Economists Scrap Recession Forecasts & Amazon's Grocery Store Overhaul

0:00Stocks? ETFs? Or what about mutual funds? Choosing your investments is easier with Fidelity. Our step-by-step experience can help you pick out the right investments for you. Plus, with recurring investments, you can decide how much and how often to invest. Lastly, there's 24-7 help if and when you need it. To find your next investment, head to fidelity.com slash trading. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC. Member NYSC SIPC. Good morning, Brew Daily Show. I am Neil Freiman. And I'm Toby Howell. On today's pod, we are going to say the words soft landing.

0:36so many times they will lose all meaning. And I'm going to reveal the single biggest differentiator between happy and unhappy people. Then Amazon is trying to freshen up its grocery business by making its stores a little less soulless. Plus, if it feels like it's been tough to fill your prescriptions lately, you're not alone. There is a massive Adderall shortage going on right now that just won't go away. It's Thursday, August 3rd. Let's ride.

1:07All right, Neil. So on yesterday's show, we kind of offhandedly mentioned this idea of a morning brew daily book club. And holy moly, the people loved it. We got tons of emails, tons of YouTube comments and some tweets even or whatever you want to call them these days. So are we doing this thing, Neil? Well, I don't want to over promise and under deliver, but I think that this seems like a good idea. I mean, we like to read, you know, just like five pages before we go to bed every night. So it would be really fun to do a book club with everyone. I was thinking of a particular book we could start off with.

1:41Michael Lewis is coming out with his big SBF book in the fall. Maybe we could get him to get him on the phone and talk to him, do a little interview. And I'll read that because he randomly embedded with SBF right when the whole FDX thing collapsed. So this is going to be like the most anticipated book of the year, at least in the business circle. I love Michael Lewis books, too. What's your favorite? I've read Big Short, Blindside, Moneyball. I've done the greatest hits for sure. So Michael Lewis, if you're listening, yeah. I mean, Moneyball was literally, it changed the entire industry. Absolutely.

2:16I mean, I guess we'll put out a call though too. We don't want to just monopolize the book choice. So if you do have an idea for a book, shoot us an email at morningbrew.com. Oh, really? I was going to pull a dictatorship. We can do it, Neil. We can do whatever we want. All right. To start things off today, I want to play a little how it started, how it's going. So here's how it started last year. JPMorgan CEO Jamie Dimon warned of a hurricane about to hit the U.S. economy, and Bloomberg's economic models predicted a 100 % chance of a recession within the next year. How's it going? Yesterday, Bank of America became the first major bank to backpedal on its prediction of a recession, saying that the most likely outcome for the U.S.

2:57economy is a soft landing. Just for a quick refresher, because we're going to be saying soft landing a lot. That is just economic speak for the Fed bringing inflation back to normal through interest rates without sending the economy into reverse. Bank of America's backpedaling comes one week after the Fed's economists also did a U-turn. They said they didn't see the U.S. economy entering recession as they predicted previously. So with inflation on its way down and growth still flowing, a rising tide of economists do not expect what has been called the most anticipated recession in American history to ever materialize.

3:32I know. And one of my favorite kind of litmus tests of where people are at in terms of like approaching the soft landing is how many times it's mentioned on earnings calls. And the phrase soft landing was mentioned 97 % more this cycle than the last one. So this earning cycle than the previous one. So clearly companies are also looking at this. And I think it's like one of those things where you don't want to jinx it. So they didn't say it a ton last quarter, but then this time around, they're like, okay, we feel a little more confident about it. So, yeah, they were saying 97 % more soft landings made it out.

4:05Right. A few of those was the PNC CEO. This is a huge bank. He goes, I think the soft landing feels right. The Wells Fargo CEO said the economy continues to perform better than many expected. Chipotle CEO, who's got his eye right on the ball with how people are spending, said we're not seeing any weakness, especially in the lower income consumer who might pull back in the, you know, in the face of a recession. If anything, they've continued to improve. So you're saying you're seeing CEOs all over the spectrum and a wide variety of industries saying people are still spending. And the big reason why there was this big Wall Street Journal about like what what is why are we having a soft landing?

4:44Like what is the underlying factors? And it's because companies just aren't laying off that many people or that many or anybody at all. and people are still getting their paychecks. So the fact that there hasn't been mass layoffs, that's a real indicator of a recession. And that just hasn't happened. I know we had a bunch of tech layoffs earlier this year, but in the grand scheme of things, companies have been holding onto their workers. Everyone's getting a paycheck and people continue to spend. Yeah, super strong labor market. Also, unfortunately though, we have seen this song and dance before.

5:16So the New York Times kind of pointed out all the previous times where soft landing became a really popular term and we might have jumped the gun a little bit and that was before recessions in 1990 2000 and even 2008 so we've done this before where a lot of people are saying we're threading the needle baby like we're soft landing and then like things go haywire because a lot of people are saying that rate hikes are kind of like this uh long release medicine where you don't see the immediate effects right away it's kind of like drawn out over time so even though like we've kind of navigated this rate hike cycle much better than we anticipated maybe a few months or a few uh weeks down the line we're gonna say a much different story what that reminded me of is what happened with svb because out of nowhere this bank starts imploding and caused this cascade of problems across other banks and that was because i mean obviously mismanagement but the rate hikes kind of made a lot of their underlying assets underwater yeah so uh that's like one of the mechanisms by which rate hikes can kind of appear out of nowhere and cause a lot of economic mayhem.

6:20And who knows if, you know, there are other areas of the economy where higher interest rates might cause something to snap real quick. It's kind of like falling in love, Neil, where it happens slowly and then all at once. But let's hope that actually predictions of a soft landing might come to pass. It would be maybe the second soft landing that the Fed has engineered. The most popularly cited one was in 1994 and 1995 under former Fed Chair Alan Greenspan, who successfully kind of jacked up rates to around 6%. And the economy did not backslide into a recession, though it did cause the bankruptcy of Orange County, California, which I didn't know went bankrupt.

6:56Neither did. Hi. Let's party like it's 1994, I guess, Neil. All right. For our next story, Amazon is giving its grocery business a little makeover, and hopefully it's from someone other than our hair and makeup team. It's a two-part makeover, tackling both its online and brick-and-mortar presence. Amazon is known as the Everything Store, which has been a blessing and a curse for people who want to order groceries from them online. To help streamline things, Amazon is combining the shopping carts from Amazon Fresh, Amazon.com, and Whole Foods into one to eliminate some headaches. Plus, Amazon Fresh delivery will now be available for non-Prime members who don't want to pay that$150 yearly free.

7:37And in terms of brick and mortar, they're moving away from the tech-focused cashier-less checkouts to add some more self-checkout lanes. Plus, how about this? They're adding Krispy Kreme donuts and coffee shops to the front of some Amazon Fresh stores to make them feel a little more homey and approachable. Gotta get back to the basics. Exactly. So major changes are going down the grocery aisle of Amazon, Neil. Do we think this is gonna help them snag a bigger foothold in the giant$1.5 trillion grocery industry. It's just crazy because I remember in 2017 when Amazon bought Whole Foods for$13 billion, every other grocery stock just absolutely plummeted.

8:15And you had everyone, every analyst was like, all right, well, this is the end of every other grocery store because Amazon is just at another level. It can bring all of this tech to bear. Whole Foods is a growing brand. And, you know, whenever Amazon goes into any industry, they just completely demolish everyone else. And it has not worked out for whatever reason. Maybe groceries are just grocery store is just like immune to tech disruption. And I guess my question is like, do we need a higher tech grocery store experience or just did Amazon fail to execute on what its vision was? I think, yeah, I think its vision got a little bit fractured along the way because I just want to take you through what a potential grocery shopping experience would be like if you shop online at Amazon.

8:58So maybe you want some steak from dinner. You can order that from Whole foods, but then maybe you want to pair it with some less expensive, less organic shredded lettuce. You could order that from Amazon Fresh. And if you wanted some normal brand, just Cheerios as a late night snack, well, that comes from amazon.com. So by the end of the ordeal, you'd be checking out in three separate carts, receiving three separate deliveries. So again, that's why I was saying it was falling victim to its label as the everything store where yes, technically you get everything from it, but it was just a nightmare of a process, which is why they're trying to condense it into one shopping cart, one checkout experience where you can do top and bottom all your groceries.

9:37So that's the online factor, but the brick and mortar factor is they have 44 Amazon fresh stores and I've never been in one. I've been to one. It's an interesting, because their big thing, their big innovation was supposed to be like, there's cameras everywhere. You just put it in your shopping cart and you walk out and it charges your prime account. and yeah it's like kind of cool but the problem with these stores is that a lot of people have been complaining they're soulless they are just like these concrete boxes and i've been in one and yeah it just doesn't have the right feel so they're trying to add these crispy cream donut shops to have that like nice smell of fresh donuts fresh coffee which again it feels like not an important thing but like you want to have that feel when you're shopping yeah you have a connection with your local grocery store and i want to take us through the bit major grocery market right now So who's the top dog is Walmart with 22 % market share.

10:28Then you got Kroger at 10%, Costco, Albertsons, and Amazon Whole Foods is down at number five, which is 4.4 % of the market. And then Publix. Let's go. Toby, what's going on with Publix? It's regional. It's not national. It's still kind of confined to the southeast a little bit. But I think it speaks to the loyalty that people have with their local supermarket. I mean, I'm going to shout out Big Y, Western Mass, Wilberham, the pride of Wilberham mass big why, but I don't know. Yeah. Maybe you don't want a soulless experience. Maybe you don't need a necessarily high tech experience at your grocery store.

11:01I don't think getting like checked out at your grocery store is not necessarily a huge pain point that Amazon is trying to solve. It's much better to have that like homey neighborhood feel or like, yeah, like you were saying earlier before the show, like the number one thing I care about in a grocery store is knowing where things are and being able to find them quickly. So it's that familiarity. Yeah, for sure. All right, Neil, let's move on. When preparing last night for this next story, I felt a little distracted, a little unfocused. That's because there is a nationwide Adderall shortage that has been going on since at least last year.

11:34Labor shortages at Teva Pharmaceuticals, the largest producer of Adderall, has constrained supply, which has left millions of people with ADHD, relying on the old-fashioned method of getting stuff done. procrastination and a little bit of tears. Both the FDA and the DEA have called on drug makers this week to work on boosting manufacturing of prescription stimulants to help alleviate these shortages. And they better figure it out fast because Adderall demand is off the charts. 11.3 million prescriptions were filled in Q3 last year, which was the highest ever. Part of the issue is that Adderall is a controlled substance because people can get addicted and abuse it.

12:14So the DEA sets quotas that only allow companies to manufacture a certain amount each year. But companies have been complaining about those quotas. The DEA says, no, they're plenty high enough. It's become this big finger pointing mess with people with ADHD kind of caught in the middle, Neil. Yeah. I mean, I've heard stories of people here in New York City that have had to travel to Pennsylvania to fill their prescriptions. It's like been a severe shortage. And it reminds me of a plane delay because it first is, you know, it's 30 minutes to start and then it's an hour and then it's an hour and a half and then it's two hours.

12:46And you're like, well, I'm just going to be here all night. Right. So because this thing, they first warned of a, of an Adderall shortage back in October, 2022. And what, I don't, what is it, August, like nine months, nine, 10 months later, it's still going on. And I was just frankly, very surprised to see these headlines still happening and there's a huge cascading effect across a bunch of the other adderall uh competitors like vivence ritalin concerta because everyone was shifting from adderall because they couldn't get adderall they had to go get these competitor drugs and then all of those drugs started uh getting in short supply as well so this is a very big issue for people who need these to kind of stay focused and also it's treated for narcolepsy yeah i didn't know that by the way yeah i might need that too because after the show in the morning i i always end up going to sleep but yeah, drug shortages in general are at a nine year high with 309 medicines in short supply right now.

13:40And a lot of it does come from a domino effect, as you mentioned. So there's a shortage of penicillin right now. And that started because doctors started prescribing bisillin, which is a brand name for penicillin for other things like strep throat. And that was due to another shortage from amoxicillin, which is another antibiotic. So it's like this domino effect where like one drug gets short and then they start over-prescribing another drug and then that drug gets short and then they start over-prescribing another drug. So it really is like this delicate balance that if it gets, it's kind of like the planes.

14:17Yeah, if it gets thrown out of whack, then it all goes downhill. It's a very delicate supply chain that relies a lot on imported materials from abroad. And it's just, yeah, it's very, very complex to make these medicines. And a lot, you know, there's only a few manufacturing plants that actually make a particular treatment. So if, you know, bad weather hits a particular plant or something goes awry with the manufacturing process or there's a labor shortage, which was in the case of Teva, then there are huge effects across the spectrum because there are just not that many places that make, that know how to make these particular medicines.

14:53You know what it also reminds me of is the sriracha shortage that we talked about a few months ago, where there's one place that produces the chilies that are used to make sriracha. So it is, and if that's hit with drought or something, then you're totally right. It throws the whole supply chain out of whack. All right, before we jump into our next story, Neil, we're going to take a quick break. In America, half of every dollar spent on brand medicines goes to entities who don't make them. While middlemen like PBMs and 340B hospitals drive up costs, Biopharma is investing$500 billion in new infrastructure and manufacturing here at home and helping patients buy medicines directly at lower prices.

15:35Tell Washington to end middlemen markups and put American patients first. Visit phrma.org slash middlemen. This episode is brought to you by State Farm. listening to this podcast smart move being financially savvy smart move another smart move having state farm help you create a competitive price when you choose to bundle home and auto bundling just another way to save with a personal price plan like a good neighbor state farm is there prices are based on rating plans that vary by state coverage options are selected by the customer availability amount of discounts and savings and eligibility vary by state All right, welcome back to Neil's Numbers, the segment where I share three stats from the week's news that will make your brain melt into liquefied wisdom.

16:24Let's return to one of our subjects from yesterday's pod, Uber, because its CEO had a real Lucille Bluth. It's one banana, Michael. What could it cost? Ten dollars moment. It happened when a wired editor took a 2.95 mile Uber ride in New York City to meet CEO Dara Khashrashoggi. He asked the Uber boss to estimate how much his ride cost, and Uber's CEO said$20. The real answer was$51.69, including a driver tip. The response from the CEO, oh my god, wow. Khazor Shahi said it must be due to surge pricing, but the editor was like, it's 10 a.m. on a Sunday Wednesday. It's not like the president's in town.

17:05So what does this episode show that Uber's CEO isn't exactly super in touch with how much rides it cost here in New York City, but also just how much ride-hailing prices have risen in recent years? The cost of rides for services like Uber and Lyft have essentially doubled from 2018 to 2021. And for Uber and Lyft in New York, they jumped 50%. I guess that's why Uber is profitable now. I know. It truly is. That's what I was thinking the whole time. It's like, it's not a coincidence that prices have doubled over the last couple of years. And then Uber finally had its first profitable quarter. I mean, anyone who lives here is like rolling its eyes at Uber CEO because like, yeah.

17:44I mean, we take an Uber into work every morning and it's 4 a.m. And it still is costing like 15 or 20 bucks. More than that for me. I know. So it is just ridiculous these days. But I guess if you want to be profitable, like get someone hooked on your product and then raise prices. Well, I remember the good old days when Uber and Lyft were fighting for market share and I was getting those emails. Five free rides all the time. That was the millennial lifestyle subsidy of the boom years of 2017 and 2018. All right. For our second number, let's head to the NFL, which officially gets underway today.

18:17Well, preseason anyway in the Hall of Fame game. In terms of storylines for this season, one thing stands out for us economics nerds, the collapse of the running back market. Running backs, who used to be highly coveted assets for teams, have essentially turned into commodities like soy, wheat, and corn. And because running backs have found to be largely interchangeable with one another, demand for an individual player's labor has completely plummeted, and so have their salaries. Here's a stat that highlights the running back recession. Together, just two quarterbacks, Justin Herbert and Lamar Jackson, will make more this season than every projected starting NFL running back combined.

18:55It's crazy. It really is just such, it shows where the league was and where the league is going, which is just way more pass heavy. So you're, you're totally right. Like it doesn't value the services of a running back as much anymore. And like the prices have, have reflected that. I feel so bad for running backs though, because it's the most physically grueling, physically demanding position and they get paid pennies on the dollar. Kickers, kickers are getting paid more on average than running backs. Maybe they're more valuable. I know. Maybe the better ones, like it's all about your replacement value.

19:27Like how much are you better than your competitor who you could sign? I could just sign a younger running back for cheaper and not really lose any of my competitive edge as a football team. But then we know that markets have been known to correct themselves. So like what's the next step here? Is the running back market going to come online? Is the nature of the NFL playmaking going to change? Yeah, that's what they need. I think the market will rebound in some fashion, but it will be really interesting to see. All right, final number. There's a new paper out from Sam Peltzman at the University of Chicago that examines what makes us happy.

20:02And in surveys through 2018, he found one thing by far is most influential in separating the happy from the unhappy in America. I'll give our listeners a couple seconds to think about this. And you can also just pause the tape for however long you'd like and think. well the answer is marriage people who are married are at least 30 points happier than unmarried people happiness in general in the u.s has declined significantly over the past few decades and peltzman says that fewer people getting married is a major contributor to that decline it's so interesting but i guess it is just better to navigate life with someone we were we were kind of joking before the show like we know some like married couples and you're like those are the happiest people in America.

20:46Like that's kind of crazy. What are the rest of us doing? But yeah, I did love seeing like that. That's the biggest Delta between happy and non-happy people. Some of the commentary on this was, does marriage make you happy or happier people most likely to get married because sad people, no one wants to be with them. So it's a correlation situation. But yeah, I mean, it can't hurt. It sounds like that if you want to put a ring on it. All right, Neil, thank you for those wonderful numbers as always. But I actually have a number of my own that I want to talk about for our next story. And that is 26.1 billion.

21:24That's the estimated value of the global sports memorabilia market as of 2021. That number comes from the consulting group Market Decipher and was in an article we stumbled across yesterday in a publication called the Rob Report, which went super deep on the ins and outs of the memorabilia market. It is nuts, Neil. We're talking a game-worn Maradona jersey selling for$9.3 million, Jordan's flu game sneakers selling for$1.4 million, and even a Derek Jeter-signed Yankees stadium seat for almost$2 ,000. This report was packed with so many anecdotes and weird facts about the sheer size and craziness of the sports memorabilia market.

22:04What stood out to you in particular. What stood out to me is that there are two very different categories of collectors here. You have to go after, there's one category, which is autographed cards and tickets. And the other is used clothing and equipment. And what gives each of those categories value is so, and status is so different. So for the cards and tickets, it has to be super pristine mint condition, never been touched, no bends or folds. And then for the used clothing or equipment, It's how dirty can I make this? I can't touch this up at all from its original. More blood, the better. More sweat, the better.

22:39So the fact that there are these two super popular categories with such different markers of value was really interesting to me. I thought that was very interesting as well. What stood out to me is actually they were looking at where's the growth opportunities in sports collection right now. and a lot of people said it's in the women's game because there's basically a non-existent like sports collectible market for women's sports and so there's actually scarcity there whereas all these other markets are a little more saturated and becoming even more saturated so like yeah maybe like it's an alex morgan signed jersey or a game warren jersey or something like that because yeah right now the market is 99 the collectible market is 99 male which is just wild because a lot of people just like gravitate towards this if you're a guy.

23:28But so a lot of analysts were saying like, all right, listen, the women's market is where like the untapped, the real growth is lying. This is an industry in hyper growth mode. And it's one that started, that really picked up during COVID and hasn't let up even if people can leave their house now. The same report predicted that the size of the sports memorabilia industry will reach 227 billion by 2032. That... Right, and what is it now? It says it's 26 billion now. So that's... 10X-ing, yeah. That's 10X-ing over 10 years, which I don't... I mean, I guess it's possible, but... I don't know how they arrived at that number.

24:03We need the women to win the World Cup again, so Alex Morgan jersey just becomes a million dollars. All right, I want to wrap up today with a little lost and found. Earlier this week, NASA heard a sound known as a heartbeat signal from Voyager 2 that it had lost contact with two weeks ago indicating that the 46-year-old spacecraft is alive and well. Look, I don't blame NASA for losing this thing at all. It's traveling in deep space 12.3 billion miles from Earth, dodging stars at a velocity of 34 ,000 miles per hour. Meanwhile, I've gone through 12 pairs of earbuds in the last three months. Still, how it lost contact is a little embarrassing.

24:42Some intern, JK was probably not an intern, gave a wrong command that tilted Voyager 2's antenna just two degrees off kilter, which was enough to sever contact with ground control. But now that NASA knows that Voyager 2 is still out there somewhere, it's going to try to send a command that gets its antenna pointed back in the right direction. This made me so sad for some reason. Whenever I think about Voyager 1 and Voyager 2 all the way out in space, just hurtling through the darkness, and then to think that we lost contact with it, It literally made me like emotional because like these things have been just plugging along for so many years and like, I don't want them to just be out there by themselves.

25:22I don't know if anyone feels that sort of kinship towards a space craft, but I think everyone was just beating up on this command thing, but I don't blame them. This is, this is a literally rocket science. I know. But what I was thinking about was they, I didn't realize they launched Voyager one and Voyager two at the same time in 1977. So I don't know who got Voyager one and who got Voyager two. Yeah, that is interesting. Voyager 1 is further away. It's$15 billion. But if they launch them at the same time, I feel like Voyager 2 is a little chip on his shoulder. It's a bit more of a problem child, too.