Biden's Plan to Help With Student Loans Launches & US Homes are Shrinking

0:01This message is brought to you by AppleCard. Apple Card members can earn unlimited daily cash back on everyday purchases, wherever they shop. This means you could be earning daily cash on just about anything, like a slice of pizza from your local pizza place or a latte from the corner coffee shop. Apply for Apple Card in the Wallet app to see your credit limit offer in minutes. Subject to credit approval. Apple Card issued by Goldman Sachs Bank USA Salt Lake City Branch. Terms and more at AppleCard.com. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. On today's pod, the UPS strike has officially been called off after employees ratified an agreement that gives them major pay raises.

0:39And Toby and I go Zillow surfing to uncover the latest trends in house design. Then IKEA is going against the grain by deciding to open a new store in a controversial city center. Plus, the shipping industry is testing out some brand new tech to get more efficient, which is actually centuries old. It's Wednesday, August 23rd. Let's ride.

1:04Toby, I have some exciting news for our listeners. You will all be able to confirm that we are, in fact, real people. Yep, Morning Brew Daily is excited to announce our first live event. On September 11th here in New York City, we are going to be hosting a screening of the new movie Dumb Money, which chronicles the meme stock mania during winter 2021, when Reddit traders successfully took down a multi-billion dollar hedge fund that had shorted GameStop. That Wall Street drama has been turned into a movie starring Seth Rogen, Paul Dano, and Pete Davidson. And Morning Brew Daily listeners will have the opportunity to watch it all together and hear Toby and me interview the producers of the movie.

1:43We'll have more details on how you can get tickets in the coming weeks. But Toby, I am so excited for this and to finally learn how to trade stocks. I know. This moment in time is just so burned into my memory. I had just kind of started working at Morning Brew. All hell broke loose. GameStop started going to the moon. and the movie itself looks amazing. I mean, Pete Davidson, Paul Dano, like these are the best actor of our day. Yeah, big name people. But I am definitely most excited about getting the chance to meet some Morning Brew Daily listeners. So far, the only Morning Brew Daily listener I really know is my mom and my grandma.

2:17So hopefully it's bigger than that. So we see your emails, we see your comments, but finally getting to meet you guys in person is going to be great. So yes, Neil, more info is coming. But for now, if you want to hang with us, catch the screening, maybe even meet hair and makeup, please send an email to Morning Brew Daily at Morning Brew dot com, indicating you're interested. That is Morning Brew Daily at Morning Brew dot com. Sound like a radio guy. Thank you. Take us away, Neil. All right, let's get to the news. In the several months we've been doing this podcast, we've discussed some major stories.

2:49But like your high school friend who moved to the West Coast, we haven't really checked in on them a while. So in the first section of the show, we're going to circle back, and I'm so sorry for using that jargon, to a few of those stories that have reached some sort of resolution this week. So first is the big student loan income-driven repayment plan that the Biden administration released last month called SAVE. That opened for enrollment yesterday, and the White House says it will slash some borrowers' monthly payments by 50 % and eliminate all obligations for others. As for the typical student loan borrower, you could save$1 ,000 per year under the new plan, though some benefits won't kick in till next summer.

3:27Just to note, this is different than the broad student loan debt wipeout that Biden had proposed because that got blocked by the Supreme Court in June. This save plan is just a more generous version of existing income driven repayment plans on the books. For example, it would reduce payments on undergrad loans to 5 % of discretionary income, down from 10 % to 15 % in plans currently available. So this is the Biden administration's way of saying, look, we may not have gotten our big cancellation plan through, but we're still looking out for you, student borrowers. We know you collectively owe$1 trillion, and we're trying to figure out a way to make that easier.

4:01Yeah, Biden's been ducking and weaving ever since the Supreme Court. The Supreme Court one was kind of a Hail Mary. This was the more dink and dunk, more sustainable plan from the beginning. So I think this is going to be huge for a lot of people still because a lot of people's payments will go to zero. And then also interest won't accumulate on a lot of different plans if your payment is near zero, which is huge because it was always interest. That was the thing that was you could be making your payment and still 10 years later down the line, you'd have more outstanding debt than you started with.

4:35So getting something to reduce those interest payments is definitely going to be huge for a lot of Americans. Right. This has definitely been a piecemeal approach since that Supreme Court stuff was the Supreme Court blocked this big one. But he's been has he has all these other programs going on, too. I mean, they've wiped out one hundred and sixteen billion dollars of relief for three point four million borrowers across a number of different programs. The administration announced on Monday. So this is kind of like you said, a dink and dunk approach, maybe like Andy Reid, Eagles offense just to lower some borrowers payments.

5:09But obviously the big thing looming on the horizon is the restarting of payments after more than three years, which is going to happen in October. And no one really knows what's going to happen, but it might definitely squeeze a lot of people's wallets. And retailers that have reported earnings over the past few weeks have definitely warned that they might see their sales dip because of it. I'm really curious to see how retailers fare. We've been talking about it for a while. All right, Neil, our next story we want to circle back to is a name I'm sure you haven't really thought about much recently, and that is Threads.

5:40Meta's text-based social media platform got off to a massive start, racking up hundreds of millions of signups before daily active users fell off a cliff as the novelty kind of wore off. But yesterday, Meta started to make good on the promise that more would be coming on the threads front and rolled out a web version of the platform, expanding access beyond just the mobile app. Neil, to this I say about time, but it also feels like a little too little too late for the supposed Twitter slash X killer. I don't think it's too late. I think we live in this very immediate gratification society. This is going to be a long burn.

6:21I think all they need to do is keep updating things a few weeks, a few months, and people will come back. I don't think this is something that they need to do everything ASAP. I think it's a very interesting case study in product development because sometimes the trap you fall into is push out a minimum viable product as soon as possible. Threads kind of recognized that Twitter was vulnerable for a moment and shipped this app that was very bare bones. and the logic is yes we'll add features and hopefully attract daily active users back to the platform but sometimes that's not the case like some once you lose their attention you'll never get them back no matter how much you shift so it's definitely going to be interesting to see if meta can win back because i mean the big headline stat here was that daily active android users on threads picked or peaked on july 7th at 49 million and then plummeted to 10.3 million just a month later.

7:14So we're seeing like this massive, massive drop off in users. That's a specific cohort. Right. But that's, that's my cohort. And I am one of those people that have, have dropped off because there hasn't been a desktop app. I go on social media on my desktop. I'm just on my laptop all day. So now the fact that they have a desktop version means that I'm perhaps one of those daily users that might come back. So it's just fun seeing meta like Zuck and these guys kind of behave like more of a startup. Like you said, that you're, that product development timeline that you just explained is very much indicative of a startup mentality where we're just going to ship something out.

7:48It may not be perfect. We're going to gather feedback from our users and we're going to make changes super quickly. It seems like that's what they're doing. And Zuck is giving off a little bit more of his personality there. He posted this picture of him at Harvard in 2004 building actual Facebook. And then the caption was actual footage of me building threads for web. So they're putting more of a face and a personality to this while Elon kind of self-destructs over there on Twitter. Obviously, Twitter slash X has been way more indestructible than anyone imagined. And people are still using the Congress.

8:24Well, have you, you know, you post on threads for Morning Brew. Like, what have you seen in terms of... I mean, this is huge for me because I'm so annoyed about going to my phone every time I have to post because it's just less of an easy interface. And so I am extremely excited from this from a social media perspective, Just because it's so much easier from your computer. Well, at least for one thing that you just made Toby's job a lot easier. Thank you. Let's move on to the next story we need to circle back on. The UPS strike that was predicted to devastate the economy is officially called off.

8:55Yesterday, UPS members of the Teamsters Union ratified a new five-year labor contract with the company. That includes about$30 billion in new money. To illustrate just how excited employees are about this new deal, about 86 % of them voted to approve it, which is the union's highest vote ever for a UPS contract. And we don't blame them. Over the past few weeks, social media threads and X has been flooded with memes about just how much UPS workers will make under the new deal. Under this contract, an experienced driver will make 49 bucks an hour in the final year of the deal, bringing their total take home pay, including wages and benefits to about one hundred and seventy five thousand dollars a year.

9:34How much money is that? Well, Well, according to Bloomberg Opinions' Tyler Cowen, if these UPS drivers form their own city, it would be the UK's richest city by far, easily topping the London metro area. It'd also be one of the wealthiest in the US. Big win for the workers, big win for the Teamsters' President Sean O 'Brien. I guess big win for UPS because while they didn't get much of what they wanted, they're still avoiding a work stoppage. And big win for other labor organizers who will use these UPS negotiations as a template going forward. Yeah. O 'Brien literally said, this is the template for how workers should be made and protected nationwide.

10:08And he actually specifically said, and non-union companies like Amazon should better pay attention. He's coming for UPS or Amazon infection. Yeah, so he literally called out Amazon in particular. Yeah, this contract's great. The other thing that was a big part of this negotiation was air conditioning because remember, UPS trucks aren't retrofitted with any air conditioning and it gets hot in the back of those trucks. And so one of the parts of the deal was all new cars will be, all new delivery vehicles will be retrofitted with air conditioning, which again, I just cannot imagine delivering packages in the back of that cab where heat was getting crazy high.

10:46Also, though, this is expensive for UPS. It raised its labor cost by 3%, more than 3 % a year. But also UPS has been absolutely crushing it recently. Adjusted net income rose 70 % over the previous five years. So they can certainly afford it. So kind of looking like a win, win, win all around. If you ask me, if I'm masterworks, I'm getting on the phone with Sean O 'Brien and I'm saying, teach a negotiation class on my platform. Oh, uh, wait, is it called masterwork? I think it is. No, it's a masterclass. Masterclass. Yes. If I'm masterclass, I am calling Sean O 'Brien because he is, he is fierce.

11:22Yeah. All right, Neil, our final circle back story of the day. Um, tomorrow is the day that Fukushima nuclear power plant will start releasing treated radioactive wastewater back into the Pacific Ocean. Now, this is as controversial as it sounds. Hong Kong and Macau announced that they are banning products from Fukushima, while China has started to radiation test products from Japanese fisheries. But officials say the process is safe and will be treated and then diluted with seawater to levels safer than international standards. Neil, tomorrow will only be day one of a 17-day release of 7 ,800 tons of treated water, But the goal is to eventually release 31 ,200 tons.

12:04So we still have a long, long way to go. This is going to take decades. But Japanese officials say it's a necessary step to decommission the plant that was completely melted down in the earthquake and tsunami in 2011. So we'll see what happens. But this is definitely controversial. It's causing all kinds of tension in the region. President Biden hosted both Japan and South Korea that had conflict for many decades at Camp David last week. And there was a sign that they were becoming a little friendlier and then all of a sudden Japan is doing this was which is raising tensions again and the fisheries off the Japanese coast are Feeling kind of blindsided because this wrecked their industry in 2011 completely and they're having to go through everything again China and South Korea banned imports from the area Japan exported two billion dollars worth of fish as you know Japanese fish is very popular especially in that region.

12:56So we're going to have to wait and see. But the big thing here is tritium, which is a radioactive element that is not able to be filtered out of the water. You can only dilute it. And opponents of the plan say it's dangerous even in small amounts. And you have Japan, on the other hand, saying a bunch of other nuclear power plants around the world also release treated wastewater with small amounts of tritium. And it's plenty below international guidelines for drinking water. Yeah. So they're going to, they're going to continue to monitor this. Obviously they're going to test the seawater and marine life throughout literally day by day to see how it's going and we'll shut it down.

13:33If anything, uh, kind of alarming, yeah, alarming pops up, but yeah, definitely a controversial thing. Um, but yeah, that's gotta be a good neighbor. Like a good neighbor. I don't know about that. All right, Neil, uh, let's move on. We've talked a lot about San Francisco on this show and how its downtown has been struggling with everything from fleeing retailers to autonomous cars causing all sorts of havoc. But you know what they say, everything is okay as long as you're eating a Swedish meatball. Okay, I totally just made up that saying, but it's what I imagine is going through IKEA's mind after the Swedish furniture giant is set to open a new store in a downtown district of San Francisco later today.

14:17It's a new concept ikea is testing a pared down store aimed at more casual stop shoppers and office workers with a much smaller footprint than the traditional labyrinthian layout it's known for but neil it's certainly jarring to see a big name retailer moving into san francisco when the likes of nordstrom and banana republic and old navy and amazon go and anthropology and office depot and I could go on, have all packed up and moved out. Pretty crazy. It's pretty crazy. But IKEA, this is part of a huge push into the US. I think they're planning on opening 17 new stores, spending$2.2 billion. While we've seen Home Depot and other home furniture companies not doing well in this current economic environment, as people have already remodeled all their homes during COVID, IKEA is somehow still blowing it out of the water.

15:08And it's because of their prices. I mean, I still think this is a very bold move, though, specifically betting on San Francisco, because, I mean, all signs point to San Francisco's downtown not doing quite as well as other parts of the country. Activity this spring in downtown San Francisco, which is measured by mobile phone use, was 68 % below its pre-pandemic levels. That's the largest decline of any U.S. city. So there's simply just not that many people walking around downtown San Francisco. go. And I mean, if you look at the rest of the city, office vacancies are at a 30 year high. Lots of people have permanently moved away.

15:45Its population declined more than 60 ,000 people from 2020 to 2022. So a lot of people saw this move from Ikea and it's a little bit of a head scratcher, but they're, they're kind of bullish on this concept and they're, they're betting on themselves. As for other famous Swedes says, take a chance on me, you know? Oh, man. I think having one anchor tenant like this is a is a sign, you know, a way of saying we believe in you. And then other retailers will look and come back. And so overall, I am bullish on San Francisco. It's been counted out so many times before. Yeah. After the dot com babble bubble after 9-11 in New York.

16:21We saw this with New York. There was so how many articles were written. New York is dead. And now rents are at a record high. I'm not counting out San Francisco. It's too beautiful. The environment is too good. The weather is too good. The smart people there, a lot of smart people haven't left. The ecosystem is still there for tech. So I would buy so much stock in San Francisco if I could right now. Have you been there? It's just gorgeous. I know the downtown area is struggling right now, but it has too many existing assets. Plus, the AI boom is set to transform it even again. So 50 % of all AI funding, AI startup funding in the first half of 2023 went to the Bay Area.

17:03It's so sticky. AI. It's going to come back. AI and IKEA. IKEA are going to save San Francisco. You heard it here first. Okay, Neil, before we jump into our next story, we're going to take a quick break. This episode is brought to you by State Farm. listening to this podcast smart move being financially savvy smart move another smart move having state farm help you create a competitive price when you choose to bundle home and auto bundling just another way to save with a personal price plan like a good neighbor state farm is there prices are based on rating plans that vary by state coverage options are selected by the customer availability amount of discounts and savings and eligibility vary by state When you walk into a Burlington, you're walking into amazing prices and great gifts.

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18:19We are back. And Toby, on Tuesdays, you always give us a trend from the Gen Z world. Well, now I want to give you a trend from the millennial and Gen X worlds. And of course, there's nothing more us olds like to obsess over than houses. So what is going on in the house design world? Well, two big shifts I want to call out. First is the explosion of bedrooms. New research from the Census Bureau shows that of the 1 million new single family houses completed in the U.S. last year, 48%, nearly half, had four bedrooms or more, which is the highest share since they've been keeping track. For comparison, just 33 % of existing homes have four bedrooms or more.

18:56The other trend, as the number of bedrooms increases, houses aren't getting any bigger to accommodate them. In fact, houses are getting smaller. The average unit size for new housing has fallen 10 % nationally since 2018, as builders try to attract would-be homeowners who just want anything they can afford. but nearly half of new homes have at least four bedrooms and houses are getting smaller. Kind of wild. It is definitely wild. So you look at what's going to the chopping block and things that are getting cut are dining areas, bathtubs, and separate living rooms. Secondary bedrooms and loft spaces are shrinking, but they're not necessarily disappearing.

19:31And then what's getting expanded, multi-use rooms like kitchens and living rooms and some Jack and Jill bathrooms, which are shared between two rooms. which I hate siblings like that makes you cringe right there. And then, yeah, also in some places, you're just cutting the entire dining room in like the kitchen island is the only place where people are just like me for real. Yeah, exactly. It's also what was so interesting to me is that this changed the game for furniture sales as well, because now that you have more mixed use rooms, you're also seeing items with multiple functions in furniture.

20:08So like kitchen islands with drawers and wine racks, pull out sofas you can sleep on, and then smaller drop leaf dining room tables. So it is interesting how all these effects kind of compound into the broader market. I'd love to see Ikea's kind of multi-use. Well, I think that these two stories play off each other really well, actually, because the Ikea store is a smaller store concept that's meant for smaller spaces, which is exactly what's happening. So I think somehow we've managed to tie these two stories. Yeah, exactly. And then also just in terms of the broader market, it does seem like the hotter the market, the smaller the home is getting because Seattle area homes have shrunk the most over the last five years.

20:47They're 18 % smaller than they were five years ago. And then Charlotte, North Carolina and San Antonio both shrunk by 14%. So it does seem like in these super, super hot housing markets, builders are just saying we're going to create smaller homes, hopefully more affordable, even though they are still very expensive. So that's kind of like the cause and effect that you're seeing in these really hot markets. And then as far as the bedroom proliferation has concerned, why do people need four bedrooms if households are getting smaller? I mean, 64 percent in 2022, 64 percent of households had just one or two people, which is up from 41 percent in 1960.

21:23So our households are getting smaller, but we have more bedrooms. And I think that's directly attributable to the work from home revolution because a bedroom isn't really a bedroom these days. is a bedroom is where you put your peloton and it's where you do have your office right so so it may be a misnomer to call it a bedroom okay neil let's move on and our next story is proof that sometimes the old way is the best way because shipping companies are looking to days gone by to navigate the seas more efficiently in the modern era i am of course talking about sales now modern cargo ships are typically inefficient, dirty oil guzzlers, but a ship called the Pyxis Ocean, operated by the biggest agricultural shipper in the world, has just finished its maiden voyage with a new technology on board called wind wings.

22:11Wind wings are 123 foot tall, solid wing sails that are made from the same material as wind turbines. They are fitted to the deck of an existing cargo ship and are designed to reduce fuel consumption and carbon emissions by around 20 to 30 percent over the length of a voyage. Neil, this just makes too much sense to me. Why have we not been putting more sales on these giant cargo ships? I'll tell you why, because it doesn't work on container ships. It's it's they're so big and they're so difficult to attach, but it's so expensive. They're they're not. We have created these trade routes that don't rely on wind, right?

22:48Like in the past and a couple hundred years ago, we all of our routes that people designed to facilitate trade were based on trade winds, right? We have completely ditched that. And we're just like, okay, we need to get from Shanghai to the port of Long Beach. And so we don't rely on whatever happens to the wind anymore. So I am bearish on this. I think it, I'm not going to call it a stunt because it was expensive, super expensive, but I don't see this happening. I, you can't put it on a container ship with, which contains most of cargo. This is on a bulk carrier, which is carrying like loose grains of stuff.

23:21So I don't mean to like shut this down. I think it's a fun idea, but I don't see it being a meaningful way to move cargo greenly. Right. It's not exactly super cost effective as of now too, because Cargill, which is the shipping company that installed it on one of their ships, they say it will take at least seven to 10 years for the fuel savings to surpass the cost of actually installing the sails. So it definitely is, I think this is the way that the shipping industry is moving is like, we got to figure out how to reduce carbon emissions, become more efficient. And why not look back to sales?

23:55I also think it's interesting that the company that makes these sales, they all have backgrounds in F1 too, and also the Americas up, which is like a very, very high tech sailing race. And so I do think that these technologies will become better over time. Maybe we figure out a way to install them around cargo. I don't exactly know how, but I don't know. I'm bullish on this. You're bullish on San Francisco. I think we need to throw everything at the wall and see what sticks because the cargo, the shipping industry accounts for 3 % of all global emissions. It is very dirty, as you said. So they need to try a bunch of different solutions to try to make this greener because it is a big pollutant.

24:32It does remind me of this professor I had in college who wrote an entire book on old transportation technologies that we can't possibly make better. So things like elephants used for war and transportation in like the jungles of Southeast Asia, like there's no better way to move goods than by using elephants, which they use thousands of years ago. And then carrier pigeons were also seen as like a very useful way to transport things, even now that we have, you know, airplanes and helicopters and things like that. So I'm all for looking to the past for inspiration for the future. I think that's great.