$350K to Flee the Middle East? & Target Has a Plan to Win You Back

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0:38Toby Tatum:Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Target's channeling Fun 101 to turn around a miserable stretch.

0:46Neal Freyman:Then McDonald's and Burger King are beefing over new beefy burgers. It's Wednesday, March 4th. Let's ride.

0:58Toby Tatum:Coming up this Sunday, Americans will spring our clocks an hour forward for daylight savings time, knowing full well we'll have to switch them back come November. But in British Columbia, they're switching the clocks on Sunday and then never changing them again. The Western Canadian province, home to Vancouver, announced it is adopting year-round daylight saving time, citing the need to reduce disruptions for families and provide an extra hour of daylight in the evenings. Premier David Eby said that the people of British Columbia made it crystal clear that the clock switching wasn't working. In a 2019 report, 93 % of participants supported daylight savings time across the year.

1:34Toby Tatum:Here in the U.S., various bills have been floated to make daylight savings time permanent, but they've gone nowhere. Apparently, it doesn't have to be that way.

1:42Neal Freyman:93 % of people supported this, but scientists are not part of that 93%. They actually prefer not daylight savings. They prefer permanent standard time. The American Academy of Sleep Medicine actually called for the abolition of daylight saving times in 2020 because they're saying that it's less healthy for you. It increases traffic accidents. It increases risk of stroke and cardiovascular events because more sun in the morning and more darkness in the evening actually better reflects sleep cycles. So it is very fascinating, though, how everyone else is like, nah, I would actually much rather have my afternoons a little bit more sunny than have better sleep hygiene.

2:19Neal Freyman:Gene, where do you fall in this divide? I feel like we've talked about this ad nauseum, but I just want to hear.

2:24Toby Tatum:Totally depends on if you're a morning person or an evening person. The evening people want it to be laid out as much as possible so they can do as much stuff in the evenings. But if you're a morning person, you're up at six or seven or four like us, then I think you want to optimize for it being as early as possible in the mornings. But I understand that that is not the way most people feel. It just feels dark whenever we're coming to work, leaving work, it's just dark all the time. Then again, daylight savings time is the best if you want to get as many rounds of golf in a day as we do. I'm sold.

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3:34Toby Tatum:To learn more, head to bland.ai.mbd. That's bland.ai.mbd. Markets were red, but not deep red yesterday, as Wall Street hung on every headline coming out of the Middle East, where a war has been ongoing since the U.S. and Israel attacked Iran on Saturday. Yesterday brought escalating attacks on U.S. embassies and diplomatic targets, with Iran going after the U.S. consulate in Dubai and the U.S. embassy in Riyadh, Saudi Arabia's capital. Earlier in the day, as you heard on Tuesday's MBD, stocks were down real bad, but pared those losses by the afternoon. Oil spiked as much as 8%, but also came back down to Earth, still climbing more than 4 % on the day.

4:13Toby Tatum:Investors were breathing a sigh of relief after President Trump made assurances around transit through the Strait of Hormuz, the world's most important maritime choke point that connects Gulf energy with the rest of the world. Trump, sensing he had to do something to calm soaring energy prices, said the U.S. would provide risk insurance to ships passing through the Gulf, and the American military would escort tankers to ensure safe passage. On Monday, an Iranian commander threatened to set fire to any ship that tries to traverse the strait, while basically no ships are currently passing through at the moment.

4:43Toby Tatum:So big picture, where are we? From the past few days of trading, it appears that Wall Street views the war as having mostly insignificant impacts on the economy, with some potential for serious damage should the Strait of Hormuz stay closed for much longer, sending an energy shock around the world. Goldman Sachs came out saying that inflation could go substantially higher if the war goes on for longer than expected. But Toby, I want to start not in the Middle East or the U.S., but somewhere very far from both of those places, South Korea.

5:11Neal Freyman:Yeah, South Korea had a rough one in the markets over the past few days, really. The KOSPI, which is kind of their flagship index, had its worst single-day decline ever on Wednesday. The Korea exchange had to temporarily halt trading for it multiple times because some of their biggest stocks have been falling precipitously. SK Hynix, Samsung, two names that have benefited very well from the AI trade are down double digits. And the reason why South Korea was hit so hard is one, they have very high single name concentration in the index. The two names, SK Hynix and Samsung constitute almost 50 % of the entire index.

5:49Neal Freyman:So two companies have a massive sway over it. And then also Korea is very acutely sensitive to oil price spikes. They are a very major oil importer. They have a manufacturing heavy economy that is very vulnerable when you see crude prices spike like this. So when you take into account the fact that there is an oil crisis seemingly far away in the Middle East, it still definitely trickles down to an economy like South Korea. And we saw it reflected in their market performance.

6:19Toby Tatum:Most of the oil that comes from the Gulf is going to Asia. It's not going to the United States. Still, we are seeing reactions here in the United States as well in the form of a gas price increase. The average price for a gallon of gasoline jumped 11 cents overnight yesterday to about$3.11. That is the largest single day increase since March 4th, 2022, right after Russia invaded Ukraine. And this is what happens when oil prices go up. 60 % of the price you pay at the pump reflects the price of crude oil. So almost instantaneously, you see gas prices go up in reflection of higher oil prices. It does take weeks and months to eventually see all that filter through the system.

7:01Toby Tatum:But you're seeing an almost immediate reaction from what we're seeing in the Middle East here at your local gas station.

7:06Neal Freyman:We're also seeing some interesting things happen with safe haven assets throughout the market because we saw stocks, gold, and treasuries, all traditional safe haven assets, kind of falling simultaneously. But one thing is going up right now. That is the U.S. dollar. The Bloomberg dollar spot index has rallied one and a half percent so far this week of 16 major currencies tracked by Bloomberg. Only the dollar was positive. And this was not something that a lot of people expected because we've been hearing all about the debasement trade and how the dollar is at threat of being the world's reserve currency.

7:38Neal Freyman:But right now is what is happening is traders are fearing that inflation could come back because energy prices are going up. That is going to make treasuries less attractive. Plus, the U.S. is a net energy exporter, while most economies are net importers. All of these things lead to asymmetry that benefit the dollar. So a surprising winner of this conflict has been the U.S. greenback.

8:03Toby Tatum:And one of the maybe surprising losers is luxury stocks. They are among the hardest hit sectors on Tuesday. Shares of LVMH, Caring, Burberry, just all the stuff that we can't afford to buy have been tanking this week. They're down all about 10 percent. And that's because the Middle East has been one of the main drivers of growth for luxury companies. China demand has been waning. The U.S. demand has been waning. But one place where they can still sell their wares is the Middle East. And there's also something that investors like to say is the feel-good factor. And when people feel good and are optimistic and are hyped about the future, that's when they go spend on luxury stocks.

8:42Toby Tatum:And so when there's a war going on, it has a more negative outsized impact on these kind of companies.

8:48Neal Freyman:And then finally, one storyline to pay attention to, we were actually just scrolling through the New York Times' most read stories about the war. And the top story right now is how the wealthy are fleeing the Middle East right now because is private jet prices are just astronomically high right now. They're always astronomically high, but they've surged to roughly three times normal. If you want to catch a flight from Riyadh to Europe, that is$350 ,000 right now. So people are trying to get out. Dubai's airport is largely closed. So how else can you get out? Some people are driving to Oman and flying from the Muscat airport.

9:23Neal Freyman:Some people are driving to Riyadh from Dubai, which is a 10-hour drive alone. and then you have to pay for the flight. So one thing to, I don't know, keep an eye on is wealthy travelers are scrambling to get out of this region. Moving on, Target reported earnings yesterday and it was unlucky number 13 for the struggling retailer. Its comparable sales fell 2.5 % in the quarter, marking the 13th consecutive quarter of weak or falling sales. Net profit was down 5.1%. Number of shoppers down as well. Everything was falling, everything except its stock, which rose nearly 7%. Why? Because new CEO Michael Fidelke has a plan.

10:04Neal Freyman:Fidelke took over on February 1st after starting his career as a Target intern back in 2003. And now he's rolling out a$6 billion plan to make Target competitive again. He's allocating$2 billion towards revamping stores, including sprucing up some locations which haven't seen a facelift in 15 years. The in-store experience will be guided by the framework of Greet, Help, Thank, which is the LinkedIn version of Eat, Pray, Love. Then he wants to do a category-by-category overhaul from home goods to apparel to grocery. For instance, by June, Fidelke hopes to turn over 75 % of Target's home decor lines to recapture some of that knick-knack magic that it used to channel.

10:43Neal Freyman:In short, Target doesn't want to be known as an everything store anymore, according to Fidelke, but is instead betting on busy families to drive its turnaround. Neil, sort of an odd framing there, but is he on target?

10:56Toby Tatum:Well, we won't know for a while. I mean, these things take years. He even took a season or two for Mike Frable to bring the Patriots back to the Super Bowl. Kurt Signetti took three years to take the Hoosiers to the national championship. We have more evidence. There's more stories in the business world of the new Starbucks CEO taking some time to implement their changes. And only one, two, three, four years down the line do you start to see improvements if the plan is working. I think it is smart by Fidelke to say we are not the everything store and focus on what Target has typically done best.

11:28Toby Tatum:He's rolling out this thing called Fun 101, which focuses on trends in sports, gadgets, games, and pop culture. And yes, they are targeting this population. I was going to say niche population, but it's a large population of busy moms and dads and really leaning into baby care by rolling out these things like baby concierges to help people find stuff for their little kids. So it seems like a smart play overall. But I think the number one thing to pay attention to is just the money. They are spending money to make money. They are going to spend$2 billion this year on store improvements and hiring more staff in order to make these stores a place that you want to go back into again.

12:04Neal Freyman:But they do recognize that, hey, we have missed the mark in almost every category lately, specifically home goods, because that is where Target had a lot of its magic over rivals like Walmart. And right now, their new SVP of Home, who joined last fall, said, Our home business has not delivered to its potential point, Blake. So they want to remodel everything. They want new products coming through. This is also happening in the apparel section as well. They're trying to have trendy clothing hit shelves faster. They're going very heavily into the Western look right now with cowboy hats and fringe jackets and embroidered jeans.

12:36Neal Freyman:So if you've been low on embroidered jeans lately, Neil, you can go to Target to pick those up. They are expanding. It's a baby division. And then grocery has been a surprising bright spot amid the sea of darkness. It had 8 % average annual sales growth since 2019. Half of Target shoppers are already going to their stores to shop for groceries. So I think they're going to lean into that. More private label. This playbook has been run by others like McDonald's, or not McDonald's, by Walmart before. So I think they're just saying, hey, why don't we just do the thing that we know works and try to get people to shop for groceries at Target?

13:11Toby Tatum:I am low on Western wear, but I'm not low on graphic tees from Target because I think I think I bought their entire selection when I was in junior in high school and still somewhere around my house. All right, moving on. Yesterday marked 100 days until the start of the World Cup. But in the lead up to the world's biggest sporting event, the competition on the pitch is the last thing people are talking about. Let's get this part out of the way. First, the upcoming World Cup hosted in the U.S., Mexico and Canada is guaranteed to break all kinds of records in terms of viewership, attendance and revenue.

13:41Toby Tatum:FIFA president Gianni Infantino, ever the hype man, predicted it will be, quote, the greatest event that humanity, mankind has ever seen or will ever see, which maybe doesn't sound so hyperbolic when estimates show that six billion people, about three quarters of the world's population, will tune in in some form. But with outsized interest comes outsized controversy. While the World Cup is supposed to be an event that brings the world together, it's arriving at a time of significant geopolitical unrest. President Trump, the winner of the inaugural FIFA Peace Prize, is at war with Iran, which is slated to play in the tournament on American soil.

14:16Toby Tatum:In Mexico, cartel violence near Guadalajara, a host city, has officials stressing it's safe to a worried public. Meanwhile, domestic divisions in the United States are holding up necessary funding for World Cup venues, which are about to embark on the biggest homeland security operation the country has seen in decades. Toby, I think I could digest all this a lot better if the U.S. team was any good.

14:35Neal Freyman:Save us, Wesson McKinney. Let's start with just the geopolitical turmoil. Iran not only is at war with the U.S., but it has also attacked many other World Cup participants. Qatar, Jordan, Saudi Arabia, these are all countries that are wrapped up in this conflict but are also playing in the World Cup. FIFA tries to stay politically neutral. Now, you might say, have they done a great job of that lately, giving a made-up peace prize to President Donald Trump? Maybe not, but they're in a very difficult position right now. So there's a lot of open questions on this front. Could some of Iran's games be moved to Canada or Mexico if they play in the tournament at all?

15:13Neal Freyman:If Iran does drop out, then who comes in and it takes their spot? There's a whole security threat associated with Iranian games at this point as well. So just a cloud hanging over this tournament that didn't need another, you know, controversy to deal with.

15:28Toby Tatum:And another controversy besides the geopolitical stuff is what's happening here at venues in the United States that are supposed to host these World Cup games. There are 11 or 12 of them. They are waiting for$625 million worth of security funding that was doled out in the One Big Beautiful Bill Act last summer. They haven't seen a penny of it. And they say we absolutely need this. The reason they're not getting it is because, remember, there's a partial government shutdown still occurring. And this this money has not been doled out. The the host of the Miami committee said within the next 30 days is the drop dead date for receiving the funding or else they're going to have to start to cancel some of those fan fest or other events that are happening around the game.

16:09Toby Tatum:He said it would be catastrophic for our planning and coordination for them to not get this money. So they are pleading with the U.S. government to dole out the$625 million. And meanwhile, something's happening in Foxborough, Massachusetts, where the where the Gillette Stadium is that is straight out of Veep or Parks and Rec. The local select committee there just held by regular regular Boston dudes is holding up game is holding up, handing out a license for FIFA to play in its stadium because they say they want. They are on the hook for eight million dollars in security funding. And they say, we're not paying it.

16:44Toby Tatum:We're just here in Foxborough. We allow the Patriots to play, but you didn't come to us and ask for this money. So we are holding up, giving you the license. You're not going to be able to play unless someone comes through with$8 million in funding. So you have these local Foxborough guys going against FIFA over$8 million in funding.

17:00Neal Freyman:Foxborough is holding FIFA hostage right now. It sounds like a horrible Ben Affleck movie coming down the pipeline. All right, we're going to take a quick break and come back and talk about burgers right after this. Cyber attackers these days don't need exploits. They'll just use your allowed tools against you.

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