Fastest Earnings Recap in Biz, GDP Slowdown & Jerry Springer Renaissance Man

0:00What should you invest in? And how often? Making investing decisions is easier with Fidelity. With their step-by-step experience, you can find investments based on your goals and comfort level. And if you'd like, you can decide how much and how often to invest with recurring investments that happen automatically. Ready to make your next investing decision? Head to fidelity.com slash trading. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC, member NYSE SIPC. Good morning, Brew Daily Show. I am Neil Freiman. And I'm Toby Howell. Today on the program, it is Friday and we've got another serving of Juicy Nugs for you to close out a busy earnings week.

0:40We also are saying goodbye to the one, the only, the Jerry Springer. We'll also do a little Friday temperature check on the economy because we got some lovely GDP data to parse through. Then we'll tell you about a new weight loss drug that could very well be the best selling drug of all time. Neil, it's Friday, April 28th. Let's ride.

1:06All right, Toby, I was walking down the street in New York City yesterday, and no one was talking about anything else but your hair. I honestly really appreciate the outpouring of support from our social media channels, our YouTube comment section was popping off. It was 99 % positive. Some people said I got a lot of Ken and Barbie comparisons. Some of them used them in a good light. Some of them used them negatively. But thank you, everyone, for weighing in on my new hairstyle. We're looking forward to seeing it all summer, and we all have summer vibes from it. We have to do our Friday segment, Fast Week, Slow Week.

1:43Fast Week, because I have been looking forward to this Friday because I am flying to Florida. I have a triathlon this weekend that I'm participating in, so I've kind of been nervously awaiting this day for a while now. The hair will make you go faster. I feel like it's white cleats in soccer. Like people just go faster when they have, you know, lighter shades. That's what I'm banking on. What about you? I am going fast week because had some really fun evening activities. And I feel like having evening activities like really pushes the tempo. We're really getting into the tech technical side of doing this for eight weeks.

2:15So like we need to find some sort of analysis around it. I love it. But yeah, let's go to Juicy Nugs. The busiest earnings week of the season wraps up today. So we're going to do a round of this segment. This is where Toby and I read all of the earnings reports. So you don't have to because most are not that interesting. And we're going to pull one juicy nugget of information that tells a broader story about the economy or the company itself. So, Toby, we're rolling the music. It's a little less intense than last time. I know we got some people who got a little anxious from the music. Yeah, people were stressed.

2:48So we're going more like Polka vibe, but kick us off. All right. Up first, we have Amazon. So as has kind of been the case with some of these big tech companies, the juicy nug always comes back to the cloud. So we're going to talk about Amazon Web Services. Came in clutch this past quarter. The AWS unit generated$5.1 billion in operating income, which is kind of similar to net income. And guess what Amazon's entire operating income was as a company? So you said it was$5.1. I'll say$5.4. It's$4.8 billion. So it quite literally put the entire team on its back. Amazon Web Services accounts for pretty much all of Amazon's profitability at this point.

3:29I also have a really cool fact that we found on Twitter. So AWS has generated$83 billion in the last 12 months. That's more revenue than 460 of the 500 companies in the S &P 500. Just a juggernaut. But it is slowing down. Right. Right. That's why. So the stock jumped initially on earnings and then it kind of settled back down and actually closed at a loss because they are expecting AWS growth to slow, which is, again, if this is driving the entire profitability of the company, then if it's slowing down, then obviously that's not a great look for Amazon. So that's kind of the cloud of the stock market today.

4:06Let's move on to Snap. And my juicy nug about Snap is I just don't know how this is a company anymore. Yesterday afternoon, the stock plunged more than 20 % after revenue fell for the quarter. And this sparked, I've been doing this for a long time following business news, this sparked this memory that literally every time Snap reports earnings, it's always terrible and their stock craters 20%. So I did some digging and it is true that pretty much every earnings report since late 2021, there is some version of the headline for Snap. Snap plunges 25 % on revenue miss. So it's this social media sisyphus where it keeps climbing up this hill back to recovery in the middle of those months and then it reports earnings and then wipes all of that out.

4:48It's really funny if you have some free time today go to Snap's like five year ten year stock chart and you can see every time it reports earnings because there's like these huge cliffs that it falls off and then yeah it climbs right back. But Snap IPO'd at$17 a share in 2018 and it's now at$10. So it just has not grown a lick should have sold should have sold to meadow back in the day or facebook back in the day um okay neil let's move to silicon valley intel is having a very rough go of it and by rough go of it i mean it just had its largest quarterly loss in its company's history and this is a company with a lot of history as we like to say it put the silicon in silicon valley so to see it struggling like this is a little tough but people weirdly see the bright side at the end of the tunnel uh intel makes semiconductors which is probably the most valuable thing you can make in the next 10 years of modern society so it's been investing in factories investing in its research team and it's trying to keep up with the big boys which is tsmc which is taiwan semiconductors and apple actually who makes their own chips now so their goal is to man intel's goal is to manufacture chips as advanced as those two by 2026 so even though it had just the worst quarter of all time people are like saying it's okay the stock didn't fall off a cliff because they expected this and they see the path forward for intel the worst is over for intel probably let's move on to oil so last year oil companies made more company than god when energy prices spiked this year prices have come back down to earth but they're still making gobs of money exxon's profit came in at 11.4 billion for its most profitable first quarter in its 140 year history.

6:31It's on quite a run right now. Quarterly profits have topped$10 billion for four straight quarters. But I also want to compare Exxon, which is the largest oil company in the West, to Aramco, which is the Saudi state oil giant. If you extrapolate Exxon's profits for the entire year, it would come in at about$46 billion in profits for the annual range. Last year, Aramco made$161 billion in profits. Holy moly. I just wonder, where do where do oil companies go from here? Because we're at - Drill deeper. Yeah, we're at record profits, but like every single indicator is pointing away from it. So I feel like we're in peak oil right now and eventually we'll see those profits.

7:11Quick gas price check,$3.63 on average right now in the US. That's down from a record high of over$5 last year. Still seems high. Even though I don't have a car, still seems high. All right, let's move to toys. So the key nugget for Hasbro and Mattel, two big toy companies, is that it's the year of the Barbie. I'm obviously embracing it with my hair. I'm honoring it. But Mattel, who actually makes Barbie, is looking closely at the upcoming Barbie movie to see if it will actually materially impact sales. Honestly, they've said they're hedging their bets. They're saying live action movies don't actually tend to drive more sales of their toys because the characters don't really look like their toys.

7:51You're more seeing Ryan Gosling rather than actual Ken or Toby Howe. Or Toby Howe, thank you. And then also I said it's the year of the Barbie. So let's talk about Hasbro. So the two actually signed a multi-year licensing agreement with each other. So now they can leverage each other's IP. So that means that Mattel is making Transformer branded Uno games and Hot Wheel cars. While there's a Barbie themed Monopoly game coming out for Hasbro. So they're sharing the love a little bit. Lego. Lego crushes both of those. Finally, Crocs, the shoe brand that caught on during the pandemic when no one could see each other's feet, but still kept rising because people apparently have no shame.

8:31They've hit a bit of a roadblock this week. And the main reason for its problems is damp sales of Hey Dude, a footwear brand it bought for$2.5 billion last February. Sales of Hey Dude were just$235 million, which were short of forecast. Now, I don't know what Hey Dude is, but you're pretty plugged into the sneaker scene. Okay, I'm pretty plugged into the sneaker scene, and I didn't know what Hey Dude was, which is ridiculous, but it's been showing up in all these industry reports, which is basically they poll multiple generations and ask like, hey, what's the hottest footwear? What are you looking at on the shelves?

9:04Hey Dude tops every single generation from Gen Z to Boomer in the casual footwear space. It's crazy. It's in the top two. And the other ones that the only time it loses is to Crocs. So clearly Crocs and Hey Dude have this grip on us. And I was doing some digging and it's because shoes with distinctive silhouettes sell really well right now. So you can, even if you don't see a Hey Dude, which is this really ugly, like clog-like shoe, or if you see Crocs, like you know what they are. And I think that's what's in style right now. So Hey Dude, where's my car? Hey Dude, where's my profits? We'll keep an eye out for that.

9:40Just want to shout out our control room because that was an excellently timed fade out of the music. I love that music. That was good. All right, so that's one juicy nug for this week. We did it twice. Their earnings season is rolling on. We'll see if there's anything worth covering in the next few weeks. But for now, let's move on. That's a two count. Let's make it an eight count of nugs, Neil. All right, let's go to GDP. And you know what time it is, Neil. It's time to put our macroeconomics hats on. I already have mine on. I'll give you a minute. I never take it off. All right. Phone wallet, keys, macroeconomic hat.

10:14That's how I leave the house every day. Love it. This is why we love you as a co-host. Okay, so we got some U.S. economic data yesterday, and it was a little all over the place. So GDP rose 1.1%, which is down from the 2.6 % figure we saw in Q4 of last year. That sounds bad, right? Well, kind of. So remember, we kind of do want the economy to cool off a little bit in order to get inflation in check. So if we dig into some of the figures, we'll see things like consumer spending, hiring, retail sales, home sales, and manufacturing output all fell a little bit last month. And all those things are technically good news for inflation because it's getting the number under control.

10:56But on the other side of the coin, we had a headline from Bloomer that said, this is the worst of both worlds because now we have a slowing economy and still higher than normal inflation. So you can either look at the bright side that maybe inflation is going down or the dark side. Where do you land, Neil? Yeah, you can just like flip a coin and say, okay, I'm pessimistic or yes, I'm optimistic. And it just depends on your personality. I guess I'm an optimism guy. And there's a lot of variables that go into that GDP number that, you know, are a little confusing and may be super, uh, you know, fluctuating from one quarter to the next.

11:32So the reason it seems that this GDP number was lower than expectations was this was business was something called business inventories. And it's because businesses weren't restocking their inventories at levels that they had been. So that is the main reason that dragged down this GDP number to such a low level and was the main reason that you see headlines being like, the economy is slowing. And then it's because business didn't restock their inventories. That is the main reason. Not that that isn't a big deal, but the far bigger deal is for the economy is whether consumers are spending because that accounts for almost 70 % of the entire GDP, which is the best measure we have for economic output.

12:10And consumer spending was up 3.7 % in the first quarter. And we've seen this from the juicy nugs of the corporate earnings reports that we talked about this week. They all raised prices and, you know, from McDonald's to Chipotle to P &G to Pepsi to Coke, they all raised prices and people and they all saw consumers not slowing down their spending. Right. No, you're totally right. Like that 3.7 figure from consumer spending is a great sign for economists. and also just a little one-two punch with that. So the labor market is still extremely strong. Unemployment fell to 230 ,000, which is pretty low, even for pre-pandemic standards, down from 246 ,000 the week before.

12:51Jobless claims. Yeah, initial claim for unemployment, sorry. So even if the economy's cooling a little bit, this gives economists hope that people will continue to spend because the labor market's very strong. People have jobs. people are making money and will continue to spend that money. So I guess we're optimists. We put our macro economic hats on and we put our optimists. I mean, people have been calling for a recession for at least a year now. Yeah. The R word is floated constantly and we never fully get into the R word territory. No. I mean, what is the definition of a recession? Typically, people have said it is two straight quarters of negative GDP growth.

13:30That is the common, And that is a previously accepted definition. But the actual definition from the people who actually arbitrate this, the National Bureau of Economic Research, that's the official recession scorekeeper. They define it as a significant decline in economic activity that is spread across the economy. And that lasts more than a few months. So pretty vague. Pretty vague. But we clearly have not hit it. And it keeps getting pushed off. And eventually these interest rate hikes, there's been nine straight, might eat into our wallets and might cause people to stop spending. But I think the labor market thing is the key.

14:03Because as long as people have jobs and they have good jobs that are paying them a lot, they will continue to spend and we won't go into a recession. They're buying hey dudes and crocs, I guess. Or not. Not enough. Okay, before we jump into our next story, we're going to take a quick break. The holidays mean more travel, more shopping, more time online, and more personal info in more places that could expose you more to identity theft. But LifeLock monitors millions of data points per second. If your identity is stolen, our U.S.-based restoration specialists will fix it, guaranteed, or your money back.

14:37Don't face drained accounts, fraudulent loans, or financial losses alone. Get more holiday fun and less holiday worry with LifeLock. Save up to 40 % your first year. Visit lifelock.com slash podcast. Terms apply. All right, Toby, I want to talk about Manjaro. And no, that is not the new Mario villain. It's the newest challenger to Ozempic and Wegovi in the exploding weight loss slash diabetes drug space, which has absolutely, you know, grown exponentially in the last year due to these treatments. But Manjaro from Eli Lilly could be the most potent one yet to induce weight loss. The company released the results of a late stage trial yesterday, and they show that it's even more powerful than its competitors.

15:21It helped diabetics who are overweight lose up to 16 % of their body weight or more than 34 pounds over 17 months of weekly taking this medicine. Early studies showed people losing up to 22 % of their body weight, which could amount to more than 50 pounds. This is the silver bullet that a lot of people have looked for in kind of their weight loss journey. So that's why we're seeing rumblings that this could be the best-selling drug of all time. So there's estimates that put it at$50 billion in sales per year, which is just an unreal amount. That's Amazon Web Services numbers, honestly. And it's coming from this new drug, new class of drugs.

15:59The COVID vaccine by Pfizer, we looked this up, brought in$37 billion in one year. And we thought everyone, I mean, not everyone, but like a lot of people, it was free. Right. I mean, for the most part, and it's kind of ridiculous the fact that we thought this was like the best-selling drug. Like Pfizer brought in$37.8 billion and now just a simple weight loss drug. It really goes to show like this is clearly a problem of like modern Western society is a lot of obesity is affecting a lot of people. So you can see where the demand comes from. It also just has kind of this cultural significance because there's always these rumors that celebrities, Kim Kardashian, was she on Ozempic, was she not?

16:40Elon Musk actually came out and just said, I'm taking Wigofi because someone said, you're looking good. And he's like, it's Wigofi. So it has this grip on the cultural consciousness, which I think can contribute to why this might be such a well-selling drug. But there are fears of access that wealthy people and celebrities who aren't diabetic will scoop up this medicine and lead to shortages. We've already seen it with Wegovi and Ozempic in the past, and people are concerned that it could happen with Manjaro as well. Plus, there are cost considerations. Basically, this is$10 ,000 a year pretty much for the rest of your life because you cannot stop taking it.

17:16Yeah. Or else you will regain all of the weight. Three quarters of private insurers don't cover weight loss drugs either, and Medicare doesn't cover it. So this is a thing that could kind of balloon and be out of the reach for many Americans, except for wealthy people who don't really need it. Right, right. Manjaro, name to look for. Manjaro. Manjaro, no? Okay. That's what I think of. Okay, moving on to our Friday segment, Stock of the Week, Dog of the Week, where we profile one company that's doing really well in the stock market and one company that is kind of dogging it in the stock market.

17:52I will go first. I get Stock of the Week, and I'm picking Chipotle. Chipotle stock hit an all-time high this week, and it's quickly turning into the McDonald's of fast casual. Tons of locations. You know what you're going to get. Tech forward. Always the baseline option in the back of your mind when you can't decide on anything else. You're like, all right, I'll just go to Chipotle. So after this week's spike, Chipotle is worth nearly$60 billion. And I know it's not a great comparison, but just another fast casual company, Sweetgreen, is worth$850 million. Chipotle rips, man. I actually found this fun fact that Chipotle was the only public U.S.

18:27restaurant chain where quarterly same-source sales grew during 2008 and 2009. So Chipotle is like this weird. Okay. Also, people keep calling out. I'm saying Chipotle. I know. You do not know how to say Chipotle. Chipotle. Sorry. I sound like my mom. No offense, mom. But yeah, it is almost this recession-proof thing. Wait, what company? Chipotle. Chipotle has done really well during times of economic downturn. People just love their burrito bowls, I guess. And then give us our little avocado fact, too. Well, we already talked about avocado this week, that Chipotle's profits are doing well because avocado prices are down, but I want to talk about something else, like this unlock that could solve a lot of the bottlenecks Chipotle has, and that is a new double-sided clamshell grill.

19:11Oh my God. Okay? So for you, Chipotle's had problems with long lines. I remember this from college in College Park, Maryland, where the line would go around the block. It was crazy. And so it's whipping out this fancy new grill that cooks chicken and steak much faster, takes two to three minutes for chicken instead of 12 to 13 minutes. And this is hopefully going to deliver a steady supply of fresh chicken and steak to those bins to keep the line moving and prevent bottlenecks. And, you know, I think for a fast casual restaurant or a fast food chain, it's all about your throughput. It's how many orders can you fulfill in any second.

19:46So I'm pumped for these new grills. You're of efficiency for everyone from Meta to Chipotle. I got so excited about pronouncing Chipotle correctly that I forgot to give our little disclaimer that this is not financial advice. We are simple, humble podcasters. So take everything you hear with the not financial advice grain of salt. Let's move to dog of the week. So our dog of the week is First Republic. Had quite a week. First Republic is one of the regional banks that kind of suffered some of the heavy ricochet shots from SVB's implosion. It had a wild week. On Tuesday, its stock dropped 50%. Crazy.

20:25On Wednesday, it dropped again by 29%. And then yesterday, it actually jumped 8.8%. Overall, though, that adds up to a 90 % drop in share price year to date. It's just had a rough go of it recently. And the big news that kind of precipitated all these drops was the fact that it lost roughly 40 % of its deposits in the first quarter, which is what everyone was nervous about. Did a bank run kind of happen on First Republic? and it turns out it did to a certain extent. But thanks to some infusions for some big banks, their deposits stabilized a little bit. So now we're in this weird limbo phase. What is going to happen to First Republic?

21:02Everyone's talking about it. Everyone's talking about it. It's your, the topics of the week are your hair and then whether First Republic is going to go under and need to be saved by the government. Yeah, so there's kind of three potential outcomes. One is kind of do nothing, hope withdrawals, stabilize, and it can kind of recover naturally. Two, it could be acquired, which there's definitely been rumblings of that, of a big bank like JP Morgan, Bank of America, swooping in, buying it for pennies on the dollar. The problem is it's got some really ugly losses on its balance sheet right now, unrealized losses.

21:32So even though it's trading for right around a billion dollars in equity value, its market cap right now, so it would be a bargain, people just, you don't want to touch it. Right. You'd be buying it. And at that price, you'd be having, you know, you'd be taking on all of these assets that are completely underwater. Right. So it's a little ugly, but there are rumblings of that. So that could happen. And then option three is First Republic goes into FDIC receivership, which is actually what happened with SVB. And that's good for depositors because that usually means they don't have to worry about losing their money.

22:04Not great for equity investors because usually that means all the value of the company is going to be wiped out. So those are the three options. We'll probably be talking about it again next week but that's our dog the week for this week all right i've been holding back on this last one because i don't want to talk i mean i do want to talk about it but it's so sad it's just sad jerry springer jerry springer jerry freaking springer talk show host politician king of mess he died at 79 years old yesterday and what an outpouring on the internet yesterday and among people sharing memories. And what struck me was how, you know, praised he was and how people said he was such a good guy.

22:46And, you know, when you watch his show, or I remember during the 90s, you know, I mean, he didn't maybe have that reputation of just being like, a great guy and a great dude with like, who was this pioneering TV guy. Yeah, I mean, I saw both sides to like, there was some chatter of like, people who had been on his show that were saying like, hey, he paid me like a hundred bucks. He owed me 200 bucks. So there were obviously like when you're in a career like that for that long, you're going to rub some people the wrong way. But yeah, for me, I'm going to be honest. Like I miss like the golden era of Jerry Springer just due to my age.

23:19And I know you say you associate a lot of it with like sick days or something. Sick days or it was on at like three or 4 PM after, after a school and you'd come back and you watch like Maury and Jerry Springer back to back and just like a key part of your childhood and you'd be like what the heck am I watching like I can't believe my parents are letting me watch or like I'm so glad I'm not with my parents so I can watch this. I know I'm actually going to read just some episode titles because they're ridiculous. Kung Fu Hillbilly was one. I'm happy I cut off my legs and of course you slept with my stripper sister so it kind of just goes to show you he was the godfather of reality tv as we know it.

23:57I actually did want to check though because I saw the Jerry Springer show had more than 5 ,000 episodes, which I was like, holy bejeebus, that is a long run. Judge Judy, 7 ,164. So there's still, Judge Judy's still the queen of kind of that daytime cable television that we know and love. Alright, one other thing about Jerry Springer, he was the mayor of Cincinnati, he was a politician. Wild, political career, didn't know that before he passed away yesterday, actually. Alright, I want to end our podcast on this note, and it's the way Jerry Springer ended each segment with his signature sign off.

24:29Take care of yourself and each other. Oh, it's nice. All right. That is our show for the week. Wow. It's over. You can always reach us at Morning Brew Daily at morningbrew.com. The show's producer and editor is Emily Milliron. Our technical director is Yuchenna Waogu. Sam Vellas and Raymond Liu are associate producers. Billy Menino is on audio. Hair and makeup got drafted by the Cleveland Browns. Devin Emery. Yikes is right. Devin Emery is our chief content officer. Our show is a production of Morning Brew. Great show today, Neil. Let's run it back on Monday.