Dockworkers Officially Go on Strike & Stock Market Has September to Remember

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0:27Good Morning Brew Daily Show. I'm Neil Fryman. And I'm Toby Howell. Today, get ready for more supply chain chaos because the dock workers at East Coast Ports have gone on strike. Then the country that started the coal power boom over 140 years ago is officially coal-free. It's Tuesday, October 1st. Let's ride.

0:52Today is October 1st, a brand new month, but also a special day for one prominent American. Former President Jimmy Carter turns 100 years old. He was already the longest living president, and now he's the first to reach the century mark. No one expected him to make it this far. When Carter entered hospice care more than 19 months ago, his family and close friends weren't sure he'd last another week. But not only is Carter still kicking on his 100th birthday, but family members say he's even perked up in recent months and has been following the presidential election, listening to Bob Dylan and the Allman Brothers, and following the playoff-bound Atlanta Braves.

1:31and this stat will absolutely break your brain. Carter has lived through 40 % of U.S. history since the Declaration of Independence was signed in 1776. He has literally seen it all. In the time that he has been alive, the U.S. population has nearly tripled. And I have to say, too, Carter is a huge Atlanta Braves fan. If they had not made the playoffs yesterday, who knows if he would have made it to his 100th birthday. But yeah, truly an incredible accomplishment. He has seen so much in U.S. history, 40 % since the U.S. Declaration of Independence was signed. Kind of a mind-boggling stat right there.

2:07Now, a quick word from our sponsor, Wise Business, the app for doing things in other currencies. Neil, ever feel like we're juggling too many things with the podcast? Every day. Between early mornings and late night prepping, it's a dang circus out here sometimes. And that's just a podcast. Imagine running an international business. I don't know how some people do it, but if you want to do things a little easier, check out Wise. Wise gives you full visibility of your money so you stay in control even when you are sleep deprived. Real-time transaction notifications, multi-user access for the team, spending controls and limits everything you need when operating a business across borders.

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3:55Well, we've been warning about this for weeks, and now the ports are officially closed. Just after midnight, roughly 45 ,000 dock workers belonging to the International Longshoremen's Association walked off the job over a contract dispute, shuttering ports from Maine to Texas and leading to another round of supply chain chaos. These 36 ports on the East and Gulf Coast handle an estimated 60 % of all U.S. shipping traffic, including consumer goods like shirts, produce like bananas, numerous raw materials that are used by manufacturers like automakers. With no one to load or unload the containers that grease the economy's engine, international maritime commerce to and from the United States is going to significantly slow down and the damage could be significant.

4:42So should you rush to the store to stock up on toilet paper or canned food? No, the impacts of the strike aren't going to be immediate. And shippers prepared by hustling goods to ports ahead of the shutdown. Still, the longer this lasts, the more painful it will be. Shuttered ports could cause shortages of goods, which could drive prices higher for consumers. Oh, God, there's that word inflation again. And to cause manufacturers to pause production because they ran out of parts. So we'll just have to wait and see how negotiations play out. between the dock workers union and the port operators, but it's certainly a nasty curveball for the economy.

5:17Yeah, I mean, you said it, the longer it goes, the worse it gets. That's probably the drum that you're gonna be hearing beat a lot in recent days, in upcoming days, because what we're looking at right now specifically is perishable goods, because you can stock up on things like importing cars or other goods, but fruits, vegetables, America's most popular fruit, the banana comes in through these very important East Coast ports. I mean, Wilmington, Delaware itself is America's largest banana port. Who would have thought that? 1.2 million metric tons of bananas flow through those ports. 90 % of imported cherries also flow through ports on strike right now.

5:58So you start going down through the list of some of the things you want to make a yummy fall fruit salad with, and all of a sudden you realize that after a few days, if this strike extends, you won't have that fresh fruit anymore. And of course, there is some domestic production of things like cherries, not so much for actually things like bananas that can make up the gaps. But we'll start seeing these cracks appear maybe in the supermarket aisle more quickly than any other kind of sector of the business world. Yeah, these perishable goods are just going to be sitting on these ships in the Atlantic Ocean kind of rotting.

6:30So what is this dispute? What do these longshoremen want? There's two main sticking points. Their six-year contract is up this year, and they haven't agreed to a new one. So the first one is wages. They currently make$39 an hour. That is up 11 % from the start of their previous six-year contract. But over the same time, inflation has crept up 24%. So that's eaten into their wages. They want a$5 an hour raise in each year of the new six-year contract, which amounts to a 77 % increase overall. Looks like the employers are offering annual raises of half that,$2.50 an hour. So there's a large gap between the wage increase and the scope of the wage increase there.

7:16And then the other sticking point here, this may be the bigger issue, is automation. Ever since the 1960s, when dock workers go on strike, it's all about new technologies, automating their jobs and taking away their jobs. So the longshoremen want protections against the increased use of automation at ports to protect their jobs. And we'll see what happens there. I have seen, though, a lot of pushback, especially from kind of the tech community here, saying that when we resist automation, we're not actually doing ourselves a service. The Milton Friedman quote actually comes to mind. The famous economist Milton Friedman said, if we all want jobs, we can create any number.

7:55For example, have people dig holes and then fill them back up again. So if you resist innovation, if you resist kind of this push towards automation, yeah, you keep the longshoreman's jobs. You protect those jobs. But also maybe you're doing yourself a disservice in the long run by not advancing to a more – I mean if you look abroad too, like you see these factories and these ports in China doing things entirely automated where you have a vehicle, a driverless vehicle pull up and start unloading stuff. So you see the world advancing around you and you don't necessarily want to be held hostage by this union who does not want to kind of make progress and automate some of their jobs away.

8:36So, of course, you want to protect people's wages. You want people to get paid what they're worth. But you also don't want to be so resistant to progress that you kind of set America back in terms of like the global landscape when it comes to port automation. Yeah. If you look at Shanghai's port, they move an average of 113 containers per hour. And then you go back to New York and New Jersey, just down the road here, they move about half that, 57.6 containers per hour. The ports here in the United States are a lot less automated than ones in Rotterdam and Shanghai and Asia. And critics of the lack of automation here say that it is a national security issue because back during COVID, we saw all of those supply chain backups at these ports on the West Coast and the East Coast.

9:23and they say, well, that's because we don't have automation. There's one port over on the West Coast that moved goods a lot quicker and that was the most automated one and that was the Long Beach Container Terminal. So I would say this strike is going to cost the economy, according to JP Morgan,$5 billion a day, equivalent to 6 % of GDP. And yes, the longer this lasts, the more you'll actually see it show up in the consumer aisle. The end of an era. You hear the phrase thrown around a lot these days, but yesterday, the last coal-fired power plant in Britain officially closed, marking the end of coal in the very country that used it to kick off the Industrial Revolution 200 years ago.

10:06Britain has been synonymous with coal power since Thomas Edison opened the very first coal-fired power plant in London all the way back in 1882. The shutdown yesterday, though, makes the UK the first country amongst its G7 peers to fully phase out coal and fulfills the deadline it set in 2015 to ditch coal by 2025. The last plant was a striking example of a now bygone era. The boilers at Ratcliffe-on-Soar power station have been going strong for the last 57 years. They powered four 500 megawatt turbines and belt smoke out of a 650 foot tall chimneys. But environmental groups have calculated that the Ratcliffe plant was likely emitting between 8 to 15 million tons of carbon dioxide a year, more than the emissions from around 2 million cars.

10:54So now its turbines have been shut off, paving the way for a new era of renewable energy in Britain. The decline of coal in Britain has been dramatic and rapid. I mean, as recently as 1990, coal provided about 80 percent of Britain's electricity. And then as recently as 10 years ago, coal was still the leading source of the country's power, generating about a third of their electricity. But then all of a sudden, wind and solar just became huge, going from 7 percent a few years ago, a decade ago, to over 50 percent today. And then coal absolutely plummeted to just 1 % last year. Back in 2014, they set a goal to shutter all coal plants by 2025.

11:35But the growth of renewables has been so strong that they said, I think we can get this done in 2024 by October. And then they did it yesterday. So it's really been a dramatic decline for a power source that really has defined this country and defined a lot of the social, political, labor struggles over the past century there. So truly the end of an era. Worldwide, though, coal is still not gone. China, India, Indonesia still are places where a lot of coal power is relied upon. Even the United States is moving away from coal, but a little bit more slowly. 25 years ago, coal generated more than half of electricity in America.

12:11Today, it counts for right around 18 to 16 percent. So it has dropped a lot. Like, we are doing well, maybe not as dramatically as the UK has. But you are correct, though, that this plant and this industry in the UK is so synonymous with the place where it was kind of built. Smog was actually first – the term smog was coined because of the kind of smoke that was bellowing out of these coal-fired power plants. And this plant was something else. It was the size – it's the size of Monaco. It took up a footprint of a 0.8 square miles. It was kind of the marvel of its time when it was first open. And now it's been a very prominent part of the community because you drive by, you see these 650-foot tall chimneys.

12:58But now each boiler could produce enough thermal energy to bring the water of an Olympic-sized swimming pool to a boil in 11 minutes. So it truly was just this amazing marvel of technology. But it is part of a bygone era, and we are moving on from coal onto renewable energies. Pretty amazing that Britain has been able to produce enough renewables to replace a power plant like this. Like a plastic bag blowing through the wind, the third quarter of the year has drifted on by. Let's see how your portfolio is looking and how the economy at large is humming along in a Q3 recap. First things first, the September curse has officially been broken in the stock market.

13:39Remember, over the past century, September has been the worst performing month for stocks, losing about 1 % on average. And after four straight years of the September effect holding true, the market bucked that trend big time. The S &P 500 gained 2 % overall in the month and about 5 % in the third quarter, buoyed by the Fed's rate cut announcement and increasing confidence that Jerome Powell & Co. pulled off a soft landing, bringing down inflation without sending the economy into a tailspin. Speaking of the economy, it's looking pretty good. Unemployment is still hovering at a manageable 4%. Inflation is sitting just above 2%.

14:16And the US GDP grew at a 3 % annualized pace in Q2, beating expectations. Neil, let's start with the market. What was the big takeaway from Q3 for you? Well, it's not just an AI story anymore. For the first half of the year, AI, the revolution on AI dominated the stock market. As NVIDIA went, so went the markets. but that's just not the case anymore. Value stocks, be growth stocks, small cap stocks, be large cap stocks. Utilities, actually, was the top performer of any industry in the S &P 500. And second was real estate, which climbed 15%. Even the Magnificent Seven didn't all grow uniformly.

14:58NVIDIA, Alphabet, Microsoft, and Amazon ended lower while Apple, Meta, and Tesla went higher. So it really was a broadening out of the rally, which investors really wanted to see because you don't want the entire stock market to depend on one or two companies on this unproven technology AI. And it amounted to a great quarter. Now the market just put together its best first three quarters of a year since 1997. What we are looking forward to, though, is that we've had this soft landing narrative. I said it in our intro. That will be a little bit tested by, one, the jobs report that comes out at the end of the week on Friday.

15:37Plus, corporate earnings start, it's corporate earnings season, if you want to call it, start in October. So we will see if kind of that optimism that did buoy the rest of the stock market, that did broaden this rally, if you want to call it that, if it's supported by the actual fundamentals of the companies themselves. So we are in a good spot right now. Q3 was solid for the market. It bucked that September trend that we spoke about at the beginning of the month. But right now, the general attitude is like, all right, let's see if they can put their money where their mouth is. Let's see if the job market is where Jerome Powell wants it to be.

16:10Let's see if companies' earnings are as strong as maybe their stock prices are indicating. So that's what we're looking forward to as we enter into Q4. Which is typically the strongest for stocks. There you go. Happy holidays, everyone. Up next, DirecTV is buying one of its rivals for a single dollar.

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17:11And so does my wife, who keeps stealing all my hoodies. Stay fit for the season and Abercrombie's newest arrivals. Shop NFL by Abercrombie in the app, online, and in store.

17:29Yesterday, the satellite TV provider said it was acquiring a rival satellite TV provider, Dish Network, in a deal that would create the largest paid TV company in the U.S. with a combined 20 million subscribers. The price tag is what you might find at a garage sale, just$1. But DirecTV is going to assume Dish's$9.8 billion in debt, so it comes with some significant baggage. DirecTV was also involved in a parallel deal yesterday with its parent company AT &T selling off its majority stake to private equity firm TPG for$7.6 billion. These moves, AT &T ditching DirecTV and DirecTV merging with Dish, don't come from a position of strength.

18:12It's more like the satellite TV industry is huddling together for warmth as a blizzard rages outside. That blizzard is all the streaming companies, Netflix, Amazon Prime Video, Max, that have lured away DirecTV's customers in recent years, and it's been bleeding them ever since. When AT &T bought DirecTV in 2014, it had more than 18 million subscribers. Now it has about 10 million. DirecTV thinks scaling up with Dish to create a satellite television behemoth, it can better weather the storm that's upended the industry. Yeah, this is like the death rattle where they're kind of teaming up to try to milk whatever last little bit of value they have.

18:52It is a relatively big company now, though. I mean, it is going to be the largest satellite TV provider in the country now. So they do have that benefit of scale. But it's just been the same story that pretty much all traditional TV providers have been dealing with. It's been dragged down by dwindling interest, dwindling demand. And then also you have the headache that is the streaming industry. kind of nitpicking you from all sides. You have the Netflixes, you have Hulu's, you have Prime. They're all been peeling away these small millions of subscribers here, millions of subscribers there from paid TV.

19:25They have lower price tags. They have more on-demand content. And you look at your DirecTV subscription, you're like, I'm paying for a lot of channels that I don't really necessarily want here. Let me go instead pick Amazon Prime and Max because that's what I actually want to watch. So yeah, it's just been the downfall. has been pretty much the same that we've been seeing and we've been speaking about for years now. Let's see if maybe the combined might can reverse that trend. Yeah. What you mentioned is kind of exactly what they want to scale up and try to do with negotiations with programmers, TV channels.

19:58You said when you get DirecTV, you have a zillion channels, 98 % of which you don't want. DirecTV and now Dish want to combine so they have greater leverage and negotiating power to go to programmers and say, we need skinnier bundles. We need smaller packages so we can sell it to customers for less money because you're cramming us with so much programming, so many channels that people don't want. Give us a sports package. Give us a family package. Give us an adventure package. Let's figure out ways to create skinnier packages to sell to customers because what we are working with you now on is just way too much.

20:34It's too expensive and it's just not a good business proposition for us. And remember, one of those headaches happened to customers earlier this year at the beginning of September. DirecTV, their 11 million subscribers, actually lost access to ESPN right in the middle of the U.S. Open, we should add, right in the middle of some important college football games, too, over this carrier fee and programming flexibility. They were trying to take the fight to Disney and win those skinnier packages like you discussed. So maybe with a little bit more heft, a little bit more might behind their negotiation, they will be able to to win those things for consumers.

21:07And I should add that Dish and DirecTV have been trying to combine for 20 years now, but regulators have tried to stop it. It doesn't look like regulators are going to care that much about this particular merger because they are just small fish in a big pond at this point. Officials are still assessing the damage from Hurricane Helene, which killed more than 130 people across the southeast and wiped entire neighborhoods off the map in western North Carolina, which suffered unprecedented and unimaginable flooding. Roads are in such a bad state in the area that mules have been called in to deliver aid to places that cars can't reach.

21:44But it's the fate of one small town in the North Carolina mountains that has the attention of the business world, spruce pine, which is home to mines that produce the purest form of quartz on Earth. High purity quartz is critical to making the semiconductors that power modern life. They are used in smartphones, data centers, cars, solar panels, and more. and the manufacturing of semiconductors wouldn't be possible without the quartz found specifically in these two mines in the Appalachian Mountains. You can't find this quality anywhere else. The professor Ethan Mollick noted without hyperbole, wrote that the modern economy rests on a single road in spruce pine, North Carolina.

22:26So how the flooding from Hurricane Helene impacted the quartz mines is of great interest to companies around the globe that use semiconductors without spruce pines quartz chip makers can't make chips and it does seem like production has stopped at least for now the biggest company operating at the quartz mine civil co said it had temporarily halted operations at its spruce pine facilities and its top priority remains the safety and well-being of its employees yeah i mean i was digging into why is this quartz so so important for the silicon and semiconductor industries because you need to this quartz to produce, they call it a crucible, but it's essentially just this vessel that you melt the polysilicon in.

23:09And the reason why you need it to be so pure is like the manufacturing process of these very fine silicon wafers needs to be as undisturbed and without purity or in high purity as possible. And quartz is for some reason just the perfect element for that. It doesn't contaminate the molten silicon. They can withstand the high temperatures required to melt that silicon without introducing those contaminants that we spoke about. And it's just great because it is chemically inert as well. It minimizes reactions with the silicon. So all of these things feed into this specific mineral that comes from this specific place in North Carolina being so, so important for the chips that do power just pretty much our entire modern world right now.

23:50So it is crazy that we talk about that the entire economy rests on a single road, but it is not that much of an exaggeration to say that. And it's just a quirk of geological history that this place in North Carolina, North Carolina mountains that has been hit with unprecedented flooding is also home to a, a material that is used in the tech industry around the world. One thing that might be hard, difficult to assess just how operational these plants are, is that these companies are extremely secret because they have processes that they want to keep under wraps. So sometimes workers, when they go to particular parts of the facilities, are blindfolded.

24:33And contractors working with Uniman, which is the parent company, this Belgian parent company that operates the mines, are often required to sign NDAs. So trying to get these people, you know, I read a zillion articles about like what is going on with these mines. Trying to get these people on the phone to have them say anything about what's going on is nearly impossible. So while all the attention is certainly and justly on how these mountain towns are recovering and obviously the search and rescue operations are still continuing, there's also this interesting business angle to the whole thing where this quartz mine is just being the focus of the entire economy.