Morning Brew Daily - Wall Street Exec. Tapped for Treasury Secretary & European EV Market In Trouble?

Episode Date: November 25, 2024

Episode 460: Neal and Toby explain why President-Elect Donald Trump chose former Hedge Fund Manager Scott Bessent for Treasury Secretary and what it means for the federal government's finance department. Next up, why was Indian Billionaire Gautam Adani was charged in a US bribery case, and the battery startup that lost $15 billion that could hinder EV progression in Europe. Then the winners of the weekend are box office hits 'Wicked' and 'Gladiator II', and then the game of Chess. Finally a look ahead at this upcoming week. 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. 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. Get your Morning Brew Book of Crosswords HERE: shop.morningbrew.com Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Turkey Pardon  02:15 - Scott Bessent Nominated for Treasury Secretary  08:15 - Gautam Adani vs DOJ 12:45 - EV Battery Maker Bankruptcy  17:45 - ‘Glicked’ at the Box Office  21:20 - New Look Chess 24:45 - Week Ahead  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 Freyman. And I'm Toby Howell. Today, Trump finally picked his Treasury Secretary why Wall Street is celebrating, but Elon Musk is fuming. Then North Follett was once the best funded startup in Europe, but now it's bankrupt. It's Monday, November 25th.

Let's ride. Today, President Biden will continue the bizarre White House Thanksgiving tradition of of pardoning turkeys when he will absolve two large birds, peach and blossom of their crime of being large birds. Why is this even a thing? The simplest answer is always the correct one. It's a PR stunt by Big Turkey. Since 1947, the National Turkey Federation Lobbying Group

has provided turkeys to presidents to raise awareness for the industry. Initially, these turkeys were intended to be eaten, but in 1963, President Kennedy became the first on record to pardon one. Not to get all technical on you though, Neil. Kennedy wasn't actually the first official presidential pardoned for whatever reason when JFK was presented with the bird. He said on Thanksgiving, we'll just let this one grow. I don't know why he said it, but he did technically pardon it. But it wasn't until 1989 under George H.W. Bush that the turkey pardon became an officially sanctioned White House event. So Peaches and Blossom, I'm not sure who you should thank

for your lives being spared this year, but enjoy your time as agricultural ambassadors going forward. Now, a word from our sponsor, Yahoo! Finance. Neil, it finally happened to me yesterday. I was thinking about this ad last night, and all of a sudden, I couldn't stop pronouncing it as Yahoo Fanonze in my head. Welcome to Team Fanon's. Thanks are much more cultured over here, more sophisticated. It does have a nice ring to it, but when you're actually using the site, you don't need some sophisticated understanding of the market. It's all there right in front. front of you, top gainers and losers at a glance. All the news headlines you need to stay up to date.

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Tickets on sale now at Yamava Theater.com, only at Yamava Resort and Casino, celebrating its 40th anniversary. UN must be 21 to enter. After an eventful search, President-elect Donald Trump named his pick for Treasury Secretary just before the weekend, tasking Wall Street billionaire Scott Bassett with the important cabinet position. Besant will now be expected to help carry out Trump's economic agenda, which includes tax cuts, pairing back federal regulation, and of course, enacting his signature tariffs.

Besant took a bit of a unique path to arrive in Trump's cabinet. He came up as a prodigy of George Soros, a billionaire philanthropist, who has donated heavily to Democratic causes and presidential campaigns. He wasn't really in Trump's orbit at all during his first term, but Besant has been friends with a family for decades and is well respected on Wall Street with admirers, including J.P. Morgan's CEO, Jamie Diamond. The cent spent months laying the groundwork to win the spot by publicly offering Trump some recommendations. And one of those economic ideas he brings to the table that won Trump over is a 3-3-3 plan,

aimed for 3% economic growth, a reduction of the federal deficit to 3% of GDP, and an increase of domestic oil production by 3 million barrels a day. That combined with support of tariffs as a way to raise revenue and protect American industries, led to him securing the nomination. Right. I do think those two things, tariffs and taxes could probably be the hallmarkers of Bessent's tenure as Treasury Secretary because he is responsible for kind of carrying out this economic agenda, including these potential tariffs. And Bessette has shown some areas where he's likely to push back a little bit on Trump's proposals. He is generally in favor of tariffs, but has deflected them saying it's obviously a maximalist, negotiating strategy, but he said that they should phase them in to give market some time to adjust.

So he is seen kind of as this more level-headed character who, yes, generally is in favor of most of Trump's economic proposals, but will not be afraid to push back in certain areas. And Elon Musk, who has emerged as one of Trump's top economic advisors, was not a fan of this. And you mentioned there was a very intense competition that resembled almost, you know, Trump's old TV show, The Apprentice, for this position with. a number of names throwing their hat in the ring, including Howard Lutnik, the CEO of Cantor Fitzgerald, who was the co-chair of the transition committee. He got tapped as the Commerce

Secretary, which is maybe the B-team of the Treasury Secretary. But Elon Musk called Bacent the business-as-us-us-us-us-us-us-us-us, and he didn't mean that in a positive way. However, this is a business-as-usual choice, and that is what Wall Street wanted. They wanted someone who would not ruffle markets and with something like tariffs, which absolutely can ruffle markets, they were celebrating, as you mentioned, Jamie Diamond, the J.P. Morgan CEO, a bunch of other, you know, heads of global finance, thought this was a great choice for being business as usual and not ruffling the stock market as much as a very hawkish on tariffs choice would be. One thing that has ruffled some feathers, though, is that the scent made some waves this fall

when he did float this idea of replacing Jerome Powell with what he called a, quote, shadow chair, which is someone that Trump could like tab someone early for the position of leading the Federal Reserve, which could technically undermine Powell's position before his term ends in 2026. That is a little bit, you keep saying ruffling feathers. That does ruffle some feathers because obviously the Fed is supposed to be insulated from this political conversation, this political maneuvering. And so him saying that maybe we could find some way around Jerome Powell to steer markets in the direction that Trump wants to go is a little bit more of a, I don't know, extremist position. But for the time being, I do think you're right.

What the market wants is someone who is a little bit more level-headed in this role. And I think Bacent, with his ties to Wall Street, is someone that will placate the markets and, you know, these big money managers for the next, you know, a few months. And you might be wondering, listening to us, what even does, like, a treasurer? secretary do. They are the top economic policymaker in the entire administration. A couple ways they've been called is a couple nicknames is America's CFO, the quarterback of the economy. If you want to get a football metaphor, they have oversight of the U.S. government debt market. They're considered the chief bond salesman tax collection. So that could be huge come 2025 when there are huge tax negotiations and potentially new.

tax cuts coming in play and economic sanctions. The role is held currently by Janet Yellen, who has made headlines for parading around the world, eating weird foods. And during the first Trump administration, it was Steve Mnuchin, a former banker who was one of the few administrative officials during that administration to stay all four years. And he was the one who encouraged Trump to pick Jerome Powell as Fed Chair. So we'll see how it plays out. Last week, the U.S. Department of Justice filed fraud charges against Guatam Adani, an Indian infrastructure tycoon who is one of the richest people in the world. The shocking indictment, which is one of the DOJ's highest profile cases in recent years, is already causing shockwaves across financial markets, the global economy,

and U.S. India geopolitical relations. Firms under the Adani Group ownership lost $34 billion in market value the day after the charges were filed, Kenya's president halted a major airport project with Adani Group, and Adani's plans to invest $10 billion in energy and infrastructure in the United States are now up in the air. As a refresher on the fraud accusations, the U.S. charged Adani and seven other defendants with orchestrating a scheme to pay $250 million in bribes to Indian government officials in exchange for favorable terms for solar power contracts. Those contracts were expected to generate more than $2 billion in profits. So what does this have to do with the U.S., you ask? Well, the DOJ alleges that Adani and the rest of the schemers did not reveal this plan to bribe officials to the U.S. investors they were raising money from, which is, I guess, understandable.

Adani has denied the charges and claims they are baseless. Toby, Adani's $169 billion global empire looks a little shaky right now. Yeah, you mentioned that this is one of the most high-profile cases pursued by the Department of Justice in recent years, because think about just the amount of jurisdictions it spans. Think about the global and diplomatic effects that this case has because there are some pretty steep hurdles to actually get Adani to the United States. The U.S. does have an international extradition treaty with India, but there is some delicate political maneuvering that will have to happen because President-elect Donald Trump has a pretty good relationship with Prime Minister Modi over in India. He sees India as kind of this good bulwark against the hedge money of China. in that region. And so this will put a lot of strain on the relationship between the U.S. and India. And the final call ultimately is up to the Indian government here and how strong

the diplomatic relations really are with India. So beyond just the business implications, there are some serious geopolitical and diplomatic issues as well. Absolutely. And I just want to highlight how intertwined Adani is in India's economy. He operates 13 ports there, which is 30 percent market share. He operates. It's seven airports, which handle 23% of passenger traffic, nearly a quarter of all air traffic there. And he's also India's second largest cement business owner, which is 20% of the market, owns six coal-fired power plants, largest private player in power.

And that's just in India. He has projects all over the world, Bangladesh, Kenya, Israel, Vietnam. And he made this big announcement to invest $10 billion in green energy in the United States. It's the, what analysts are saying this is going to happen. What's going to happen is his empire will stay intact. It may not all come crumbling down, but a huge blocker from this indictment will be blocking access to capital. So they just scrapped a $650 million debt sale that Adani Group wanted to do and his stock market or in the market value of all of his holdings, which it's a massive sprawling conglomerate, has cratered in the event. And this is not the first time that.

Adani has come under scrutiny. Yeah, Hindenberg, the short-selling firm, wrote this big report last year saying how they think that it's calling into question, basically, Adani's group saying that his company was probably overvalued at that time. And so Hindenberg's coming out of this looking pretty good because now you have this big indictment with more details coming out. One thing, just to zoom out one more time, this probably isn't going to sink a Donning Group, but what it might do is kind of stain India as a destination for a global capital,

although a lot of people are saying there's a lot of headwinds, or a lot of tailwinds, actually pushing money into India, so it probably won't have any huge long-term catastrophic effects, but in the short term it will kind of maybe dull the appeal of India as a destination for global investment. What is going on with the Battery Maker North Volt? One of the best funded startups in the world went bust over the past week when the Swedish company filed for bankruptcy after running out of cash to fund operations. Northfault was supposed to be Europe's best chance to compete with Chinese battery makers,

raising $15 billion from investors to try and establish a foothold in the industry. But a turbulent year has all but sunk that dream. Everything from falling demand for electric vehicles to difficulty scaling, push the loss-making company into Chapter 11 bankruptcy instead of into the big leagues of battery manufacturing. The financials just weren't making sense. North Volt reported losses of roughly $1.2 billion last year, with revenue of just $128 million. On top of the math, not mathing, North Volt rust expansion efforts plowing forward with plans to build new factories in Canada and Germany to go along with its main gigafactory in Sweden. But while it eyed new business, it couldn't keep up with existing demand, falling behind on battery deliveries and losing a $2 billion contract with BMW in the price.

process. So yes, the idea sounded good on paper. Create a European stronghold for lithium ion battery production, but it didn't quite work out that way. It didn't, but they had every, you know, source of support that they possibly could have. They raised $15 billion in debt equity and grants. Every Western government was throwing money at them because to have a Western battery maker would be huge because all this industry happens in China, but maybe we're realizing why all the industry does not happen in the Western world because it's really hard. You need to have a lot of know-how, a lot of capital to invest in making these plants. And it didn't seem like Northville really had the expertise. It was founded by two Tesla, former Tesla executives. So you'd think

that maybe they would have some sort of know-how in the electric vehicle business. But it does speak to just the broader headwinds that this industry is facing, especially in Europe through October electric vehicle volume sales fell by, fell by 5%. We've been talking about them not growing as much as they used to, but they actually declined in Europe so far this year. Ford just laid off 4,000 employees at 15% of its entire European workforce. So this transition from traditional cars to electric vehicles has not panned out in the way that was expecting. And a lot of funding just went up in the dust. Yeah, some big names were attached to this company. Goldman Sachs will ride off almost $900 million that it plowed into Northfold. It was Northfold's second

largest shareholder. VW also was its first largest shareholder. It had a 23% stake in Northfold that it is now riding down at 2.0 as well. This company just blew through cash. Again, we call it, it was Europe's best funded startup at one point, $15 billion. But last week it said it just had $30 million in cash remaining, which it said was enough for one week of operations. So, You said that battery making is a capital-intensive business. $30 million a week run rate is capital-intensive. But you're right, it's just hard to create a good system for building batteries outside of Asia. One of their issues was they were one of the first European buyers of Asian manufacturing equipment,

and that just led to some cost overruns and cost delay. So just a lot of issues, even though on paper this sounds like a great idea, let's build this stronghold of battery manufacturing. But in reality, it was much more difficult than it appeared. Up next, some winners of the weekend for you. Today we helped a... Latte for Sam. Coffee shop, get an insurance quote simply and easily.

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It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill three burner gas grill. Or get $50 off a select Weber Spirit grill and bring big flavor to your backyard. Then set the scene with Hampton Bay string lights that bring it all together. Shop spring backyard days for seven days at the home deep. Now through May 6th. Exclusion supplies, see Home Depot.com slash price match for details. Welcome to Winners of the Weekend, the segment where Toby and I pick two things that have a lot to brag about when they see their high school friends the night before Thanksgiving. I won the pre-show turkey carving competition, so I get to go first.

And my winner is wicked for scoring the biggest box office debut for any Broadway adaptation ever. The movie musical that explores what happened in Oz before Dorothy arrived and messed everything up, earned an impressive $114 million in North America, the third biggest opening weekend of the year, behind only Deadpool and Wolverine and Inside Out too. That sound you hear is movie execs breathing a huge sigh of relief because the stakes were high. Not only did Wicked have one of the most expensive promotional budgets

in Hollywood history, but like any good musical, there's an encore. Part 2 of Wicked is coming out next year, so making sure people like the first enough to see the second is key. Of course, Wicked wasn't the only big budget movie to arrive this weekend. Gladiator 2 hit theaters as part of a double bill, some people called Glickid, which didn't turn out to be a thing like Barbenheimer. The R-rated Gladiator survived a battle in the Coliseum,

but didn't exactly win, earning 56 million in domestic ticket sales a tad below expectations. Toby, what was your takeaway here from a big weekend at the box office? I think it shows that you can't really force a meme to happen. I mean, Barbenheimer worked because it was just internet culture at its best. It just took that meme and ran with it. Glickett was a little bit more, yeah, I'll say force from a promotional perspective. Manufactured. Yeah, manufactured.

People were just smushing the word together. That doesn't actually make a trend. People as in Neon Toto. Yeah, I mean, we are part of the issue. Let's be honest, because it does roll off the tongue quite well. But I do think it speaks to a broader trend of maybe eventifying movies, if you will. I mean, showing up in costume. This is mostly applies to Wicked because it did have a bigger.

opening weekend where you go there, you buy the merch, you dress up as, you know, the Wicked Witch of the West, and you're probably seeing a little bit in the theater. I think people do want this experience outside the home. So long term, I think it is bullish for the movie theater because the only way you can have that experience is by going to a movie theater. You can't have it watching at home. So I do think movie execs are breathing a silent relief, even if it wasn't as big of an event as Barbenheimer. And there was an expectation that these movies would break down heavily along male-female gender lines, and that absolutely panned out. About 72% of ticket buyers for Wicked were female, while 61% of Gladiator 2 spectators were

male. So maybe there wasn't so much overlap, which they were expecting that sort of counter-programming concept. But let's run the tape against Barbenheimer, how Glickett fared against Barbenheimer. So Barbie did $162 million in its opening weekend. Wicked did 114. And then when you're comparing Oppenheimer to Gladiator, Oppenheimer did 82 million. Gladiator did 56 million. So across the board,

Barbenheimer kind of romped. A little bit lower, but I do think we got Thanksgiving weekend coming up. So I think we'll have a good boost this next time. I don't know why I'm rooting for Glickett's so hard, but maybe it's because we pushed it so hard. But I do think they're saying that these will have a pretty decent shelf life, especially with this big weekend coming up. My winner of the weekend is the game of chess.

because the oldest game in the world has got some fresh new drama on its hands. The World Chess Championship kicks off today in Singapore, pitting reigning champion Ding Loren against 18-year-old upstart Goukesh Domaraju. But the best player in the world isn't going to be there, and neither will the second best. That's because Magnus Carlson and Fabiano Carrara, the two topped ranked players in the world, hosted a match with their own last week,

playing a variant of chess called Fisher Random Chess, where positions of the back-rank pieces are randomized every game. Their tournament is seen in the chess world as a bit of a protest against the current state of the game. Carlson, who is probably the best chess player to have ever lived, vacated his spot as world champion two years ago after five years on top because quite simply he was bored with a state of classical chess, where games and matches stretch on for days and weeks. Instead, he spends most of his time playing faster-paced online tournaments

and Fisher Random Chess because he thinks it is a better test of pure chess skills in contrast to the long memorized sequences that are required to excel at classical chess. So while Loren and Damaraju sit down for a two-week slog to crown a world champion, Carlson has his eyes on the future after raising $12 million in VC money to start freestyle chess a new tour launching next year, he thinks will bring more excitement to the ancient game. Yeah, are we seeing like the TikTokification of chess? I don't know if that's too glib, but certainly there is a push to make the game faster and create more randomness and create a little more strategy than the game that has been played for a few thousand years.

If you look at chess.com, 13 of the 20 most watch events haven't been those classical matches. They have been a different style of the game. So perhaps what's happening between pickleball and tennis right now is happening, with Magnus Carlson's new league and classical chess as a way of freshening up a game for a mobile and streaming audience, which has absolutely blown up in the past few years. Chess.com has become a very big app. You know, in January 2020, before the pandemic, it had 51 million users. Now it has 190 million users worldwide. One in 10 Americans, according to Chess.com, have an account. So the game has blown up, but it's blown up in a way that maybe expands its reach.

And Magnus Carlson as the top chess player ever possibly, and a person with a very big entrepreneurial mindset is trying to disrupt the game. Right. I think Magnus Carlson is the X factor here. I mean, the world of chess kind of goes as he goes because the part of the reason he stepped down too wasn't just because he was bored with the state of classical chess. He literally said, like, no one is good enough to play me. I'm not going to play like the same people over and over again.

I know I am better than them. So like, I want to move on. He still loves chess and plays a lot of chess, but he's just not playing in the world championships anymore. I do say that you should still tune in to watch the world championship because it is crowning a world champion in chess is still just one of those things that you should pay attention to. But Ding Loren, who is the current reigning champion, has gone through an absolute funk and has dropped to number 23 in the world. He's lost tons of tournaments since he was crowned world champion. So it is going to be potentially we'll see the youngest chess champion crown ever if Damirajou does get. crowned as an 18-year-old.

So I think- A lot of drama still. A lot of drama. And the prize money is $2.5 million, which is about as much as the winner of Wimbledon makes. So there is money on the line. A lot of money. So tune in if you can bear to stomach these long classical chess masses.

All right. Finally, here is your preview of what to expect in the week ahead. It's going to be a short one because it's Thanksgiving. Many of you are probably planning to travel in the next couple of days to see family or friends. About 80 million people are projected to hit the road or the airways this Thanksgiving, a new travel record and surpassing pre-pandemic numbers. But the weather doesn't appear to be cooperating. Forecasters are calling for rough weather across the country this week.

Rain and snow on the radar for California, the Midwest, and the Great Lakes region. Get to the airport early. Get some TSA pre-check action. Download some morning-rood Daily episodes for the plane, maybe a few extra ones in case you get delayed. You guys got this. And then when Thanksgiving Day comes itself, there are no shortage of distractions. Turkey trots are going to be held in communities all over the United States. The Macy's Thanksgiving Day parade in New York City begins at 8.30 a.m. Eastern.

And come the afternoon, it's all about football. The NFL will hold three games, Bears, Lions, Giants Cowboys, and Dolphins Packers. I have a nice parlay cooked up. I'm taking Bluey to have a Macy's Day parade float. I'm taking me to win the turkey trot. I'm also taking the bears over the line, and then also I'm taking me to fall asleep on the couch by 3 p.m. That seems like a cabot probably hit. Markets will be closed for Thanksgiving and open for a half day on Black Friday, but investors can't totally mail it in like you this week because there are some big events on tap.

The Personal Consumption Expenditures Index, which is the Fed's preferred inflation gauge, will drop on Tuesday and is sure to cause some shockwaves on the market. and a few more earnings reports from the likes of Zoom, Macy's, and Best Buy will roll in. If you're going to lose money this week, if you're going to lose money on Friday, do it quickly, I guess, because the market does close at 1 p.m. But you know what? It doesn't close the crypto markets. And Bitcoin is right now above $98,000. So I ask you, you already had this other parlay. Will Bitcoin hit 100K before Thanksgiving?

Well, here's the thing. We've been thinking of talking about it on the show because what if it hits 100K? What if it does it? It just hasn't yet. It stayed at this level. Honestly, for our sake, I hope it does just so we have something to talk about. Okay, that is all the time we have. Thanks so much for starting your morning with us and have a wonderful start to this short week. For any questions, comments, or feedback, send an email to Morning Brew Daily at Morningbrew.com.

And if you find yourself learning something from this podcast, share it with friends, family, or coworkers. As always, Toby is here to provide a more specific recommendation to make your life easier. I want you to share this podcast with someone who got friends. really into chess. It's one of those things that speaks to someone with an addictive personality. So if we can get those people listen to the show, then I think we lock them in for life. So send this to your resident chess nerd. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lute is our producer. Olivia Graham is our associate producer. Lonnie Fiscus is our technical

director. Billy Minino is on audio. We part in you hair and makeup for missing every show. Devin Emery is our chief content officer and our show is a production of Boring, Great show today, Neil. Let's run it back tomorrow. Hey, honey, it's mom. Did you know if we switched to Verizon we can get four phones for $0, plus four lines for $25 a line? Call me back. Me again. That's just $100 a month for four lines on Unlimited Welcome. Plus Four phones, no trade in needed. Call me. It's Mom. America's Best Network, Verizon. That's the one we're talking about.

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