Buffett's Bank Warning, Own a Share of a Derby Horse & Zuck is a Jiu-Jitsu Champ

0:28The best B2B marketing gets wasted on the wrong people.

0:34Good morning, Brew Daily Show. I am Neil Freiman. And I'm not Toby Howell. Okay, on this podcast, we are going to talk about the controversy surrounding the Kentucky Derby this year and whether horse race is dying. And not Toby and I will pick our winners of the weekend, and truly, they could not be more different. We have a great show lined up. We're also going to discuss what Warren Buffett talked about at the annual Berkshire Hathaway Conference. and Elizabeth Holmes talks to the media for the first time since 2016. Neil, let's ride.

1:08Okay, so you're not Toby, but who are you? I'm Kyle Hagee. I'm the director of community here at Morning Brew, and I've been an avid listener of podcasts, so I figured how hard could it be to be on the other side? We'll find out. Yeah, we will see. Yeah, so thanks for your filling in for Toby this week, and we know each other. But Kyle, I have to say, this is a big day for me, and your silence is a little bit deafening. it's your birthday. It is not my birthday, but it is my height day. It's your, I saw that in the newsletter. Happy height day to everyone that is 5 '8". Is it a specific height or anyone with heights?

1:405 '8". May 5th. May 8th is 5 '8". Well, in three days, it'll be my height day. So don't make the same mistake I did. The people who have height days after me are just inherently going to be more successful. If you have a height day in June, you're probably in the NBA. Absolutely. Yeah. Definitely in July. Yeah. In August, there's probably a concern. Yeah. All right, let's get into it. Yeah, so all right. Our first story for the day is we're going to turn to the Oracle of Omaha. Berkshire Hathaway's annual conference was this weekend. It's known as the Woodstock of capitalism. This is Warren Buffett's 58th year of running Berkshire Hathaway.

2:15And I actually attended this conference with my dad in 10th grade. So I'm a bit of an expert. All right. What was that like? I don't remember much besides getting free dilly bars because Berkshire owns Dairy Queen. And after that, I put all of my money into Berkshire Hathaway stock and I'm very close to retirement now. That's exceptional. I mean, yeah, one one share price of Class A stock. I think we're looking at it is above four hundred thousand dollars. So if you bought one one share, I think, yeah, I know why you're here. I think I own the B share. Yeah, it's worth a lot less. All right. So let's talk.

2:47So basically at this thing, Warren Buffett and his main man, Charlie Munger kind of hold court and dish about the company's performance and the economic issues of the day. Was there anything that stood out to you that they said? Yeah, actually, they said a lot of interesting things, but I liked their take on Elon. And I think they're almost the opposite entrepreneur. They had a lot of respect for Elon. They said he dreams really big. He goes for extremes. And Charlie and Warren, they go for boring businesses, low risk of failure, and they just avoid doing dumb things. And I thought that was really interesting.

3:19So everyone was also talking about what they would say about the regional banking crisis. Buffett has helped out in past banking crises, so everyone's kind of curious about what he thinks about this one. He really took out his wrath on the leaders of these failed banks, like SVB and First Republic. He said they should suffer and face punishment for their mismanagement. But he also blamed what he called totally crazy banking regulations that incentivize risk-taking behavior. And also he kind of blamed the media like us and politicians for very poor messaging. Finally, he said that he thinks the government was right to intervene to protect SVB depositors.

4:00That was kind of a controversial move to shore up deposits above the FDIC cap. And he said it would have been catastrophic otherwise if the government hadn't stepped in. Yeah, I mean, something that's so great about Warren Buffett is he's, I think, 99 years old. He's been around the block for a bit. So I actually think he has great perspective on the financial system as a whole. Another thing that stood out to me was his investment in Apple. Now, Berkshire is not known for its tech investments, but somehow Buffett got into Apple and now it accounts for 46 percent of its entire stock portfolio portfolio.

4:33It is now his stake is now worth one hundred and fifty one billion dollars. So he is a massive shareholder of Apple. And he's just like, look, it just happens to be a better business than any we own. Right. I mean, this is like classic Warren Buffett. He's like, I don't know technology, but let me invest in the best technology company ever and have it be 46 percent of the portfolio. Also, I was relieved to know that Warren Buffett is team blue bubble. I don't think that got enough press coverage. He's team Apple. He's got the blue bubbles for tax. I'm not surprised, but we'll get into that a little bit later in the week ahead.

5:03Finally, you know, they always dish on business and the economy, but they also give some life advice, as you mentioned. Munger's 99 and Buffett is 92. And so Buffett said, this is how you live your best life. And I actually hadn't heard this before, but maybe it's common. You should write your obituary and then try to figure out how to live up to it. Yes. It's not that complicated. I love you done that. I have not written my own obituary, but now I might have to. But I do love their advice about the obituary and like focusing on like the essential things of life. They're like marry the right spouse.

5:34Yeah. Don't do dumb things. Like it's not your average tech investment advice. And I do wonder if it's connecting with a younger audience. But I was heartened to see that there was some college students actually in attendance. Yeah. Like, well, you were a high school student when you were there. Yeah, I was pretty ahead of the curve. I got to go. Let's just before we move on, let's talk about the how the business did. Like, how did Berkshire Hathaway do? Because this is where they report their earnings. And just for people who aren't so familiar, Berkshire Hathaway is a massive conglomerate. It wholly owns or owns big stakes.

6:04And these kind of you mentioned it, like these unsexy companies like Railroads and Paint, I think. and insurance companies like Geico and Fruit of the Loom, right? I actually broke this down. And I want to introduce the Warren Buffett Berkshire Hathaway starter pack. Okay, I'm ready. This is how diversified their business is. You could have Apple for all your tech needs. You could dress head to toe in Fruit of the Loom. If you bank with Bank of America and American Express, you fill up your car with Chevron oil insured by Geico. You have a diet consisting of only Dairy Queen, Kraft Macaroni, and Seize Candies.

6:40I can't confirm or deny if that's a healthy diet. And finally, if you need to make a cross-continental escape, hop onto a Burlington Northern freight train. That's a diversified portfolio. Wow. I'm not sure I would live to his age if I just consumed Berkshire Hathaway products. Yeah. I mean, he still eats McDonald's every day, drinks Coke, like it's water, and he's still living large. It's incredible. So that's Berkshire Hathaway. They did actually really well thanks to a surprise profit by Geico. and Buffett also warned that the economy was slowing down and that all his wide portfolio of companies would experience lower earnings for the rest of the year.

7:16But as he always does, he sounded a pretty optimistic note about America and he's like Berkshire needs America. America does not need Berkshire. So that's his main takeaway. And yeah, we'll see what happens after Buffett. I mean, he's still going, but they do have a successor tapped, which his name is Greg Abel and he's the vice chairman for non-insurance operations. If they made succession about Berkshire Hathaway, it'd be a lot less intense. I know, it's so clear. They have their ducks in order. There's no like huge personalities involved. Yeah, they just are a boring business. That is some shoes to fill though, I have to say.

7:53Yes. All right, let's move on. So the Kentucky Derby was on Saturday and a horse named Mage, which was a 15 to one shot, won the first leg of the triple crown in front of 150 ,000 people at Churchill Downs. There are a few things I want to talk about with this derby, but the first is this huge cloud that hovered over the event this year after seven horses died in the week leading up to the race. It's got people wondering about the future viability of this sport when your athletes kind of mysteriously die. So many of these deaths seem like freak accidents where a horse would pull up after a training session or break a limb in while racing, and that is enough for these horses to have to be euthanized for humane reasons.

8:38And one trainer, Safi Joseph Jr., was actually suspended by Churchill Downs after two of his horses died in the last week. And there was this interview, he was sobbing, and he said he had never had a horse die in 4 ,000 starts. And so it's all kind of a mystery, but it definitely created this gloom over the race this year and over the industry in general. Yeah, I think it was a really sad story to read about. And I also think it's quite interesting because I feel like this is two kind of themes that we're seeing coming together, which is the democratization of almost everything. Like you could co-own a horse.

9:11Yeah, we'll talk about that. And then also just like gambling. I don't think that this is an issue that's going to be resolved because it's now a multi-billion dollar industry. Right, so people are talking about the fact that, you know, gambling and revenues are actually going down for horse racing and this kind of ties into this cloud over the industry. There's been a lot of doping allegations. Bob Baffert, you know him? No. He's this legendary trainer at the Kentucky Derby. I'm going to go, Bob. No, well, last year, 2001, Medina Spirit, 2021, Medina Spirit, who won the Kentucky Derby, was found to have drugs in its system, illegal drugs.

9:46And Bob Baffert was suspended for two years. So that combined with the safety is leading to just an overall downturn in horse racing. So in 2002, more than$15 billion was bet on races in the U.S. Last year, that went down to$12 billion. I don't think there's another sport where sports gambling went down in the past few years. That's very interesting. And then attendance is down, too. I don't know if you've been out to the Belmont in New York, which is the third leg of the Triple Crown. Yeah, you're a Minnesota guy. But I've been there. But not that many other people are because there's 88 % fewer fans at the Belmont Stakes now than in 1978.

10:19And there's just a lot of fewer horses being registered. 33 ,000 thoroughbred foals were registered in 2000. Now that's about half of that. So there's just like a lot of competition in the sports gambling world. For a lot of times, you know, horse racing was the only game in town where you could bet money. And now you can just sit on your couch and bet on LeBron to go over 20 points. That is true. Maybe this is the perfect use case for the metaverse. The gambling revenues are going down. People are less interested in the sport. Let's move the horses to the metaverse. We avoid horses dying. And then maybe that's a wide open space for horse racing to take off.

10:57I remember in 2021, there are all these articles coming up out about digital horse racing. It was booming. I haven't really checked in on it since, you know, everything else kind of crashed in the metaverse. But I mean, it does seem like it has quote unquote legs. In sixth grade, I would go to the bowling alley in Eden Prairie, Minnesota, and they had a horse racing game. And let me tell you, if you could get that energy into the metaverse, this would be a giant win for horse racing. I'm bullish on it. Something else on Bullshon is these apps that give you fractional shares and things. And the reason I'm talking about that is because typically after the horse of the derby wins, they interview the owner and the owner is going crazy.

11:37This year they interviewed these random guys and I was like, what the heck is going on here? Turns out that 25 % of Mage is owned by people using the Commonwealth app. And this is an app that lets you buy fractional shares in pro athletes like golfers and racehorses. And so almost 400 people had a stake in this horse, Mage, and got to split at least some of the winnings. They get$94 per share before taxes. And not only do they get that, they get the proceeds of future breeding, which is where the real money comes in because all this genetic material from Mage is worth a lot because they won the Kentucky Derby.

12:13Yeah, I think, one, I have to comment on the name Commonwealth App. I feel like every app now has like no vowels and is like five letters. They just went like with the most bougie name Commonwealth app. If I had to guess what that does, it would be to own horses. So well done on the branding for them. Yeah. Second is I just wonder how this will affect sports going forward. I do think that gambling is becoming bigger and bigger across all sports and this like owning athletes or future shares like that will be quite interesting to see how that plays out and affects the actual sport. There are other apps like this and that you can buy fractional shares and alternate investments like art and cars that IPO, you know, like old cars.

12:51There's there's an app for that. So that is kind of booming a little bit where you can kind of buy a piece of antique or something like we'd never me or you would never be able to afford. Well, I own Berkshire stock. I forgot about that. We could never be able to own a freaking thoroughbred horse that races in the Kentucky Derby. but through these apps. So we'll definitely pay attention to that. I thought that was a really interesting angle to the derby. Before we get into our next story, let's take a quick break. Let's do it. Close your eyes, exhale, feel your body relax, and let go of whatever you're carrying today.

13:29Well, I'm letting go of the worry that I wouldn't get my new contacts in time for this class. I got them delivered free from 1-800-CONTACTS. Oh, my gosh, they're so fast. And breathe. Oh, sorry. I almost couldn't breathe when I saw the discount they gave me on my first order. Oh, sorry. Namaste. Visit 1-800-CONTACTS.com today to save on your first order. 1-800-CONTACTS. 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.

14:06Bundling, 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. All right, Kyle. Over the weekend, the New York Times published a long profile of a devoted mom of two who recently spent six months traveling around the RV in a country and loves it. Wow, this sounds like a heartwarming story. Who is this about? Elizabeth Holmes. I think you actually mean Liz Holmes. Okay. Neil. We'll get into that.

14:41The Elizabeth Holmes, she's just Elizabeth to me. Okay. She's a convicted fraudster, might you remember. She spoke to the media for the first time since 2016 for this article. So anytime you write a article about a convicted fraudster and paint her in like not the worst light in the world, you get some criticism. And the New York Times got a lot of criticism for running this article. It did not help that they also gave some not so awful press to Sam Bankman freed right after he was convicted to last year. So this just gave New York Times critics some ammo. There was some pushback in the other direction saying that the writer of the piece kind of knew what she was doing because you kind of have to get close to your subject and let disarm them a little bit and give them a little bit of flattery.

15:26So they open up and say some like really wild stuff and, you know, implicate themselves when they talk. And you don't have to. It's just like a little more of a nuanced reading. But I don't know if I'm convinced by that. Either way, what were your takeaways from this article? I think two main ones. The first is I think it's hard to have an actual interview that you can feel confident with Elizabeth Holmes because, I mean, part of her whole persona is her ability to fabricate the truth. And so, you know, you're reading it and you're not sure what to believe or what not to believe. My second takeaway is I need a full on documentary about the husband.

15:59Like, I don't think they're the husband. I think it's a, they called the romantic partner. The romantic partner. I mean, no, I have kids together. They met during all of this stuff was pretty out in the open about who she was in a person. So I need to go deeper on that. Some other things from the article. She talks about Theranos as if it's her baby. Like she said, I devoted my whole life to it since it was since I was 18. So she like compares the loss of Theranos to the loss of a child. she went to Burning Man with this romantic partner and they burned an effigy of Theranos while at Burning Man.

16:33Oh, well, I think her prison sentence can be relieved. And then the final, the final thing was this great anecdote about she attended, she went to a doctor or a kid went to a doctor and the doctor said, you look a lot like that horrible woman. And then eventually figured out that she was Elizabeth Holmes. And, and she goes, yes, I am Elizabeth Holmes. And then he goes, I am so sorry. And then she said, don't be all, you know, is what you've read. Yeah. Also, I need more details on this doctor. I don't think in med school, they tell you, find a person that your patient looks like and call them horrible.

17:04That's, that's not what they teach. And then say, I'm sorry that you're Elizabeth Holmes. Anyway, Holmes has successfully delayed her prison sentence. So she's still appealing and booked a one-way flight to Mexico that everyone kind of raised their eyebrows about. Why do you need that? You're going to prison. But yes, she at some point soon will enter prison to serve her sentence of 11 years for defrauding investors of hundreds of millions of dollars and one of the biggest corporate frauds in history. Yes. Well, let's talk about another tech founder on Winners of the Weekend. Yes. And I think there's two paths you can take as a tech founder.

17:40You either end up 11 years in prison for fraud or you become obsessed with jujitsu. And Mark Zuckerberg has chosen the latter. The winner of the weekend is Mark Zuckerberg, the CEO of Facebook, who actually just won two medals at a jujitsu competition. I believe he took up jujitsu during COVID as something to do. You know, I feel like Facebook needed a W. The metaverse is not really going anywhere. Their currency is a joke. And he kind of took matters into his own hands and he secured the W for Facebook. Neil, what does this do for Facebook stock? To the moon. Know your founder and CEO is, you know, a beast at martial arts.

18:15Right? Imagine trying to negotiate the next acquisition with Mark Zuckerberg, and you see what he's pinned this guy. That's incredible. I don't even know what to say about Mark Zuckerberg. He knows how to meme himself. Yes. We've had many generations, many versions of Zuckerberg's memes. We've had BBQ Meats. Of course. Zuckerberg. We had Surfing. Zuckerberg with Zuckerberg with the sunscreen on his face. What was that thing called? Parasailing? Parasailing with the American flag. No, not parasail. It was some weird water sport. It's like a rich sport. Yeah, yeah, yeah. They don't even show it to me on Amazon.

18:48They're like, you can't afford it. And now we have Jiu-Jitsu, Mark. So his ability to get memed is incredible. You know who else was into Jiu-Jitsu? I remember seeing the documentary on this. Anthony Bourdain. Oh. Anthony Bourdain was huge into Jiu-Jitsu. Wow. So, I don't know. Interesting. RIP to Anthony. I just do Peloton. Yeah. So that was your winner of the week. You picked Mark Zuckerberg. Winner of the weekend, you picked Mark Zuckerberg. For my winner of the weekend, I'm going to pick the kids at the Coronation. Okay. So the coronation happened this weekend, which I think everyone knows about.

19:19Of course, as they do with every event, the little kids, if there are little kids, they will steal the show. So Prince William and Kate Middleton's kids, who are George, Charlotte, and Louis, were there and just looking bored, sticking out their tongues, looking like little Star Wars nymphs. So George is nine years old, and he's second in the royal line of succession after his father, Williams. There was a kid who did not steal the show. It was actually more marginalized. And that was Harry, William's brother. I've heard of him. He was sidelined. He did not play a big role in this coronation at all.

19:51He dipped quickly. And his wife, Megan, didn't even make the trip from California. Now, hearing me talk about myself, I swore I would not care about this. But I think I care. Well, I have a different take. And that is, I can't tell you how much I didn't care about this. It felt very 13th century to me. So I've actually come up with three ideas on how to get younger audiences more invested in the coronation. The first is the British Crown releases their own version of ChatGPT. Kids love artificial intelligence, but it only has knowledge up until 1776. That is good. The second is we have Dua Lipa as an opener for the coronation.

20:28Okay. I mean, they got like Katy Perry. I think, I think Katy Perry's, I think the kids love Dua Lipa. Yeah. And then the third is Gen Z loves representation in the workforce. I think we should let the nine-year-old boy become king for one year. and then go revert and see what happens yes or charles those are my three ideas listen it could work because uh viewership is way down 20 million people tuned in this year which was 31 percent lower than the 29 million viewers who watched the funeral of queen elizabeth ii yes so the internet was hot with memes and chatter about this coronation but it didn't seem to register i think more people watched the berkshire hathaway right uh annual shareholders meeting so it's happened at the same time.

21:09All right. If you're listening, press office of Her Majesty, His Majesty's. We will be consultants for you. Listen to Kyle. He has Berkshire Hathaway stock. All right. Final segment. Let's get into the week ahead. Let's do it. It is a massive week on tap for the economy. Debt ceiling issue is going on. Biden, GOP House Speaker Kevin McCarthy and other congressional leaders are meeting tomorrow to discuss raising the debt ceiling. This is bad news if this doesn't happen Janet Yellen has warned that the US could default as soon as June 1st which it's my height day it's it's 5 8 right now it's only a few weeks away absolute economic catastrophe if this doesn't happen the Republicans are trying to use their leverage as the controlling party of the house to stuff in their priorities like budget cuts to a debt ceiling increase Democrats just want a clean increase and there's a stalemate there's this game of chicken going on the problem is this problem is just so much more important than anything else going on because if we don't get a deal, then you open your Robin Hood and you will just see zeros everywhere.

22:12That might be the angle that we get people to really unite on this. If you want to open your Robin Hood and see green, tell them to pass this. I do think that it's very interesting now. We're always trying to package other policy objectives into bills, which complicates it. And I think the other thing is just we don't have an ability to have a united front on something that seemingly is important for every American. I loved your analogy of chicken. It does feel like we're playing game of chicken, but we're all in the car and we just want to go home and watch Netflix. And then what else is happening is two pandemic era policies are ending on Thursday.

22:47You have title 42, which is the immigration law that allows the U S to expel migrants back to Mexico really quickly. That's coming to an end. And the U S is also ending its public health emergency for COVID-19 that won't affect the availability of treatments and vaccines. We also have Legend of Zelda Tears of the Kingdom coming out on the Nintendo switch on Friday It's the first Zelda game in six years after Breath of the Wild Yeah, might have to buy a Nintendo switch for this I the last Zelda game I remember is Ocarina of Time and it was a banger so I might have to get a switch as well Last couple things are the Google event, which I'm a Google pixel guy So I'm excited to see there.

23:24They're supposed to be announcing that live people know they all know there's they might release the pics they're gonna release the Pixel Fold, folding smartphone. There's Eurovision tomorrow that's kicking off in Liverpool. Ukraine won last year, but typically, and typically the winning country will host the next year's competition. You're not really gonna host anything in Ukraine right now, so they moved it to Liverpool, and so the UK people are hyped, probably more hyped about that than Coronation. The Pulitzer Prize is being handed out today, so I got my fingers crossed. I'm feeling good for you.