Morning Brew Daily - ‘Red Hot’ US Economy Cooling Down? & Facebook’s Plan to Win Over Gen Z

Episode Date: June 5, 2024

Episode 337: Neal and Toby dive into Meta’s plan to attract younger users back to Facebook with its features such as Marketplace and groups. Then, the once ‘resilient’ US economy shows some signs of losing steam as consumers pullback spending and job openings are low. Also, Poppi soda is being used for skimping on its so-called gut-health benefits. Next, the sports world is rocked by another gambling scandal, this time with a MLB player betting on baseball games. Meanwhile, California beats Texas and New York for being home to Fortune 500 companies. Lastly, Coldplay announces it beats its emissions target during its world tour with the use of kinetic dance floors and bicycles.  Download the Yahoo Finance App (on the Play and App store) for real-time alerts on news and insights tailored to your portfolio and stock watchlists. 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

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Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howe. Today, can prebiotic sodas like Poppy actually improve your gut health? A class action lawsuit is putting those claims to the test. Then Facebook wants you to know it's not just for boomers. It unveiled a new plan to win over the youths. It's Wednesday, June 5th.

Let's ride. Is the third time the charm? Later this morning, Boeing will try for the third time to launch its starliner capsule into orbit and on its way to the International Space Station after two previous attempts were scrubbed at the last minute. This is a really big deal. It'd be the first time this spaceship will carry human astronauts and perhaps offer some vindication for a Starliner program that suffered countless stops and starts over the years. Toby, Liftoff is scheduled for 1052 Eastern from Cape Canaveral. You feeling good about it? I'm feeling good because it has to make

to the space station because a board starliner is a crucial pump needed to fix the international space station's urine processor assembly. So truly urine has just been being stored on board right now. They can't process it in any way. So if this thing doesn't make it, I don't know what they're going to do. It must not smell too great up there. No, do you want to know the weather conditions, a little weather report here? So we got 90% favorable conditions. The only concern is cumulus clouds. Those dang cumulus. Are they cumulus nimbers? No, no, just cumulus.

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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. We all know that Facebook is for old people these days, right? Well, apparently META missed the memo because it is laying out a grand plan to win back the youths and help strengthen its hold over the ever-valuble 18-29-year-old age group. Meta's new strategy hangs on two main pillars. One, more content discovery and two, introducing the kids to a smorgasbord of marketplace,

dating groups, and events. On the discovery side of things, it boils down to meta straying even further from the olden days of chronological posts from people you follow and boosting more. recommending content like reels in your feed. And on the smorgasbord side, Facebook thinks it still got a lot to offer young people. Say you're a new grad who just moved to a big city. You're going to need furniture, marketplace. You're going to need to meet friends, groups, and planned parties, events.

And you might even want a significant other Facebook dating, which is a real thing. Neil, do we think Facebook's appeal to the youth has some meat to it? I do think this strategy makes sense. And it is really important for Facebook to clawback some of the market share. that they've lost over the years to TikTok, to their own Instagram platform, to Snapchat, because just young people are not going on this platform at all. Just 32% of teens use Facebook each month.

That's compared to 80% who use Instagram and 72% who use TikTok. Go back to 2014. 71% of teens use Facebook. I was one of them. Actually, well, I wasn't a teen back then. But I do think I was using Facebook back then. I definitely don't use it now. they look like they seem like they have some assets that could appeal to young people like groups,

like events, like marketplace, most crucially, that they can start clawing back some of that user engagement that has fled to other platforms. Yeah. Anecdotally, I think I have definitely seen a rise in marketplace especially, especially when you're living in a big city because so much of your life around those lease beginning and ending revolves around marketplace, finding couches, finding tables, and whatnot. I'm a little less bullish on groups and especially dating. Groups isn't exactly this utopia of friendmaking than I think Facebook is trying to make it out to be.

They're more for the bit than actually meeting people at this point. I mean, I was talking with Emily R. producer, and she says she's in a group where people just pretend to be boomers. It's more for like niche subcultures than actually going and making friends in a city. Facebook dating to, which I recently learned was a real part of their website. it doesn't have a ton of cultural cachet, especially with young people. Meta does say dating numbers are up 20% year over year, but they haven't actually revealed how many people are using that platform. So of those, like the triumvirate of groups of Marketplace and dating, I do think Marketplace

has definitely the most cultural cachet. Yeah, and let's talk about Marketplace, because right now it has 1.2 billion monthly active users. That's four times as many monthly users as Amazon. And it right now, it's the second most popular online site for secondhand goods right after eBay. And analysts think that Marketplace could easily eclipse eBay in the next few years. There's a lot going right for Marketplace. One of them is that it's integrated into Facebook's website and platform.

And as much as we want to bash Facebook, it is a platform that works really well. It is integrated with Messenger. So when you want to buy anything, you can easily instant message people. And I've just, yeah, anecdotally, I mean, you hear about all these people. You go into an apartment and it's a source of pride. They brag about, hey, I got all this stuff on Facebook marketplace. So it does have cultural cachet with young people. I think they understand that and they want to lean into this particular marketplace.

What's so ironic is that Elon is setting out to build this Everything app on X. But slowly over time, Facebook has become that Everything app. Think about all the stuff you can do on it. I mean, we just ran through it. So I think it's very funny that poor Elon Mark beat you to it. Well, we'll say. Right now, 19% of all of Facebook's North American users are 18 to 29. We'll see if that percentage grows over the years and this strategy comes to fruition.

For pretty much the entire year and a half of Morning Brew Daily, we've talked about how the economy has kept on chugging despite high inflation and the Fed's historic interest rate hikes. But cracks are beginning to form. In the past few weeks, a number of data points show the economy may be hitting a wall like Toby in that bike race. Let's start with those freewheeling American consumers who drive 70% of the entire U.S. economy and I've been propping it up for months. Seems like people aren't spending like they used to.

Pandemic savings have run out. Debt is piling up. And they're starting to think, maybe I shouldn't buy these new golf clubs. A report last week showed that consumer spending ticked up a measly 0.2% in April, while companies across the board say shoppers are being more discerning with their purchases. And in the labor market, all signs point to a. slow down. The number of job openings fell in April to the lowest level in more than three years, joining a bunch of other indicators that show employers are putting the brakes on hiring.

Toby, the economy has defied everyone's expectations by growing as long as it has, but it seems like it's finally running out of steam. Yeah, cracks are showing a little bit because consumer spending has been the MVP. It's put the team on its back, and it's what's led the economy to defy expectations even in this high-rate environment. But yeah, people, are just spending a little bit less now. You look at real disposable income. It's only gotten up a little bit over last year. And so where has maybe that robust consumer spending numbers come from? It may have been more relying on credit cards or other sources of financing. So we've been talking about consumer spending, propping everything up. But I think digging a little

deeper, cracks are beginning to form. Yeah, I mean, that was the main theme of this earnings season was consumer companies coming out to a T and saying the, consumers being stretched. Just recently, Best Buy CEO came out and said that consumers are making tough choices with their budgets. We've seen all of these companies start discounting things, and I think that is a sign that consumers are pulling back. But and also in the labor market, that's also been a huge sign of a huge reason for the growth because if people don't have jobs, they're not going to spend. And everyone has many people have had jobs that have had wage growth. But in that report yesterday, this quits rate with this measures people who voluntarily

leave their job quit. Okay. That is had its lowest level since 2020. So that may be an indication that people are less secure that if they quit their job, they'll find another one. So just another warning sign in the labor market. Right. And it's actually the Fed is liking some of this data because remember, the Fed's job has been to try to tame inflation while also not sending the economy into recession while also not making unemployment tick up too much. And so when you see things like a softening market for job openings, that's actually good in the Fed's eyes because that means a little less people are hiring, which is cooling the job market off, but unemployment rate isn't skyrocketing.

So all of these data points that we've mentioned are actually feeding into some whispers that are getting louder and louder that rate hike, that mythical rate or rate cut, I should say, might be coming sometime soon because this is good news in the Fed's eyes. Right. This is, yes, you can look at this and say this is pretty good news. And the Fed's eyes because inflation is driven by wage gains and people getting raises that those wage increases are decreasing. Let's look ahead. These next two weeks are going to be critical for all the stuff we've been talking about for investors. For the economy, we have the official jobs report for the month

of May is being released on Friday. And that should indicate that job growth is. slowing like it did last month. That would be good news for the Fed. And then speaking of the Fed, the week after that next Wednesday, it's holding its policy meeting for June. We're not expecting a rate cut at that meeting, but it's still very important to hear what Jerome Powell has to say about rate cuts going forward. With this softening economic data, there are whispers that maybe July could bring the rate cut, but I don't think anyone's super banking on that. The more likely rate cut will come in September if these trends hold. So back in 1924, Major League Baseball banned New York Giants outfielder Jimmy O'Connell for gambling.

Exactly 100 years later, it's doing the same thing. MLB announced yesterday that San Diego Padres' infielder Tukupta Marcano could never play pro ball again after he placed bets on games involving his team. The league also issued one-year bans to four other players who bet on MLB games. It's the latest in a string of betting scandals for sports leagues this year, as they try to walk this tightrope between embracing sports betting now that it's legal in many states and protecting the integrity of their games. What's become clear is that they are having trouble, having their betting cake, and eating it too. Remember, just a few months ago, the NBA banned one of its own players, Jonte Porter,

from playing in the league ever again because he tipped off betters to confidential information and bet on his own team, the Raptors to lose. So in 2024, it's already two players in North American Pro Leagues that have been banned for life because they wagered on games involving their teams. Why does it feel like this is only the tip of the iceberg? Yeah, a hundred years in between players being banned, but then you look at the broader sports landscape and we're seeing scandal after scandal. I mean, we haven't even mentioned Shoai Otani either and his translator stealing money from

him to bet. So there is a lot of gambling scandals. Baseball is very clear about gambling, though. There's this rule. It's called Major League Rule 21. It's posted in every single clubhouse. and it basically says anybody involved in betting, even if you have no duty to perform,

you're going to result in a one-year suspension. But if you bet on a game in which you do have a, quote, duty to perform, that is a lifetime ban. And yeah, they don't mess around about this. And even though this is the craziest part about this, is that the investigation actually posted Marconno's results, which is, it was very humbling. He made 231 MLB-related wagers for almost $90,000.

He won just 4.3% of them. That's 10 bets total, and he lost every single parlay he made. So adding insult to injury here. I know it's not a laughing matter, but only winning 4.3% of your wages, that's a tough look. Yeah, he was, he's just not a good gambler. I mean, nobody is really. But let's just talk about the big picture here. So in 2018, the Supreme Court allowed states to legalize sports betting, and now 38 of the 50

States have done that. Meanwhile, it's been an absolute cash grab for pro sports leagues to ink these partnerships as MLB has done with the Draft Kings, MGMs of the world, because people are now watching more of their games and placing wagers and they're making a ton of money off of it. At the same time, there are increasing questions about players betting on their own teams, on their own leagues, and that is raising these questions about how these leagues are balancing all of the money and revenue they're generating from betting partnerships and all of the more eyeballs they're getting on their games with these scandals that are opening up because this is a part of male culture these days about sports culture and players are a part of this.

Apparently, in MLB Clubhouse, gambling is a big part of the conversation. It's a big part of the cultural identity of baseball players. So you're just going to start seeing more of these scandals. And also, this is two years ago. This stuff happened two years ago in the investment. investigation only started in March. So I think there's no question that more of these are going to come out across sports leagues.

Yeah, definitely need more enforcement action from Sportsbook. I mean, sportsbooks do monitor and look for these type of things happening. And, like, they have flagged numerous instances. But, I mean, you ended the spiel at the top of the show by saying this is just the tip of the iceberg. And I think you're absolutely right because what we're seeing get caught. There's probably a lot more going on behind the scenes. Up next, a lawsuit over what you put.

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But some are questioning those health claims, and those concerns have ended up in a class action lawsuit. Last week, a customer named Kristen Cobbs sued Poppy in San Francisco court, claiming the brand doesn't improve gut health as much as its marketing suggests. She says Poppy is violating California. consumer protection laws and gaining unjust enrichment. The crux of her case is that poppy drinks contain just two grams of this prebiotic fiber that's supposed to improve your gut health, while research shows you need 7.5 grams daily to see any meaningful prebiotic benefit.

But drink more poppy to get those 7.5 grams, and those benefits are outweighed by all the sugar you're drinking, she says. Poppy says it stands behind its products and called the lawsuit baseless. Toby, these prebiotic, probiotic, probiotic beverages with benefits are booming right now. What's your gut tell you about their health claims? My gut tells me that it is better than what else is out there. And so that's why I think Poppy feels relatively stable in their claims because, I mean, 63% of Americans drink soda or sugar, sweeten beverages, according to the CDC. If you ask experts, are Poppy healthier or not?

They say, listen, anything is healthier than traditional soda, just the amount of sugar. sugar that you're drinking. It leads to a litany of health of health outcomes. Poppy probably isn't going to magically transform your gut into a much more healthier biome, but it is, it does have less sugar. It does have some sort of prebiotic benefit. So I think that Poppy will probably walk back how concrete their claims are. But I do think health experts are saying it is the lesser of two evils when it comes to comparing it to regular soda. Can we just talk about how popular these drinks are becoming? Because U.S. sales of prebiotic and probiotic drinks more than tripled last year.

You go to a supermarket. There are dozens of brands of these things saying that this is a healthier soda alternative. It can help your gut. And I think if people are like, hey, is Poppy? That seems familiar. And if you watch Shark Tank back in 2018, Poppy went on Shark Tank and they secured an investment of $400,000 from investor Rohan Oza for 25% stake in the company, and they've used that to launch a really, really popular soda brand.

So these drinks, which are part of a broader, what's called, functional beverage market, are just exploding right now. They're outpacing the broader beverage market. And I do think trends do come and go in functional beverages. I mean, if you literally go back to ancient Egypt, they were slinging chamomile tea as the original functional beverage. Red Bull was initially kind of positioned as a functional beverage. Now it's more of like a media company than energy drink company. Remember, wheatgrass had his moment a few years ago. So yes, right now we're in the pre and probiotic soda era. There's also

new tropics are a big thing, which are these cognitive enhancers. So functional beverages are always going to be around and there's always going to be sometimes these lawsuits pushing back on their claims. I mean, I remember back in 2013 when palm, pomegranate juice, was all the rage. They had been advertising that it was clinically proven to treat, prevent or reduce heart disease or prostate cancer. They had to walk those claims back.

So this is nothing new. It's literally AdLib or MadLibs at this point where you insert the claim that the drink is making and then you insert the legal pushback that it inevitably receives. 70 years ago, Fortune published its first

ever Fortune 500 list, ranking America's largest corporations by revenue, and yesterday the list dropped again. Obviously, things look a lot different, but the more things change, the more things stay the same. Despite seven decades going by in between lists, 49 of the original Fortune 500 companies from 1955 have made it on the list every single year. They include blue chip names like ExxonMobil and Pfizer, but also interestingly enough, spam maker Hormel. At the apex of the list rests another familiar face, Walmart. Despite Amazon growing at a faster rate in threatening its throne, it was the pride of Northwest Arkansas

that remained the highest revenue-generating company for the 12th straight year. Neil, what trends jumped out to you on year 70 of the Fortune 500? The first thing that's jumped out to me was the share of female CEOs that stayed steady from last year. There wasn't any progress. So 10.4% of Fortune 500 companies are run by women. So that hasn't been progress from last year, but it is gigantic progress from just six years ago when there were only 24. Now there are 52. So that's more than double. Just did some mental math there. And in 1998, there were only two female Fortune 500 CEOs total. So that is one stat that jumped out to me that there's been a lot of progress just in the past six years more than doubling. But over the course of the past year, so there hasn't

been any increase. And the share currently stands at just 10%. One of my big takeaways, too, is that California had a good year for the first time since 2013. California is home to the most Fortune 500 companies. A couple new entrants that have were Workday, DoorDash, and Monster beverage, speaking of functional beverages. But also, even though California did well on the state level, New York City still comes on top when it comes to cities. 41 companies of the Fortune 500 are based in New York.

A lot of them are those big banks, J.P. Morgan, Chase, Citigroup, Goldman Sachs, Morgan Stanley, the financial sector lives here. You know who came in second, though, was Houston, 21 of the company's biggest businesses. And you know why it's because energy, petroleum, gas, oil and gas is just huge in Texas. Third place was Chicago because McDonald's is there, a couple others. So 15 of them were based in Chicago. Final point on the Fortune 500. One of the big themes this year that I think speaks to what's happening in our economy is the financial sector.

And banks, 17 of the 20 fastest growing companies were in the financial sector. Bank of America and Citigroup returned to the top 25 after several years. Morgan Stanley and Goldman Sachs rejoined the top 50 this year. All in all, there were 92 financial sector companies in the Fortune 500 this year compared to 86 last year. So finance is growing because they make money when consumers are spending, as we talked about, and they make money when interest rates are high. So both of those things have conspired to pad bank revenues.

So it's very interesting to see the way the Fortune 500 has. has progressed over the years. I mean, it was only until 1995 that they only included manufacturing companies because that really was the base of our economy. And now you see banks, healthcare, tech, those are the sectors that are really supporting this list. And we'll see whether Walmart gets dethrone soon. That is the rumor that Amazon is going to one day eclipse Walmart as the most revenue generating company in this country. Coldplay is taking on a warming planet. And it's winning. Back in 2019, Coldplay singer Chris Martin announced that the band would stop touring until they could figure out how to make them a little more environmentally friendly, and they succeeded. Initially, they wanted to cut their emissions in half, but the band raced by that target, announcing this week that they had reduced their carbon footprint by 59% compared with their previous world tour.

Now, how does a band cut down on CO2 emissions? By harnessing energy from their audience, of course. Coldplay shows feature kinetic dance floors that harness the power of the audience dancing and jumping up and down via specialized tiles that convert that energy into electricity. Sometimes they even urge people to hop on

specially modified bikes during the show for little extra power boost. I cannot imagine if someone told me to get on a freaking Peloton during a show but I guess... You would love that, Toby. Come on. But we should all thank Coldplay for helping us Aviva Arvita's a little bit longer.

Yeah, I mean, there's a lot of scrutiny on artists and their world tours because they generate a ton of carbon emissions. Think about what Taylor Swift has been doing, what Beyonce has been doing, what Colplay has been doing, which is literally just going to a city, hopping on a jet and going to another city, and then, you know, just lighting it up with consuming so much energy. So it does, so maybe it seems weird that you're like, why do I care about whether a musician generates emissions? But when they're on these world tours, where they're traveling a ton and doing such crazy

energy-consuming productions night after night after night does consume a lot of emissions. And, you know, Coldplay had these numbers verified by MIT's climate science lab. And the guy there, the leader of that lab, was like, Coldplay is really setting the standard here. So if you're a Coldplay fan, this is another thing to be proud of with your band. Yeah, they've gone all out. These kinetic dance tiles are super interesting. I researched it, though. They're very expensive to install.

Just a small installation will run you around 30,000 euro. So they're definitely spending a lot of money in order to harness that energy. They've also installed solar installations. For every ticket they've sold, they've planted a tree to help reforestation. So 18 of their shows were powered entirely by this touring battery system that are recycled BMW batteries. So they are attacking it from a lot of different angles. And you're always going to make headlines, though, when you're telling people to hop on bikes to help power your shows. I know.

It's like a big old soul cycle class, but with a lot more people. And Coldplay is not the only one doing this. I mean, Neil Young and Bonnie Raid have been promoting sustainable tours for decades. Billy Elish released her new album, hit me hard and soft, which I have to say, is freaking incredible. You love it. You've been bumping that. It is so good. Anyway, it is also on recycled and eco-vinyl.

Its packaging is made with recycled materials radio head over a decade ago pioneered the use of low-energy LED lighting rigs. So bands that are more eco-friendly have started to do this. Taylor Swift has been very much under scrutiny for using her private jet. When she went back and forth from Tokyo to the Super Bowl in Las Vegas this year, that generated that plane flight generated 14 times as much as the average American emits per year. Her team said she bought enough carbon offsets to sort of negate those emissions. But yeah, musicians are under scrutiny. Coldplay is leading the way.

I know what I'm listening to for the rest of the day. And that's all the time we have for today. show. Thanks so much for listening and hope you're able to get over the hump that is Wednesday. If you have any feedback on Morning Brew Daily or want to pass along your daily affirmations, you know where to go. Morningbrewdaily at morningbrew.com.

Let's roll the credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Olivia Graham is our associate producer. Eugenwa Ogu is our technical director. Billy Minino is on audio. Hair and makeup will try to fix you. Devin Emery is our chief content officer and our show is the production of Morning Brew.

Great show today, Neil. Let's run it back tomorrow.