Investment Firm Sends Analyst to Strait of Hormuz & Bars Are Banning Phones

0:00Neal Freyman:There's more to investing than stocks and bonds. With iBit, you can broaden your investment mix and get Bitcoin exposure. Learn more about iBit with iShares by BlackRock. The market is yours.

0:16Good morning, Brew Daily Show. I'm Neal Freyman. And I'm Toby Howell. Today, more restaurants are going phone free.

0:23Neal Freyman:Then, if you want to know what's going on in the Strait of Hormuz, you got to go to the Strait of Hormuz. It's Tuesday, April 7th. Let's ride.

0:35Neal Freyman:Good morning and happy Tuesday. 252 ,760 miles from Earth, four humans sat in a tiny lunar module and ventured further into space than any human has before. The Artemis II crew set the space flight record yesterday as they completed their lunar flyby around 7 p.m., passing the old mark held by Apollo 13, traveling more than a quarter million miles away from home, and basking in 40 minutes of solitude as they circled the far side of the moon. It is so great to hear from Earth again, astronaut Christina Koch said when the craft finished its orbit. Jeremy Hansen, the Canadian member of the crew, decided to use the historic record as a chance to fire up future generations.

1:14Neal Freyman:We most importantly choose this moment to challenge this generation and the next to make sure this record is not long lived. On the moon itself, they described it as made of cheese. No, just kidding. They did see five small meteors hit the surface in their time observing it and loved the giant Oriental Basin, the 600-mile-wide crater that is considered the moon's grand canyon. Wiseman, the commander of Artemis II, said it's very three-dimensional. Neil, Artemis 2 begins the long journey home on target to splash down by Friday, but I am fully moon-pilled after all of this. That's far, but it's not as far as my dad's old car.

1:52I remember he used to show me the odometer and say, it's more than 250 ,000 miles, Neil. I have driven this car to the moon, so I'll never forget how far the moon is because of that old car. Another poignant moment was that these astronauts called down to mission control because there was this unnamed crater that they wanted to name after Carol Wiseman, who was Reed's late wife. She died of cancer in 2020. And you cannot watch that video and not cry. I mean, I don't cry. I didn't cry after watching the first 10 minutes of Up, but I did cry watching this video. They all hug at the end in silence.

2:28Just a very emotional and very cool moment.

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3:06That's taxact.com slash business dash returns.

3:09Neal Freyman:The Strait of Hormuz, a 21-mile maritime channel sandwiched between Iran and Oman, through which 20 % of the world's oil passes, has become the most important waterway in the world since the war in the Middle East broke out. The state of the strait is the most critical factor affecting markets today, where the goings-on can affect trillions of dollars in the markets. So a stock-picking substactor shipped off one of their analysts armed with a smartphone and$15 ,000 in cash to figure out what's actually going on. Citrini Research, which publishes market recommendations to their thousands of subscribers, sent an analyst to the northern tip of the UAE to see with his own eyes what we can only read about.

3:48Neal Freyman:The journeys of analyst number three, as Citrini calls him, have since gone viral, with one photo showing him cruising the straight with a beer in hand and a waterproof Pelican case full of Zin and cigars in tow. You might remember Satrini from earlier this year for causing a$200 billion market meltdown after publishing a research note describing a dystopian post-AI future. This boots-on-the-ground research operation is capturing the attention of the investing world in a similar way, prompting lots of jokes about the sheer audacity of analyst number three, but also some real alpha too. According to analyst three, a lot more ships are transiting than commonly believed, contradicting what transponder data is showing.

4:29Neal Freyman:In more bearish news, the analyst reports that there is a larger U.S. troop presence in the region than what's being reported, warning that a months-long conflict could be unfolding. Neil, this is part marketing stunt to sell sub-stack subscriptions, but also part common sense. As the analyst report starts off, what if I just went to the Strait of Hormuz? And so he did. There will be an analyst number three at your Halloween party this year. And if you want it to be you, I'm thinking bucket hat, Hawaiian shirt. Yes, you need a bunch of zins and a beer and some cigars. And also maybe you want to carry a copy of Infinite Jest because they cited David Foster Wallace as the inspiration for this type of gonzo on the ground fact finding.

5:09But yes, it was actually really important information as well because it does challenge the dominant narrative that the strait is effectively shut. Because he said, actually, these ships are going through. We're seeing actually up to 15 ships a day. hey, we all thought it was essentially closed, but there are ships going through. The thing is they're turning off their transponders, their IAS systems, which is a beacon to the rest of the world to let them know where ships are. So there was actually some interesting information that challenges the dominant narrative.

5:37Neal Freyman:Yeah, because there has been a lot of fog of war sort of increasing around the region. The US government has actually asked certain satellite imagery providers to delay some of the imagery that they are relaying out of the conflict zone. They're saying that we don't want much information emerging from that because it is an active, you know, war zone. So how do you get any information out of the region? It really was, it sounds like this thing that you say to your friend at like 2 a.m., like, what if we just went to the Strait of Hormuz? But they did so because they're like, someone needs to figure out what's actually going on.

6:08Neal Freyman:A few other anecdotes that they surfaced was that missile attacks are a lot more common than people know. They also saw more ships transiting, as I've mentioned, which led them to conclude that the Strait isn't mined as has sort of been floated around by Iran. So some bullish news, some bearish news, but in general, it looked like there was a little bit more activity in the region than previously expected. It looks like Iran, we know that Iran has set up a central toll booth at the Strait of Hormuz, and it looks like they're making either one-off deals or doing some diplomatic back-channeling things because the shipping traffic has been picking up in recent days, even after this guy got back from the Strait.

6:46Yesterday, it was reported that a French container ship and a Japanese-owned tanker both exited the Strait of Hormuz, which is the first such instances since the war began. So there is a steady trickle. I don't think any U.S.-linked ships or any Israeli linked ships are going to go through the Strait anytime soon. But it looks like there is some back-channel discussions going on to get a Western—it's very notable that a Western ship, like a French container ship, got through the Strait.

7:11Neal Freyman:Meanwhile, the deadline for a ceasefire is approaching. Remember, Donald Trump, over the weekend, extended the deadline for his threats on Iran to Tuesday. S &P 500 futures are a little bit in the green as of this morning. Remember, Axios has reported that the U.S. and Iran and other mediators are trying to come to terms on a potential 45-day ceasefire. That's going to kind of be the dominant headline today. OpenAI released its first big paper on how the government should respond to super intelligence, and it kind of sounds a little like it came from the office of Bernie Sanders. In the report called Industrial Policy for the Intelligence Age, Ideas to Keep People First, OpenAI predicts immense disruption from AI technology that will soon become smarter than humans.

7:55To cushion the blow, the company proposed a number of policies it compared to the New Deal, including a four-day work week, a shift in the tax code to prioritize corporate income and capital gains, a public wealth fund, and a social safety net like cash payments when AI displacement hits certain thresholds. CO Sam Altman said that these ideas were just a starting point to kick off a discussion he feels is extremely critical. He told Axios, quote, we want to put these things into the conversation. Some will be good, some will be bad, but we do feel a sense of urgency and we want to see the debate of these issues really start to happen with seriousness.

8:27As The Wall Street Journal notes, the ideas presented in OpenAI's report would represent trillions of dollars of new government programs and fundamentally reshape America's economy. But as lawmakers consider regulating AI and public hostility to AI remains very high, OpenAI wants to steer the conversation in a way where it benefits. Toby, Sam Altman said the idea of this report was to spark discussion. So let's have one, a brief one. We can't go all that.

8:51Neal Freyman:Not a lot of tech CEOs do something like this. Not a lot of industries sort of put out a detailed blueprint for how the government should tax and regulate itself. It is kind of a uniquely AI age thing that is happening right now. There are some very interesting parts of this proposal. I think this shift to the tax system is maybe the most, I don't know, the most radical change. Moving away from taxing labor and income and payroll taxes, you know, the way our current tax base is mostly set up and shifting that more towards corporate income and capital gains. One, it does sound exactly out of the playbook of Bernie Sanders and that sort of wing of the government.

9:29Neal Freyman:But it is something that Sam Altman says, hey, as AI, you know, becomes more productive, as humans are not necessarily involved in so much of the labor force, we need to have a tax base that supports a lot of these social systems, these safety nets. Think about Medicare, Medicaid, Social Security, stuff like that. All of those programs still need to be funded. But if people aren't making as much money, you have to find that money somewhere. Let's tax corporations instead. It kind of is a recognition that there's going to be major job losses due to AI. Meanwhile, OpenAI had a day yesterday. So they released this paper and then all of a sudden things took a huge downward turn.

10:09First of all, The New Yorker released a very long profile about Sam Altman. They interviewed more than 100 people. And the main conclusion of this was that even the people who work with Sam Altman currently and in the past don't trust him as a leader. and then later in the night, Anthropic revealed, Anthropic is their biggest rival, revealed that they hit$30 billion in annual recurring revenue, which is reportedly more than OpenAI, up from just$1 billion 16 months ago and$9 billion to start the year. So Anthropic seems like it's zooming ahead of OpenAI, even as all these controversies swirl around OpenAI.

10:45Neal Freyman:My favorite quote from that New Yorker piece is not that people don't trust Sam Altman. One OpenAI board member said, he's unconstrained by the truth. That's the new way of saying that someone lies is, no, they don't lie. They're unconstrained by the truth. But you're absolutely right. Some people read between the lines and said, maybe this proposal coming out on the same day a giant New Yorker profile came out. It's just a way to regain control of the narrative, say, hey, we are a safety focused AI company. Maybe there's a PR angle to this whole thing. Moving on, Jamie Dimon contains multitudes.

11:17A few months ago, he opened a gleaming$3 billion 60-story headquarters for his company, JP Morgan, in New York City. Yesterday, he warned that companies are fleeing the Big Apple. In his annual letter to shareholders, the Queens native argued that high taxes and red tape were causing a large exodus of businesses out of New York City. Cities like individuals, companies, and countries need to compete, he wrote, adding, the truth is that while New York City has much going for it, particularly for financial companies because of extraordinary local talent, it also has the highest city and state corporate taxes and the highest individual income and state taxes.

11:50No city or company or country has a divine right to success. The warning comes about a week after a report that mega investment firm Apollo Global Management was looking for a second headquarters, not in New York, but in southern states like Texas and Florida. Fears of a corporate exodus have risen following the election of Mayor Zoran Mamdani, a democratic socialist who was trying to raise taxes on companies and the wealthy to fill a$5.4 billion budget hole. In his letter, Diamond didn't mention Zoran by name, but it was pretty clear who his barbs were directed at. Toby, is this business exodus real?

12:20Are we going to start recording these podcasts from South Beach?

12:23Neal Freyman:Yeah, look at Jamie Dimon's own company. Their headcount in New York City has shrunk from 30 ,000 employees a decade ago to 24 ,000 today. In the meantime, their headcount in Texas has increased from 26 ,000 in 2015 to 32 ,000 today. Back in the napkin math there, there are more workers in Dallas offices for JP Morgan than there are in New York City. So as Jamie Dimon is saying, like, hey, it's not, there is no divine mandate that says that the finance capital of the world has to be New York City. There are policies, there are taxes that feed into this and just look at his very own company as sort of the poster child for the migration to warmer climes.

13:05But yet the data doesn't bear this out because if you look at commercial real estate in New York City for Q1, which is when Zoran Mamdani has been in office, things could not be healthier. Leasing volume is up to 8.5 million square feet. Vacancies have dropped 2.2 percentage points to 13.5%. This is all analysis from JLL. Rents were up 3.5 % year over year. So rents, commercial office space in New York City is very healthy. there's been two huge leases, which was American Express announcing in February that it will build a new headquarters in Lower Manhattan Bank of America, signed a 20-year commitment to its New York City office space in March.

13:49And I need to remind everyone that JP Morgan just opened a $3 billion office tower in Midtown.

13:54Neal Freyman:One record that I feel that I need to mention is the most expensive rent ever recorded was recently signed by an AI company in Q1. That is N-Scale Global holdings. They signed a lease at one Vanderbilt at$320 per square foot. Little trivia fact for you. First time an AI company has ever earned the distinction of signing the most expensive lease in the entirety of New York City. All right, we're going to take a quick break and come back with Toby's Trends right after this. Not working with a financial professional is one of the biggest mistakes you can make. Yeah, that and sneaking up on a miniature horse.

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15:33Neal Freyman:So whether you're prepping for a SOC 2 or running an enterprise GRC program, Vanta keeps you secure and keeps your deals moving. Get$1 ,000 of Vanta today by going to vanta.com slash morningbrew. That's vanta.com slash morningbrew. Phone eats first is a motto that has unfortunately become all too common at restaurants around the world. Before you dive into a scrumptious meal, the phone comes out, the flash turns on, and an Instagrammable pic is snapped before any calories are consumed. But a Newtonian-level pushback is simmering, with the equal and opposite reaction to Phone Eats First being a growing cohort of eateries banning phones altogether.

16:12Neal Freyman:And I want to talk about it on today's edition of Toby's Trends. According to Axios, at least 11 states now have restaurants or bars with explicit phone restrictions. Hush Harbor is a bar in D.C. where cell phones are not allowed. People say it's like stepping into a time warp where going out means mingling with strangers and actually talking to other people, which doesn't happen very often these days. A consumer report survey from earlier this year found that we're checking our phones 144 times per day with an average of four hours and 30 minutes spent looking at our screens. and it's replacing normal interactions while eating.

16:50Neal Freyman:87 % of mealtime phone use involves social media and messaging per the Financial Times. Restaurants around the world are taking notice, risking the ire of influencers to try and create a better experience for all diners. The Spy Bar in London passes out a For Your Eyes Only sticker to put over your phone lens to add an air of mystique to the whole experience. But chef Michael Z, who goes by Symmetry Breakfast on social media, said it best. When you go to a concert or nightclub, how often has that experience been ruined by phones? You wouldn't take your phone to an orgy, Z said. Neil, what are we supposed to do at dinner?

17:25Neal Freyman:Talk to each other? I can't even imagine that. No, it's very interesting that the restaurant is borrowing this trend from other industries because if you go into certain comedy shows, you have to put your phone away. If you go to nightclubs, which I haven't in a while, but I know from that culture, is you can't have your phone out. Other music festivals are asking you to put your phone in a baggie before you go in. So it looks like the restaurant industry is just another one of these things where it's trying to promote social interaction at a time when we all want to be off our phones more. But we just can't because we're so addicted.

17:57Neal Freyman:The issue is that the restaurant industry thrives on phone usage, though. I said risking the ire of influencers. And that is a big deal because how do you get discovered as a restaurant these days? it's helpful to have people come in, film your food, talk about the experience. You need your phone for that. So they are constricting a major marketing challenge for themselves by doing this, although it does feel like the pendulum is absolutely swinging in this direction. So the fact that word of mouth can now say, hey, this is a place where no phones exist. Maybe you just film the outside of the establishment.

18:28Neal Freyman:I do think that there's two sides of this coin here. I wonder if enough momentum is building on the no phone front to allow these places to survive in the age of social media. It might be that the upper tier places don't need phones because demand for them and the marketing is all around the mystique and you don't really know what's inside. So maybe it just plays into their advantage, but it also is trickling downstream to more mainstream establishments like Chick-fil-A. Chick-fil-A in Maryland went viral last week for offering a ice cream treat for families who come in and put their phones away.

19:03If you go in, there's a sign on the table that says, we'll give you ice cream if you don't use your phone. So this is going from Chick-fil-A all the way up to the nicest eateries in the country.