Disney Streaming > Parks & Mortgage Rates FINALLY Drop

0:28Change is always happening. Good morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, did you accidentally send$200 to a scammer on Zelle? The government is trying to help you get your money back. Then the American consumer is still behaving a little bit like your high school ex and sending mixed signals. It's Thursday, August 8th. Let's ride.

0:54Here is a handy tip for when you're done swimming in a body of water with iffy levels of pollutants. Drink a Coke. After all, it's what all the Olympians are doing after racing in the Seine this week. Following their competitions in the potentially dirty river, many triathletes and swimmers swear by a post-game Coke, not Diet Coke, regular Coke, as a way to rid their body of potential contaminants. According to them, Coke's acidity works as a quasi-bleach for the digestive tract and can flush out any strange bacteria they might have picked up in the river. Toby, have you heard of this? Olympians drinking Coke and not like Gatorade?

1:33It doesn't seem to square up. I have heard about this. The bleach your intestines part is more urban legend than fact because your stomach is already very acidic, especially if you're a healthy athlete. But you do see Coke all over endurance events. Like if you go to these 100-mile races, 200-mile bike races, you will see athletes down in Coke because the part that actually really does benefit you is that when you're exercising, your glycogen levels, your sugar levels go way down. So when you see a Coke that has 39 grams of sugar in it, tons of tablespoons of sugar, that just screams out to you.

2:07And it tastes really good to replenish those sugar levels. So that part of it is true. Does beer function in the same way? There's no sugar in beer. That actually dehydrates you more. They actually make goos, you know, those goos that marathoners eat in Coca-Cola favor because sometimes you're just craving that very intense flavor as well. So, Neil, on our little five-mile run that we do after this, let's drink a little bit of Coke. Now, a word from our sponsor, Beehive. Writing a newsletter is hard business. You put all this work into making the copy as good as possible, proofread it, proofread it again, and then send it off into people's inbox and hope for the best.

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3:19Just let it go, Toby. You were meant to be an English major and use Beehive. And if you want to try it too, head to beehive.com slash brew. That's B-E-E-H-I-I-V dot com slash brew. And get a 30-day free trial plus 20 % off three months with code brew. 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.

3:56Like a good neighbor, State Farm is there.

4:02Regulators are turning up the screws on Zelle, the Venmo rival that's been accused of being a hotbed of frauds and scams. According to the Wall Street Journal, regulators are investigating some of the biggest U.S. banks, such as JPMorgan Chase, Bank of America, and Wells Fargo, for their response to customers who dispute transactions made on Zelle. For some background on Zelle, it is a money transfer service that was created in 2017 to compete with the likes of Cash App and Venmo. It's owned by a consortium of seven of the largest U.S. banks, including the ones I mentioned above. Zelle has grown quite a bit since it was founded to be even bigger than Venmo.

4:40Last year, people sent$490 billion through Zelle compared with$230 billion through Venmo, which is its closest rival. But allegations of rampant fraud and abuse has dog Zelle. Customers have complained that they were duped into sending money to scam artists and have been met with a too bad by the banks. JP Morgan, Wells Fargo, and Bank of America reimbursed about 38 % of customers reporting unauthorized transactions in 2023, which is down from 62 % in 2019. Toby, Zell's been in the hot seat for a while. This investigation could crank up that heat even more. Yeah, how big of a problem is this? Because I think anecdotally, everyone's heard about some friend or some cousin accidentally sending money to a scammer.

5:23And according to the three largest lenders, Bank of America, J.P. Morgan, and Wells Fargo, customers lost around$370 million via Zelle. But the banks only reimbursed around$100 million of that. So it's leaving customers to kind of eat the rest of the difference. So that, in the whole context of things, is a relatively small number compared to the$806 billion that flowed through Zelle. But still, it's a real problem for consumers. And so that's why the Consumer Financial Protection Bureau is looking into this issue because right now customers are saying there's not a lot of recourse when I do accidentally fall for one of those scams.

6:00Right. So what is the legal recourse that customers can take and what are banks forced to do via the law? And it really depends on whether you're subject to a fraud or a scam. And a fraud, money is transferred out of your account without your authorization. So say you're hacked and someone sends money and you look at your Zelle account and you're like, where did$200 go? I didn't approve of anything. Then you are allowed a reimbursement. The banks have to reimburse you. But in the case of a scam where you authorize the transaction because you were duped, then they don't have to. There's a loophole in the law that they don't have to reimburse you for when you authorize a transaction.

6:41And that's what regulators and lawmakers are looking into to say. Even if you do authorize a transaction, but you were scammed or duped into it, then the banks must reimburse you. And that's really the tension of this. Yeah. And persuading the bank that you were a victim of a scam is the difficult part. I mean, there's evidence of people. One person, a Chicago resident, was literally robbed at gunpoint, had it on security camera of these assailants making her send money via her J.P. Morgan app to them on camera. And it still took this very long process. The local news got involved in order to convince the bank that she hadn't authorized the transaction.

7:19So what are people suggesting you do about this? A lot of people are saying that make the protections more like what you get with credit card markets. If you just look at the reimbursement rates on Zelle versus credit card payments, Zelle, you're looking about at a 26 % reimbursement rate. But for credit card payments, that jumps up to 47. Debit card payments, 36%. But there's obviously downsides to that as well, because right now Zelle is a free service. And if you were to make these transactions subject to reimbursement, you might have to kick in money to afford about this. These are unintended consequences where you can't enjoy the benefits of cash and the benefits of having the credit card payment model as well.

8:01So a lot of people are saying, think about two sides of the coins here. You can't just have your cake and eat it, too. Well, the reason that these platforms have become so popular with scammers is because they're free and they're very easy to use and you can send money in an instant and you can't get it back, which makes it so awesome for when I have to pay you for dinner. But also it makes it really attractive to fraud. But this industry is just absolutely booming. I mean, back in 2018, less than half of all Americans use these peer to peer payments like Cash App, Zelle and Venmo. and now nearly three quarters of consumers use them.

8:39I mean, payments on Zelle alone exceed total ATM withdrawals. So they're just ubiquitous at this point. So we'll see what regulators have to do with particular fraud on Zelle. But meanwhile, the banks are pushing back and they're like, guys, 99.9 % of all transactions are completely kosher. The amount of fraud is just a rounding error. It's such a small margin of the amount of money that flows through our system. Plus, think about it as cash. I think they want to take the more educational approach and be like, if you hand a$100 bill to someone and they just take off and run with it, that's on you.

9:19Yeah, it's not on the banks to reimburse that. Disney reported earnings yesterday. and as Michael Scott once said, oh, how the turntables have turned. Its media business, which includes its troubled Disney Plus streaming platform, isn't the ugly stepchild of the company anymore. In fact, it's its park business that is now facing slowing demand and falling profits. Why the switch up? Disney streaming business, which includes Disney Plus, Hulu, and ESPN Plus, turned a quarterly profit for the first time ever, while it attributed the park slowdown to the shaky economy taking its toll on travelers.

9:51In other words, Disney customers are spending their money to go see Inside Out 2, but won't shell out for a trip to Orlando. These consumer contradictions are something that we're seeing play out all across the economy and corporate America as more earnings reports trickle in. But first, Neil, what do you make up of the switch up in momentum around Disney's business units? Well, one of the main reasons why that streaming service is so profitable now, not so profitable, but has turned a profit for the first time ever, is just simply price hikes. When you raise prices, people have to pay more. Your profits get a little bit bigger.

10:26You bring in more money. I mean, when Disney Plus debuted in 2019, it cost$6.99 a month. after price hikes last week that Disney just announced, it's hiking prices again. That basic plan will cost you$15.99. So$7 to$16, that is one recipe to make more money off of your streaming business. They've also taken a page out of Netflix's book, and I've been cracking down on password sharing as well. So that has led to a boost in profitability for this unit. But if we just wanna zoom out a little bit, because we've talked a lot about the American consumer and consumer spending, because it is a very big part of the jigsaw puzzle that props up the economies.

11:06Everything from restaurants, hotels, concert venues. These are, if the consumer keeps spending, these are the places that are allowed to stay afloat. But what seems clear right now is that we're almost seeing like this split economy in many ways. On one hand, you have these wealthier Americans still driving very robust spending, but then you have on the other end of the spectrum some households that aren't keeping up. I mean, data from the Federal Reserve Bank of New York just showed that total household debt is increasing. It increased by$184 billion in the first quarter. So some people are falling behind a little bit.

11:38But we've talked – even within companies like Disney, we are seeing multiple different data points that are showing either the economy is doing great or it's not doing great. And we're seeing that across earnings reports. Yeah, I mean, the head of Disney's theme park business said that exactly because their domestic theme parks in Orlando and California were not doing so hot over the summer. Meanwhile, their international ones were booming. And what he said was the lower income consumer is feeling a little bit of stress. The high income consumer is traveling internationally. So that may help explain just a bunch of those confusing earnings reports on the state of the consumer that we've gotten this week.

12:17And another earnings report that came out yesterday, which also speaks to perhaps a week in consumers, that Airbnb said it saw lower demand in the summer for vacation rentals, which is usually its busiest and peak quarter. It had its worst stock wipeout in ever, and it warned of lower consumer demand going forward for people traveling around the country. So just another data point. Then Maersk comes out just a few hours later. They are the biggest shipping company. And they're like, yeah, we don't see any signs of recession. People are buying stuff. Our ships are completely loaded with goods. So again, it's just this total head fake where you're not exactly sure where the consumer is.

12:55But it's very important. Every earnings report seems to be a referendum on the economy at the time when we're talking about a recession potentially looming. Neil, is that Flowers by Miley Cyrus I hear? Because it is looking a lot like May of 2023 in here. at least when you look at the 30-year U.S. fixed mortgage rate. It fell to 6.55 % last week, its lowest level since May of last year. It's caused a surge in demand for both homebuyers and current homeowners. Total mortgage applications rose about 7 % last week compared to the week before, and they are now at their highest level since January.

13:30Even if you were lucky or unlucky enough to find a home in the last year or so amidst sky-high mortgage rates, you are probably looking at refinancing right now. Applications to refinance a home loan jumped 16 % week over a week and were 59 % higher compared to a year ago. Again, this is a relatively small base of unlucky folks who are refinancing because the majority of borrowers today are still sitting very pretty with sub 5 % rates. But still, Neil, as mortgage rates begin to ease up just a tad, the big question is, will this act as a plunger to the massively clogged up housing market? Yeah, we'll see.

14:05I just want to get into why we're seeing a dip in mortgage rates in the first place. It's because investors are scooping up bonds right now, specifically the 10-year Treasury note. After those market meltdowns of Monday and the signs that the Fed especially is going to cut rates, bond prices move inversely to yields. So more people buying bonds mean yields go down and mortgage rates tend to track the 10-year Treasury yield. So lower 10-year Treasury yield, lower mortgage rates. So in essence, just by signaling that the Fed is going to cut rates soon, it has already cut rates. The interesting part, though, is that it's not leading to a massive surge in mortgage applications yet.

14:47They increased just 1 % for the week. And the issue is that if the Fed is promising that they're going to cut rates, then a lot of people are saying, well, I can stick it out for another month or so. And if rate cuts are on the horizon, that means mortgage rates will fall even further. So what's the rush? You will probably be able to get a better rate soon. So it hasn't led to this big increase in sales yet. That being said, for sale inventory is beginning to increase gradually. There are more houses coming onto the market. Rates are falling. So people can wait. They probably are waiting. But I think we're about to see a little bit of a thawing in the housing market.

15:23A little bit, and it's so needed. But they have to go down much more for any sort of activity to kickstart because 90 % of mortgage holders have a rate below 6%. And what did you say it was now? Like 6.5%. So they really have to go down even more for any sort of meaningful movement. And you need two sides of this equation to work, too, because you need buyers coming off of the sidelines being like, all right, we're at 5.5%. I think I can do that. And meanwhile, you have this big lock-in effect that's going on where you have people sitting on homes that would need to give it up and get a new mortgage to get another home.

15:56And they're saying, well, why would I do that when I'm sitting on a 2 % or 3 % mortgage? And now it's still at 6%. So you need both the buyer and the seller to get off the sidelines and start participating in this market again. And it's gonna require a little bit more of a drop in mortgage rates. The good news is, like you said, that might be coming because remember I said mortgage rates sort of track the 10-year yield. Well, right now they're 2.6 percentage points higher than the 10-year yield. And sort of historically, that's been 1.7 percentage points higher. So it looks like there is a gap that could be filled.

16:29And one might expect mortgage rates to go lower. And then, you know, we'll see what happens when the Fed cuts rates and by how much that will totally impact where rates end up. But right now, they are still extremely high. And it's not really, it's not really making a lot of movement in the housing market. Up next, I could heartily concentrate on the first half of the show because we have Neil's numbers coming up next. Eczema isn't always obvious, but it's real. And so is the relief from EBCLIS. After an initial dosing phase, about four in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks.

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17:37Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EBCLIS. Before starting EBCLIS, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about EPCLIS and visit epglis.lily.com or call 1-800-LILY-RX or 1-800-545-5979. Tuesday on NBC, Jimmy Fallon and Bozema St. John host the 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.

18:13This 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. Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will have you outsmarting the Zell scammers. My first number is zero, which is how many stocks Democratic VP nominee Tim Walls owns, according to public disclosures. It's true, the Minnesota governor doesn't own a single stock, nor does he or his wife own mutual funds, bonds, private equities, or other securities.

18:50He hasn't even diversified into Dogecoin. Okay, but he must have real estate assets, right? Nope, the couple sold their home in Mankato, Minnesota, after he moved into the governor's mansion in St. Paul. Literally, the entire investment assets belong to Walls and his wife Gwen, a teacher, are state pensions. This is highly unusual for elected officials, especially ones on presidential tickets. At a time when lawmakers such as Nancy Pelosi are more scrutinized than ever for their active stock trading, it is a rare sight to see a politician without a Fidelity account. Toby, quite a contrast between Walls, who doesn't own any stocks, and the other side of the ticket, with J.D.

19:28Vance being a multimillionaire former venture capitalist, and Donald Trump owning real estate properties around the world. Yeah, we're almost seeing two sides of the American dream coin in a way with both candidates for BVP. I mean, a lot of people have rags to riches stories like Vance. I mean, he literally went from rural Appalachia to becoming a multimillionaire. So to a lot of people, that's the American dream. But on the other side of the coin, you have the spotlight on the very much less wealthy walls. He represents a much more attainable, stable, middle class version of the American dream.

20:00It's less sexy for sure, but it's probably more realistic for a lot of people. A lot of people maybe find themselves in a similar boat to Walls. So it is interesting to see these contrasting sides of the American dream. Yeah, I mean, Walls is likely has the least wealth of anybody on a presidential ticket than Harry Truman many, many decades ago. And one thing that he did was actually introduce the Stock Act, which was in 2012 signed by President, former President Obama, which was aimed at curbing insider trading. A lot of critics say that that act did not do anything. And, you know, stock politicians are trading more than ever before.

20:41Meanwhile, if you look at Kamala Harris, she also has a very boring investment profile, just like mostly retirement accounts, not doing any any active trading. The one impressive thing about Kamala's about her investment profile is that she has a 2.6 percent mortgage rate on her house. We just we're all envious of that. That's the crowd. Pretty dang good. Meanwhile, yeah, you mentioned J.D. Vance. He was a former venture capitalist. He owns over$100 ,000 worth of Bitcoin, and he has more than 100 investments in startups, which we'll see how those pan out. Sticking with the investing theme for my second number, Warren Buffett's Berkshire Hathaway owns an astonishing amount of U.S.

21:22Treasury bills. In fact, he owns more than the United States Federal Reserve. Buffett bought up$230 billion worth of T-bills and fixed maturity securities. in the first six months of the year, compared to the$195 billion the Fed currently owns. Now, Buffett controls 3 % of the entire treasury bill market, more than any other company or institution. Buying up T-bills is Buffett's way of putting his Gringotts-level cash hoard to use. He has called T-bills the safest investment there is because they are short-term securities backed by the U.S. government. Their maturities range from four weeks to a full year, and in this period of high interest rates, they're paying out anywhere from 5 % to 6%.

22:01So for someone with a lot of cash like Buffett, there are worse places to park your money. And did I mention he has a lot of cash? After selling more stocks last quarter, including loads of Apple, Berkshire Hathaway has amassed a record cash pile of$277 billion. 5 % on that ain't bad. Right. And let's look into it, actually. If he invested in three-month treasury bills yielding 5%,$200 billion in cash would generate around$10 billion a year just literally sitting and doing nothing. Love that. I mean, that is just a staggering number to think about that your little cash pile is generating$10 billion.

22:36Of course, it is a little nervy to see Buffett be such a large net seller. He's been a net seller of equities for seven quarters straight. Obviously, him cutting his apple steak so much set off a lot of warning bells. Who knows how much it contributed to the market wipeout we saw on Monday. But it is staggering. When you're comparing your cash stores to the literal Federal Reserve, that means you're doing something right and you're working on a very massive scale. My final number is the list of prizes Filipino gymnast Carlos Adriel Yulo has been promised for becoming the first male Olympic gold medalist in the history of the country.

23:11OK, here it goes. $173 ,000 in cash from the Philippine Sports Commission,$52 ,000 more in cash from the country's House of Representatives, a free house plus a fully furnished two-bedroom condo valued at$415 ,000, A lifetime of free ramen, free buffets, and free meals from numerous local businesses. A lifetime of free cookies from a shop called Cookies by the Bucket. An iPhone 16. And last but not least, a lifetime of free colonoscopies and gastroenterology consultations. But only once he turns 45, he's currently 24. Yes, for athletes from some countries, the awards for winning a gold medal go a lot further than some hardware hanging around your neck.

23:52The Filipino government and brands looking to make a splash are handsomely rewarding their country's newest hero. He's never going to have to pay for a colonoscopy again. But there's a wide range of what countries hand to their medal winners. Hong Kong gives out the most cash,$768 ,000, to its athletes who win gold, followed by Singapore and Indonesia. The United States hands out$38 ,000, but that can run up quite a tab given that we've won 27 gold medals so far at the Olympics. Right. I mean, other countries struggle to even win a single medal. So when you see that United States number, you say, wait, Hong Kong's paying way more for their medals, almost three quarters of a million dollars.