Americans Are Spending Like No Tomorrow & Dell Surge Lifts Trump’s Portfolio

0:29Ready to soundtrack your summer? I'm Neil Freiman. And I'm Toby Howell. Today, JPMorgan's salami incident is its latest tabloid scandal. Then on your left, OpenAI, Anthropic now has a bigger valuation than its chief rival. It's Friday, May 29th. Let's ride. Good morning and happy Friday. Anyone catch the spelling bee last night? N-O? Well, it was electric. Trey Parikh, a 14-year-old eighth grader from California, defeated 12-year-old Ishan Gupta of Jersey City in a sudden death spell-off to win$50 ,000 in his final year of eligibility. When the heavyweight battle was deadlocked after the ninth round, the judges declared a spell-off, which means these kids had to spell as many incredibly obscure words as they could in 90 seconds.

1:16Shrey nailed 32 of them, the most in a spell-off ever, while Ishan managed 25. Toby, in this age of AI, it's nice to know that the kids are still reading books, even if it's just memorizing the dictionary. I loved the shootout style finish, which is a little controversial because purists say it rewards speed and memorization rather than, you know, tricky vowel combinations. But since it was a spell off, there's no real one word that won him the title. Scripps has said officially it was Bromocryptine that won him the championship, which obviously means, Neil, say it with me. A polypantide alkaloid that mimics the activity of dopamine.

1:52Yeah, of course you knew. I don't know what it means, but I sure as heck can't spell it either. I implore you guys to watch a video of the spell off because Shrey is listing out letters faster than I can say any words. The only thing slowing him down was the host trying to pronounce the words that he was giving him. And now, Neil, I am going to put you on the spell. Spell Bromocryptine. No one wants to hear me do that. I think you can do it. I think you can do it. Bromocryptine? Bromocryptine. B-O-B-R-O-M-O-C-R-I-P-T-I-N-E. You nailed it. You actually got that right. Watch out, Shrey. Watch out, Shrey.

2:26Okay, now a word. I'm feeling good about myself. Now a word from our sponsor, LinkedIn Ads. Toby, how do you generate return on ad spend? Spend to spend. Easy, Tiger. If you don't optimize spend in the right way, it can easily be bull spend. See, impressions, views, and reactions don't always lead to return. That's why LinkedIn Ads helps you invest in what looks good to your CFO. They generate the highest ROAS, 121 % of all major ad networks. Reach the right buyers with LinkedIn Ads. you can target by company, industry, job title, and more. That way you can avoid the not-so-fun conversations with your CFO.

3:01Spend$250 on your first campaign on LinkedIn ads and get a$250 credit for the next one. Just go to linkedin.com slash mbd. That's linkedin.com slash mbd. Terms and conditions apply. There's only a few things you can count on in life. Diners, drive-ins, and dives, reruns, and American shopping like their Carrie Bradshaw. Retail shares popped off yesterday after reporting that customers continued to spend, even as the war in Iran drives gas prices higher and savings get depleted. Dollar Tree up 18%, Best Buy up 16%, and Kohl's surged 20 % upon revealing the surprising resilience of the American consumer.

3:37But resilient in this case also means choosy. Retail execs noted that customers were opting for value and affordability over everything else. So it's no surprise it was the budget retailers like Dollar Tree and Kohl's that are being overrun with shoppers from all income spectrums. Cole's CEO, Michael Bender, was the most explicit about the conversations going on in American homes right now. He said, right now our customer is sitting around their kitchen table trying to make life work. It's the combination of how do I pay for gas, food, light bill, all the things that are necessities, and with what's left over, which retailer is the one that's gonna help me stretch my dollars as far as I possibly can?

4:13For more people, it is Cole's. The company posted its best comparable sales performance in more than four years, But all that spending has taken a bite out of savings. In fresh data released yesterday, the U.S. personal saving rate dropped to 2.6 % in April, down from 3.2 % in March, 4.3 % in January, and 5.6 % from a year ago. So now we're at the lowest savings levels since mid-2022. So Toby, it was a real shocker seeing these retailers report booming sales, but they definitely sounded a little anxious that the good times won't last. Yeah, Americans are burning through their cushion at an alarming rate.

4:49they are spending faster than income is growing. So when that happens, of course, your savings are going to be drawn down. The big story here, though, is is it good or is it bad that Americans are spending in this way? And Treasury Secretary Scott Bissett has argued that low savings rate could actually reflect some good things because that means consumers are confident they're going out. Maybe they're putting more money into the stock market. They're not hoarding cash because what do people do during times of recessions? They do hoard cash, and so savings rate goes up. So just because low savings is out there doesn't mean it's inherently bad.

5:24But then you look at what they are spending their money on. It's not like they're going on these luxury vacations. They're not spending on superfluous goods. They are spending on stuff they need, necessities, gasoline, all these things that have become more expensive recently. And that's not necessarily good if gasoline is the thing that's bringing down your savings. And that was pretty stark in Costco's earnings. They also reported yesterday the CEO said they saw record breaking volumes for gas in the fiscal third quarter for the final five weeks of the quarter were Costco's top five volume weeks ever.

5:57So Costco is known for cheap things as well as cheap gas when you become a member and people were just flocking to Costco gas stations. Costco also saw 12 percent sales increase from the past year. Another thing that's guaranteed his life is Costco beating revenue earnings revenue expectations. So you're right. There is a debate about whether a low savings rate or a high savings rate is indication of a healthy consumer because during the 2008 financial crisis, the savings rate was above 8 % and now we're at 2.6%. Right now, it seems like people are just paying a ton for gasoline. I do think that Best Buy was the weirdest company during this earning cycle though, because yes, you can paint the story that Dollar Tree is doing well because people want to save money.

6:40Costco is doing well because people want to save money, but Best Buy doing well, that was a little confusing to me because electronics and these things are not necessarily necessities, but their kind of take on it was that consumers will spend on discretionary products if they feel necessary, if there's innovation attached to it. So gaming consoles, mobile phones, these are all things that sold well at Best Buy still. And it does, to me, show that the American consumer is relatively strong still because those are not, you know, your bread and butter necessities. I mean, you could argue in today's day and age that a cell phone is just that, but big picture, it does seem like the consumer is a lot more price sensitive.

7:17They're a lot more deal focused, but they are still spending even though that spending is burning through their savings. Moving on, it took a funding round that reached midway through the alphabet, but Anthropic has officially passed OpenAI as the world's most valuable AI startup. Anthropic raised$65 billion in a Series H round at a roughly$965 billion valuation. A few comparisons courtesy of Fortune to put that number in perspective. That is roughly the GDP of Switzerland, more than the combined market cap of every U.S. airline and more than the entire U.S. defense budget. It's also sort of breaking VC nomenclature.

7:56A unicorn is a$1 billion startup. A Decacorn is a$10 billion startup. Anthropic is now flirting with a valuation that does not have a name, a Megacorn, a Trillicorn. Left in the dust is OpenAI, who last raised at a paltry$852 billion valuation, as Anthropic's popular coding tool, CloudCode, has spread like wildfire and pushed its competitor off the top of the AI startup heap. Anthropic said its ARR crossed$47 billion this month. That is up from a reported$4 billion in July of last year. Neil, there's been some chatter about how companies like Uber or Microsoft are pulling back on their AI spending as it balloons in costs and hasn't led to sufficient ROI.

8:40And yet, Anthropic investors seem undaunted and almost turned it into our first trillion-dollar AI startup outside of some weird Elon company combining stuff. This is one of the fastest growing startups ever, and it's got to feel good for the Amadei siblings. Back in 2021, they were working at OpenAI, and Dario and his sister Daniela, Dario is now the CEO of Anthropic, and Daniela is the president of Anthropic. They left OpenAI because they were worried that OpenAI wasn't concerned about AI safety enough. So they started Anthropic and baked safety into the very core of the company, and their mission continues to be, quote, safely guiding the world through a technological revolution that has the potential to change the course of human history.

9:22Now, for many years, OpenAI was the face of an AI startup. They released ChatGPT. They got everything going. But now it feels like Anthropic has surpassed them, not only in valuation, but in just being the reputational and just the public image of AI. And they've just been in headlines everywhere. They've been fighting with the Pentagon. They They released Mythos, which was this AI model for cybersecurity that they said was too dangerous to release to the public. And then Pope Leo earlier this week issued that AI encyclical, this big letter that was talked about everywhere, who was with Pope Leo but an anthropic executive.

9:59So they've sort of taken the mantle from OpenAI in just four years that OpenAI has been around for a lot longer. This valuation is crazy, too, because I mentioned a Series H round. You never get to a Series H round. That is a very rarefied error, not necessarily good or bad. It's just very few companies make it that deep in private rounds. Facebook, Slack, Lyft, and Discord are a few that you may have heard of. Databricks recently raised a series I, J, and K, but they only hit a$134 billion valuation. So Anthropic is an order of magnitude larger than them. And I also talked about the unique moment we're in right now in AI, where a lot of companies are going, is this worth it?

10:40They're laying off workers in order to afford their AI spend. So some questions are raising around if this is going to be a profitable endeavor going forward. Axios recently told this anecdote about a client who spent half a billion dollars in one month on Claude code usage after failing to cap that. That is$500 million just going to Anthropics, you know, ARR right there. And so that's not sustainable. Like no one can keep that spending up. So maybe some of these revenue figures are inflated by this unique moment in time of token maxing where these companies are saying, use AI however you want, where a lot of people are just using AI to check the weather.

11:21It's like bringing up a Ferrari to go pick up your groceries. It's way too much horsepower for what you need. So maybe this is the peak of the AI hype cycle, or maybe it's just another round on its quest of world domination. But almost a trillion dollar private startup is a moment in time that we have to just like take a minute and say, holy moly, this is quite the moment we're living through. Moving on, it's Stock of the Week, Dog of the Week time, the segment where we pick one stock that immediately unpacked their suitcase after a long trip, and one stock that let it sit there for an anxiety-inducing amount of time.

11:54I won the pre-show game of who can pull the perfect espresso shot, so I'm up first. And my Stock of the Week is Dell, which just reported its fastest revenue growth since 2018. Dell is not just a company who makes boring PCs anymore, though they still do that. Their AI server business is flying with revenue jumping 757 % since last year. Dell buys GPUs, then gussies them up to get ready for hungry AI companies to use. And that infrastructure business is crushing. Its full year AI revenue forecast is now$60 billion. Dell also got a major assist from the man in the White House. President Trump became a Dell shareholder earlier this year, buying over$1 million of the stock, according to his personal filings, and piled on the support saying, go out and buy a Dell at an event earlier this month.

12:45Then the Pentagon signed a five-year, nearly$10 billion contract with Dell this week to cap off a whirlwind of support from Uncle Sam. It all adds up to a great week for the stock, with earnings, the Pentagon deal, and Trump support powering it to a 75 % gain over the last five days. Yeah, Michael Dell and Trump are kind of BFFs and it's paying off for Dell, it seems. One of the reasons that Dell and Trump are so close is that last December, remember, Michael and his wife Susan appeared alongside Trump and then they announced an investment of$6.25 billion to Trump accounts, which is this investment program for children.

13:24That was actually launched yesterday. So everything was coming up, Dell, yesterday. This is considered the largest ever private commitment devoted to American children, $250 to about 25 million American children, just seeding an investment account. So wherever there is Trump, there is Dell. And whenever there is Dell, there is Trump. And there are a lot of questions being raised about whether Trump is pumping the stock because of the fact that he now owns over$1 million worth of it as of Q1. And now that 1 million, at least 1 million is worth a lot more after Dell's stunning stock search. And the company itself though is doing very well.

14:01I mentioned like their PC business, which feels like an afterthought. That beat on revenue that rose 17 % to$14.5 billion. But again, that business is just so far from the main thing that Dell does at this point. It's server business is just crushing it. It jumped 750 % year over year. That is insane. They're implying 144 % growth going forward for the year. It now has over 5 ,000 AI server customers, everyone from just big enterprises to these neoclads that want to spend up their own cloud business. Dell is really good at just the nuts and bolts of setting up a server farm. You need a lot. You can't just put a GPU in a room and say, make an AI happen.

14:43You have to wire them together. We've talked about how fiber optics is a big part of it. All the stuff that goes into setting up servers, Dell has been doing long before the AI revolution came. And now it's just finally their moment in time. But, yeah, it's fascinating to see. When I think of Dell, I think of just the computer monitor that's sitting on a desk not doing much. Now it's an AI infrastructure company. Yeah, Trump got up there at the podium a couple weeks ago. He was like, go out and buy a Dell. And Michael Dell is probably sitting there being like, well, that's fine. But actually, don't buy our computer.

15:13Just buy a bunch of servers from us. All right, we're going to take a quick break and come back with our Dogla Week right after this. Toby, what if I told you you had to pay me$1 ,000 right now? I'd be in deep trouble. Well, you would be in the same boat as a lot of employees in the U.S., and that can lead to decreased productivity and distractions. Thankfully, Affleck can help. Affleck pays claims fast, accurately, and fairly at no direct cost to businesses. Plus, Affleck plans can save businesses and employees tax dollars when payroll deductions are withheld pre-tax. To learn more, just head to aflac.com slash morningbrewdaily.

15:46That's A-F-L-A-C dot com slash morningbrewdaily. Neil, I've got something pretty big on the Verizon. You mean Horizon? Nope, pretty sure that's not a real word. But the Verizon Visa card helps eligible Verizon customers get more from everyday spending. You can earn 4 % rewards on gas, groceries, and dining. Redeem rewards toward Verizon bills or devices with no annual fee and unlimited rewards with no expiration. For a limited time, new cardholders can get up to$150 cash back. Just head to verizon.com slash morningbrew to learn more. That's verizon.com slash morningbrew. Neil, have you ever wanted to create a meaningful project beloved by millions of people?

16:31You mean like a daily podcast with your friend? No, something way cooler than a podcast with your coworker. For those with real vision to create, there's Minimax. It's a full stack AI lab building frontier foundation models across text, voice, video, and music. From indie developers to global enterprises, Minimax models are available via API and ready to build with today. To get started, just head to minimax.io. That's minimax.io. My dog of the week is JP Morgan, because with so many scandals piling up, it's not clear whether this is a bank or a beach house. In the latest addition to JP Morgan's hot tabloid summer, dubbed the Salami Incident, the largest firm on Wall Street was ordered to pay$4.25 million over a Super Bowl deli platter that cost just$642.50.

17:23cents. Here's what happened. In February 2024, a longtime JPMorgan broker based in LA named Brent Ryan Bodner expensed a spread from a local deli that included buffalo wings, sandwiches, pickles, and some cookies. According to his lawyer, Bodner wanted to turn a watch party for the Chiefs and Niners into a client prospecting shindig at his house, but ultimately only his cousin, a client, and her businessman boyfriend RSVP'd. Someone at JPMorgan must have flagged a deli platter because the bank investigated the expense report and fired Bodnar, claiming that the report implied the meal was eaten at the deli, not at his home.

17:58He both misstated the purpose and location of the gathering, a J.P. Morgan spokesperson said. But Bodnar claimed wrongful termination, and last week an arbitration panel overseen by the Wall Street watchdog Finra took his side, awarding him a$4.25 million sum out of J.P. Morgan's pocket. Toby, the salami incident comes on top of a megaviral story involving an ex-JP Morgan banker accusing a colleague of using him as a sex slave. Not exactly the kind of headlines Jamie Dimon wants to be making. First of all, I feel bad for Bodnar, not because he was terminated or wrongfully terminated, but because when you throw a party and you buy a deli platter and only two people show up, that has got to feel awful right there.

18:40You really misread the room when it came to how How many people wanted to come to your Super Bowl party? But the heart of Bodner's claim is that J.P. Morgan had already decided to fire him before the investigation into the salami incident ever concluded. And he said that bank employees moved, quote, like vultures on a carcass to decide to divide up his client book. So Bodner managed almost a billion dollars in client money. And the fact that they already had someone coming in, a retention team to split up those clients to move to other parts of J.P. Morgan showed that this was not about a deli platter incident.

19:16It was more about, you know, trying to get Bodnar off the payroll. And so they could divide up his book right there. But an insane, like the fact that we're saying Salamigate at all in conjunction with the biggest bank in the world, just the fact that we're saying the word Salamigate and then the biggest bank in the world is just not a good look for J.P. Morgan. No, and it's pushed back on Bonner and it doesn't like this ruling from FINRA as well. It said in every workplace in America, submitting an inaccurate expense report is grounds for termination. We vehemently disagree with FINRA's decision and are disappointed by this outcome.

19:49But they're probably focusing on Bonner a little less than this other thing that is happening, which has been percolating for weeks and months now. We didn't really talk about it on the show, but you may have seen it in the New York Post or all over your Twitter feed. Basically, there's a former banker of J.P. Morgan named Chirayu Rana, and he sued the bank and a former colleague, Lorna Hajdini, accusing her of allegedly drugging and sexually assaulting him over a long period of time. She has countersued. J.P. Morgan also said that this did not happen. This is a complete fabrication. So this is working its way through the court system.

20:25This week brought another twist when his lawyer, Rana's lawyer, Daniel Kaiser, just resigned from his position. He said, I'm gone. We don't know exactly why. But then the judge was like, actually, you have to stay on until another lawyer comes. So it must have been a little awkward in the courthouse on Tuesday when he had to show up on behalf of his client that he had resigned from. And he's like, OK, I guess I'm just a lame duck lawyer for you now. Meanwhile, Jamie Dimon has said JP Morgan is doing really well right now. They have a lot of excess cash on their on their book right now. and they say, we may be looking into an acquisition in the$20 billion range.

21:00So you have three headlines going simultaneous right now. Jamie Dimon's saying, we wanna buy something for$20 billion. Then you have this sexual assault case and then you have the salami plate as well. So just a lot of weird optics around at JP Morgan right now. Maybe you should buy TMZ to get a little better PR. Yeah, exactly. All right, let's sprint to the finish with some final headlines. Maybe you didn't have the best day yesterday, but I guarantee it wasn't worse than Jeff Bezos's. The New Glenn rocket from a space company, Blue Origin, exploded in spectacular fashion while conducting a hot fire test on a launch pad at Cape Canaveral, shaking homes nearby and causing a massive fireball that could be seen as far as Orlando.

21:38No one was hurt, and Bezos explained, it's too early to know the root cause, but we're already working to find it. Very rough day, but we'll rebuild whatever needs rebuilding and get back to flying. It's worth it. It's another setback for New Glenn. a troubled rocket that's been tapped to play a key role in bringing NASA astronauts back to the moon. But it was kind of an awesome explosion. I implore you to watch it. It was the biggest explosion I've ever seen on camera. And people were filming the explosion from their planes landing in Orlando Airport. Imagine looking off to, you know, your right and you just see this massive fireball in the sky.

22:13They're like, oh, Nolan's filming Oppenheimer 2. Right. It literally was that level. New Glenn is way behind schedule at this point because they were supposed to fly June 4th carrying 48 Amazon Leo satellites. Amazon is so far behind in the race to create this Starlink competitor. They need at least 24 Blue Origin launches to get up to the FCC requirement of how many satellites you need in orbit to, you know, offer internet connection to a lot of people. So that doesn't help with that. But the big thing here is not actually losing the rocket because you can rebuild a rocket relatively quickly in a few months these days.

22:49The launch pad, though, is so messed up at this point. One of the towers fell. One of the launch towers fell. The concrete is damaged badly as well. So that you cannot rebuild in months. And that's a very specialized and expensive launch pad. That is going to take a lot longer. So now the timelines are all out of whack for their commercial satellite business. But also, as you said, for the Artemis mission going to the moon. Moving on, the Trump administration wants to release a$250 bill featuring the face of Donald Trump. Treasury Department officials have mocked up a new bill commemorating the U.S.'s 250th birthday that would have, at its center, the president's portrait, which would make him the first living person on U.S.

23:28currency in more than 150 years. U.S. Treasury Secretary Scott Bessent defended the move yesterday, saying, I don't think that there's anything untoward about having the person who is president of the United States on the 250th anniversary bill. There's just one problem. It's against the law. Federal law says that only the portrait of a deceased individual can appear on U.S. currency and securities in a measure dating back to 1866. Toby, Trump portrait or not, a$250 bill would be dangerous for me in a casino. I want to talk about this 1866 rule, though, because it has a very funny origin story.

24:03So a Treasury official during that year somehow managed to get his own face on a five-cent note, by the way, which is crazy. We're already up to$250 notes. And since then, no living person has appeared. But I do think it's very funny that this guy was printing money. He's like, wait a second, why don't I just put my own self on it? And so that rule was passed down and it has been held very sacred since that moment. But it does speak to Trump loves to put his name on lots of things we talked about. Trump accounts, everything is like Trump X in the government at this point so the money question is of course you would try to put his own face on a 250 dollar bill and they're trying to get this to actually happen right bills and congress and the senate to actually move this forward because that's what needs to happen to turn around this law that our boy our mid-level bureaucrat in 1866 uh the fast one yeah yeah finally virginia losing to umbc mike tyson losing to buster douglas michigan losing to appalachian state none of those famous upsets can hold a candle to what happened yesterday at the French Open.

25:07Yannick Sinner, the number one player in the world, lost to Juan Manuel Cerundolo, the 56th ranked player in the world, but the details are even worse. Sinner arrived at Roland Garros as the prohibitive favorite to win the tournament after his arch rival Carlos Alcaraz had to withdraw. But what was supposed to be a cakewalk to the final turned into a code red, not because of his opponent across the net, but because of extreme heat. Sinner won the first two sets easily and was a single game away from winning the third and final set, but then his body essentially shut down from playing in temperatures that exceeded 90 degrees Fahrenheit.

25:46I kind of just hit a wall and that's it, Sinner said. Neil, odds on Sinner falling this early in the tournament were essentially zero. Pre-match, Sinner was a minus 50 ,000 favorite on DraftKings, which means a$50 ,000 bet would yield just$100. At one point during the third set when he was up 5-1, the odds exceeded minus 10 ,000, a 99 % chance of him winning, and yet he lost. I mean, this is a thing. His chief obstacles have been, number one, Carlos Alcaraz, and number two, heat and cramping. Back in the Australian Open, sorry, was it this year? Back in the Australian Open earlier this year, he lost to Djokovic, which was 100 degree heat, And then he also had to retire in China for the Shanghai Masters last year because of soaring heat.