Is Election Anxiety Slowing the Economy? & Gold Keeps On Shining

0:03When did making plans get this complicated? It's time to streamline with WhatsApp, the secure messaging app that brings the whole group together. Use polls to settle dinner plans. Send event invites and pin messages so no one forgets mom's 60th. And never miss a meme or milestone. All protected with end-to-end encryption. It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, want to build the next billion dollar brand? Consider making an energy drink. Then, the hot new asset class attracting the eyes of the world's government is also one of the most ancient.

0:45It's Friday, October 25th. Let's ride.

0:52If you're heading to the airport to travel to any late fall weddings this year, I hope you don't run into any gate lice. No, your hair isn't in danger of infestation. Gate lice is a term for people who linger around boarding areas in an attempt to get on the plane before their group or zone is called. And airlines are beginning to crack down. American Airlines is testing a new system to disincentivize any over-exuberant boarders. If you try to scan your boarding pass before it's your turn, an alert will blare out. Then everyone will point and laugh at you. No, you'll just be sent back to wait until your group is actually called.

1:30Neil, is this over the top or was it time gate lice were dealt with properly? I had no idea that this didn't happen already. I was someone who always follows the rules because I thought if I boarded in a different zone than I was, and I'm usually zone 14, somewhere in that about, I thought, yeah, there would be a huge police presence and everyone would laugh and I'd be shamed in the corner. But I know I've been to the airport with you. you just wait out in the terminal until you want to be the last person on the plane so you are the opposite of gate lice i want to be the last one usually i travel pretty light with just a backpack so i'm not too concerned with overhead bin space but i hate waiting on a plane like i'm going to be on the plane for hours i'd rather be in the wide open expanse of the terminal so i think it says a lot about people their boarding habits but now american airline said we know exactly what you're doing and we're starting to crack down now a word from our sponsor bonobos okay i know i've been saying this every day since this sponsorship started but neil you are looking positively debonair today well it's not every day i get to wear a suit into work so i'm taking full advantage of it i mean i'm running out of adjectives but for all you listening neil is rocking a perfectly tailored gray suit that has a nice shape and drape and gives off an understated yet ever so stylish five and you're not looking too shabby yourself toby and i'm not feeling too shabby either these suits are comfortable it's got the stretch it's got the breathability, I might do the New York City marathon in this thing.

2:56See, that's the Bonobos effect right there. It's clothes get you looking your best so you feel your best. Or in Toby's case, you feel like you can run a marathon in dress shoes. Don't tempt me with a good time. To find your fit, head to your nearest Bonobos store or go to Bonobos.com and use code BREW20 for 20 % off. This episode is brought to you by State Farm. Checking off the boxes on your to-do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app, it's nice knowing you have help finding coverage that best fits your needs.

3:35Like a good neighbor, State Farm is there. Okay, tell me if this sounds familiar. I really want to buy it, but I think I'll just wait until after the election. Yeah, well, this attitude is pretty typical ahead of big presidential votes. Every four years in the weeks leading up to Election Day, American consumers tend to pull back on purchases, especially on those big ticket items, until the political uncertainty is over. We are already seeing that play out this fall. From real estate brokers to car dealerships, businesses say they've seen potential buyers hesitate on signing the dotted line until they know who's going to be in the White House.

4:14It makes sense. Presidential elections often lead to big changes in things like tax policy. So there's comfort in the wait and see approach. Whirlpool is a perfect example of this. On the Appliance Maker's earnings call this week, the CEO said that the upcoming election has knocked its sales and he's desperate for the votes to be counted so that people would start buying washing machines again. Execs blamed much of the sales slump on all the negativity from political ads that people get depressed about the future. Whirlpool's CFO said, you're either hearing about how bad off you are now or how bad off you're going to be.

4:48Neither one of those gets you really excited to redo your mudroom. No. So if you look at polling, it does show that consumers do pull back in the weeks leading up to the election. Ipsos found that half of consumers are planning to spend less and save more in the run-up to election day. Cox Automotive surveyed consumers in June. 60 % said that the election would affect their next vehicle purchase, and 78 % said it would influence other big ticket purchases. So those ones that you may finance or are really big life events, you do tend to hold off on those until the election. I'm wondering if anyone listening to this has kind of experienced that before.

5:30And it's not just consumers either. It's businesses as well. You're seeing this manifest in a bunch of industries from construction to manufacturing. A lot of these producers, There's a lot of these builders are just pausing orders and pausing big projects right now until they get some clarity around what how the White House is going to shake off, shake out. Almost a third of Americans tasked with financial decisions. So think about your CFOs. They've postponed, canceled or stripped down near and long term investment plans this year. The way I think about it in my mind is when I graduated college, I lived in Maine for a little bit and I knew it wasn't going to be a long term thing.

6:04So I didn't want to really invest in my room, didn't want to decorate. So that manifested in me sleeping on a mattress on the ground for six months. I feel like that's what businesses are doing right now. They are pausing investment. They are sleeping on a mattress on the ground until they can figure out, am I going to, what is the long-term forecast here? So I think people even haven't built their bed frames at this point. One industry where you really see this play out is in housing and real estate. There was this very fascinating analysis of housing sales data in Los Angeles, Manhattan, and Miami in the last 20 years.

6:37So in even years, sales dipped in the second half of the year, and in odd years, they rebounded, and even years are those presidential election years. In even years, election years, sales were down 5.5 % in Los Angeles, 2.5 % in Manhattan, and 2.6 % in Miami. And then in odd years, sales were up 4.6 % in L.A., 8.5 % in Manhattan, and 10.2 % in Miami. So you really see that stark rebound. And that's why this is probably not going to be a long-term drag on the economy, because right after Election Day, you're going to see a pop back up as people start to spend. So if you're trying to see this in the actual economic data, you don't.

7:18Retail spending is still quite strong, according to government figures, and it's expected to be. So it's just a short-term blip that happens once every four years. If you talk to your local small business owner, they're probably saying, yeah, we see this happen every four years. We can't wait till November 5th is over and people start spending again. Hope you are ready for your K-Cups to pack even more of a punch in the morning because Keurig Dr. Pepper, the coffee maker and beverage conglomerate, just acquired the energy drink brand Ghost for more than$1 billion. Ghost is one of the many brightly colored cans the sleep-deprived might encounter when perusing the energy drink section at your local gas station.

7:55It separated itself from peers in a crowded segment by inking partnerships with candy brands like Sour Patch Kids and Oreos, attracting younger customers in the process. And it's that appeal that caught the eye of Keurig. Its CEO, Tim Coffer, said on an earnings call yesterday that Ghost appeals to Genzenials, which is quite literally the first time I have ever heard that phrase. Despite its CEO's odd perception of the use, Keurig landed themselves a hot commodity. Ghost net sales have quadrupled over the past three years as it has ridden an absolute boom in energy drink popularity. I think it's Gen Zennials.

8:31Gen Zennials? No, I'm joking. It's definitely not that. But I was wondering how that was pronounced. It is an all-out land grab right now for these large consumer giants like Coca-Cola, Pepsi, Keurig, Dr. Pepper, to get their tentacles, plant their flag in growing energy drinks because this is one of the biggest growth sectors in this entire sector. Coca-Cola is Monster's biggest shareholder. Pepsi invested$550 million for an 8.5 % stake in Celsius. Keurig, Dr. Pepper, this was not its first energy drink investment either. It owns a 30 % stake in NutriBolt, which makes C4 Energy. This is a classic playbook.

9:11Whenever you see a growing sub-industry like energy drinks or anything that's become the hot new food or beverage trend, All of these giants just go in and make investments so they can be on the ball. What I do find interesting, though, is that energy drinks are obviously exploding in popularity, but typically it's been more recently cleaner and healthier energy drinks. I mean, Celsius is the one that comes to mind, but Ghost is kind of in the opposite direction of that. Remember, technically they have no added sugar, like low calories, but the way the drinks are branded, it literally has our Sour Patch Kids branded all over it.

9:46So they're not trying to ride the health wave as much, but clearly they have found a market like their sales are doing great. But you can go to any grocery store aisle right now and find plenty of, you know, sparkling energy drinks with infused lion's mane and adaptogenic mushrooms. Ghost is certainly not that trend, but there is that trend that is out there as well. So if you're Red Bull or a monster or a Celsius, are you, you know, looking over your shoulder? These giants are definitely losing market share. I mean, Red Bull's market share in the U.S. fell below 36 percent last year from more than 39 percent two years earlier.

10:19Monsters slid from 42 percent to 35 percent over the same period. So you have a lot of upstarts coming at these, you know, I don't want to say legacy energy drink companies that have dominated the market for decades. But if I'm coffee, too, that is what I'm really looking over my shoulder. If I'm the Starbucks CEO, I'm saying, wait a second, there are so many energy or caffeine products out there at this point that maybe coffee is going to start phasing out and these healthier or not so healthy energy drink brands are stepping in. So that's another one that I think is looking over their shoulder.

10:52Gold, it is so back, Neil. Over the past year, its price is up 38 % to over$2 ,700 per troy ounce, touching an all-time high as recently as a Wednesday of this week. And humanity's favorite metal is everywhere you look these days. You can find gold bars while wandering the giant aisles of Costco. Korean convenience store chains are selling fingernail-sized pieces like hotcakes. And central banks around the world are snapping up gold as the increasingly uncertain world pushes countries towards the safety of the world's original reserve currency. This turn towards gold, especially from the higher echelons of the finance world, is not something you see too often.

11:31Warren Buffett famously hates the asset class because it produces no income and is favored by those who fear other assets and believe that fear will spread, according to him. But everyone from Costco shoppers to central banks are trusting the ancient asset to maintain its value as geopolitical instability and uncertainty increases. Gold has got its shine back, Neil. It does. And what's fascinating is that the rise in gold has been decoupled from its traditional marker, traditional things that have influenced this price, like interest rates, inflation and the dollar. Gold has typically risen in price when interest rates have come down and yields are low, but yields are still high.

12:12And we've just had, you know, one or two Fed rate cuts. So interest rates are still high. Gold is still soaring. It also usually goes higher when the dollar is weaker and there's just a gloomy economic outlook for the United States. But that also isn't true. So you've seen it break up with its traditional influencers, usually when there's a geopolitical drama going on. It spikes, but then it comes back down. But if you look at the gold price chart, you should check this out. It's pretty linear from the past two to three years. So people are wondering, like, what is going on? It seems like this is a more sustained trend than anything you've seen in the past.

12:50I think a big pivotal moment was Russia's invasion of Ukraine and then the subsequent crackdown on Russian assets because it demonstrated to a lot of these central banks across the world that typically they kept their reserves in stuff like American treasuries or supposedly safe Western currencies. But when they started passing down sanctions on Russia, it showed that those were not safe by any means. And so it's prompted this renewed interest in gold. According to The Economist, 11 % of reserves of central banks around the world consisted of gold last year. That is up from just 6 % in 2008. It's a little bit down from the height of 40 % back in the 1970s when gold was the de facto reserve currency.

13:33So I do think that moment there caused a lot of countries to realize that maybe our U.S. treasuries are not as safe and sound as we thought, especially since we saw what just happened with Russia after they had invaded Ukraine. And then it's not just happening in central governments around the world. It feels like gold is having also a cultural moment among retail investors or just in fashion. And generally, you mentioned that Costco is selling$200 million worth of gold every single month. And that is going to just regular folks who are buying gold watches in the luxury watch market. They're selling more yellow gold than they ever have.

14:11Zuck is wearing gold chains. So it's been a part of the moment that we're in right now for whatever reason. Up next, take a sip of coffee and sit tight because we have Stock of the Week, Dog of the Week coming right up. Eczema isn't always obvious, but it's real. And so is the relief from EBCLIS. After an initial dosing phase, about four in 10 people taking EBCLIS achieved its relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. EbGliss, LibriKizumab, LBKZ, a 250 milligram per two milliliter injection, is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema.

14:55Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies. EbGliss can be used with or without topical corticosteroids. Don't use if you're allergic to Epglis. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with Epglis. Before starting Epglis, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about Epglis and visit epglis.lily.com or call 1-800-LILY-RX or 1-800-545-5979.

15:25I'm Christian McCaffrey, pro running back, and Abercrombie is an official fashion partner of the NFL. I'm not kidding when I say NFL by Abercrombie broke the internet. last year, and I think this season's lineup is even cooler. And 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.

15:55It is Friday, which means it's time for Stock of the Week, Dog of the Week, the segment where Toby and I pick one stock that's having a beautiful day and another that still hasn't found what it's looking for. My stock of the week is Philip Morris International, whose shares popped more than 10 % this week to reach a record high. Philip Morris has historically been known for its cigarette brands like Marlboro, but now its business is buzzing thanks to a newer product, Zinn. Zinn's oral nicotine pouches have been growing in popularity for more than a year, But last quarter, they truly reached the upper deck.

16:29Shipments of Zincans in the U.S. grew more than 41 % in Q3 from the same period a year before, driving the bulk of Philip Morris' overall sales. The wildest part, we probably haven't even reached peak Zinc. The brand's growth has been constrained by supply shortages that are only now being smoothed over, and there's plenty of room to run overseas. Total nicotine pouch volume outside of the U.S. soared nearly 70 % last quarter, with Zin becoming available in 30 different markets. Toby, for the last 10 years, Philip Morris was seen as this corporate dinosaur making a product, cigarettes, that had been consigned to the ashtray of history.

17:05Now, thanks to Zin, it's blowing past all-time highs. Yeah, I mean, I urge you all to pull up the stock chart because literally from - I thought you were going to say urge you all to get the Gaka Zin. To start Zin. No, I urge you all to pull up the stock chart because you're right, from 2013 to 2023, nothing really happened because who wanted to invest in a maker of cigarettes? because that is not a growth market. It paid a nice dividend, so it did see a little bit of volume, but you're right, it was kind of relegated to the periphery. What I do find interesting, too, is that Philip Morris was actually broken into two separate companies back in 2008.

17:36Philip Morris kept its name, and they also kept the international cigarettes business, which turned out to be a good call because that actually is still growing. But then Altria was the other spinoff from this. They kept the U.S. cigarette unit, and they have really struggled so far. They are way below their all-time high in 2017. And we've seen the two companies just completely diverge because Altria kind of went down the Juul route. But Philip Morris went down the Zin route. And right now, Zin has been the winner by a large margin. Altria took a 35 % stake in Juul and lost pretty much all of it.

18:10And that is honestly being considered one of the worst corporate investments in history. Now, Philip Morris is doing well because they've done this very graceful pivot to this IQOS heated tobacco device and Zinn, which I think has really come out of nowhere. They're spending$600 million on a Zinn factory in Colorado. And again, just like gold, Zinn's become a part of the culture on Monday night football. Baker Mayfield, the quarterback of the Tampa Bay Buccaneers, was seen on the sidelines popping a Zinn. I don't know the exact term for it, but like in the third quarter of the game. and everyone was talking about it.

18:46So it's kind of like, you know, Keith Hernandez smoking a cigarette in the duck out in the 1980s. My dog of the week is Polymarket. The crypto-powered prediction market has been a key narrative driver in this year's presidential election. Frequently cited as a more up-to-date look at the sentiment of voters who are putting actual money on the line, there's been a significant amount of scrutiny recently around the platform over the presence of a big spender potentially skewing its probabilities. Right now, Polymarket is showing Donald Trump with a 63 to 36 % advantage over Kamala Harris. And that significant gap, larger than most national polls or other prediction markets show, has been traced back to four accounts controlled by one person who's not even American.

19:28The Polymarket Whale is a French person with extensive trading experience and financial services background, the company said. In total, the Whale has collectively spent over$28 million betting on Trump to win the 2024 presidential election. Now, Polymarket insists that the trader wasn't trying to juice the odds in Trump's favor, but they did ask them to chill with making new accounts. Still, a tough look for a platform that supposedly offers a more accurate snapshot of election results to have a single foreign player with such an outsized financial impact. Right. Well, I mean, it's they're probably relieved that it's a foreign player because this is not allowed in the United States.

20:05So that's what sparked this investigation. They saw these four accounts doing some weird trading and they're like, well, let's investigate because we hope this is not happening from a U.S. account because that is not allowed. The poly market is not allowed for U.S. users. So they're probably like, OK, I'm glad it's a French dude. But the fact that he's spending tens of millions of dollars on this election is sure to raise concerns that this market is being manipulated. prediction markets had been seen as a pretty fascinating and reliable snapshot of where public sentiment stands as opposed to polls.

20:39So the fact that they found this huge whale manipulating four different accounts and doing interesting trades is certainly going to prompt some introspection, maybe more scrutiny on prediction markets, poly markets specifically. And it has been a bit of a blow to maybe people who do favor Trump. Elon Musk has been parading Polymarket around as more accurate than the polls because that's his line of thinking that there's actual money on the line. Therefore, they are more accurate than the polls. Polymarket, to its credit, does say that prediction markets are not opinion polls. They only track the odds of a candidate's victory as implied by the people putting money on the platform.

21:16They aren't equivalent to polls, so they do try to quell maybe people who are trying to equivocate the two. But still, I do think Polymarket did become a really big barometer in this election. And if you have a whale spending $28 million, you start to, in the back of your mind, think, okay, maybe it isn't quite as accurate, or maybe it is accurate. You don't know. It is just implied by the bets on the platform. But yeah, so they've been going through a little bit of this negative PR cycle, but I don't think prediction markets are going anywhere anytime soon because they have had their moment this election.

21:46All right, Toby, let's sprint to the finish with some final news stories to close out the show. You can go first. All right. Thank you. Tesla just had its best single day in the market in over a decade. Shares closed up over 20 % yesterday for their biggest jump since 2013. The extra$150 billion in market value comes from renewed optimism that Elon actually does care about its core business of selling electric cars. To go along with solid Cybertruck sales numbers, Elon forecasted a 20 % to 30 % jump in sales next year with a promise to launch that all-important affordable EV in the first half of 2025.

22:22It was a huge day for Tesla. It was a crazy good day for Tesla. It was a crazy good day for Elon Musk, who owns a lot of Tesla. He added$33.5 billion to his net worth. And as Bloomberg congressional reporter Stephen Dennis pointed out, his wealth increased more yesterday than all the political spending on the election by both parties combined. And he also said it was likely Elon Musk's one-day haul would exceed all the spending and all the presidential campaigns in history. So that just shows you how much money he has. And this$1 million giveaway, which apparently has been paused for now, is just absolute chump change for him.

22:58Tuesday's report that the onions on McDonald's quarter pounders led to an E. coli outbreak is causing shockwaves across the fast food industry. Yesterday, Yum Brands, the parent company of Taco Bell, Pizza Hut and KFC, said it was pulling onions from some of its restaurants. And Burger King announced it was removing onions from 5 % of its U.S. restaurants after a view of its supply chain. Both companies said the moves were a proactive measure and they had not received any indicators of illness from health authorities. Yeah, right now, health authorities, just an update on that E. coli outbreak.

23:29Health authorities say that there's been one death in 49 confirmed cases across 10 states at this point. It does look like most of the fast food brands looked at their supply chain. Burger King said this was definitely a precautionary measure. 5 % is not a lot of its supply chain, but you are seeing everyone kind of take stock and make sure that this doesn't kind of infiltrate their supply chains as well. An$8.5 billion luxury merger is on the ropes after the FTC sued to block it. A federal judge nixed the potential merger between Tapestry, the owner of Coach, and Capri, the parent company of Michael Kors, after regulators had concerns that it would make the handbag market less accessible.

24:09Tapestry's stock jumped 10 % after the news, which showed investors weren't so enthused about the idea of folding the struggling Michael Kors brand into the fold. Meanwhile, Capri's fell off the cliff to the tune of a 50 % drop. This was an interesting trial because it was basically a referendum on whether handbags were worthy of antitrust scrutiny. And the judge in this case did assert that handbags, sure, were a very important good that people purchase on a daily basis and it's important to look at this market and see if it's being too concentrated. The judge wrote downplaying the importance of handbags as non-essential discretionary items that consumers can simply choose not to buy if the price is too high ignores that handbags are important to many women not only to express themselves through fashion but to aid in their daily lives.