A New Southwest Air Arrives & US Dollar Dips to 4-Yr Low

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0:33Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, why did Amazon pay$75 million for the Melania documentary?

0:42Neal Freyman:Then you won't believe how much money Southwest expects to make off its seating changes. It's Friday, January 30th. Let's ride.

0:54Good morning and happy Friday. Major announcement incoming. President Trump said he's going to reveal his pick to become the next Fed chair this morning, and all signs indicate it's going to be Kevin Warsh. Warsh is a former Fed governor who was actually passed over for the job in 2017 by the current Fed chair, Jerome Powell. He's known for his previously hawkish views on inflation, which means he supported higher interest rates, though in recent months he's publicly called for lower rates, likely a key factor in securing Trump's support. If nominated and confirmed, takeover for Powell, whose terms ends in May.

1:29Neal Freyman:How did the market react to this breaking news? The stocks fell, treasury yields rose, and the dollar also rose. The trades basically reflected speculation that Warsh is going to be a little less enthusiastic to cut rates than maybe other candidates would have been. But as you said, that tune changed of late. So then it leads to some questions about, is he driven by data or is he driven by who's in the presidency? Because if you change your tune after many years of being hawkish on monetary policy to suddenly being dovish and much more amenable to rate cuts, then you're saying, what do you actually stand for, dude?

2:04Neal Freyman:But the market's kind of trading on what the body of his career work has been rather than his recent change to being more open to rate cuts. We'll see. Anyway, you never know with Trump. He actually could change his mind as of this morning, but it's looking like goodbye, J-Pow, and hello wars and now a word from our sponsor sandals neil what do you look for in a vacation i just want to go somewhere where i can relax read a good book by the pool and clear my head a bit is that so much to ask wow man you sound pretty stressed which is crazy because you get to spend every day with me but sounds like you'd also like sandals resorts get away from it all at the caribbean's best beaches powdered white sand and turquoise waters and not a worry on your mind.

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2:54Neal Freyman:There is no better place to experience the Caribbean than at resorts founded by a family from the Caribbean. The winter blue sale is now on. So visit sandals.com for the best all-inclusive value in the Caribbean. That's sandals.com. Apple still hasn't figured out its AI strategy, but you know what's better than AI? An iPhone. and they sold a lot of them last quarter. Reporting earnings yesterday, Apple notched its biggest sales jump in four years, a result Tim Cook called staggering. While everyone else in the big tech world was plowing money into AI build-outs, Apple pulled in$143 billion, up 16 % from a year ago, and a record for the company.

3:35Neal Freyman:The profitability stood out too. Apple posted net income of$42 billion, the most money ever made in a single quarter by any public company ever. It did it thanks to Old Faithful. iPhone revenue surged 23 % as people took a liking to the 17th edition of the best-selling product ever. The strong results also stand out even more when considering, A, everyone and their mother is trying to kill the iPhone right now with some AI gadget of their own, and B, software-focused companies are getting demolished right now as the market scrutinizes all the money they are spending. The one sneaky surprise from Apple was an announcement before earnings.

4:11Neal Freyman:it acquired a startup called Q.AI for$2 billion, which helps devices to interpret whispered speech and enhanced audio in noisy environments per TechCrunch. Neil, Apple's earnings feel a lot different than the rest of the big tech world. Tim Cook just bought himself a lot of time. We know that Apple's transition to AI or its investments in AI have not gone as well as the rest of the industry. Siri is still a debacle. And so the pressure was on Tim Cook to deliver a very solid quarter, and he did. So now Apple has a lot of money and a lot of resources thanks to this booming iPhone sales to throw at AI, and they can do it over a longer time horizon than maybe investors initially wanted.

4:52What stood out to me, actually, was that product revenue growth outpaced service revenue growth. And that's very interesting because a lot of growth for Apple in the recent years has come from just squeezing more money from its existing user base by selling them services like Apple Health or Apple Music. But product growth came in at 16 % year over year, and service revenue expanded about 14%, which shows that Apple is still selling people products and gadgets and hardware that they actually want.

5:21Neal Freyman:Yeah, Mark Gurman, who covers Apple for Bloomberg, put it well. He said, the iPhone absolutely crushed it. The new designs worked. The new colors worked. But then he also put a word of caution out there. He said, this shouldn't change the overall need to have a reckoning to ensure they are a key part of future in AI hardware software and services. So I think buy Tim Cook time is a great way of framing it because all the question marks are still out there, but now they have, it's clear that their products are still making money. It's still, it was a gangbusters quarter for their core business. So you can't be too mad at a company for doing what it does best.

5:55Neal Freyman:But let's talk about the toe that it dipped maybe into the AI world with this sort of surprise acquisition for$2 billion of this AI startup. It interprets whispered speech. What does that actually mean? What does QAI actually do? And apparently it's going to feed into maybe a wearable strategy, a AirPod strategy where you're in a crowded room. You could talk on the phone without really talking out loud. What's also fascinating about this company is the CEO also sold a startup to Apple a few years ago. In 2013, he sold PrimeSense, which was a 3D sensing company for$360 million. Now he sold this Nexstar for$2 billion.

6:38Neal Freyman:Apple, just hire the dude. You could have saved a lot of money and a lot of heartache over the years. All right. So with Apple, that sort of rounds out the big tech earnings of the week. I would say Meta was the big winner. Their stock jumped 10 % because their ad business is absolutely crushing it and investors didn't really care about how much they're spending on AI. The biggest loser was clearly Microsoft. Microsoft shares were down about 10 % yesterday. It was a huge wipeout. It was a historic wipeout. It was Microsoft's biggest daily decline since March 2020. And one of the biggest stock market wipeouts of all time, Microsoft lost$357 billion in market cap.

7:16Neal Freyman:And it's not just Microsoft. It's just the entire software industry as a whole. 73 % of public software companies fell yesterday. atlassian it fell 12.2 percent it's in its biggest drawdown ever service now also fell 12 percent also now in its largest drawdown ever i mean microsoft literally setting market cap shaving records out there it is crazy we've spoken about a little bit how vibe coded apps have eaten into the software trade by saying maybe people could just go and code out their own solutions they don't need to invest in these big software companies anymore and also just ai spend in general, the market is kind of coming to a reckoning with how much money they're spending, which is, again, why Apple looks so different from everyone else, because they ain't spending much on AI at all, and suddenly that looks good to investors.

8:04Moving on, the documentary Melania hits theaters this weekend, and just about everything surrounding its release has defied industry convention. First, the movie Melania follows the intensely private first lady, Melania Trump, over 20 days in the lead-up to her husband's second inauguration last January. Now, the curiosities. Amazon paid$40 million to Melania's production company to secure the rights, which is basically unheard of for a documentary. In fact, it's the most Amazon has ever paid to secure the distribution of a single film. Then came a Super Bowl-sized marketing campaign. Amazon has thrown $35 million behind promoting the film, buying pricey NFL playoff commercials, and taking over the sphere in Las Vegas.

8:43A marketing budget of$35 million is roughly 10 times what other high-profile documentaries typically receive, according to the New York Times. Finally, the film will enjoy a wide release, coming to 3 ,300 theaters worldwide. The vast majority of documentaries do not get a release remotely close to this scale. Given how detached this all appears from market reality, critics are accusing Amazon of buying and lavishly marketing Melania as essentially a bribe to ingratiate themselves to the White House. Toby, how much money is this movie actually going to make?

9:12Neal Freyman:I mean, it's expected to make$2 to$5 million in its opening weekend, which is not a lot of money, but I guess it's a lot of money for a documentary. Amazon is trying to say that this is not obviously a B word. It is something that they bought because they think customers are going to love it. That, I guess, remains to be seen. Where this is a big departure from tradition, though, is that first ladies typically do not do this while they are still in the White House. That's not to say that after leaving the White House, they don't try to monetize their stories in a way. Often that comes in the form of a book.

9:49Neal Freyman:I mean, Michelle Obama wrote Becoming. Hillary Clinton also has written multiple memoirs. If you even go back to Eleanor Roosevelt, she sold her autobiography rights in 1937 for$2 million today. That faced a lot of criticism at that time. So this is almost something that has happened before, but never on this scale, never during an active presidency. And it's kind of throwing into question, like what is the first lady allowed to do? What should they do? What is the role of the first lady in modern society? All those questions are being brought up because Amazon is just spending so much money on this thing.

10:23And Melania herself is pocketing$30 million from Amazon's purchase of the rights. There's another angle here, which is who is directing the movie? And his name is Brett Ratner. He is best known for the Rush Hour trilogy. But back in 2017, he was accused of sexual misconduct by multiple women and was essentially canceled. Melania is his first feature film in 12 years. And it's not going to be his last because remember how Trump actually pushed David Ellison at Paramount to make a rush hour for? Well, Ratner is going to come back and direct that as well.

10:57Neal Freyman:Yeah, there's a reason why Ratner just suddenly became thrust into the public eye. And it really is this documentary. But then there's also some critique. is this even a documentary at all? If the subject of the film has producer credits, if they have editorial input, then does it just become myth-making? That is some of the criticism that most movie critics in general have shown. But a lot of documentarians are going, this just doesn't happen for our industry. It is really hard to make money, even with the biggest documentaries ever released. And now Melania is just completely bucking the trend because they never get these widespread theatrical releases.

11:35Yeah, so only five documentaries have ever made at least$75 million in North America. That's how much Amazon is paying for this. Those documentaries are Fahrenheit 9-11, which was in 2004, which is by Michael Moore. March of the Penguins, an absolute classic. And then the comp three music ones, Michael Jackson's This Is It, which I love that movie. Justin Bieber, Never Say Never, which I love that movie. And also, and finally, Hannah Montana and Miley Cyrus, Best of Both Worlds concert, which also I love that movie.

12:05Neal Freyman:I've seen the last two only. I haven't even seen March of the Penguins. Come on, Tim. You got to watch better documentaries. Moving on. So you may hate that Southwest got rid of its open seating and free checked bags, but man, do investors love it. Shares jumped the most since 1978 on Wednesday, surging 19 % after execs painted a rosy picture of what life will look like under their new strategy. While other airlines like Delta lean heavily on premium seats to drive profits, Southwest's egalitarian seeding strategy meant it was missing out. Delta raked in nearly$4 billion in profit last year. Southwest, just$512 million.

12:42Neal Freyman:But here's the wild part. For 2026, the carrier expects earnings to quadruple. CEO Bob Jordan said in an interview the changes moved Southwest from kind of mid-pack in terms of profit margins to top of the industry margins. Neil, for a long time, Southwest hung its hat on a no-frills flying model. Now it's looking a lot frillier and a lot more competitive because of it. When anything happens in the airline industry, any airline changes its strategy, I always go to Gary Leff, who writes this blog, View from the Wing. He is an airline industry expert who a lot of people look to for insights. He's not convinced about Southwest turnaround.

13:19He wrote, you would not expect a strategy of taking the most financially successful airline in history, which is Southwest. It had always turned a profit until COVID every single year for over 50 years, discarding everything unique about their business model and copying financial laggards, JetBlue and American. But worse, because they lack ACC power, seatback entertainment, functional Wi-Fi, first class lounges and ovens for hot meals on board to a recipe for success. So he is not buying what Jordan, the CEO of Southwest, is putting down by making these incremental changes that don't actually address what customers actually want to see in their airline.

13:54Neal Freyman:Well, CEO Bob Jordan is framing it in this way. He's emphasizing choice, saying that customers can buy the product that they want, which feels ironic because the earlier model also emphasized choice. Like you could have free reign over where you were seating. So that's one of the talking points that they're doing. And then the other thing that executives are kind of saying is that maybe customers don't care about all those things that Lef just mentioned because service quality and on-time arrivals are probably the two things that customers care about the most. So maybe we don't need CPAC outlets.

14:24Neal Freyman:Maybe you don't need in-screen entertainment. They just want their planes on time, and they just want it to be a quality experience overall. So Southwest had the lowest cancellation rate of any major U.S. airline last year. Maybe it'll just hang its hat on that. I think that doesn't vie with reality because the only two airlines that are doing well right now and have separated themselves from the pack are Delta and United, and they have all those things, all those features. There's seatback entertainment, Wi-Fi, lounges. They're the only two airlines that are actually making a lot of money right now.

14:56And Southwest is not exactly investing in those. Actually, the CEO did say that they were thinking about doing lounges. Southwest lounge, is that? I don't know. I never go to lounges in general.

15:06Neal Freyman:You're the lounge guy. So I think this is very funny, though. Like, we talked about Southwest ending open seating earlier this week. And I was very against it. You were like, ah, I kind of liked the, I like assigned seating. Now we've fully flipped on it after reading a little bit more about it. All right, we're going to take a quick break and come back with our Stock of the Week, Dog of the Week, right after this. Neil, have you heard of Public.com's newly launched Generated Assets? Yes. Helps you turn any idea into an investable index with AI. Start with any prompt, say renewable energy companies with high free cash flow or semiconductor suppliers growing revenue over 20 % year over year, and it'll get to work.

15:45Neal Freyman:Well, so much for surprising you, but the AI can screen thousands of stocks and will build you a one-of-a-kind index and let you backtest it against the S &P 500. Then you can invest in a few clicks. Just head to public.com slash morningbrew and you can earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash morningbrew. Paid for by public investing, full disclosure, and podcast description. Pretty much everybody is using AI agents these days to automate just about everything. I even made one to respond to all your emails and texts. That explains the deleted files, unauthorized changes, and nonsense messages I keep getting.

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17:47I won the pre-show Math Olympiad, so I get to go first. And my Stock of the Week is Zoom, not because people are video chatting more, but because it made a remarkably timely bet on an AI giant. Zoom stock popped 18 % this week after analysts at Baird announced a discovery. Back in 2023, Zoom's venture arm invested in Anthropic, the maker of the Claude chatbot, that's now valued at$350 billion. Zoom most likely sunk in about$50 million in Anthropic back then, meaning it could see a return of about 78 times its initial outlay. Barrett estimated that Zoom's current Anthropics state could be worth between$2 billion and$4 billion, and the biggest payoff is yet to come.

18:29The analyst wrote, Zoom is literally invested in Anthropics' clawed success, and as Anthropics IPO rumors accelerate, the investment could become even more meaningful. Zoom finding a bunch of billions in its back pocket couldn't come at a better time as it struggled to recapture the glory days of the pandemic. Shares began cratering in the summer of 2021 and are now down about 83 % from their COVID peak. Toby, this is like betting on the Patriots to reach the Super Bowl back in August.

18:53Neal Freyman:It's never actually a good sign if the biggest thing that makes your stock pop is the fact that you invested in another company. But I think Zoom will take any W that they can at this point. Others do have access to the golden goose of Anthropic, though. Amazon has a very large stake in Anthropic. They invested$8 billion back when the company was around a$60 billion valuation. Google has$3 to$4 billion in Anthropic as well. It's tough to know exactly how much they're worth now, but it is a lot of money. So this is a story that you can see play out on bigger scales with bigger companies as well.

19:28Neal Freyman:But I do want to shout out another company too, and that is FTX, the crypto exchange that imploded a few years ago. It bought an 8 % stake in Anthropic in an early round where it was valued at$500 million. So it had the earliest investment of all of them. It eventually sold that stake during bankruptcy proceedings for$884 million. Pretty good return. But if this next round of funding goes through and it values it at$350 billion, that investment alone would have been worth$28 billion. It would have been plenty to make all creditors whole. So, FTX, low-key, the best Anthropik investor of them all.

20:05Redemption for Sam Bankman-Fried. Can we talk about how insane this IPO slate is going to be this year? Not only is SpaceX planning to go public in the biggest IPO of all time, Anthropic is going to go public as well or wants to. And it's currently valued at$350 billion. Usually that's going to rise ahead of the IPO. So we're seeing like$500,$600 billion IPO. And then also the Wall Street Journal reported last night that OpenAI is laying the groundwork for a public listing later this year in Q4. It wants to be Anthropic to the public market. So potentially we could see SpaceX, OpenAI, and Anthropic all go public this year.

20:42The hottest club in New York City is going to be the stock exchange.

20:44Neal Freyman:My dog of the week is the whole damn US dollar because it just hit a four-year low. It spent all week falling compared to a basket of other currencies, bringing its total slide this year to nearly 10%. What does a weaker dollar actually mean? Well, it depends. If you're an importer of global goods, tough luck. It makes things more expensive. If you're an exporter, though, suddenly your doodads and trinkets are more competitive compared to your global peers. Most likely, though, you're not an importer or an exporter at all, but you are a traveler. A weaker dollar raises the cost of your overseas trips from hotels to flights to the doodads and trinkets that you buy abroad.