Banks Thriving Despite Crisis, Magic's $6B NFL Deal, Meet the NYC Rat Czar

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1:04that I'm low-key getting nervous for the future of humanity, Neil. Low-key goaded. Then we'll finish off the show by introducing you to the hero New York City deserves, the new rat czar. Let's ride.

1:27All right, Toby, it is time for another low-key Friday tradition. Fast week, slow week. It's Friday morning. Was this a fast week or a slow week? The slowest week on record so far. Wow. I don't know why. I think it was because the weather turned and it started getting warmer midway through the week. And it felt like summer was here. Your metabolism slowed down. Yeah. It just everything slowed down to an absolute standstill. So it was a slow week for me. I am a little divided. First part of the week was so slow. Second part of the week, super fast. So it's kind of a wash. It's a tie. And unlike Donovan McNabb, I do know that ties exist in this world.

2:06You can't hedge your bets like this. So I'm going high because it's 50-50. Okay, that's fair. Looking forward to next week. All right, Neil, let's jump into our top story for today. We were up early this morning and watched as the bank earnings flowed in. Side note, we appreciate the banks for reporting their earnings so early, so we have something to talk about on this show. But what did we learn? The overall trend in bank earnings is that deposits have been flowing in from the smaller regional banks like SVB and Signature into bigger banks like JP Morgan, Citigroup, who reported earnings today.

2:39So that's the good news for big banks. The bad news is that they've kind of been forced to pay up as customers shift their money into these higher yielding accounts like money market funds. And we'll actually touch on that a little bit later. But first, I want to jump into the specific earnings from some of the banks that I mentioned. So first, J.P. Morgan crushed it. It's the biggest bank in the U.S., so everyone was kind of looking to it to see the health of the ecosystem. They exceeded revenue by over$3 billion. Their profit jumped 52%. The only downside was the IPO market is still a little soft, so the investment banking division is not doing as well as it typically does.

3:20But overall, their CFO said the banking system is in good shape and things are looking better now. So that was good from JP Morgan. Wells Fargo didn't crush it, still did well. Brought in$20.7 billion in revenue versus a$20 billion estimate. So just squeaked by and also increased their net income by more than 30%. So another pat on the back for Wells Fargo. And then finally, Citigroup, kind of the same boat as Wells Fargo. Good, but not outstanding. Exceeded expectations, brought in 21.5 billion versus 20 billion expected. So overall, all these banks were up between 3 % to 7 % in pre-market trading.

3:58So pretty much a pretty good, I'll give them an A minus. Oh, I was going to go B plus. A minus because JP Morgan did so well and they're the biggest. But especially given the banking turmoil and everyone was kind of looking to these banks for stability and to make sure that everything was okay. I think they obviously passed that with flying colors. Though people were saying that this banking crisis was only going to benefit them, and it seems to have done that. Yeah. But what else is benefiting them, and you touched on this, is that higher interest rates. The Fed has been hiking interest rates for nine straight meetings now, and that is seen as benefiting banks.

4:31Banks like it when you raise interest rates because they can charge more interest on the loans that they give out to businesses and people, whatever. They pay you some interest on the deposits that you put in them, but there is this gap that is called the net interest income, which is what they charge for loans and what they pay out for loans. And that gap is only getting wider. For JP Morgan, it was nearly 50 % increase from a year ago. So they're just raking in the cash because they can charge more because of higher interest rates. Yeah, I think it's so interesting how the narrative changed around these big banks of like, now we're hoping for them to make more money and do well because it means the banking sector.

5:11Well, it's just, I mean, I just presented those in a very positive light because we wanted the banking sector to be stable. But yeah, it's interesting that the interest rates hiking is only making these bigger banks bigger, only making them make more money, and everyone is breathing a sigh of relief from it, which is interesting. Although I do want to touch on, it is a bit of a rock and a hard place right now for these big banks because even though they are making more money, loaning money out, they have to kind of stay competitive in the market with these money market funds that I touched on that are offering, I mean, Wealthfront, one of where you, this is not a Wealthfront ad, but where you have your money is offering over 4 % in yield.

5:57And so why would you ever put your money in a checking account that's yielding 1 % a year, less than 1 % a year, if you can get 4 % somewhere else? This is definitely not investment advice, but if you have your money in a savings account that's only returning like 1 % right now or just in a checking account, There are, as interest rates have risen, there are all of these different money market funds and robo-advisors that are offering much higher yield, giving you free money because there is a much higher interest rate environment. So I would say go check those out. For sure. And then just overall taking a zoom out to the earnings season, banks just kicked it off.

6:34This is seen as the first day of earnings season where companies report their Q1 results. and obviously look, we know that earnings reports probably don't matter to the average person, but you can look for patterns between what CEOs say and I'm sure there's gonna be a lot of AI talk and so we can like draw connections there and connect the dots. And then also there are probably some surprises that will move the stock market in certain directions. The example I always go to is that Snapchat goes first of all the social media companies and they say the digital ad market is bad And then every other social media company plummets like 20 % right after Snapchat goes.

7:12So that is sort of like the upside downside surprise that sometimes happens during earnings season. But yes, I will say Toby and I will make sure that you know all the important earnings that come out. And we won't talk about the unimportant earnings. That's our guarantee to you. That's our guarantee. All right, let's move on. Josh Harris is assembling an Acela Corridor sports empire. The owner of the 76ers in Philadelphia and the New Jersey Devils in New Jersey has reached an agreement in principle to buy the Washington Commanders for$6.05 billion from current owner Dan Snyder. He's leading a group that also includes billionaire Mitchell Rails and former NBA star Magic Johnson, who's a very prodigious sports owner in his own right.

7:56Right. So if signed, it will be the most expensive purchase of a team in sports history, topping the$4.65 billion paid for the Broncos last year. I mean, it feels like overpaying, honestly, because we know that the Commanders is historically, I mean, not historically, but in the last 20 years under Dan Snyder has been one of the worst franchises in the NFL. They were literally voted the worst franchise to play for by players when you take into account the facilities, the ownership, how the players are treated. So paying$6 billion for that feels a little expensive. It's valued the same as Manchester United is, which just feels like a much bigger club in the worldwide scale of things.

8:35But it just goes to show you how much these prices have inflated due to these television deals from the NFL. And yeah, Snyder bought the team in 1999 for$800 million. All right, so he did well with the growth of the NFL. But also, this was a controversy-laden throughout many, many years. He was being investigated for workplace misconduct, allegations, and sexual harassment from over 50 former employees. There was a tough about season ticket holders with Washington, D.C. Attendance is so bad. 58 ,000. I think it's the worst in the NFL. Crazy. From 83 ,000 in 2010. So they have an actually a really crappy stadium in Landover.

9:15I've been there. It is not good. Yeah. There's more Eagles fans there when the Eagles play the Commanders. So I was actually looking into like, who is Josh Harris? Is he well-liked? And by looking into it, that means I asked our producer, Emily, who's a big Philadelphia sports fan. And basically he's not the most popular guy in Philadelphia because one of his big missteps was during the COVID pandemic. He made the move to cut staff member pay who anyone who made over$50 ,000, he was cutting their pay because they weren't bringing in as much revenue as they normally do. horrible idea just from a PR perspective actually fun fact Joel Embiid the 76ers center stepped in and said hey I'll make up the difference in contract which caused Josh Harris to kind of roll it back yeah so he's not exactly a benevolent his biggest pro is that he's not Dan Snyder so yeah and then Magic Johnson is now a will soon be a co-owner in in an NFL franchise and he already He owns the Los Angeles Sparks.

10:15He owns. Co-owns. Co-owns Los Angeles Sparks, Major League Soccer Team LAFC, and he's a co-owner, minority owner of the Dodgers. And he used to own the Lakers. They all have won championships too. So, Commanders fans, if you're listening, you got magic on your team, you'll probably win something. Okay, Neil, we mentioned this at the top of the show, but we got a hefty, hefty AI rundown to talk about. So, you may not have heard about this one unless you hang out on AI Twitter, which is basically just Twitter at this point. Auto GPT is one of the more powerful AI tools we've seen yet. Essentially, as the name suggests, it allows you to carry out tasks autonomously.

10:56So I'll give some examples. It's self-sufficient, meaning you can tell it to schedule an Instagram post. And it not only will it schedule an Instagram post, it will write the caption without you manually telling it to, and it'll post it for you. So it's got, it's like this mini assistant that you can tell to do whatever you want. And it can do everything from write code and then debug that code and try again. So it's basically, it's a wild development in the AI race because you don't have to babysit it. You just tell it what to do and it's off on its way. The problem it's solving is that for ChatGPT, you have to ask it a million questions to get the answer that you want and constantly refine your prompt and be like hold its hand a lot and it doesn't have a great memory.

11:39So it does remember what you asked for it. And then so you get an, what are they called? Autonomous agent. Just, yeah, like a personal assistant. Go tell ChatGPT to do this thing. And then it works on a loop, constantly refining questions, constantly asking ChatGPT to do stuff. And then eventually you have this desired outcome. It's wild. Yeah. Some of the jobs that they say at risk are social media managers, SEO experts, and customer service is a big one, too. Because it knows how to pull the relevant data and answer customer questions in multiple languages, too. it's wild one of these things is called baby agi i kind of like that that's a good one we're a week into these things too which is crazy like they just really started getting steam a week ago so it's wild now we'll zoom out to another ai news amazon has joined the ai game with some with their aws aws amazon web service um they have these plugins via api that they're offering that they essentially allow customers to do what chat gbt does on a small scale but on an enterprise scale so you can do things like uh create these chat bots that people are doing using gbt you can use stable diffusions image generator but they're just offering an enterprise solution for their aws members it feels like they had to enter the ai race who knows how i don't know big this will be we'll actually see how many enterprise customers end up paying for something like this but But it is just indicative of the direction that every company is going, that Amazon is jumping on the train as well.

13:11My takeaway from all of this is that next year, we will not be saying the words chat GPT. We'll be saying like Bloomberg GPT or Walmart GPT or Microsoft Autopilot. Because what you're seeing now is everyone's building on top of these chatbots. You don't even need to use GPT for OpenAI to make your own chatbot. Bloomberg trained its own chatbot on its financial data. So it released Bloomberg GPT this week that, you know, is more focused on business and finance and can give you better answers than ChatGPT can on things like who is the Citigroup CEO and is this headline bullish or bearish on this particular stock?

13:55So you get these way more specific use cases for GPTs that chat GPT is actually not that good because it tries to do everything. It's scraping the entire internet. But if you can say only scan retail data for Walmart or only scan financial data for Bloomberg, then these things become really powerful because they have more specific uses. Yeah, much more precise. Not our last AI rundown we're going to do for sure, but a meaty one at that. Okay, before we jump into our next story, we're going to take a quick break.

14:28This message may be shocking to many millennials. If you are one, you might want to sit down. Right now, loads of people are searching the following on Depop. Low-rise jeans, halter top, velour tracksuit, hookah shell necklace, disc belt. You likely placed these in the dark of your closet in 2004, never to be seen again. But if you can find it in yourself to dust them off, there are a lot of people who will give you money for them. Sell on Depop, where taste recognizes taste.

15:27All right, it's time for our Friday segment, Stock of the Week and Dog of the Week. Toby, I'm going to kick it to you for our disclaimer. This is not financial advice. We already gave this disclaimer. Two in one show. We've got to love that. But this is not financial advice. We are just humble podcasters. All right, for our first Stock of the Week, this is a stock that did really well, LVMH. Luxury never goes out of style, Toby. And I know, look at me. wearing a sweatshirt that's five sizes too small. LVMH is the French luxury conglomerate and the owner of Louis Vuitton, Dior, Tiffany, and a bunch of other luxury brands.

16:04After topping earnings in Q1, its stock jumped and it joined the list of the top 10 most valuable companies in the entire world with a valuation of$486 billion. It's the biggest company in Europe also, and its owner, Bernard Arnault, is leaving Elon Musk in the dust in terms of the world's richest person. He's now worth$210 billion, and Elon Musk is now worth about$180 billion. So I guess you should make handbags instead of rockets. It's crazy to me how big LVMH is. I actually did Google this, too, because France is obviously the hotbed for luxury market. And it turns out the four largest companies in France are all luxury brands.

16:44So what big tech is to the United States? Exactly. Clothing is to France. Fashion and luxury. I never knew you could make that much money off of this. I know. This is like Facebook, NVIDIA level money. To me, it's kind of like Apple where like you, it is this premium product, but it's people, the demand is there so they can just charge like these pretty high prices. And so Apple's the biggest company in the world, even though it deals in physical goods. It is a wild, just that this company is as big as it is. And we should say that growth recently has been to do with China coming out of COVID restrictions and they love luxury over there so they're scooping up a ton of lvmh gear uh and that has been sort of the win behind uh lvmh's back recently that's our stock of the week our dog of the week is actually not a publicly traded stock uh this is our show so we can bend the rules in whatever way we want it's the pant maker bonobos who recently sold to whp global which is this big retail brand aggregator for$75 million.

17:46But wait, this is dog a week. $75 million? That's kind of a lot of money. No, wrong. Walmart initially purchased Bonobos back in 2017 for$310 million. So this was not a good outcome. And they originally brought the brand as kind of their expansion into the e-commerce game. They wanted to go toe-to-toe with Amazon. Hasn't quite panned out that way. And this is kind of indicative of the general, I don't want to say failings of Walmart's e-commerce strategy, but they're kind of taking a step back and like re-jiggering their entire strategy because Bonobos does not fit in with it anymore. Yeah, I don't know.

18:25Bonobos just doesn't have any emotional pull to me. And I think in an apparel company, you have to have some sort of emotional connection because anyone can make a chino pant. and so I just don't, I don't know, Bonobos was big in 2017, 2018. Everyone, all my friends were buying Bonobos khakis and stuff and you have to really stay on top of the trends. We've seen it with Allbirds, we've seen it with a bunch of other apparel companies. If you don't kind of evolve and stay hip to what's going on, then you just become an afterthought and you get, your valuation is reduced from$310 million to$75 million.

18:57Big fashion Stock of the Week, Dog of the Week for Neil and I today. We're getting in the fashion week do you disagree about bonobos i don't i all i will say i do have a pair of of bonobos and they fit incredibly well and like a good fitting pair of pants yeah especially for guys is like the holy grail so you get one and you wear it for like five years so i i don't i don't hate them but i haven't bought any of them right so maybe my assessment is that should never have been worth 310 million place in walmart was a desperation move they also bought jet.com for 3.3 billion and that doesn't even exist anymore yeah all right so this is actually a big news yesterday the fbi arrested the man who allegedly leaked a highly classified u.s intelligence docs to the internet sparking a ton of international drama uh but it was not exactly who they thought it was a 21 year old junior member of the massachusetts air national guard named jack tachara tachara does not fit the profile of a leaker like edward snowden who wants to expose US military surveillance of its citizens.

19:58It seemed like he was just trying to impress his friends online. He was the ringleader of a group on Discord called Thug Shaker Central. These are basically kids who hung out on this server during the pandemic when they were lonely, and Teixeira, who was known as the OG, wanted to teach them about what was going on in the world. Kind of like what we're doing. He just wanted to be us. So naturally, the thing is, he had access to classified documents, and he uploaded them to this server to give his friends a social studies lesson in what was going on in the world and what was going on in the Ukraine military battlefront.

20:31And someone else posted it to another Discord server and then it was over. Yeah, the cat got out of the bag. My biggest takeaway is these freaking kids, man. What this made me think of is, do you remember the Lapsus hacker group? This was from back in 2022 where this gang of cyber criminals called Lapsus hacked Microsoft, half Okta, which is this big password manager, hacked NVIDIA, kind of took down all the big boys. And then news leaked that they were all teenagers. One of the ringleaders was a 16-year-old from Oxford, England. So it's kind of ridiculous that these kids are literally just messing around on the internet.

21:12And it's almost like they don't understand the real world repercussions of their actions. And this case is a prime example of that. Who knows? He wasn't trying to, yeah become edward snowden he wasn't trying to make some grand political point he just wanted to be cool for his friends and look at what happens he was let out in handcuffs it seemed like he knew what he was what that he was doing was wrong right obviously he's not without blame but it is like i don't think he understood quite the risk that he was taking on maybe also when you were talking about the kids i remember remember when twitter got hacked like michael bloomberg elon musk right uh big really really really huge accounts obama that was a 17 year old i remember They're all just messing around.

21:53Yeah. The kids these days. So this is sparking a little controversy because the U.S. government said it wants to start closely monitoring social media sites. And people are like, no, we do not need the U.S. government surveilling more American citizens. They don't want to patriarch to an overreaction to this. And so but the problem is discord is kind of a hotbed for illicit activity, hackers, malware. This is just discord. That's its vibe. It's for gamers and illicit activity. Right. Is it a private channel? Your private messages aren't as private as you think, but Discord wants their members to feel the freedom to discuss what they want.

22:33So you're right. It is going to be a testy moment of, I wonder if we'll see legislation coming down the pipeline. All right. Let's finish with just the most Friday story of all Friday stories. I want to introduce our listeners to New York City's latest public servant, the rat czar. So Kathleen Karate was introduced to the public by Mayor Eric Adams this week, who described her as a maestro who would successfully coordinate New York City's attempts to address their rat problem. She came in guns blazing with a monologue that have rats shaking in their tiny furry boots. And we have a clip that will play for it.

23:20Pizza rat may live in infamy, but rats and the conditions that support their thriving will no longer be tolerated in New York City. No more dirty curbs, unmanaged spaces, or brazen burrowing. There's a new sheriff in town. And with your help, we'll send those rats packing. Who is the audience for that? Us. We're giggling after it. It's cringe. It's the rats. Any rats that hear it. This is so stupid. This is not a problem. I don't think so. I mean, it is a problem in certain areas of the city. You don't want rats on your curb. Okay, but it's a very simple solution. Don't put garbage out or put garbage out in just an hour or two over the course of the day so that it gets picked up in time.

24:06If there's no food, then there's no rats. All right. Very simple. I should be the rats. The rats, my ass. I don't know. I care about what about affordable housing. You don't hear people leaving New York because they're rats. You hear people leaving New York because they can't afford a home. so the fact that they're really hyping this up i get it there it's a whole pr shtick uh about rats but but rats new york is not even the rattiest city in the u.s that's chicago i know but i do think it's a quick win for mayor eric adams uh and no one's gonna be against like getting rid of rats no one really i mean i guess you i i guess no one's on the side of we like the rat problem is totally fine here but i don't want to vilify them yeah this is like genocidal language big ratatouille guy right here.

24:49All right. That is our Friday show. Hope everyone has a good weekend. What are we doing? Golfing. Golfing. Coachella's going on. You can always reach us at morningbrewdaily at morningbrew.com. We'll be checking our emails all weekend. That's for sure. Let's roll the credits. The show's producer and editor is Emily Milliron. Our technical director is Yuchenna Waugu. Our supervising producer is Bryce Beloff. Uber Batista. Thanks for waking up, my boy. and Raymond Liu, our associate producers. James Atamian is our sound guy. Hair and makeup is at Coachella, actually. Devin Emery is our chief content officer.

25:26Our show is a production of Morning Brew. Great show today, Neil. I wish you well.

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