Big Banks Fuel Stock Market Rally & The FTC's Next Target... John Deere

0:26Race the rudders! Good morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, stocks had their best day since right after the election. Who's responsible for Wall Street's surprise party? Then John Deere is in trouble with the FDC for making his tractors too dang hard to repair. It's Thursday, January 16th. Let's ride.

0:54Before we get into the business news, There were some major developments in global politics yesterday. After 15 months of devastating war in Gaza, Israel and Hamas agreed to a long-awaited ceasefire brokered by the U.S., Qatar, and Egypt. It's a three-stage deal that will see a return of the hostages to Israel, a phased withdrawal of Israeli forces from areas in the enclave, and a surge in humanitarian aid to hundreds of thousands of displaced Palestinians. Both the Biden and incoming Trump administration worked together on the deal in a rare moment of cooperation one official called almost unprecedented.

1:30The first phase is set to go into effect on Sunday, but it needs to be approved by the Israeli cabinet first. And earlier this morning, that vote has been delayed as Israel accused Hamas of reneging on parts of the deal. Biden followed up that ceasefire announcement with his farewell address to the nation last night. He used his platform to sound the alarm about the, quote, dangerous concentration of power in the hands of a few ultra-wealthy people and the rise of the, quote, tech-industrial complex that he says puts our basic rights and freedoms at risk. Today, an oligarchy is taking shape in America, Biden explained, of extreme wealth, power, and influence that literally threatens our democracy.

2:10Biden's remarks come as Elon Musk, Jeff Bezos, and Mark Zuckerberg are set to have courtside seats to Trump's inauguration on Monday, with Zuckerberg topped to host a black-tie reception for the incoming administration. Now a word from our sponsor, public.com. Neil, you know what's better than finding$20 in your old jeans? Finding$10 ,000? Well, those are some big jeans, but yes, when you transfer your investment portfolio to public, you could earn up to$10 ,000. And they make it super simple. You can set up and fund your account in under five minutes. Once you're in, you've got access to their full menu of investment options, stocks, crypto, bonds, options, it's all there.

2:51not to mention their AI research assistant, Alpha, which helps you make sense of it all. Head to public.com slash morningbrew and see why millions of investors trust public with their portfolios. And always remember to check your gene pockets. Paid for by public investing, full disclosures in podcast description. Tuesday on NBC, Jimmy Fallon and Bozema St. John host a highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea.

3:26This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best idea win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC. If you opened your brokerage account yesterday, you were finally greeted with some green numbers looking back at you. The Dow surged 700 points. The S &P 500 had its best day since November, and the Nasdaq snapped a five-day losing streak as the market digested a favorable inflation report and a solid start to fourth quarter earnings. The CPI report, which measures the monthly and annual price changes for consumer goods, showed that the Fed's fight with inflation is far from over, but had some bright spots too.

4:08The index rose 0.4 % from November to December and was up 2.9 % from a year earlier, in line with expectations. However, core inflation, which strips out volatile food and energy prices, fell to 3.2 % below expectations of 3.3%. That reading spurred a little optimism in traders and boosted hopes that Jerome Powell and the Fed will continue its rate-cutting campaign throughout this year. On top of the CPI report, fourth quarter earnings got off to a strong start, headlined by the largest banks. JP Morgan, Wells Fargo, and Goldman Sachs all reported quarterly and annual financial results yesterday that beat analysts' expectations as a pickup in corporate dealmaking, fattened profits.

4:51JP Morgan CFO Jeremy Barnum went so far as to say that there is, quote, no question that we are in an animal spirits moment right now. Neil, judging from yesterday's market performance, I don't think John Maynard Keynes would disagree with him. Let's go back to 2023. JP Morgan posted the biggest profit of any lender in the history of American banking. And then in 2024, it followed that up and crushed those numbers. It scored $58.5 billion in profits, which was up 18 % from 2023's$49.6 billion. It's the first time that any bank in American history has breached that$50 billion profit mark. Times are so good for American banks right now.

5:38They had been good last year. They'd been good since we've been coming out of the pandemic. And now they're looking ahead to the incoming administration, deregulation, rolling back of some rules that had constrained them. They're seeing animal spirits. They're seeing just so much more money coming into their coffers. They're seeing more deal making. They're seeing companies finance more, to spend more. And so these banks reported absolutely incredible numbers. And then let's zoom in on the CPI report as well, which was a little bit of a mixed bag, because again, we did see inflation actually rise on a monthly basis from November to December.

6:12So why is that a good thing for the market? The market was pretty fired up about core CPI, which again, cuts out those food and energy prices, which can be pretty volatile. I mean, this is a colder than expected January, for instance, when the weather does that, it usually jacks up natural gas prices. But those are more short term monthly trends. The Federal Reserve likes looking at the core measures because it gives a better picture of these broader trends and takes away some of those temporary issues. And so when you look at core inflation, it was a decent look. Again, it's not necessarily going down, but it's not going up either.

6:50So it was kind of a mixed bag. But at this current time, it didn't set off any fears that we're going to see any rate hikes in the upcoming year. And it did kind of resume hope that the Fed will just get back on its pace of maybe two to three rate cuts in 2025. Still, what is going on with eggs? Eggs prices shot up 36 percent last year compared to 2023. It seems like it's the one item in the grocery store that just won't go down. It's because of that avian flu supply of chickens is downling eggs. So it's tough for people who eat a lot of eggs. I think I've cut back on my egg consumption because of how expensive it is.

7:32So that's just like one sticky item that can't seem to come down because of, you know, unique trends in that particular industry. But overall, like you said, this was a promising report. It looks like, you know, traders are going back to expecting a rate cutter to this year. Bond yields fell after that big run-up that we had talked about. Stocks surged. So overall, a good day in the economy from CPI to bank earnings. The FDA will no longer allow you to paint the food red. The health agency announced yesterday that it's banning the use of the artificial dye red number three, a popular food additive using everything from veggie bacon to candy corn to make that color pop.

8:15The problem, two studies have linked it to cancer in male lab rats, and consumer advocates have mounted a years-long push to get it removed from human diets. They're quick to note that red dye number three has been banned in cosmetics for more than 30 years over the same cancer concerns. This rule will cause major food companies to reformulate their recipes if that wasn't in the works already. Like I said, red number three can be found in many aisles around the grocery store, especially in the baking one. More than a quarter of baking decorations and dessert toppings have the dye. 16 % of chewing gum and mints have it, 13 % of candy, 11 % of cookies and biscuits.

8:53And that data is from an analysis by the healthy food app, GoCoCo. The industry isn't making a huge stink about it because they're probably gearing up for more battles to come. incoming Health and Human Services Secretary, RFK Jr. has pledged to wage a war on big food and singled out colored dyes as a main area he'd target for removal. Consumer advocacy groups are doing a little bit of a victory laugh because this has been a long time coming for them. They have always been frustrated with this so-called regulatory paradox that is Red 3 because it's been illegal in the use in cosmetics. You can't put it in your lipstick, your red lipstick, for instance, and yet it's perfectly legal to have in candy corn, to have in these foods that you serve to children in the form of, you know, these bright red foods that line the aisles.

9:40That is because that even though that it has been found to cause cancer in lab rats, there is a study that showed it caused increased tumor growth within lab rats. They didn't see that replicated in humans. So they said it is fine for humans to consume. But that has just never made sense to a lot of these advocacy groups that if there's any sort of chance that this is cancer causing why should it be allowed in our food supply so it's been a long time coming people are celebrating and you might think that having red food dye in your food is not necessary okay substitute it with something else and they do have substitutes but nearly 10 years ago a bunch of major food companies including kellogg took dyes out of american products but there was a huge backlash when people poured tricks into their bowl and found that it just didn't pop like it used to.

10:29It was more natural coloring. And then all these companies backtracked on taking dyes out and put it back in. So maybe that's a little insight into our messed up brains where we really need to have very vibrant colors in our food, or at least we've been tricked into thinking we tricked into thinking that we need very vibrant colors in our food. It's hard to imagine that there was a huge backlash, but there was. And in Europe, they've been dealing with very mellow colors in their cereal for a long time. In Europe, red dye three is banned. Only in certain types of cherries can you use it. Also Australia and New Zealand.

11:07So this is the US also catching up with the rest of the world. We were talking about what do you replace red dye three with just off the top of our brains. And I said like maybe cherry juice, but it actually is going to be some natural forms like beet juice because beets, if you've ever had that. Very red. Stains your fingers red. There's also carmine, which is a dye made from insects. And then there's also pigments you can get from foods like purple sweet potatoes, radishes, and red cabbages. So obviously the food industrial complex has been getting ahead of this issue and have found some suitable replacements.

11:38The FTC is fed up with John Deere for making their high-tech tractors so hard to fix and sued the agricultural equipment maker yesterday, accusing it of illegally forcing farmers to spend big bucks at authorized dealers in order to make critical repairs. It's a big win for the right to repair movement that has fought to remove some of these onerous proprietary restrictions companies keep in place to try and boost their bottom lines. John Deere has become a major battleground for the movement as tractors have become stuffed to the gills with complicated computers over the past few decades. As the yellow and green machines grew more complex, Deere made it so that only its authorized dealers could access the software tools necessary to make repairs, which farmers view as really annoying and time-consuming and the FTC views as anti-competitive.

12:28Neil, this is one of the last actions of a Lena Kahn-led FTC before Trump's new chair takes her spot and she's going to bat for farmers. Underscoring all of this is how John Deere has turned into essentially a tech company. It might surprise you. They have more software development engineers at Deere than they have mechanical design engineers. And when you become more of a tech company, there becomes more bugs associated with the software that is in these tractors and these combines. And that has led to an incredible amount of frustration with farmers who say they need to go to these authorized dealers.

13:06And often, particularly in the agricultural sector, time is of the essence. Days can make your yearly income because you need to harvest right now. And if your tractor is broken and you need to fix it right away, it can be so frustrating when you have to call up a John Deere authorized dealer and say, hey, do you have this part? And they say, no, we don't. Yeah, we'll get it for you in a few days. But you also can't take it anywhere else. And we won't teach you how to fix it yourself. So this is you're right. This has been a huge battleground for the right to repair movement. This is also the biggest enforcement action that the U.S.

13:38government has ever taken against a company over right to repair. They've issued smaller fines here and there. They put pressure on companies in other ways. But this is the first time the FTC has taken off the gloves and saying, we're suing you. We're taking you to court. And now Lena Khan is leaving it to the next FTC chair to see whether he'll see it through. And it's kind of tough because the FTC has five commissioners, two Republicans and three Democrats. Both of the Republican commissioners did actually vote against this enforcement action. and the new head of the FTC coming in under the Trump administration voted against it as well.

14:10So it looks like potentially this could be under some threat under Trump's administration. That being said, though, it is still a win for these farmers who have just been so frustrated because a lot of them grew up being able to fix their machines and use their skills to their advantage. But now they've been forced to, in some cases, hack their own tractors in order to repair them. There's been the media company 404 Media has talked to farmers who have pirated software from Ukraine and other countries in order to make it past this annoying firewall that John Deere puts in place in order to hack their own machines.

14:46So definitely been a pain point and definitely been something that I think a lot of the agricultural industry would love to see some movement on. Up next, I haven't said this in three weeks. It is time for Neil's Numbers!

15:27It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com. This episode is brought to you by State Farm. Checking off the boxes on your to-do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app, it's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there.

16:00Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will send your brain to its VO2 max. For my first number, the early numbers are in for New York's congestion pricing plan. And so far, so pretty good. The added$9 toll seems to be accomplishing advocates' goals of lowering vehicle traffic in Manhattan's core and decreasing driving times. About 7.5 % fewer drivers entered Manhattan below 60th Street, the congestion zone, each weekday last week compared to January's of the last several years. Meanwhile, traffic times on inbound crossings like the Williamsburg Bridge and the Holland Tunnel decreased by 30 to 40 % on average.

16:44That 7.5 % fewer drivers is not a huge drop off. It's less than the 13 % the MTA predicted for the first full year of congestion pricing, but officials say it's an encouraging start. And that's worth emphasizing. It's tempting to draw conclusions, but it's been just one week, and traffic could be influenced by any number of confounding variables, including the cold weather we've been having here. Still, anecdotal evidence shows that New Yorkers have reported faster commutes and less bumper-to-bumper in Lower Manhattan. Yeah, anecdotally speaking, you are seeing potentially fewer traffic jam. People are looking out their office windows and going, hey, this street used to always be covered in cars.

17:21Now it's not as much, less honking, more curbside parking available. But I don't want to pour water on things, but this data comes with a lot of asterisks. It's only one week of data so far, so it's too early to really make any definitive conclusions. Also, there's no great historical data to compare this because they weren't measuring congestion the way that they currently are. So there is no real perfect comparisons yet possible. Also, you mentioned it, the cold weather could be a confounding variable here. It's been really cold in New York this January so far. So maybe people are just staying home because it's so cold out there.

17:59So those are a few of the asterisks to pour some cold water and some cold weather on this data. But again, early signs are encouraging. Your stats professor would be very happy with you there, Toby. My next number is a rare piece of good news from the Los Angeles fires. The world-renowned J. Paul Getty Museum has stood intact despite flames reaching six feet from its walls. On January 7th, the first night of the wildfires, the Palisades blaze came within a Toby's length of the Getty Villa's eastern walls, threatening the 40 ,000 antiquities and other priceless treasures contained in the museum.

18:36But it never got closer. Some might call it a miracle. Others, more correctly, would say it's a result of meticulous decades-long planning to combat this exact thing from happening. When the villa opened in 1974 in the hills north of Los Angeles, it was constructed with fire-resistant concrete and tile roofs. The expansive grounds are dotted with oak trees and acacia shrubs, which are less likely to ignite than other vegetation because they absorb lots of water. Both of the museum's two campuses have a water tank on site, and resources aren't a constraint. The Getty is the U.S.'s richest museum, boasting a$9.1 billion endowment, and they put that money to good use.

19:16This place is a fireproof fortress. I just want to reiterate that the fire got within six feet, one inches of the Getty Museum. That one inch is important, Neil. But yes, this museum was designed by the architect to avoid burning all the way back in the 70s. They were already thinking about making it fire resistant. Another thing that contributes to it is that they have a lot of big plazas in between the actual outer grounds and the inner building. So it makes it trickier for the fire to spread across those kind of wide swaths of plaza as well. They also, the museum staff was very vigilant. They would go around each day with fire extinguishers in hand, look for embers on the ground, look for embers in the oak trees as well, and just putting them out.

20:04So part of it was good planning, but then part of it is also just being very vigilant by the museum staff in the current day over the past few weeks. Have you been to that museum? I haven't. I couldn't believe. That's a good trivia that it has the largest endowment, over$9 billion. It's a pretty spectacular place, and the views are incredible, and just the entire setting is amazing. So we're happy that it's standing for my final number. We've got our first box office flop of the year, folks. Better man, a biopic about the British pop star Robbie Williams brought in just one million dollars at the U.S.

20:38box office in its debut weekend, which is not enough to cover its enormous one hundred and ten million dollar budget. If you're thinking Robbie who? Well, that is the problem. Robbie Williams is a household name in Europe, having rose to fame in the boy band Take That in the 90s before having a spectacularly successful solo career. But he's unheard of in the U.S. Of the 75 million albums he's sold globally over his career, only 700 ,000 of those were in the United States. So it was always going to be a tough sell. And I haven't even gotten to the strangest part of the film. In the movie, Williams is represented by a CGI monkey, hence the high production costs.

21:19It's meant to be a metaphor for Williams claiming that he is less evolved than other people. Toby, the reviews of this movie were actually positive. 88 % on Rotten Tomatoes, and it's directed by the guy who did Greatest Showman. But the gamble that Americans would care about a singer they've never heard of being played by a digitally rendered monkey did not pay off. This is the tough part. Britain thinks the world revolves around it, and Americans refuse to pay attention to anything outside of America. So it was an unstoppable force, meaning an immovable object here. But, Neil, I knew you were going to do this.

21:51I knew you were going to call him a monkey. He is not portrayed as a monkey. He's actually portrayed as a chimpanzee. And chimpanzees are not monkeys. They are apes. If you want a little cheat sheet to how do you distinguish between a monkey and an ape, apes don't have tails, while monkeys generally do. So that was one thing that I knew you were going to call him a monkey because everyone's called him a monkey. But he's actually. You could have told me before the show and we didn't have to do this. I wanted to do the gotcha moment. Anyway, people, you should stream some Robbie Williams later today.

22:20Toby and I were jamming out to Angels. That's the only song that we know. Angels. It's pretty good, though. All right. Let's bring to the finish with some final headlines. Turns out putting your products inside of cases that only an employee can open will cost you business. That's the aha moment Walgreens CEO Tim Wentworth had earlier this week when during the company's earnings report, he acknowledged, quote, when you lock things up, you don't sell as many of them. We've kind of proven that pretty conclusively. Wentworth said that anti-theft measures like locking up goods and increased security has not been effective.

22:52And the retail pharmacy is looking for new creative ways to prevent what's known as shrink, calling it a hand to hand battle. I mean, this is one of those things that you read the headlines and every single shopper goes, no, duh. It, of course, is this onerous procedure to try to get someone to come over. Unlock. You just want some deodorant. Everyone has experienced it. It has not been a good shopping experience. So to hear the CEO come out and say, oh, wait, it actually didn't work. That was an eye rolling moment for a lot. That being said, though, they did. Walgreens reported a 52 percent increase in shrink, which is the industry term for loss inventory.

23:27over that 2020-2021 period. So you can't fault them for trying something. This was just not the correct thing to try. We've gotten artificial intelligence, Apple intelligence, and now the dating app Hinge has introduced a new AI tool called Relationship Intelligence. What used to come from your older sister now comes via a new feature within the app designed to evaluate the quality, depth, and originality of a user's messages. In other words, it's trying to save you from being too basic. So no more looking for the gym to my Pam or the dog mom to my dog dad under the AI's watchful eye. The goal is to improve the quality of messages users send each other and in the process, improve the dating landscape that has increasingly left users feeling burnt out and uninspired.

24:15There has been a lot of hysteria around adding AI to dating products and Hinge's owner match group said it was going to invest 20 to$30 million in these features. There's a lot of backlash saying, oh, we're just going to have AI dating AI. But improving prompts like this, I think is actually a good use case for AI. And I think people will use it to become less basic and stand out more because there are so many times you scroll by and you see, oh, what do you, you know, what's your plan for Sunday? F1 in brunch. What do I want to do this year? Travel more. What's a fun fact? Oh, otters hold hands so they don't drift apart.

24:53That was pretty cute, though. I like the otters holding. But once you see it 5 ,000 times, you get a little immune to it. So I am pretty bullish on AI helping people develop more unique prompts in this case. Apple's still got its marketing fastball ahead of the highly anticipated season two premiere of its office drama Severance. The main cast members, including Adam Scott, acted out their roles inside of a glass cube at New York City's Grand Central Station during Tuesday afternoon's rush hour, startling and amusing commuters. This spread widely online and people generally loved it. And the stunt certainly feels like a breath of fresh air after those brand collaboration overloads of Barbie and Wicked.

25:34Maybe the best part was seeing Ben Stiller, who directs the show, there taking videos of the team on his phone like a proud dad. It was a very viral stunt. And I think it was because there was this grand metaphor within the metaphor itself, which is Grand Central is this beautiful place. The terminal is something that has all this grandeur to it. And yet here in the middle of it was this drudgery that's going on that just working at their computers. And then also the people going through it are not necessarily taking in the grandeur. They are also experiencing the drudgery of a commute. So it was working on a lot of different layers.