Morning Brew Daily - The High-Speed Rail Connecting LA to Vegas & Express Goes Bankrupt

Episode Date: April 23, 2024

Episode 307: Neal and Toby chat about the big transportation news of Brightline West breaking ground of the high-speed rail line connecting Southern California and Las Vegas. Then, Express is the latest once-before retail giant that is filing for bankruptcy. Also, the New York Stock Exchange is seeing if you have any interest in trading during the late night hours while you’re at your favorite 24/7 diner. Next, the growing trend of boba tea turning its founders into billionaires. Meanwhile, streaming has become so easy to sign-up and cancel that it's becoming part of our normal watching habits. Lastly, Kansai International Airport in Japan is among the best in the world because of its flawless luggage record.  00:00 - Intro 2:45 - LA to Vegas train 6:30 - Express stores closing 915 - NYSE 24/7 trading? 12:40 - Hot boba market 16:30 - Stream churners 20:30 - Legendary airport Get your Morning Brew Daily Merch HERE: https://shop.morningbrew.com/products/morning-brew-daily-sweatshirt?utm_medium=multimedia&utm_source=podcast&utm_campaign=mbd&utm_content=shownotes Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Disclosures: Returns are not guaranteed. Terms apply to the match and limitations apply to IRAs. Visit robinhood.com/retirement for more information. Robinhood Financial LLC (member SIPC) is a registered broker dealer. Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.com slash US slash brew AI. That's pwc.com slash us slash brewAI. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howe. Today, L.A. to Vegas in just two hours that could become a reality thanks to a new high-speed rail line. Then should you be able to trade stocks 24 hours a day, seven days a week? The New York Stock Exchange is exploring that very question.

It's Tuesday, April 23rd. Let's ride. Today is National Shakespeare Day. because while we don't know exactly when Billy was born in April 1564, the 23rd seems like a pretty good bet. And you can honor the bad as barred in the land by infusing your conversation with a little Shakespearean flair today. Here are a few tips. Instead of saying it, simply use the letter T like tis or twood. Make your verbs sing by adding it to the end.

And when you're mad, yell, I bite my thumb at you. Toby, you're going to use any of these? So I should have said Tis Tuesday, April 23rd. That's Rydeth? Is that the way to do it? That's the way to do it, at least today. But it is crazy going through Shakespeare's works and looking at all the phrases that he coined that we just take for granted today.

I mean, in a pickle, wear your heart on your sleeve, wild goose chase, all that glitters is not gold. Love is blind and Riz. Wow. So, no, I'm just joking. I invent Rizz. I was going to say Netflix is stolen a few of those. The only person to coin more phrases might be Jerry Seinfeld.

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Grow, plant, grow. Or if you're feeling like an overachiever, you can set it up in addition to your existing employer-sponsored retirement accounts. There are a plethora of ETFs that choose from. Or again, if you're feeling like an overachiever, customize your own plan. Learn more about the Robin Hood app in the App Store or Google Play Store. Disclosures investing is risky. Limitations apply to both IRAs and 401Ks. Refer to the IRS for more information.

More info in the description of this podcast. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting $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.

See homeb Depot.com slash price match for details. Well, here's a headline that may sound like an April Fool's joke, but it is in fact very real. High speed rail is coming to the United States. Yesterday, construction broke ground in Las Vegas on a rail line that leaders called America's first true high speed rail system, the $12 billion $218 mile project, will connect Vegas and the L.A. suburb of Rancho Cucamonga,

which also happens to be the best name for a city ever, with a target date of, of 2028 before L.A. hosts the Summer Olympics. This rail line won't be run by Amtrak. It's from a private company called Brightline West, whose sister firm already operates a rail line in Florida between Miami and Orlando. So far, that Florida route has been successful, and it wants to take that model and apply it to the Mojave Desert. What does this high-speed rail mean, actually? Well, Brightline's trains will travel between Vegas and L.A. at max speeds of 186 miles per hour completing the journey in just over two hours. Currently, it'll take you at least four

to drive between the cities and it's bound to be longer with traffic. I've done it. It's not fun. So, Toby, is this the project that finally kicks off the high speed rail boom in the U.S.? I think so. I don't want to jinx it though because we've just been birded so many times in the past. I mean, if you just look at how California has done when they tried to build high speed rail, Remember, there was one from L.A. to San Francisco that was approved by voters all the way back in 2008. But now due to rising costs and a bunch of other issues, a 2022 business plan forecasted that it would now cost the project would cost $105 billion. So anytime you hear the words high speed railed America and California, you're not very bullish on it. But this project seems to have crossed all of its dotted its eyes, crossed its teas, and it looks like it's underway.

Yeah, this is why I'm bullish on this project, because, there is very little red tape. They have the right of way already because I-15 goes from L.A. to Vegas. And what they're doing is just building the rail line right in the middle on the median of this of this interstate. So they're not going to have to deal with a lot of the red tape, the land use regulations, the legal headaches that come with that L.A. to San Francisco route. They're already going on a piece of land that they can build on. So that's why this project costs $12 billion as opposed to $105 billion. It's just the, the so-called train tracks are already existing for this to be successful.

Whether people will use it, I mean, California, Vegas, we know people love to drive there. So whether they'll pay up, and at least in Florida, this costs a one-way ticket, $80. So I don't know if they have a price point yet, but it's going to be probably cheaper than a plane flight, but it might be the right amount of distance for this rail line to exist, just over 218 miles, a little too short for a flight, a little too long, for a four-hour drive. Right. That's Brightline's whole business plan in a nutshell there,

is that they do look for cities that are too near for air travel, but then, yeah, it's a very annoying drive. And they also, it's going to be a nice experience. They're going to have snacks coming down the aisle, your high-speed Wi-Fi on the train, all the good stuff that you would expect out of a train and at around airline prices. So I hope this happens, though,

because just, oh, my gosh, America's high-speed rail game is so weak, but the Palm Beach one has done very well. I think Brightline has kind of gotten this down to a bit of a science at this point. Yeah, I mean, people on the Northeast are probably wondering, wait, isn't the Acella that goes from D.C. to Boston high-speed rail? And actually not technically. It maxes out at 150 miles per hour.

And it only goes that fast on 41 miles of the entire route because this, because the Acella needs to share with commuter rail and freight at the same time. So it's not really technically high-speed rail, which, according to Interstate, international standards is 160 miles per hour and above. This L.A. to Vegas rail is going to be as fast as the bullet chains in Japan, but a little slower than the expansive high-speed rail network they have in China. It's not easy being a mall-based retailer these days, and the once-trendy fashion brand Express is the latest casualty. Yesterday, the company, which also includes Bonobos and Up West brands, announced it is filing for Chapter 11 bankruptcy, closing 115 locations in the

process. As it tries to dig itself out of a hole that was created by a good old-fashioned decline in sales. Revenue has fallen 10% since 2019, which doesn't sound too bad on the surface, but it is bad when you compare it to the broader red hot apparel industry. Express just found itself on the wrong side of too many trends. The formal and smart casual market that Express serves hasn't really caught consumers' eyes in recent years as clothing becomes more casual. And if you're a clothing outlet with a bunch of locations in malls, you're going to struggle these days. Neil, this is a story I feel like we've heard before. Yeah, Express is Siri in a chatchy BT world. It's just not representative of the current

era we're in in the apparel industry. I think Morning Brews writer, Molly Liebergall put it best. She wrote, it's clothes just kind of look like clothes. There's nothing exceptional about them. And yeah, Express is getting hit from all sides, at leisure, Lulu Lemon, fast fashion. Sheen and H&M and Zara and whatever Old Navy is, they're all putting pressure on Express and it just was in this messy middle where none of its clothes stood out to anybody and they didn't get with the trends of what people are wearing to work these days. Yeah, it's been a fall from Grace for Express because if you go back to 2010, it went public

as the six largest specialty retail apparel brand in the U.S. And then even in 2015, its quarterly sales hit $765 million. Compare that to the second quarter of the second quarter of. of last year. They sank to $435 million. So it's just been a long, slow decline for them. This isn't a pure bankruptcy, though, because they are trying to do a court-approved sale to a group of mall owners led by Simon Property Group in Brookfield Properties. This is a trend that we've seen in the past, these kind of shopping center staples being bailed out by the very companies that have stakes in their success.

So we've seen Simon Brookfield do things like involve the bailing out of Forever 21, Brooks Brothers, J.C. Pennings. All these struggling mall retailers are being kind of supported by their landlords, essentially. So it's this weird symbiotic arrangement that hasn't been working too well, but it's better than just letting them fade off into oblivion. Little vertical integration. And so if you want to, Express is starting all these closing sales at the 95 stores that it's closing. So if you want to score some cheap clothes, I would definitely look up which express stores are closing in your local area and get to those stores.

Moving on, of all the businesses in the world, the New York Stock Exchange may have the most well-known hours. It opens at 9.30 Eastern with the ringing of the bell, and it closes at 4 p.m. with another ringing of the bell. But that could change. The exchange is thinking about going full diner mode in operating 24-7, allowing you to buy and sell stocks at all hours of the day. According to the Financial Times, the New York Stock Exchange's data analytics team

polled market participants about the pros and cons of going 24 hours, and it'll take that feedback into making a decision. Currently, investors can trade equities on the exchange between 930 and 4, and there are some windows pre-open and post-close where you can also place trades. But this is 2024, after all. And, well, something called the computer exists, making these strict. hours seem like something out of the Cretaceous period, or at the very least 1890, a bunch of assets, including cryptocurrencies, U.S. Treasury bonds, and stock futures can be bought and sold at any time.

Toby, good idea, bad idea for the New York Stock Exchange to go 24 hours. I think it's just inevitable idea at this point because, as you said, a lot of trends have been forcing the industry this way. Cryptocurrency is probably the biggest one where that market stays open all the time. And retail traders have become extremely accustomed to having a lot. access to liquidity at all hours of the day. So I do think this is driven by retail investing activity, though, because if you actually look at institutional investors, they're not going to be placing big trades at 4 a.m. in the middle of the night because there's just not enough liquidity

being traded at that point. So this is very much a retail trader spurred kind of trend right here. Yeah, speaking of retail traders, just look at Robin Hood. Robin Hood and its recent earnings report It said that 25% of total trading volume took place outside of traditional market hours. Robin Hood was just one of several retail brokerages that do allow trading in some securities across all hours of the day. And it said investors traded more than $10 billion in volume over the since it launched that. So Robin Hood's seeing a huge, I mean, 25% of its total trading outside of market hours. That's a huge chunk of its business, not in between 930 and 4.

So it obviously sees a huge growth market here. And Rob and its CEO Vlad Tenev said, if you were designing the market from scratch, you would never like today, you would never have it at 930 to 4. You would have an open 24-7, kind of like crypto, which was created in 2008 and 2009, is operating 24-7. Imagine if Elon Musk tweets something on Saturday or Sunday, and you're like, oh, I'm very bearish or bullish on Tesla right now. I want a place to trade and now you can't.

Yeah. And there's certainly interest. beyond just the New York Stock Exchange in this area as well. There's this startup called 24 Exchange backed by Steve Cohen's venture fund, and it's seeking SEC approval to launch the first round-the-clock exchange. So if the New York Stock Exchange doesn't do this, I do think another company will come along. And that's the biggest thing here is that SEC still has to look into these proposals and see if they want to pass them. But people are just saying let the market decide if this is something that they want. We'll see if there is actually a business model. The SEC is not there

to decide whether there is a viable like commercial path forward for these companies. So I do think we're going to see it within the next few years or so, if not at the New York Stock Exchange with someone else. Up next, my favorite segment on the week, Toby's Trends. Own it all. Pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly, Big Board Buckslot machine by Aristocrat Gaming, Yamava Resort and Casino at San Manuel is giving one person a $1.6 million dream package. The biggest prize in Yamava's history. Club Serrano members can earn daily instant prizes and secure a spot in the finale

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businesses. When it comes to your small business insurance, thank you. One size, absolutely does not fit all. Get a quote or find an agent today at thehartford.com Well, if it isn't our old friend Toby's trends, the segment where I tell you about a cool little trend I have my eye on so you can look cool in front of your colleague or your crush. If those two are the same for you, I do wish you the best.

But today's trend is bubble tea or boba tea or the tea that has those slimy balls of tapioca in it that slither up your straw and down your throat. Whatever name you know it by, it's creating billionaires over in China. China's third largest bubble tea chain, Bachai, Baidau, went public today, raising $330 million in the process, good for Hong Kong's biggest listing since November of last year. It's also big enough to give the company's husband and wife founders a combined net worth of around $2.5 billion. And it's far from the only big bubble chain out there.

Another company that opened in 2008 now has 8,000 shops across China that did $787 million in sales last year. Mixu Group, another big bubble tea purveyor, calls itself the world's second largest drink chain behind Starbucks by number of stores. It's got more than 32,000 locations across China and 4,000 locations in 11 other countries. Neil, the Chinese market is full of bubble tea chains that are minting billionaires that we've never even heard of. No, but we're going to hear them soon because the reason they're IPOing they're going public is to raise all this money to plot global expansion. They're setting up locations across Korea, Vietnam, all over East Asia, and now they're definitely going to set their eyes on the U.S. market.

This is such an interesting type of product, type of beverage, because in this mold that Starbucks has been going in, very customizable, very personalized. You can go in and get an infinite number of customizations. You can choose between different types of teas. You can choose between different types of fruit. You can get various bubbles in there. You can get special additions in there. And then also, some chains are.

offering a little alcohol in there. So if you're getting in after 5 p.m., you want to say, okay, I'll have a little fun. But no, it does seem like this is the general trend of you going into this shop and feeling like the world is your oyster. I wonder if Shakespeare coined that. But this whole personalization trend of like, I go into Chipotle, all these, all these things, I can really make this beverage what I want. There's no set thing for me. What's interesting, too, is that buy to buy Dow, which is the company that went public today, they sell a half liter of bubble tea for a little over $2. So it's very much on the cheap side.

The industry average is closer to $5. So it's always been this very cheap product. So that's why even though China has experienced this period of economic slowdown, Bidau's sales have grown more than 56% from 2021 to 2023. So it's kind of bucking the trend there as well. It's interesting to me, too, that bubble tea hasn't been around that long. it's only originated in Taiwan during the 1980s. So it is still relatively like a newish entrance into the drink scene. And you're right. I do think that over in China, massive, massive company

creating billionaires. And I think they're only going to get bigger once they... Yeah, but we'll see because the U.S. really loves its coffee. A new survey just came out yesterday saying that 67% of adults in the U.S. said they had drunk coffee in the past day, which is a more than 20-year high. And back in 2004, it was less than half. And now it's 67%. So it's going up against a lot of competition because in China they don't have this attachment to coffee as much as they do tea. And here we really love our coffee. So I think it'll be interesting to watch what happens in the U.S. market as all of these bubble chain cheese come and compete against the Starbucks and the coffee and the Dunkins of the world. Should we put some balls in tea or in coffee, little tapioca balls in coffee?

Do you like bubble tea, though? I love bubble tea. It's like my guilty pleasure. I don't know. I think it's very fun to eat. Yeah, it adds a little something, something to your drink. Let me know if this experience sounds familiar. You keep seeing thirst traps of Jeremy Allen White on TikTok.

So you finally decide to bite the bullet and subscribe to Hulu so you can watch The Bear. But after you finish the show and start to dream of opening your own restaurant, you slowly forget about that Hulu subscription. Allow me to blow your mind. You can just cancel your subscription after you've watched the one show you like. And more and more people are doing just that. There is a big shift in consumer behavior that shows we're ditching the monogamous relationships cable providers lock you into and embracing the polyamorous life streamers open up.

So-called serial churners, those who subscribe to a platform, then cancel once they've watched a show they like, accounted for about 40% of all new subscriptions and cancellations across the streaming industry last year. That means nearly 30 million people canceled three or more streaming subscriptions in the last two years, but a third, resubscribe within six months. These serial churners are a force to be reckoned with, Neil. They are. This is absolutely crazy. And it's frustrating as frustrating as it is to cancel any other subscription you have. It seems to be relatively simple to do it for a streaming service. So we're seeing very high rates of people canceling and it's only growing. I've definitely talked to friends who say,

yeah, I'm getting Apple for severance and then I'm going to cancel it. I'm going to get Max for a White Lotus and then I'm going to cancel it. And it's very a la carte with the way people are treating their television picks these days. Right. And it's reshaping the entire entertainment industry, too, because traditional media like Paramount, Warner Bros. Discovery, Disney, they're also trying to navigate this new paradigm where they're shifting from the cable bundle, which was intensely profitable, very profitable for these companies, to streaming, which is not very profitable, which the downstream effect is that these companies are cutting investment in new shows, a number of scripted shows in the U.S. suffered its deepest drop in 2023 in the last 15 years, because, again, if you're having a

so much churn and you're having such uneven revenues. It's very hard to invest into new shows. But paradoxically, that's exactly what you need in order to keep customers around because you do need this almost steady stream of coming soon on the platform in order to keep people locked in because you're right. If you subscribe for severance and then severance runs out and then there's nothing new on the horizon, you're probably going to cancel this subscription. So it's this weird paradoxical relationship. Yeah, I think one reason why people are canceling is the lack of robust content on all of these platforms. And then another one is just the price. I mean, there's been, what is it called? Streamflation. I don't think Shakespeare coined that one either,

but prices have gone up across the board. Disney Plus and Hulu both raised the price of their commercial free tiers by $3 a month last year. Netflix, the standard plan is now over $15 a month. And then the average American with a streaming subscription pays an average of $61 a month for four services, which is an increase from $48 a year ago. I think if prices weren't as skyrocketing as they were, we wouldn't lead to see the mass cancellations that we are now. So price has a lot to do with it. And streamers are trying to figure out different ways

to keep subscribers on their platforms from canceling. You know what makes the most sense, by the way, to keep subscribers on, is to bundle multiple platforms together. So you have new content from a variety of sources, which is literally just cable once again. We've joked about this a lot. But we are seeing this.

like Disney's bundling Disney Plus, Hulu ESPN. They also have this Fox Sports Warner Bros. Sports streaming service that are scheduled on. So I think we're going to reinvent cable this time in 10 years. Well, that is a good point because Netflix, as we talked about, has the most robust type of content on its platform from reality TV show to more highly produced dramas. And its rates of cancellation are much lower than anybody else in the industry. So maybe that's a model that others are going to replicate if they can't on their own

platforms by bundling with others as well. Okay, a survey of the world's best airports was just released and the top spot for baggage delivery went to Kansai International Airport outside of Osaka, Japan. You're probably thinking, okay, I guess that's somewhat interesting, Neil, but wait till you hear why it won the award. Since its opening three decades ago in 1994, Kansai has never lost a single piece of luggage, according to Niki. Not one. Not a single piece of luggage. And this is a super busy airport. It receives approximately 30 million passengers every year. So what's the secret sauce? Well, anyone who's been to Japan knows they put a premium on customer service. But Kansai goes above and beyond with carefully constructed baggage

handling protocols that prioritize traceability. And from its inception, it designed workspaces that optimize ground services. And this perfect luggage record isn't the only remarkable thing about Kansai. Search it on Google images and you'll see that it sits on a floating eye. island in the middle of Osaka Bay. In fact, it is considered to be the world's first airport built entirely on water. Toby, they say that Joe DiMaggio's 56 game hit streak is the only record that will never be broken. I'd also suggest 30 years without losing a single piece of luggage should be in the same conversation. American consumers literally cannot wrap their mind around never losing a piece of luggage. We've all had some sort of luggage horror story. But you're right,

Kansai is just incredibly impressive no matter which stat you look like. That artificial Landstat is crazy. The island is two and a half miles long, one and a half miles away. It took 21 million cubic meters of Earth that was extracted from three mountains nearby to build the island, more than 10 million working hours were dedicated to construction. And you're right, that's the reason why they've been able to design these perfect systems because they got to build it from scratch. There was no existing geographical formations or restrictions that they had to build around. They literally created this from nothing with the express purpose of having the best baggage system in mind and they achieved it.

There is just one problem, though. If you build something in the middle of the ocean, which they did, well, it might sink. And this airport is sinking much faster than they expected. So by 2018, the airport had sunk 38 feet since its construction, which is 25% more than experts had predicted. And some are saying in 2056, this thing might be underwater. So I don't know how much. That's maybe when the streak will run out.

Right. when it's just underwater. The one interesting thing that I do want to put an asterisk on this streak because Kansai Airport does have this crazy lore. Remember the story of the Nissan exec, Carlos Gosen, who escaped from this country? This was a crazy country. He was arrested in Japan in 2018 on charges of breach of trust, misusing company assets, other security laws violations.

But then in 2019, he jumped bail in Japan in this insane escape where he smugged himself out of the country by hiding in a box. that made it aboard a private flight out of Kansai Airport. So maybe the only luggage it ever lost was a Nissan exec, Carlos Gosen, in this daring escape engineered at Kansai Airport. Finally, let's just go through the ranking. That is a crazy story.

Finally, let's just go through the rankings of what the world's best airports are overall. Doha, number one, Changi in Sangerport, number two. Number three, Newark. Just kidding. In Jian, in Seoul, South Korea was that. And then the two airports in Tokyo closed out four and five, Haneda and Narita.

A U.S. airport did not make the top 20. Are you surprised? No, I'm not surprised, literally at all, especially when I read about Kansai and how buttoned up their services. All right, that's a good note to end the show on. Thanks so much for listening and have a wonderful Tuesday. Sixers fans, you can sound off in the YouTube comments. I feel your pain. You can also send an email about the Sixers or anything else to our inbox Morning Brew Daily at

Morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Yuchinawa Ogu is our technical director. Billy Minino is on audio. Hair and makeup doesn't work before the bell rings. 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. Spring is the season everyone refreshes everything except their blinds.

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