Morning Brew Daily - US Loses Top Credit Rating & Crypto Wealthy Being Targeted?

Episode Date: May 19, 2025

Episode 585: Neal and Toby dive into the latest report from Moody’s that downgraded the US credit rating due to increasing debt and budget deficits. Then, a wave of attacks on the crypto-wealthy is sweeping Europe and parts of the US that has forced individuals to hire bodyguards. Also, New Jersey has seen an increasing share of transit fiascos in land, sea, and air recently, but seems like some headway is made with the locomotive engineers’ union agreeing to end the strike. Meanwhile, big cities got bigger in 2024 and the WNBA season is back with a bang. Finally, what you need to know in the week ahead.  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. Listen to Morning Brew Daily Here: https://www.swap.fm/l/mbd-note  Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Joe Biden Cancer Diagnosis 02:40 - Moody’s Downgrades US Credit Rating  06:40 - Crypto Criminals  10:20 - NJ Transit Issues  15:20- Winners of the Weekend  21:10 - Week Ahead  Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.com slash U.S. slash brew AI. That's pwc.com slash us slash brew AI. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. Today, the U.S. has lost its last AAA credit rating.

Time to panic or shrug. Then a wave of brazen kidnappings is rocking the crypto industry. It's Monday, May 19th. Let's ride. Welcome back to the week. Sad news has come in about former President Biden. who was diagnosed with an aggressive form of prostate cancer, his office said yesterday.

The 82-year-old's diagnosis is serious with the cancer spreading to his bones and characterized by a Gleason score of 9, which is how the most aggressive prostate cancers look under a microscope. The good news is that managing prostate cancer has come a long way in recent years, allowing patients to live years, not just months, with current treatments. And Biden's office said his cancer appears to be hormone sensitive, which allows for effective management. Following the news, lawmakers across the spectrum, including President Trump, former President Obama, and other Democratic and Republican leaders expressed their support for Biden on social media. Yeah, following the diagnosis, former President Obama said,

nobody has done more to find breakthrough treatments for cancer in all its forms than Joe. And what he's referring to there is the Cancer Moonshot program that the White House announced back in 2016 with the goal of eliminating cancer as we know it. It eventually became known as the Bo Biden Cancer Moonshot Initiative, named after Biden's son who died from brain cancer in 2015. And it has done a lot since then. According to the National Cancer Institute, the program has funded more than 250 research projects

and over 70 programs. And last year, after Biden kind of stepped down from running for president, one of the last things he did in office was award $150 million aimed at finding new methods of tumor removal. So battling cancer is clearly a personal quest for Biden and one that he is now confronting. in his own life as well.

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Using the code Fresh Start. Refresh your wireless with Visible. Tap the banner to switch today. Terms apply, limited time offer subject to change. See Visible.com for plan features and network. management details. Moody's got in one of its moods Friday evening downgrading the U.S. credit rating from pristine AAA. It's a symbolic move because that means the U.S. no longer has a AAA credit rating

from any of the three large rating agencies. S&P Global Ratings downgraded it in 2011, followed by Fitch in 2023. To justify its decision, Moody said the U.S. was being irresponsible with its bank account, running up large fiscal deficits and paying more and more an interest to service its debt. It blamed the past few administrations and Congress for not making the hard choices necessary to bring the government's budget more into balance. Whether the timing was a coincidence or not, Moody's downgrade comes as Republicans are pushing forward what President Trump calls a big, beautiful bill, a giant tax and spending package that is estimated to increase deficits by about $3 trillion over the next decade by extending his tax cuts from 2017.

It all amounts to a big reputational blow for the world's largest economy, but what it means in practice or for your brokerage account remains unclear since markets haven't been open since the announcement. We'll learn a lot more today, and early indications are it's not going to be a great. Bonds are selling off sending the 30-year yields higher than 5%. And stocks in the dollar are also falling. That's precisely the sell America trade that have been spooking investors in recent weeks. Yeah, this was both a surprise, but then not really at all. It was just surprised because Moody's had held out for so long and nothing super major had changed, but it's also not a surprise because you're right. S&P and Fitches were on this AA1 bandwagon long before now.

And when you dig into the numbers, it's not super pretty. The U.S. government paid over $1.1 trillion in interest on its debt last year. That's bigger than the Pentagon's entire budget. And Moody's is concerned that going forward the U.S. won't be able to generate enough tax revenue to actually cover the interest on his debt, which could lead to the nasty cycle of having to borrow more money just to pay interest on the money it's already borrowed. So again, and then when you throw in Trump's big, beautiful bill, it's not a massive surprise that this happened. Only the timing without there being an inciting event is the only thing that left some people scratching their head. So what was the response to this? Well, Treasury Secretary Scott Bassett was asked on the Sunday shows about it

yesterday morning. He kind of dismissed it. He said Moody's is a lagging indicator. That's what everyone thinks of credit agencies. But just a few months ago, he was in front of Congress, and he actually told lawmakers that he was very worried about debt and deficits. He said the debt numbers are indeed scary, and a crisis would involve a sudden stop in the economy as credit would disappear. I'm committed to that not happening. So with one side, he's saying this is not a big deal.

With the other, he's saying, actually, Moody's is touching on a very important point, which is that our debt situation has gone completely out of control. And I think every lawmaker would agree with that. They just don't do anything to bring it more into balance. And we just keep adding to the deficit, adding to the debt and creating interest payments that we can't pay. Or we can pay, but they're ballooning. Yeah, they are ballooning. And it also has just reinforced fears about the U.S. bond market. The big fear here is will investors, both, you know, sovereign investors, but also institutional investors, are they going to start swapping treasuries for other safe haven assets, which we've already seen happen a little bit?

we're already seeing yields start to rise in response to the downgrade. I mean, you mentioned that that 5% yield number, which we haven't crossed since, actually, April 9th, when Trump's Liberation Day tariffs kind of started filtering through the economy. So it's definitely one of those things we're like, oh, no, like, will investors just start ignoring U.S. bonds? If you go back in history, that hasn't really been the case, because actually foreign investors have piled into even more U.S. debt since Fitzfirst downgraded the U.S. back in

2011, so maybe it's not the big alarm bells that people are seeing. That being said, though, we did see yields rise overnight. So maybe there is something more to this particular downgrade. A kidnapping attempt in broad daylight has gripped Paris and drawn new attention to a disturbing trend sweeping Europe, crypto millionaires being targeted by criminals. The inciting incident took place back on May 13th, where three hooded men were caught on camera, jumping out of a white van in an upscale neighborhood of Paris and trying to snatch the daughter of a prominent crypto millionaire in broad daylight. There's been a recent search in similar instances, including two that have involved fingers of loved ones being chopped off and sent to crypto millionaires

to demand a payment. Obviously, the attacks have shaken the industry to its core, which semi-ironically has resulted in calls from crypto magnates for increased government intervention, not something you usually hear from fans of decentralization. Concerns for, physical safety have also ramped up in the wake of a recent Coinbase breach, which allowed hackers access to customer data, putting even more crypto-rich individuals at risk of real-life threats. Neil, some of the details from these abduction scene pulled right out of a movie, complete with ransom notes and copycat attacks, which has led law enforcement to believe that

organized crime has gotten involved. So a very scary time to be a crypto-rich individual. Yeah, especially after this Coinbase hack. The thing about crypto that people like about it, the speed and anonymity also makes it very much a target for criminals because unlike an institutional traditional financial finance bank account, you can't freeze these assets. So if I were a criminal and I go up to you and I kidnap you and I say, hey, give me your private key so I can access your crypto wallet with all of that money and you give it to me then that is going to me instantaneously and it's going to be extremely hard to recover, which is why this. This industry has been such a increasing target of criminals. Prices of crypto is also going up, but Bitcoin is nearing another record high. It's up 50% in the past year.

And anytime prices go up in a particular sector, you see increased criminal activity, increase heist because it's just a bigger profit opportunity. And then also, ironically, the industry have obviously known about crime for a long time. So they've put a ton of effort into protecting their online systems, making it less vulnerable to hackers trying to break in, steal secret codes. But that has conversely left them more exposed to physical attacks, because if you can't get in online, that means let's go kidnap them in real life. So it's almost been this perverse incentive that have caused criminals to start targeting people,

IRL. And the Parisian police are saying that we do think that word has gotten out amongst organized criminals because we've seen just a string of attacks that are very similar in nature. and some experts are saying there's this mistaken belief that crypto transfers are just completely untraceable. That's not necessarily true. And so I think criminals might start to figure out that wait. This is not as anonymous as we initially thought. These attacks may go down. But it's clearly something that France and Paris is incentivized to figure out too, because you want to attract these sort of individuals. You want to attract these wealthy companies as well to your country.

And if you are having people being captured in broad daylight, that's not going to happen. If you're in the personal security or bodyguard business, though, time has never been better. This is a crazy stack. Coinbase spent $6.2 million in personal security costs for its CEO Brian Armstrong, which is more than JP Morgan, Goldman Sachs, and Nvidia combined, which shows just how, you know, prime targets major crypto leaders are because of just the nature of the crypto industry and how easily it is to transfer money anonymously. New Jersey has gone from one hellish transportation headache to another, leaving the Garden State fully stuck in the mud. Trains weren't running over the weekend because of New Jersey transit engineer strikes. Plains are delayed or grounded because of air traffic control issues.

Even cars are having a rough time after a stretch of highway was closed due to sinkholes. But yesterday provided some relief after the brotherhood of locomotive engineers and trainmen said it would call off their strike, and New Jersey transit trains would begin running a full schedule again. on Tuesday morning after a tentative deal was reached. It ends a disruptive period for the nation's third largest transit system and the one million weekly passengers it ferries around the tri-state area. The union had said its members had been earning an average salary of $113,000 a year, about $10 less per hour than workers employed by LIRR and Metro North,

so we're looking for an agreement that would boost their average salary to $170,000 a year. The exact terms of the deal, which still has to be ratified, were not immediately disclosed. And, Neil, despite the strikes being averted, it still turned life upside down for hundreds of thousands of commuters. Plus, when you zoom out to the other transportation issues the state has been having, New Jersey has basically been turned into an 8,700-square-mile rest-stop, as the New York Times described it. Well, there is a bunch of rest stops all along the term pike, which I frequent and are great. You're right. So MJ Transit is going to be back up and running on Tuesday, which is good news for all the hundreds of thousands of people who commute in.

But the problems plaguing that particular service don't seem like they're going away. Last year, there was what they call it just like a hellish summer because there were so many delays and suspensions that at one point the governor had to say, okay, everyone gets to ride for free for one week because we've been so bad. we've provided such a bad service for you this entire summer. And he also had to impose a 2.5% surcharge. This is the governor, impose a 2.5% surcharge on New Jersey's existing 9% corporate tax rate. Now has the highest corporate tax rate in the entire country. That is not a good sign for business or a way to promote business as New Jersey loses jobs and businesses to southern states that have a lower tax rate.

So yes, it's been a bad few months. and a few years for New Jersey transportation. It's a state that really prides itself on just being always on the move. Yeah, and it was not only bad months and years, but also just a bad last three or four days because, I mean, Uber prices just went nuclear because there was just the only option to getting into work for a lot of people was renting a car service. And it was also a tough time for banks and other big companies that were trying to, you know, wrangle their people back into the office.

This put a damper on that because no one could get into work. So then some people who had been forced back in the office were saying, wait, I got a taste of this remote life. Again, I had this excuse that wouldn't let me actually commute into the office. And now it seems like a pretty good thing. So that was a setback for a lot of big banks as well. Some bankers told stories about how they were just leaving their family in New Jersey behind and staying over on their friend's couch in Brooklyn because they didn't want to deal with commuting over the next few days. So just an enormous amount of headaches because this transit system serves so many millions.

hundreds of thousands of people per day. Up next, let's talk about our winners of the weekend. Yamava Resort and Casino at 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,

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Thank you. One size, absolutely does not fit all. Get a quote or find an agent today at the Hartford. Let's hit our winners of the weekend where Toby and I picked two things that actually followed through on their spring cleaning plans. My winner is large American cities because after a pandemic-induced slump, they are growing at the fastest pace in a generation. According to new census data, 94% of the largest cities in the country welcomed more people from July 2023 to July 2024, amounting to the largest yearly increase in almost a quarter century. Cities everywhere on the map got bigger from the behemist New York, Houston, and L.A.

to post-industrial metros like Philly, Detroit, and Newark. Two cities, Fort Worth, Texas, and Jacksonville, Florida, crossed the one million population mark for the first time, which speaks to the continued boom of the Sun Belt and those two states in particular. Texas and Florida are home to five of the 15 major U.S. cities with the most overall population growth between 2023 and 24. It's not that everyone who fled to the suburbs is now moving back. Demographers say the increase in urban living was mostly driven by surging immigration over that time span. Still, it means everyone who declared cities dead in 2020 will now be enshrined in the freezing cold takes Hall of Fame. Yeah, cities are back. Part of the reason, too, is just that the overall population gained as well.

Nationwide, the population rose about 1% over the same period. So more people means more people, going to cities as well. That 1% gain doesn't sound like much, but that was actually the highest increase we've seen in a generation. So maybe that's part of the turnaround. But holy moly, I cannot believe how big some of these southern cities are.

I mean, the fact that Jacksonville now has more than a million people, it's just unfathomable to think about because I've played soccer tournaments there. It doesn't feel like a million person city, and yet people just continue to pour in there. One, that's where the space is, one, That's where lower taxes are. We've had this story of the sunbelt rising,

but it is just jarring to see these names kind of populate the list of the biggest cities in the country. And if you're looking for the fastest growing city in the United States last year, that would be a Dallas suburb named Princeton, which is located about 45 miles north of that city. Its population has more than doubled since 2020. They don't have enough roads or infrastructure

to handle all of the people coming in. They've had to pause new home construction. But right, I think affordability is really the name of the game in looking at what cities are growing faster than others. The average or the median home value in Princeton, Texas is 325,000, which is lower than other suburbs in that area. And of course, lower than other more pricey places like here in the Northeast. But, yeah, Sunbelt is rising. Princeton, Texas, the fastest growing city in the United States. My winner of the weekend is Caitlin Clark, because she has picked up right where she left off, breaking anchor. setting records and getting tangled up with Angel Reese.

As the Indiana fever kicked the WMBA season off this weekend against Angel Reese in the Chicago sky, Clark proved to everyone that her rookie of the year campaign last season wasn't an anomaly, just a preview of what's to come. She dropped a 20 point triple double as the fever routed the sky by 35. The W is certainly happy to see their biggest star in Sterling form. Last season, the league had 22 regular season games that averaged more than a million viewers, the first time since 2008 that they had even won. When you throw in the All-Star game and the draft,

24 WMBA events drew more than a million eyeballs last year, and Clark was part of 21 of them. While the WMBA is chock full of talent, Asia Wilson, Brianna Stewart, the newly drafted Paige Beckers, in terms of public interest, Clark still rises above, something the league has caught on to. The fever are playing 41 of their 44 regular season games on national TV this year,

with the remaining three likely to be shifted towards a national audience too. Neil, we don't have the TV numbers yet, but I would imagine that everyone involved with the W is quite pleased to see Clark picking up right where she left off. There is no rivalry really around sports right now as Angel Reese and Caitlin Clark, and we just got right back into it on Saturday. These two players are just a ratings machine for the WNBA.

Caitlin Clark is just an economy unto herself. There was a they played in Indianapolis. There was a line for the merch store for the Indiana fever at 9 a.m., which was an hour before the store opened and six hours before game time. I mean, this is just a massive phenomenon right now. And they also released T-shirts, the fever release T-shirts called Every Game is a Home Game. And that's because wherever the fever playing, they're going to go to a larger stadium than they originally did. six teams have moved games from their smaller home arena to the larger NHL or NBA arena in their city to accommodate the larger crowds that want to go see Caitlin Clark play. So, yeah,

she is a one-woman economy for the WMBA right now. Yeah, the biggest kind of parallel that I want to draw here is that Chris Collinsers once said, if NBC had their choice, we would do 17 Cowboys games, meaning that they just want to put the teams that draw the most eyeballs on the major networks at the time for, so for anyone pushing back saying like, why, the league giving the fever such preferential treatment. They are just doing what the market is telling them to do. The NFL puts Cowboys on primetime, even if they were 7 and 10 last year, they were horrible, but they're opening up the season once more because they draw the rating.

So you're seeing a similar thing happen where the league is figured out that, hey, this is our biggest star. I'm sorry if some other teams feel like we're not getting the same amount of billing as you are, but you're not the Cowboys. You're not Caitlin Clark in the Indiana fever. So it's just interesting how there is parallels between, you know, the biggest league in the world and now the WMBA with Caitlin Clark, unfortunately, turning into the Cowboys. I say unfortunately, just because it's been a rough couple of years for the Cowboys. But it's fascinating to see them kind of jump on the same sort of ratings bandwagon.

It's Monday. Sorry to remind you. So to get you prep for the week, let's run down the major events coming up on Wall Street. It's all about retail as major players like Target, Home Depot, Lowe's and TJX report earnings. These will be critical reports that show how tariffs are going to impact what Americans pay for things, especially after Walmart dropped that bombshell last week by announcing it was going to hike prices by the end of the month. Many analysts said that Walmart's announcement will give its small rivals the green light to do the same. Yeah, going back to Walmart, they had this clear pan for how it was weathering tariffs, leaning on its grocery business.

They sourced two-thirds of their goods from the U.S., and then, of course, it will bump up prices. but maybe you're a little more nervous for its pure Target who relies a lot more on discretionary heavy merchandise, the stuff you pop into buy, even if you weren't planning on just because you're wandering around Target. Economic uncertainty obviously weighs on those purchases, but also those products tend to be more trade exposed as well. So between Walmart last week and Target this week,

I would be a little bit more nervous if I was a target shareholder. And Walmart was also in the crosshairs of President Trump this weekend, who posted on social media that Walmart should eat the tariffs and not pass on those to its customers, as it said it would. On Thursday, President Trump will host the top 220 holders of his meme coin, Trump coin, for a dinner at his golf club in Virginia. And for the most part, we don't know who's going to show up and what they're after. Because of the nature of crypto wallets, the identities of most of the top coin holders are unknown. but analysts believe that 19 of the top 25 wallets are almost certainly owned by people outside of the United States.

Some congressional Democrats wrote a letter to Treasury Secretary Besant last week saying that dinner could allow bad actors and authoritarian governments to influence U.S. government policy by buying Trump coin. Yeah, there was always this fear that this was a way for foreign actors to buy influence with the sitting president. It looks like that is playing out. Or actually, we don't even know what it looks like yet because we don't know who these people are.

And by the way, what has happened with Trump coin since it kind of launched, it's fluctuated wildly. It debuted and shot up to about $75 per coin. By the time this auction for this dinner ended, it was hovering around $12 a coin. Some analysis of the crypto industry put the figure of 750,000 buyers have lost money trading the coin. So it hasn't necessarily been a very stable money-making asset for a lot of people. Also on Thursday, the first major new theme park is opening in Central Florida. in 26 years. Epic Universe by Universal is a $7 billion, eight years in the making property that spans more than 100 acres.

When combined with the other universal parks, it presents the stiffest challenge yet to Disney World's dominance of Orlando's $92.5 billion tourism market. As you head in, don't worry about remembering your ticket because Epic Universe will use a facial recognition system to shuffle guests through the entrance plaza. You will have to pay, though, adult single-day tickets start at $139 and rise to $199 during peak holiday times.

I'm kind of excited for this park because this is universal kind of saying, hey, Disney doesn't have a monopoly on good stories or good storytelling. We got some good stuff too because the park has four different kind of themed areas. One is Harry Potter, obviously. The other is how to train your dragon, which I think gets slept on in just the pantheon of all storytelling. Nintendo video game properties make up another. And then the final one is tied to classic movie monsters like Frankenstein.

So it kind of is running the gambit there, but it's saying like, hey, we have a fastball too, Disney. You're not the only one with good properties to make parks about. Even as the WNBA season tips off, the NBA season is winding down. The conference finals are tipping off this week with Kyle's Timberwolves taking on Oklahoma City in the West and the Pacers doing battle with the Knicks. New York is just in a tizzy over this team, which is playing in its first conference finals in 25 years. I think a tizzy might be putting it a little lightly, Neil. I cannot wait to see what this city does if the Knicks makes the finals, let alone wins it.

Also, Timothy Chalameh is officially Lysan Al-Ga-Ub at this point. Everything the man touches turns to gold. And we're all counting down the days until Friday when Memorial Day weekend starts and unofficially kicks off the summer. Maybe you'll go see Mission Impossible, the final reckoning, which hits theaters this weekend and is allegedly the last installment in the franchise. Tom Cruise first began playing Ethan Hunt at age 34. Now he's 62. That is wild. I saw this video of Cruz at AMC and Lincoln Square over the weekend of theater in New York City

and someone took a pick of him saying that he had been talking to the movie staff there for 15 minutes straight. The dude just loves making movies. He loves being in movies. He loves talking about movies. And he loves doing insane stud. So I guess I don't know who's going to fill the Mission Impossible void after he leaves maybe, I don't know, Timothy Salamis is next up, but yeah, quite a run for Tom Cruise.

That is all the time we have. Thanks so much for starting your morning with us. Have a wonderful start to the week. If you have any thoughts on the show, send an email with questions, comments, or feedback to Morning Brew Daily at Morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lute is our producer. Our associate producers are Olivia Graham and Olivia Lake. Garra Peck is on audio. Hara makeup says Pacers in six. Devin Emery is our president and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow.