where the product is just money but here's my question what happens when you go to a slot and you lose money by wanting to

play this jackpot where does that go it just goes back to the casino it's truly they're only promising these progressive jackpots will be played out but the the mechanisms of the game are still functioning you're still not uh the house still has the house still always wins and it's because the the regulation is there is because these this money is full of gambler's losses. And by Nevada rules, you have to get rid of it before you close. Yeah, so Mirage has just been a total institution since 1989. It is considered as ushering in the wave of mega resorts before it opened by Steve Wynn. Las Vegas was known for the all-you-can-eat buffets, the gambling, but not for necessarily the extravagant shows and the over-the-top spectacle like we're just

talking about in the India story. I feel like I was just saying the same thing. But yes, but this is what happened in Vegas once the Mirage opened. It ushered in Treasure Island, Bellagio, Excalibur, MGM Grand Luxur. They opened with the Siegfried and Roy show. They had this massive exploding volcano. So it really marked the beginning of an era where Las Vegas exploded as a luxury destination. 18 million people went to Vegas in 1989. Last year, there were 41 million, way more than doubles.

So the Mirage really was just a part of the Las Vegas story to become what it is today. I'm still not one of those 41 million people. We've got to go to Vegas by at least July 17th. We've got five days to get some of these jackpot. All right. Well, maybe you should go in 2027 when this new building opens going to be the hard rock. And if anyone's been to South Florida and seen that massive hard rock with a huge guitar going into space, that's exactly what they're going to do in Las Vegas right on the strip.

It's right at the 50-yard line right in the middle. And you're just going to walk by and see a massive, massive, massive guitar. I don't know exactly how tall it is. but it is towering. It's really understated and classy. That's all you got to know. All right. That is a wrap on our shows for the week.

Thanks so much for starting a day with us and have an amazing weekend. You made it. If you heard anything on the show that made you think, hey, I'd love to ask the boys a question about this. You can't. Just send an email to Morningbrood Daily

at Morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lou is our producer. Olivia Graham is our associate producer. Yuchinawa Ogu is our technical director. Billy Minino is on audio. Hair and makeup is playing the slots at the Mirage.

Good luck. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. I wish you all well.