Morning Brew Daily - Warren Buffett Plans His Retirement & Welcome to SpaceX City?

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Starting point is 00:00:26 Good morning Brew Daily Show. I'm Neil Fryman. And I'm Toby Howell. Today, Warren Buffett is stepping down as CEO of Berkshire Hathaway after making a lot of people a lot of money. Then Elon Musk's rocket base in South Texas has gotten so big. It's officially become its own city. It's Monday, May 5th. Let's ride.

Starting point is 00:00:49 Good morning and happy Cinco de Mayo. When you're out sipping a spicy margarita later, do not tell anyone it's Mexico's independence. day. That's in September. Cinco de Mayo commemorates the defeat of French forces by the Mexican Army at the Battle of Puebla in 1862 and is mostly celebrated now in the United States by people of Mexican descent honoring their heritage. Of course, beer companies have a lot to do with its popularity. In the 1980s, they began to leverage Cinco de Mayo in marketing campaigns, turning it into an unofficial national drinking holiday. Yeah, now Mexico accounts for about 30% of all global beer exports. and ships more than double the amount of beer as any other country.

Starting point is 00:01:33 And of course, a lot of that beer ends up across the border. 97% end up in the United States. And Modelo is the top selling beer in America, not the top Mexican imported beer, the top beer in America where it's been since it's surpassed Bud Light back in 2020. So, and now word from our sponsor, Planned it out. Neil, you ever watch one of those cooking shows where they take a plain old dish and somehow turn it into something magnificent? Don't I ever.

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Starting point is 00:03:13 Ends of thousands of Warren Buffett fans hung on his every word for hours of a Q&A until they heard the ones they had dreaded the most. He's stepping down. The 94-year-old Buffett stunned the business world when he closed out Berkshire Hathaway's annual shareholders meeting by revealing he would leave his CEO role by the end of the year. It even came as a surprise to his handbook successor, Greg Abel, who wasn't told of the announcement beforehand. After Buffett's mic drop, the silent crowd erupted into a delirious minutes-long standing ovation. To say it was well-deserved is the understatement of the century. Buffett is the most famous investor in the world, having inspired millions across the globe with his philosophy of patience and seeking out value. It was how he

Starting point is 00:03:57 transformed a struggling textile company in 1965 into a $1.1 trillion conglomerate that spans 189 operating businesses such as Geico, Duracell, and Fruit of the Loom, and dozens of stock holdings, including Coca-Cola and Apple. What happens next? Buffett said he'd, quote, still hang around and could conceivably be useful in a few cases, but the keys to the kingdom will be handed off to Abel, a Canada native and big hockey guy who grew Berkshire Hathaway's energy division, into one of the leading power producers in the United States. Whatever his achievements until now, he'll have some size 21 shoes to fill.

Starting point is 00:04:35 Toby, we all knew this was coming at some point, but still, Buffett retiring doesn't feel real. It doesn't feel real. I mean, I can't imagine a world without Buffettisms, without tuning into his annual shareholder meeting. It really is just he defines such an era of capitalism in America. He's been CEO for 55 years. He's the longest serving CEO of any S&P 500 company, and he deserves. his 10-minute standing ovation because let's run through the scorecard a little bit. Berkshire Hathaway has returned 5.5 million percent since 1964.

Starting point is 00:05:07 That's a 20 percent annual compound growth rate versus 39,000 percent returned from the S&P 500 over the same period. So the stat that I have to quote is Berkshire could fall 99 percent and he will still have outperformed over the length of his career. And then talk about the power of compound investing, which is just such a tenant of Warren Buffett's philosophy. 96% of his net worth was accumulated after his 65th birthday. So that's just how compounding works.

Starting point is 00:05:37 So there are so many insane stats you can just keep going down. But I think that just shows how much of an outperformer he really was over his story career. Let's talk about one of those investments that Buffett said made more money than any other one. And that is Apple at the Berkshire Hathaway annual shareholders meeting on Saturday before he announced this retirement. Buffett said, I'm somewhat embarrassed to say, Tim Cook, the CEO of Apple, has made Berkshire a lot more money than I've ever made. Berkshire started investing in Apple in 2016. He bought about $31 billion worth of shares. The value of that investment, a couple years later, grew to more than $174 billion before Buffett started selling Apple shares. That's a neat

Starting point is 00:06:20 six-exter and kind of was a watershed moment for Berkshire Hathaway and Buffett because for so long, he stayed away from tech companies. And he never really did a huge investment in tech companies besides Apple. And you wonder how much that 5.5 million percent return could have been more if he had invested in, say, you know, a Facebook or a Microsoft or an Amazon. But yes, he had a lot of good things to say, as he always does, about Tim Cook and Apple. And then looking ahead, Greg Abel has a lot of questions that he has to answer as he steps into the CEO role.

Starting point is 00:06:51 Namely, what are you going to do with this $350 billion pile of cash? that Warren Buffett had been reluctant to deploy over these last few years of volatility. So who knows how he's going to actually use that? He's obviously in a good position. A lot of CEOs would love to have that cash pile to work with. But questions about, is he going to bring a different risk tolerance? Is he going to have more preference for industries that Buffett typically avoided? Is he going to dive deeper into tech or something like that? And then also, is he going to continue this woodstock for capitalist? Is the shareholder meeting going to have the same sort of magic it did under Buffett and

Starting point is 00:07:25 These are all questions that Abel has in front of them, but by all accounts, he's a very good operator of businesses who knows how he is as a capital allocator. So that's maybe one of the biggest question marks as well. So an enviable position to some, but also a lot of weight on your shoulders. Starbase, the sprawling command center Elon Musk uses for SpaceX launches of its towering Starship rocket is now officially a town. After a near unanimous vote, 97% in favor from a pool of mostly SpaceX-connected residents, Elon Musk's outposts near Brownsville, Texas, has incorporated as its own municipality.

Starting point is 00:08:01 That means Starbase USA now is the power to levy taxes, right zoning laws, and if a pending bill passes, even shut down local public beach access during launch activities. For Elon, the move offers a way to streamline operations and possibly reduce the logistical friction that comes with being a very big private company that has huge ambitions. For example, SpaceX has not been able to, to provide enough housing for workers who want to live near its headquarters, especially after a recent

Starting point is 00:08:29 attempt to build more was rejected by the county. So its new identity should help fix that since state law gives wide latitude to municipalities in Texas. Critics do worry about blurring lines between private ambition and public responsibility, especially if Starbase uses its new authority to sidestep environmental concerns or cut residents off from a previously public destination for waves and sunshine. But for many in the area, the tree, the tree. The tradeoff looks to be worth it. 3,400 jobs in a budding tourism economy of people who want to stop by and watch starship in action, we're enough to win over most of the dissenters, Neil.

Starting point is 00:09:04 I mean, we are so back in terms of company towns. I thought this was going to be, you know, a relic of something you just read in your history textbooks of the United States. I mean, I think we all learned in high school about George Pullman, who was the rail car magnate, who started this company town called Pullman, Illinois, after himself, which was just south of Chicago. Gary Indiana was created by U.S. Steel in 1906. You have Corning, New York, Benville, Arkansas with Walmart, and Elon Musk has sort of reinvented the concept of the company town for the space age. And it's a very interesting development with a lot of possibilities

Starting point is 00:09:39 and also a lot of pitfalls that local residents are certainly, you know, excited about the opportunities in terms of economic development, but also wary of, you know, SpaceX gaining control of this particular area that had been very remote, very remote, not a lot of people there, and now it's turned it into, you know, the frontier of Mars colonization, essentially. And this incorporation isn't just this get out of jail free, free pass to do anything you want, any regulations that you want, but it does give you a lot of unique authority to kind of set the rules in your developmental area. So zoning, building projects, even just more normal aspects of life, all fall under their purview of now a mayor who is a vice president at space x so that's where people say is this really like

Starting point is 00:10:24 this there has to be a conflict of interest here when the literal mayor of a town is also a VP at this private company but one of the big sticking issues was i mentioned this beach because beach access is something that should be available to a wider population and so if you grant control over that ostensibly to a private company then you are depriving a public population of going and tanning and going and having a beach day, which has been a big issue because, you know, SpaceX has these big launches, they testy rockets, and they need to shut down the local highway every time they do something like that. So a local judge has said, hey, we've been working with you, SpaceX. There's no need to go to this step. So expect that to be kind of a hallmark issue in this,

Starting point is 00:11:05 you know, push to make a public place into a private enclave for a company like SpaceX. Let's move on. What is the last time you went to see a Marvel movie? Or better yet, when was the last time you went to see a Marvel movie and actually enjoyed it. Unfortunately for Disney, your answer probably dates back to Avengers Endgame in 2019 if you had an answer at all. But Kevin Feigey, the brainchild behind the whole interconnected web that makes up the Marvel cinematic universe, thinks he's figured out a plan to make Marvel good again. Stop making TV shows and start making good movies.

Starting point is 00:11:39 According to the Wall Street Journal, Feige had recently told colleagues that keeping up with all the company's new movies and TV shows was starting to start. to feel less like entertainment and more like homework. As the latest Marvel film, Thunderbolt, debuted to a tidy $165 million worldwide, you can see the inklings of that strategy starting to pay off. Thunderbolts doesn't feel like most of the rest of the heavily Cgi-eyed fare that MCU typically serves up. It's a smaller affair both in terms of feel and in name recognition. Gone are Captain America in Iron Man and in their place steps Florence Pugh as Yelena Bolova and a JV squad of anti-heroes that even the most ardent of comic book fans would be hard-pressed to recognize.

Starting point is 00:12:20 But critics and fans actually like this new Marvel movie precisely because it feels distinct. Thunderbolt's director Jake Schreier said, when I first started on the movie, Kevin Fagie said, Make It Different. It all adds up to a movie that feels like a breath of fresh air for a cinematic universe that was becoming woefully stale and represents a glimmer of a new Marvel, one that makes fewer TV shows and more standalone stories that don't require an instant. encyclopedic knowledge of previous MCU fodder release on Disney Plus to actually understand. You're probably wondering how I got here. Well, in 2008, Marvel releases Iron Man, and that sets off one of the greatest cinematic runs in history from 2010 to 2019. They turned out 21 movies.

Starting point is 00:13:05 Every single one of them was a smash hit. They averaged in the box office about $1 billion. and the apex of this was the crowning achievement of Avengers end game. That was also the year around that time when Bob Agar, the CEO of Disney, started rolling out plans for Disney Plus, their streaming service, and he looked at Marvel and said, wow, people really like that. We should put a ton of Marvel content on Disney Plus. So he went to Kevin Feigy at Marvel and said, give me a lot of content. So Kevin Feigy and his team worked really hard to produce a ton of content.

Starting point is 00:13:39 And they just got stretched too thin. and the quality deteriorated not only on TV, but also in the movies. So they need to hit the reset button. It looks like we're starting to see the fruits of that labor start to come with this particular movie Thunderbolts. And part of the greatness of the MCU

Starting point is 00:13:54 is also its biggest vulnerability in that Faggy had an immense creative control over everything that went through the Marvel Cinematic Universe. And so he would have the final creative say, he would have the final editorial say, he would be in the edit bay with people and saying, hey, we need to reshoot this,

Starting point is 00:14:10 we need to cut this. And so as you expand, you start to see these demands on his attention where quality starts to fall. And, you know, the quote that came out of this big Wall Street Journal piece was the strategy just became expansion, expansion, expansion. And when there's only one Kevin Faggy, that becomes an issue because he's a major bottleneck as well. And he has told friends that he felt that the need to be an excellent corporate citizen and, you know,

Starting point is 00:14:34 step up to the plate when they want to execute this expansion strategy. And it was just very obvious to anyone who went to see a Marvel movie. that the quality just went off a cliff. I mean, I was talking about my experience seeing Ant Man Quantum Mania, and it was like the worst movie I've ever seen, and that was supposed to be this next big setup for its next big, you know, expansion, set up the big bad villain. So it's just one of those things where it was too much of a good thing. And so Thunderbolts is trying to be a much different feel, a much different strategy,

Starting point is 00:15:04 you know, stop relying on the, on the big named characters of Yore and try something different. That being said, they do still have the heavy hitters waiting in the pipeline. Robert Downing Jr. is coming back as Dr. Doom somehow in their next movie. So they are trying to recapture some of that old magic. But it's been a rough couple of years for Marvel, to say the least. Up next, we have our winners of the weekend coming your way. Wireless can feel like a world of traps. But not with visible.

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Starting point is 00:15:57 See Visible.com for plan features and network management details. Excema is unpredictable. But you can flare less with Epiglis. A once-monthly treatment for moderate-tissaphyr. After an initial four-month or longer dosing phase, about four and seven people taking ebbglis achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. Ebglis, Librikizumab, LBKZ. A 250 milligram per 2 milliliter injection is a prescription medicine used to treat adults in children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema.

Starting point is 00:16:31 Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies. can be used with or without topical corticosteroids. Don't use if you're allergic to Epglyss. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with Epgless. Before starting Epgless, tell your doctor if you have a parasitic infection. Ask your doctor about Epglus and visit abglis.com or call 1-800 LilyRX or 1-800 545-979. Welcome to Winners of the Weekend, the segment where Toby and I picked two things that nearly had as epic a weekend as sovereignty who won the Kentucky Derby, I won the pre-show podcast Derby,

Starting point is 00:17:12 so I get to go first. And my winner is the stock market because investors are laughing in the face of danger. In spite of tariffs, recession warnings and swirling uncertainty, the S&P 500 closed Friday having gained for nine straight trading sessions, its longest winning streak since 2004. The index is now a hair above its level from Trump's Liberation Day tariff announcement on April 2nd, which sent stocks plummeting, and it's down just 3.3% year-to-date, a big comeback from its bare market. Wall Street pros are puzzled by the stock surge, given that, A, no trade deals with other countries have been announced yet, and B, earning season hasn't really offered much in

Starting point is 00:17:51 the way of optimism. Dozens of companies have scrapped future guidance, and around 25% of them have mentioned the word recession up from 2% last quarter. On the flip side, recent economic data has come in pretty good. The April jobs report on Friday showed a healthy labor market, with the U.S. economy adding 177,000 jobs beating expectations. And both Trump and China have signaled that some sort of de-escalation in the trade war could arrive soon.

Starting point is 00:18:18 It all makes for an extremely confusing economic picture, but investors appear to be keeping calm and carrying on. Yeah, just a little context index is still down more than 7% from its all-time high, but what a run we have been on. and a lot of it has been led by retail investors, according to Vanguard net buyers of stocks, outnumbered net sellers by a ratio of four to one amongst self-directed investors over this last little run we've been on. So that is, you know, the retail traders, the Reddit people saying, hey, buy the dip, which has become a very popular refrain. And the S&P 500 Vanguard ETF actually saw

Starting point is 00:18:53 $21 billion in inflows last month, which was the most in its 15-year history. So clearly it was institutional investors kind of rotating out, whether it was by algorithmic trades just automatically, you know, making adjustments here and there. But retail investors said, hey, we haven't seen, obviously that nine and a half percent dip we saw on Liberation Day may have been overstated a little bit and have been piling into stocks. Again, it's just a one-month sample size. I feel like Warren Buffett's on my shoulder right now saying zoom out, which he actually did talk a little bit about it, that these recent market volatility haven't been anything in the grand scheme of things. But it has been interesting to see retail investors step up to the plate here. My winner of the weekend is Tim

Starting point is 00:19:34 Fridi because he might have the most valuable blood known to mankind. Fridi is a man who quite simply loves letting snakes bite him. Over 18 years, Fridi has injected himself with venom more than 650 times and endured roughly 200 bites from the deadliest snakes in the world. As such, his blood now contains powerful antibodies that, according to a landmark study published on Friday, provided various levels of protection from 19 different deadly snake species. He started on this crazy journey in 2001 and nearly gave up until he met Dr. Jacob Glanville, the CEO of biotech startup Centivax, who knew how to turn his hardcore science experiments into a viable protection from snake bites, which, to be clear, is a major worldwide issue.

Starting point is 00:20:21 According to the New York Times, snake bites kill 140,000 people a year and injured nearly half a million figures that are both thought to be vast underestimates. So if Fridi's blood does yield a mythical sort of universal anti-venom, that is a lot of lives saved. I'm really proud that I can do something in life for humanity, Fridi said, for people 8,000 miles away that I'm never going to meet. Neil, have you heard of a more hardcore story? Very hardcore. Not all heroes wear caves. Some just get bitten by extremely venomous stakes hundreds of times and save a lot of lives in the process wild that this was happening and we didn't really know about it. But it is a landmark study because these particular antibodies and the antivenom that they have created applied to

Starting point is 00:21:08 such a wide variety of snake species. And we know how to create anti-venom now, but it just targets one particular snake species or toxin. For example, cobras and mambas produce toxins that paralyzed neurons, but then the venom from the venom from the viper family rips up tissues, causes you to bleed to death. So there's a wide variety of the ways that really venomous snakes can kill you. And to create this widely applicable antibody anti-venom is a huge breakthrough in science, which is a very big public health problem. And what's crazy is that the way anti-venom is made hasn't been changed in over 130 years.

Starting point is 00:21:47 We still do it the same way, which is you inject a small amount of venom into a larger mammal, like a horse, a camel, or a sheep. and then you harvest the antibodies that were produced in response to that injection of venom. And you're right. The issue is that most venom are just so, most anti-venoms are so particular to the snake that they treat and that they do not, there's no universal application of them. And so if you can find this super blood that Fridi has created over time through just sheer force of will, by the way, he's like, I am not a real scientist.

Starting point is 00:22:18 I was just doing the best I could with no real end in sight either. because a few scientists had sampled his blood before, but they never made any stride. So if it wasn't for this magical pairing of, you know, Dr. Glanville with Fridi, we wouldn't have this anti-venom at all. So just truly a crazy story, a lot of people over the weekling going, this is the most hardcore I've ever seen. But it looks like Freezy is going to save a lot of lives. It's Monday. So per MBD tradition, here's your preview of the major events coming up this week. The Fed is holding its meeting.

Starting point is 00:22:49 And Chair Jerome Powell is pretty much a lock. to maintain his wait and see outlook and keep interest rates steady, despite President Trump's urging to lower rates. The Fed, much like everyone else in the business world, is trying to navigate a deep fog of uncertainty, and Powell has repeatedly said he needs more clarity on the direction of the economy before making a move. Traders are betting the first rate cut won't come until July.

Starting point is 00:23:12 Yeah, they think there's a 98% chance of rates being left unchanged. And a big reason of that, we kind of gloss over it in that earlier story, was that very strong April jobs data, 177,000 jobs added, which was ahead of an expected, 133,000 jobs. So despite everything that's going on with the economy, again, that underlying data seems pretty solid, which is enough for Jerome to say, let's keep things where they are. Right here in a federal courthouse in Manhattan, the sex trafficking trial for Sean Diddy Combs will begin today with jury selection.

Starting point is 00:23:42 The one-time King of the Rap world was arrested last September and charged with racketeering, sex trafficking, and transportation to engage in prostitution. prosecutors claim that for over two decades, Diddy orchestrated a scheme to abuse and rape alleged victims to, quote, fulfill his sexual desires. Diddy has pleaded not guilty to all counts against him, but if convicted, he could face life in prison. Toby, this trial is going to be everywhere for the next couple of weeks.

Starting point is 00:24:07 Which is why jury selection is going to be difficult because most of the potential jurors are going to know who Diddy is and know something about the case. And so the judge will determine who gets excused for cause, for knowing too much or having preconceived notions about things. While attorneys for both sides will also have a certain number of strikes when it comes to jurors, which can be used strategically as well. So all this is to say, before we actually get into the case, jury selection is going to be a major storyline.

Starting point is 00:24:33 The Met Gala is tonight. And if you've managed to snag a $75,000 ticket to the A-List Museum fundraiser, you'll be expected to go viral in an outfit inspired by the theme tailored for you, which honors black dandyism throughout American history. The co-chairs of Anna Winter's fashion extravaganza are Farrell Williams, Coleman Domingo, Lewis Hamilton, and ASAP Rocky, while LeBron James gets a participation trophy as the honorary co-chair title. Personally, I hope hair and makeup tune in to learn a thing or two, but yes, pretty excited to see the fits this year, as always, especially co-chair Coleman Domingo, who absolutely just rips fits

Starting point is 00:25:11 every single time he walks out on the red carpet. It's another busy earnings week on Wall Street, headlined by Disney Uber. and Palantir. Wednesday is the deadline, a long time coming, for needing a real ID to fly domestically. Don't have one yet. It's not the end of the world. You can still use your passport to get through security. Also on Wednesday, the conclave begins in Vatican City to select the next Pope. So if you need to contact a powerful cardinal, do it now. My vote is for Ralph Fines. I hope he becomes Pope this year. He deserves it. He can do it. Good luck, Ralph. And finally, in sports, the second round of the NBA and NHL playoffs are kicking.

Starting point is 00:25:48 off headlined by a Nick Celtics matchup that begins tonight. Toby, favorite storyline so far. Well, honestly, just all the game sevens that we've gotten recently across hockey and NBA as well, it's just been a lot of entertaining stuff. Though I'm not a fan of in the NBA playoffs, there was a game seven that started after

Starting point is 00:26:03 the next round had started. The NBA playoffs are just too dang long. All right, let's wrap that up there. Thanks so much for starting your morning with us and have a wonderful start to the week. Want to get in touch with us? You can. Send an email with any questions, comments, or feedback on the show to Morning Brew Daily at MorningBrew.com. Let's roll the credits. Emily Bealiron is our executive

Starting point is 00:26:23 producer. Raymond Loo is our producer. Our associate producers are Olivia Graham and Olivia Lake. Scoop Stardaris is on audio. Hair and makeup is snake bitten. Devin Emery is our president and our show is a production of Morning Brew. Great show you. Aeneal. Let's run it back tomorrow. Relax and let Ralph's delivery handle your grocery shopping this week. We start with only the freshest items. Then review your list and carefully choose. choose each one. Then we pack it all up and deliver it in as little as 30 minutes so you can feel confident it's what you ordered. Fresh groceries, your way with Ralph's delivery and pickup. Get free delivery during online deal days plus $30 off your first online order. Ralph's,

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Morning Brew Daily - Warren Buffett Plans His Retirement & Welcome to SpaceX City?

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