Morning Brew Daily - US Dollar Falls to 3-Year Low & Prediction Markets Take on the Next Pope

Episode Date: April 22, 2025

Episode 566: Neal and Toby chat about why the US dollar continues to stumble against world currencies and how gold is having another moment. Then, the world mourns over the passing of Pope Francis and, of course, prediction markets are taking bets on who the next pope will be. Plus, Chipotle plans to open up its first restaurant in Mexico, something other chains have attempted to do but failed. Can Chipotle pull it off? Meanwhile, Toby dives into the Dubai Chocolate trend taking over the world.  Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Visit https://planetoat.com/ to learn more! Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Hue new? Scientists claim to have found colour no one has seen before | Science | The Guardian 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 Howell. Today, Chipotle will open its first locations in Mexico. What could go wrong? Then in the wake of the Pope's death,

people are taking to prediction markets to bet on the outcome of the upcoming conclave. It's Tuesday, April 22nd. Let's ride. Good morning and happy Earth Day, which takes place every April 22nd to raise awareness around environmental protection. To me, it's an opportunity to reflect on just how many things had to go

right for us to be living here. The Earth happens to be located in a remote section of the Milky Way galaxy, which means fewer threats, like a huge star devouring us. As for the star nearby, the sun, we have a key magnetic field that deflects its deadly flares. We have a moon that stabilizes the climate, a bodyguard in Jupiter that redirects asteroids and comets from smashing into us, and an active plate tectonic system that produces volcanoes whose eruptions may have led to the first instances of life. And if all that doesn't make us the best planet around, we also have unlimited breadsticks. Also, just for some more perspective on this Tuesday morning, if Earth's four and a half billion year history was squeezed into a 24 hour clock, humans, you, me, Neil, your neighbor, Paul, everyone you ever know or have known showed up at 1159, 59 p.m. So remember, we're guests who just got here.

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Learn more at Windows.com slash student offer. While supplies last, ends June 30th, terms at AKA.m.m.S. college PC. Investors came back to work after the three-day Easter weekend and clearly didn't find it relaxing. The sell America trade that has been stalking Wall Street since President Trump announced sweeping tariffs on April 2nd was back in full force. The S&P 500 and NASDAQ dropped more than 2%. And the Dow lost nearly 1,000 points.

That index is on pace for its worst April since the Great Depression. More significantly, the dollar continued its free fall down to a three-year low against the United States. the euro, even while virtually every other major currency was higher, bonds also sold off, continuing this unusual scenario that has spooked investors for the past couple of weeks. Remember, when times get hairy, investors have flocked to treasuries and the dollar because America has been the most dependable partner. The opposite is happening. Now, meanwhile, gold rocketed higher to another record, topping $3,500 an ounce for the first time ever. analysts say that what we're seeing here, equities, bonds, and the dollar all falling in tandem

is investors fleeing American assets due to uncertainty around the trade war and President Trump's suggestions at firing Fed Chair Jerome Powell, which would abolish the Fed's independence that investors considered a bedrock of the global financial system. Trump did nothing to alleviate those concerns yesterday, ramping up his criticism of Powell in a post on true social. He called the Fed Chair a major loser and demanded Powell lower interest rates. rates immediately, which contributed to the market sell-off. Toby, sinking dollar, sinking bonds, sinking stocks. It's been a disturbing trend to investors and a sign they are increasingly

losing faith in America as a safe haven. Yeah, not a fun combo whatsoever. So what does a weaker dollar actually mean? There are some pros if you're sitting as someone who thinks that U.S. exports should get cheaper. American-made goods cost less overseas, which can technically boost sales for U.S. companies, help domestic factories, farmers, manufacturers, you name it. So it could support U.S. manufacturing, which is a stated goal of this administration. Companies may start making more things domestically if foreign goods aren't as cheap comparatively. That is a big argument for driving the U.S. dollar down. Some other less prominent arguments are technically tourism to the U.S. might go up, although we've seen the opposite happen just because of the general

attitude that we've adopted towards other countries. And then finally can help pay down foreign debt if the U.S. has debt in dollars, which it does. Paying it off is cheaper relative to other currencies. But there are also a lot of cons to a weaker dollar. One, imports get more expensive. Stuff made abroad, electronics, clothes, cars, food gets pricer. Remember, we import a lot more than we export. That's the whole basis of this trade war we're conducting. So that can fuel inflation. Then also traveling abroad gets more expensive now. The opposite is true. Remember how everyone was going to Japan earlier in the year because there was a weaker yen. No more Japan trips for you as the dollar gets cheaper. And then also, it just shakes investor confidence. As you said, as this sell America trade keeps percolating through

the markets, you're just less confident in the U.S. economy. So that manifests as more volatility and less foreign investment. So when you hear the dollar is weaker, the dollar just hit a three-year low. Hopefully this provides a little more context around what that actually means. And I also want to turn to the treasury yields as well, not just the dollar because those yields are going off. People are selling bonds. This month has been a historic moment in the bond market. I wouldn't be surprised if Michael Lewis would write a book about it one day. We've seen the biggest weekly surge in the yield on 10-year treasuries in more than two decades. 30-year yields had their largest weekly increase since 1987, four decades, four-neutral.

foreign investors have plowed money into the U.S. Treasury market because it is the bedrock of global finance and it has led to this premium that Americans get on interest rates are 30-year. I know it doesn't feel like it now, but our interest rates for buying mortgages is, or forgetting mortgages is lower. Interest rates across the economy are suppressed than they would have had foreign investors not plowed money, plowed trillions of dollars into our treasury market, it allows the government to borrow more cheaply. And now that yields are rising, you know, all these borrowing costs across the economy are going up. And it's downright spooking investors that perhaps foreign investors are, you know,

lowering their demand or interest in U.S. treasuries. What ties the bow on what we've been talking about together is gold this year. Because, I mean, cold is ripping. It is behaving like the Magnificent Seven. So far, Gold has outperform the stock market by 42 and a half percent so far this year. Gold has always been that safe haven asset. But, like, Bitcoin has come along and tried to say, hey, we can be a safe haven't asset. But that usually kind of correlates more closely with the actual stock market, specifically NASDAQ.

So gold, you know, the oldest metal, it is a store of value right now. And it's massively outperforming all these other asset classes that we've been talking about. Here's a crazy stack. Gold could not move from where it is. now in 2025, and it would have its best year since 1980. So just truly a crazy run for gold. Moving on, tributes poured in from across the globe yesterday after the Vatican announced that Pope Francis, the leader of more than one billion Catholics, died at age 88. In his 12 years as Pope, Francis left behind a historic legacy of reform, such as clamping down on the church's

financial misdeeds, embracing the global poor and marginalized, and addressing modern threats like climate change and artificial intelligence. But even before France's funeral plans were made, a big question came up, who will be the next pope? No one will know until a conclave of cardinals chooses the next Catholic leader in one of the most unique and secretive traditions

on planet earth, but that's not stopping people from betting on it. Prediction markets, which surged in popularity during the last presidential election, have once again been thrust into the spotlight over the outcome of a new election. On Polly Market, the prompt, who will be the next Pope has drawn more than $3.5 million in wagers, but that's not all.

People are betting on which continent the new Pope will be from, or what name he will choose, or whether he'll be selected by May. Overall, the papal market has become one of the biggest active pools on the platform. Many have criticized this sort of papal wagering as distasteful and perverse, especially when Pope Francis was still alive. But Toby, if you go back in history, there is a long tradition of people wagering on popes. Yeah, this is certainly not a new thing. The technology is new, but the fact that there was a gambling culture that existed around this is not new.

There was a big gambling culture in Renaissance Rome. There were these things called Sensalis, which are essentially your bookie who, you know, you send Vemos too on the weekend. They took bets on everything from, you know, the identities of new Cardinals to who actually would be become a Pope. There was also newspapers and newsletters that would spring up around conclaves. People kind of liken it to the comment section on the Polymarket right now. So it shouldn't shock us that there has. has been this kind of long tradition of gambling around it. And obviously, the spread of information at that time did impact the process of the new Pope.

I wonder if we'll see a similar thing to a day. There was very egregious example back in 1555 when some rumor mongers spread this idea that one of the top candidates had died that lowered that candidate's chances in wagering, which probably led to a nice little profit on the side. So you can draw parallels to modern day markets where, you know, some rumors are going to fly. Polymarket odds might change very quickly based on those rumors, and someone might stand to make a profit. So nothing is new under the sun. We've been seeing this all the way back in the 1500s.

Now we just have Polymarket. We saw it back in the 1500s, but in 1591, the hammer came down, actually, from Pope Gregory the 14th. Yes, I'm reading these Roman numerals correctly. So he issued this bull called Kogit Knaas that said, you can't bet on anything that has to do with Pope's else will excommunicate you, which was, you know, the worst punishment at the time. So for centuries, gambling on this did go down in the early 20th century. The church lifted its ban on betting. And

then over the 70s, 80s, 90s, we saw gambling, you know, start to pick up again on Pope's Paddy Power. The last time this happened in 2013, Patty Power, which is a UK betting platform, you know, gained a lot of headlines for allowing people to bet on this outcome, which is very interesting because, you know, unlike the NFL draft or these other things that people bet on, it is so secretive. You know, and I think a lot of people are probably going to watch the movie Conclave that came out last year to learn more about this process. But basically, no information escapes those walls.

So we'll see how the odds change in what information they're trading on. Yeah, and by the way, if you think you're going to predict the next Pope, you're probably not because Pope Francis started at 55 to 1 odds and never had better than 32 to 1 odds. So if you think you're going to nail the next papacy, you probably are not. Chipotle is opening a store where no one will mispronounce their name in the very country that inspired its cuisine, Mexico. The burrito chain is partnering with a restaurant operator who has experience running brands like Domino's and Starbucks to begin opening outposts in Mexico by 2026. The hope is that the familiar ingredients will make it a success south of the border as the company eyes grows outside of the U.S. But just because Chipotle's carnitas, guac, and other offerings take their cues from Mexican dishes, it doesn't mean that Mexicans will actually.

actually turn out. No one knows that better than another Mexican-inspired chain Taco Bell. It tried to enter the market back in 1992, but was essentially laughed at for its inauthentic naming conventions like Tacostadas, especially when it was juxtaposed next to mom and pop talkarias. It packed up its cheesy gordita crunches and shut down every location just two years later. It's like bringing ice to the Arctic historian Carlos Montesivas, told the AP at the time. But sometimes the U.Sified versions of traditional food and beverage do find success. Starbucks entered the Italian market in 2017 by leading into humility and a proprietary coffee blend tailor made for Italian taste, and now it has 30 stores in operation.

So, Neil, on a scale of Taco Bell to Starbucks, where do we think Chipotle is going to land? It could go either way. It totally depends on how they do that. And you can see that by what Taco Bell did because it tried to go into the Mexican market twice, adopting two very different approaches. In the early 90s, when it tried to go into Mexico the first time, it tried to present itself as this authentic taqueria. It was in, they opened in a taco stand, and they tried to cater their menu and ingredients to fit into the local mosaic. That didn't work. So then they came back in the 2000s and said, you know what, you're right. We're an American chain that is inspired by Mexican cuisine, but we're not really, you know,

trying to be a part of your milieu. So they took out an ad in a newspaper saying one look alone is enough to tell that Taco Bell is not a taqueria. It is a new fast food alternative that does not pretend to be Mexican food. Well, guess what? That didn't work as well. So I'm sure Chipotle is studying this a lot, you know, more closely than we are to see what is the right tactic to get people to embrace Chipole. are they trying to become an, are they trying to present themselves as this authentic Mexican-inspired restaurant that could fit into the local cuisine? Or are they just going to say, you know what,

we're Chipotle. We're from, you know, Boulder, Colorado. And, you know, you like other American goods. So maybe you'll like this one as well. And then maybe it won't be something as sexy as their brand positioning that will make or break its fortunes in Mexico. Maybe it's just the cost of importing food to Mexico because it makes sense that to open a chain in Mexico because a lot of their avocados come from south of the border. Now they won't have to pay those import fees. So technically, they should be able to keep their menu prices a little bit lower than you see. I mean, they're not going to be $16, $17, $18 barreda bowls. I'm loading up in New York City because I'm getting extra guac. So potentially they will be able to fit in more with their supply chain and

their prices to say that we're not like this Americanized chain with Americanized prices. Or maybe they won't be able to pull that off. So it could just be pricing power that ends up, you know, dictating the fortunes of Chipotle in Mexico. If you were Chipotle execs, would you go in and try to say, like, we're one of you? Or would you adopt the second Taco Bell approach and just be like, yeah, we have burrito bowls. You probably have never heard of that before because we invented it in Colorado. But, you know, that is what we do.

And, you know, I think you're going to like it. I think just lean into the quality aspect. Don't try to be anything you're not to say, hey, we make quality ingredients right there in front of you. Come try it if you want it. Up next, we got Toby's Trends. Yamava Resort and Casino at San Manuel is California's number one entertainment destination

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And it's also the latest Toby's trend that I want to talk about today. Dubai chocolate is a sweet treat that consists of a milk chocolate bar stuffed with a creamy green pistachial. filling and shredded pastry known as Katafi or Kanaffei. First made by an Emirati chocolate tier fix. It initially debuted to modest success back in 2021, but that modest success gradually turned into smashing success due to a single TikTok. A video posted in December of 2023 features a girl just eating Dubai chocolate in her car. The ASMR vibes combined with the clearly delicious looking treat has since racked up

over 120 million views. and it has put some serious strain on its key ingredient. One nut trader told the Financial Times, the pistachio world is basically tapped out at the moment, with the craze pushing prices to over $10 a pound, a 34% rise in just a year. And one chocolate shop in the UK sells Dubai chocolate at more than double the price of its other bars.

It does look like the only thing that can slow Dubai chocolate's role now is shortages. The U.S. pistachio industry is coming off a poor harvest, and now it's got to contend with half of TikTok clamoring for this delicious new treat, Neil. This is a very cool example of guerrilla marketing, too, because the bars were first invented in 2021 by this British Egyptian woman living in Dubai, Sarah Hamuda, and she made these bars while she was pregnant because she wanted to kind of indulge herself.

And she sent all these bars to a bunch of local influencers and said, hey, do you want to try my chocolate? This is, you know, a tactic that a lot of people do when they're creating a product. they're going to send it to influencers and see whether they make a video about it that happens to go viral. And, you know, one caught on. He racked up so many millions of views and led to a global craze. That's, you know, I've never had this, but you know, you can't get it anywhere because it sells out in multiple hours when they, when these stores have it in stock. It's leading to a global shortage of pistachio. So an absolute, an absolute sensation.

One interesting aspect of this is the U.S. is actually pistachios, the world leader in exporting pistachio. That's one thing we do export. And when I say that the U.S. crop, the most recent U.S. crop had a shortage. It was actually because they had a higher quality than usual crop, leaving fewer of the cheaper, you know, shell-free kernels that usually are used as ingredients in stuff like baking or chocolate. So it was almost too good of a harvest season for the United States. And also, it's coming off of a year where there was a supply glut in a 2020. So suddenly there was like this global supply exceeding demand back in 2020. So maybe that coincided with the fact that a lot of chocolatiers were experimenting around with this ingredient.

And so it's been like the worst of both worlds where they're like, all right, there's going to be a lot of pistachios because we're in the supply glut environment. Now there's the supply shortage and prices are kind of skyrocketing and leading to, you know, Dubai chocolate being very expensive as well. Well, I need to get my hands on this because it looks so good. Delicious. Okay, let's sprint to the finish with some final headlines. In its monumental battle against the Trump administration, Harvard has turned the volume up to 11, filing a federal lawsuit yesterday against the government for illegally freezing $2.2 billion in funding and threatening its academic independence as part of an anti-Semitism crackdown at colleges. The country's wealthiest college accused the government of violating the First Amendment by attempting to use financial leverage to, quote, gain control of academic decision-making. at Harvard. Alan Garber, the university's president, said the consequences of the government's overreach will be severe and long-lasting, saying that funding cuts imperil research into things like child cancer and infectious disease outbreaks. The White House replied to the suit by saying taxpayer funds are a privilege, and Harvard fails to meet the basic conditions required to access

that privilege. The gloves are officially off. Yeah, after Harvard took this stand and filed this law student. Over 150 university leaders from other U.S. universities signed this joint statement where they were pushing back against what they see as government overreach on college campuses. They specifically called out the use of federal funding as this sort of pressure lever to get these universities to do what the administration wants. So it's big names, MIT, Princeton, Yale, Brown, Tufts, Duke, you name it. They were among the signers. So you're seeing higher ed kind of rally behind Harvard here as they fight what they see as overreach from this administration. For our next headline, Airbnb users rejoice.

The short-term rental company is finally being transparent about the fees it charges. You know the feeling. You're cruising around on Airbnb search function. Find the perfect little cottage upstate for a weekend getaway for the right price. And then you click it and boom, hit in the face by taxes and fees galore, pushing it right out of your price range. It was always a huge pain point for users, but that changed as of Monday with the platform now displaying the total price, fees and all right from the outset and by default. This change aligns with the new US FTC rule, which requires rental platforms and hotel to disclose all fees transparently before purchase

to prevent hidden junk fees. Neil, feels like a big win for consumers. It is. And they can thank the FTC for that for instituting this rule. What I'm going to be looking for is whether this leads to any pricing changes or any pricing decrease among hosts because, you know, the pricing will be far more transparent as you're scanning, and there may be some indications that hosts will lower their prices because in 2023, Airbnb introduced an optional toggle button that you could go, you could show it, show the prices with fees or without fees. And Airbnb in a blog post last year said that after they introduced this toggle button, hosts behind nearly 300,000 listings removed or lowered their cleaning fees in the months following its introduction. So I wonder how

this will affect pricing on Airbnb. And you're not the only one using ChatGBTGPT to do your work for you. The United Arab Emirates announced that it will begin using artificial intelligence to write new laws and review existing ones in the world's most ambitious plan yet to fuse generative AI and government. The goal, according to UAE leaders, is to make the legislative process more responsive, agile, and efficient. Sheik Mohammed bin Rashid al-Makhtoum said, the new system will allow us to track the daily impact of laws on our people and economy using large-scale data, and it will regularly suggest updates to our legislation. The government expects AI to speed up lawmaking by 70%. The UAE has been pouring billions into AI development in order

to become a global leader in the technology, and this move shows how it's diving in much deeper than other countries are comfortable with. Yeah, they already created this dedicated investment vehicle to kind of back AI-related projects. It's called MGX, and they have an AI-O-I-O-O-Server on its own board, kind of figuring out how to deploy money into AI company. So it's AI all the way down when you look at UAE. Also, the tongue-twister of UAE-A-I has been something that we've been grappling with over the past few hours.

So, yes, clearly the most bold plan yet. They do think it just speeds everything up, how it's going to be, you know, and what pitfalls it could face is something that they're willing to try. Again, more autocratic-leaning states have the ability to work fast and break things when it comes to experimenting with government, less so than a democracy like the United States. So they are going off kind of like the AI deep end here and seeing what is going to be the result of giving AI the reins of laws that govern their country. Finally, researchers at UC Berkeley have figured out how to hijack your eyeballs, but they're

not forcing teens to stop rolling their eyes. Instead, they figured out how to show people a brand new, never before seen color called OLO. Now, of course, it's impossible to imagine the color you've never seen before. Seriously, try it. But the lucky few who have seen Olo describe it as a blue-green of unprecedented saturation. The new technique researchers use is called OZ and uses lasers to zero in on specific cones in your eyes in isolation to unlock hues beyond our natural comprehension. The cones in question are those most sensitive to green light, hence the name Oz because Emerald City, you get it. Beyond unlocking new color magic, the controlling of the retina on such a granular level is a totally new way to study vision. For example, you could play around

with a technique to try and bring back full color vision to colorblind people by compensating for any missing or defective light receptors. But Neil, I'm personally excited to walk into a hair salon and ask them to hook me up with some Olo-colored locks for this summer. Well, anything would be better than what you usually do in the summer. I don't know if I'm sold on this new color. I think I'm more with John Barber from the University of London. He's a vision

scientist. He said, it is not a new color. It's just a more saturated green and called the work limited values. So this experiment has had some pushback, but I am curious to see the new color for myself. The problem is only five people

in the entire world, entire history of the world has seen this new color. What is actually a new color or just a more saturated green is up for debate. Yeah, if you want to weigh in on this debate as well, obviously you can't see the actual color, but we link the article in the show description. We also flash it on our YouTube. It does look like kind of a turquoise vibe, but I think it's not it. That's clearly not it.

It has to be, you know, beamed in your eye via laser. So I am bullish on Olo, and I'm going to get my hair colored Olo if it's the last thing I do. I think we have enough colors. Too many colors. All right, let's wrap it up there. Thanks so much for starting your morning with us and have a wonderful Tuesday. For any questions, comments, or feedback, send an email to Morning Brew Daily at Morningbrew.com.

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Devin Emery is our president and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow.