Mug Shot Merch Takes Over the Internet & SpaceX Sued by the DOJ

0:28The best B2B marketing gets wasted on the wrong people. dot com slash mbd terms and conditions apply only on linkedin ads good morning brew daily show i'm neil freiman and i'm toby howell on today's pod toby and i can't teach you how to fly fish but we can get you prepared for jerome powell's big speech in jackson hole and the government takes a swipe at elon musk over spacex's hiring practices then donald trump's mugshot finally dropped last night and the memes and t-shirt sales were a-flowing plus cancel all your weekend plans because the largest Loch Ness monster hunt in 50 years is going down in the Scottish Highlands tomorrow.

1:04It's Friday, August 25th. Let's ride.

1:10Neil, two things. One, I could totally teach people how to fly fish. You went one. I've been twice. Okay. I'm an expert now. And then two, it's Friday. So let's do our Friday segment. Fast week, slow week. Which one was it for you? To me, this was a fast to me because I've been looking forward to this weekend for a long time. My buddy is getting married in New Jersey and a lot of my college friends are flying in that I haven't seen in a while. And I just love seeing old friends because you don't miss a beat. Like after five or 10 years, if you were good friends with them a long time ago and you just start talking again, and it's like no time has ever passed.

1:45And I love that feeling. Someone needs to do a spreadsheet of how many weddings or bachelor parties this podcast has gone to this year. It's been truly outrageous. My week was slow. I have nothing to look forward to this weekend. The track and field world championships are happening. Some good Premier League. So I'll have a good weekend regardless. Chilling is fine. Yeah, that's what I need. All right, let's get into our top story of the day. Neil, Donald Trump, star of Home Alone 2 and former president of the United States has had his mugshot taken and the internet went wild. As a reminder, Trump was booked at Atlanta's Fulton County Jail last night, where he turned himself in for allegedly conspiring with 18 others to reverse the 2020 election results in Georgia.

2:28After he made bail, he left, but the picture got out as to the details of his booking, where he was listed at 6 '3", 215 pounds. The internet, love that. Neil, there's so much to talk about when it comes to Trump's fourth arrest of the year in terms of the charges themselves and what it means for the broader presidential race. But I want to actually start with the business angle of this. And that is how much money Etsy sellers are going to make off this picture. For months, people have been raking in money from fake mugshot merch, but now that the real one is here, it's basically like their Super Bowl.

2:59I don't know anyone who would actually buy one of these shirts, but they are going crazy. And the thing about this is this Trump mugshot will be used by both sides to further their agenda because it's really the power of a picture. And it's so incredible how one picture can be used to further your agenda or to solidify your position or to show your allegiance. So you have obviously like the Trump resistance people who are using it as a little vindication to say, this guy has committed so many crimes. I'm so glad that we finally get to see his mugshot. And then on the other hand, you know, the Trump campaign has been using his indictments as a fundraising tool for months and pictures, fake pictures of his mugshot.

3:39So now that they have the real one, you can be sure that they're going to use this as marketing collateral to raise a lot of money for his campaign. And we saw it literally instantly last night. You had Donald Trump Jr. tweeted out a picture of the free Trump collection. And then Trump actually used last night to make his triumphant return to Twitter slash X. He tweeted out a link to his campaign page with a picture of the monk shot. So I don't know if I expected it to be used this quickly, but they are capitalizing on it for political value and also to fundraise off the back of it. There was an interview with Etsy sellers saying, like, this is going to be the best selling T-shirt for a long time.

4:18And they had already been talking to their manufacturers. They'd already got designs ready. So as soon as that mugshot was released, which everybody was anticipating, and there's another angle here of misinformation spreading on the Internet because in the hour before the actual mugshot was released, a fake one spread. Well, lots of fake ones. And because also AI has been, of course, we have to talk about AI in this. There's been AI Trump mugshots photos circulating around the internet. So yesterday on Twitter, it was legitimately confusing for a little bit because, yeah, the one picture really got a lot of steam.

4:54But then I also saw other AI generated ones. So it was interesting to see just like so many parts of the discourse over the last six months that we've been talking about all combined into one story. At the same time, the internet was on fire. Do you think the Trump returning to Twitter will have any bearing on the X versus threads debate, whether this might stop threads in his tracks? Because as the campaign heats up, people are going to want to know what Trump has to say for better or for worse. And if he starts posting on X, then, you know, why even be on threads if you're only going to see it a few minutes after the fact and not be up to date?

5:31Well, I think X is just a magnitude larger than threads already. And I think this is only going to cement its daily active user gap that it has over it. So, yes, I actually do think it will play a role. And then just to kind of put a bow on everything and talk about the actual, a lot of people are wondering why we got a mugshot now, even though this is his fourth arrest. And it's because Trump avoided a mugshot in New York, Miami, and D.C. because mugshots are usually used as a means to identify detainees. And those jails were like, everyone knows what Trump looks like. But the Fulton County Sheriff said that he intended to treat Trump like anybody else.

6:09So if you're wondering why this was the first time we got a mugshot, that's part of the reason why. Yeah, and there's also going to be cameras allowed in the courtroom. And there's just going to be a lot more coverage, a lot more visual and transparency around this particular case than the others. So expect a lot more images to come out. And as you're strolling down Myrtle Beach, you can be sure the vendors will have the mugshot there. Oh my gosh, yes. OK, moving on. SpaceX is in the U.S. government's doghouse for not giving everyone a fair shake when applying to work at the company. The DOJ sued SpaceX over hiring discrimination yesterday, claiming that from 2018 to 2022, Elon Musk's rocket company discouraged asylum seekers and refugees from applying and refused to consider them because of their citizenship status.

6:53Now, SpaceX and Elon Musk have not been quiet about hiring only Americans. Musk has said multiple times in the past in interviews and in tweets that SpaceX can't hire foreign nationals unless they have a green card because SpaceX works with advanced weapons technology and a law known as the International Traffic and Arms Regulations prevents SpaceX from hiring people born elsewhere. The government doesn't want sophisticated American military technology falling into the hands of an adversary, after all. But the DOJ says, not true, Elon. The law you mentioned does not apply to refugees or asylum seekers who can definitely work at your company.

7:29There's nothing on the books that's stopping you from hiring them. And the feds accused SpaceX of systematically taking actions to thwart them from applying. They cited one example from 2020 in which a SpaceX engineer posted a job announcement in a career fair chat that said, sadly must be a U.S. citizen to apply, which isn't true. What stood out to you here? What stood out to me is just the risk reward that these aerospace and these rocket companies face when hiring, because a lot of their revenue comes from government contracts. And if you violate ITAR, which is that International Traffic in Arms Regulations, then you stand to lose those contracts.

8:05So I see why SpaceX was erring on the side of only hiring Americans, because if you mess up, If you have an accidental ITAR violation, you could lose a big Department of Defense contract or a big NASA contract. So I see where he's coming from. But also, I really wonder, did they really not know that they were in violation and that this law didn't apply to refugees? Or were they being intentionally obtuse? That's the big question. what the investigation you know this case is trying to understand is whether this was you know a systematic play to not hire refugees or asylum seekers even if spacex knew full well that they could hire them right because musk has not been quiet about it you said it he's tweeted about it he's been on multiple uh there's multiple sound bites of him saying that yes like if anyone is confused why we only hire americans this is why we have to do it so it it leads me to believe that maybe he was uninformed or yeah i mean i guess this is what the or it could be intentionally misleading right exactly all signs point to to probably a settlement out of court for this also tesla has a i mean elon musk says 25 to 30 percent of tesla's engineering staff is born outside the country so he was making a distinguished you know he was distinguishing between spacex which works on rockets and works with the military and tesla which makes cars and he says like we we hire a lot of foreign people over there by the way a lot of people think that these ITAR regulations are anachronistic at this point and that it leaves a lot of talented foreigners on the sidelines.

9:35And so a lot of people are calling for reforms to this. So maybe this does lead to a little bit more lenient rules around it because, yeah, you're excluding a large part of the rest of the world, basically, when you put these intense kind of restrictions on who military can work with. Okay. So we'll see what happens there. Let's move on to our next story. There is a big event happening out West where a bunch of people are getting together, spending some time outdoors, reflecting on shared principles of free expression and talking about different ways to formulate our economy. No, I am not talking about Burning Man.

10:10I see Toby nodding his head in. I knew where we were going. In knowing agreement. It is the Jackson Hole Economic Symposium. Way more exciting. No, this is a huge deal. While the metaphor is definitely overused, the Jackson Hole meeting is the Super Bowl for central bankers. More than 100 of them come from all over the world to discuss the most pressing problems with the global economy and through their speeches set the tone for the year to come. The main event, the Rihanna show of this Super Bowl, is Fed Chair Jerome Powell's speech later this morning. Investors will be glued to what he has to say about inflation.

10:42And if you don't believe me that people pay attention, Powell's Jackson Hole speech rocked markets last year. The Dow plunged 1 ,000 points after Powell warned the Fed would jack up interest rates and American households would feel pain because back then inflation was raging. This year, with the economic landscape looking pretty good, inflation's on the way down and interest rates at 22-year highs, Powell is expected to keep things a bit more chill in his speech today. He's probably just going to take out a five-wood, try to hit it down the middle of the fairway with a more nuanced approach, arguing that the Fed's rate hikes are working, but the job to stamp out inflation isn't done.

11:16Yeah, I think some of the things that people are expecting is he's not going to necessarily explicitly say if the Fed will raise interest rates next month, because we're actually not really hanging on his every word, like in previous Fed meetings. But it will kind of talk to how long it will keep rates high and just, yeah, the general vibe going forward. And I also do think, though, that the 70s have definitely scarred the Fed because they've done victory laps before where inflation was really high. They did these rate hikes. They got it under control and only for it to immediately spike again.

11:50They had to reverse what they were saying. So I definitely think you'll see a lot of kind of hand-wavy stuff and allusions to stuff, but no explicit guidance going forward because they've been burned in the past. They've been burned in the past. Let's do a quick check on inflation right now. So interest rates have risen to a 22-year high. They are so high. Inflation is coming down. It's at 3.2 % now compared to a peak of 9.1 % last summer when Powell had that very forceful address saying, we got to do something about this. We're going to throw everything at this. But it's still 3.2 % is not 2%.

12:26And so the talk in economic circles is this last mile, right? They talk about it in delivery, like the last mile is always the hardest. And so, you know, you have a few people like Larry Summers warning, the former treasury secretary, who warned of inflation in the beginning before anyone was talking about it, saying the Fed's got to keep its foot on the gas to make sure that inflation actually comes down to 2%, because like you said, it could flare up again. For sure. Okay, Neil, before we jump into our next story, 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.

13:05While 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. Tell Washington to end middlemen markups and put American patients first. Visit phrma.org slash middlemen. Close your eyes, exhale, feel your body relax, and let go of whatever you're carrying today. Well, I'm letting go of the worry that I wouldn't get my new contacts in time for this class. I got them delivered free from 1-800-CONTACTS. Oh my gosh, they're so fast. And breathe. Oh, sorry.

13:47I almost couldn't breathe when I saw the discount they gave me on my first order. Oh, sorry. Namaste. Visit 1-800-CONTACTS.com today to save on your first order. 1-800-CONTACTS. Neil, this next story hits near and dear to my heart as a long-term Subway apologist and fan, but my beloved Subway chain, the chain that brought us the$5 footlong, the chain that brought us that sweet, sweet smell of fresh baked bread, has sold after more than five decades of private family ownership. The price of the deal wasn't immediately disclosed, but the Wall Street Journal estimated it to be in the$9.6 billion range.

14:26Subway has been the subject of sales rumors for years now, as the sandwich giant has struggled to adapt to increased competition and changing consumer tastes in the last decade. Recently, it's revamped its menu, ditched the$5 footlong, and installed deli cutters in its stores to offer fresh sliced meat. Game changer. Game changer. But Neil, the most interesting part of this deal to me is the PE firm that bought it, Rourke Capital. Rourke has an unreal lineup of restaurant brands already under its control. we're talking duncan baskin robbins sonic arby's buffalo wild wings jimmy john's annie ann's carville ice cream cinnabon moe's schlotzkley's and more i have to stop there because i am running out of breath but this is kind of the goat of restaurant focused pe firms do we think this is a good match sure i mean it seems like they have expertise the one thing that subway seems to not be good at is it's franchise based right so it's franchisee based they do not have a lot of wealthy franchisees that can revamp stores and have the resources to make things look good.

15:26That's kind of what you want in your franchisee base. And Rourke does seem to have the expertise that could do that. So right now, Subway has way too much real estate. I mean, we were talking earlier this week and talking about retail vacancies and how in 2008, there was way too much retail space that we knew what to do with in the United States. And slowly that's been filling in. Well, Subway has the same problem because what they have 20 ,000 locations in the U.S., which is 7 ,000 more than McDonald's. That's like, I was driving in rural America, right? You're just driving down in these small towns.

15:58You go to like a little intersection. And when you get there, you don't see McDonald's. You don't see Burger King. You see a subway. Like it's a subway and a Dollar General. That's every small town. And I love it. It's really incredible to me how much real estate subway has in the US. But analysts say that it's way too much. And they need to kind of pare that down, make their stores like a little more, I guess, appetizing. And get, you know, get Inc. deals with well more capitalized franchisees so they can actually execute this mission of revitalizing their stores. Yeah. And I mean, it has been reducing its store footprint in recent years.

16:34Closed 571 units last year, more than 1 ,600 restaurants in 2020. So we definitely have been going back from the peak. It peaked actually in 2012 was its big year. That was when revenue hit$18 billion. Last year, revenue was only$9.8 billion. So you see it's been in a steady decline for a decade. Turns out that$5 footlong meal, by the way, might have been net negative because of the perception and also the pressure it put on franchisees' profit margins. Also, you have the Jared from Subway PR debacle. So it's not been good to my King Subway over the last decade. What I found interesting is the industry divides fast food into various categories.

17:17So there are burgers, pizza, chicken, and sandwich chains. And sandwich chains are fourth relative to those other ones, thanks to largely due to Subway slowing sales. So I didn't know that. I know. Yeah, because Subway is the sandwich industry, no matter, I mean, Jimmy John's. Jersey Mike's is coming for it. Jersey Mike's is growing much faster, but it's still, Subway did nearly four times the U.S. sales of Jersey Mike's last year. So it's still the giant in the room. So the industry goes as Subway goes. So hopefully Roar can kind of turn around. All right. Before we move on, we all know the meme of the, uh, the Taco Bell, the combination Taco Bell pizza hut.

17:55So now that, you know, uh, Subway is going to be in the same fam brand family as Duncan and Culver's and Jimmy John's and all that you're designing a store. What two brands are you putting together in the same location? Okay. I want to pair Culver's with something because Culver's is so underrated. I went to school in the Midwest for a little bit. I've spent time in Michigan. So I literally love Culver's. So maybe that cheese curds. With some ice cream. No, but they serve ice cream already. So I don't want to double up on that. So it might be weird, but maybe like a pizza place. So you have like the cheese curds, the pizza vibes.

18:30I don't know. Whatever it is, it's going to be extremely bad for your health and your cholesterol. But I love Culver's. All right. A new era for Subway. Let's head to our Friday segment, Stock of the Week, Dog of the Week. we'll discuss one stock that's been tasting as sweet as honey and another that puckers you up like a jolly rancher. Before we start, per tradition, I have to kick it to Toby for a spiel on why you shouldn't listen to us. We are not financial advisors, so we are just humble podcasters. So please do not take any of this as financial advice. That's my favorite part of Friday shows.

19:00All right, let's go to our stock of the week. It's biotech company Moderna, which rose more than 6 % in the past four days. And when a company that makes a vaccine gets named a stock of the week can only tell you one thing. COVID is back. A bunch of people I know have gotten it recently and nationwide COVID hospitalizations are up two thirds since June to about 10 ,000 people, though that is still far less than last summer's 40 ,000. With the uptick in cases, investors are betting on increased demand for booster shots from these vaccine makers in the fall, propelling shares of Moderna and its peers like Novavax higher.

19:32But if you want a booster that's been reformulated to tackle newer variants, you'll have to wait a few weeks. Updated shots have been moved to an annual cycle and push this fall to conclude with, or to coincide with flu shot season. Public health experts are hoping you'll just get both jabs in one visit to Walgreens. Yeah, Moderna's up this week, but if you look up in the, if you zoom out a little bit, Moderna is down around 40 % this year. Pfizer's also down 28 % because a lot of WHO officials are just saying, we are, this is a quote from the Dutch virologist who advises the WHO, we are in a very different phase of the pandemic.

20:08Then, yeah, we're in a very different phase of the pandemic. Basically, like the vaccines have done their work and they've... Sorry, I think it's the WHO. The WHO. You can call it the WHO. Really? I think so. All right, we're going to hear in the YouTube comments. I'm pretty sure it's the WHO. Okay, well... See, I like the WHO better. I like the WHO better. Oh, my God. The World Health Organization. Fine, Neil. Neil was giggling at me that whole time. Okay, the WHO is a great band. We know that. But again, let's zoom back into this story. Worldwide testing is also way down. So the WHO said, oh my gosh, the WHO said COVID testing has declined 90 % worldwide from its peak.

20:50Same in the U.S. So it's definitely, it's tough to get a sense of where the pandemic is right now or where COVID levels are at right now simply because testing is down so much. To me, when you look at pharma stocks, it's so interesting because you can tell which ones have the anti-obesity drugs and which ones are just reliant on COVID vaccines. because Pfizer, yes, is down 30 % today, and they don't have like a compelling anti-obesity drug. Meanwhile, Eli Lilly has Manjaro. It's up 50%. We've talked about Novo Nordisk, which makes Ozempic and Wagovi, and that's up 35%. So Pfizer has been getting crushed in sales because demand for vaccines has gone down.

21:26I don't think with each new booster that gets put out, there is lower demand and lower pickup. So Pfizer needs to get its act together. And Moderna, I don't know what it's going to do. It needs to get more drugs in the pipeline because this is not going to be a sustainable thing going forward. Yeah, it can't be a one-trick pony. Okay, let's move on to our dog of the week, Neil, which is Dollar Tree. It had a rough one in the markets yesterday as the value retailer struggles to combat the same problem other retailers are facing, theft or shrink as it's called in the industry. Its stock fell over 12 % yesterday after Dollar Tree CFO Jeff Davis said that shrink was eating into its margins.

22:05So the company is taking some anti-theft measures like moving certain items behind checkout counters and removing some offerings altogether. But the most extreme measure is putting some items behind lock and key, something all too familiar to anyone who shopped at Walgreens or CVS recently. Neil, just to zoom out, this is an industry-wide problem that retailers are trying to figure out how to solve. Earlier this week, Dick's sporting goods cited theft as a main reason why profits plunged even as sales grew. and others like Target, Walmart, and Home Depot have also called out pressures from Shrink.

22:39Tough time. Yeah, it seems like dollar stores in general are susceptible to violence and theft. Dollar General employees have been so angry, they staged like a protest outside the company's headquarters because 49 people have been killed at Dollar General stores since 2014. So these places are just not particularly safe. And you've been seeing an increase in theft and it seems like dollar stores in general get hit particularly hard from this. Right, and this is the problem though, is that locked cases, even though they help reduce theft, are really bad for business. They can cause sales to drop 15 to 25%.

23:15That comes from the CEO of an anti-theft company. So it really is, it's kind of, you have to choose one or the other. You're in a rock and a hard place because at the one hand, you have theft eating into margins. On the other side, you're gonna cause your consumers to buy less in your stores. So it really is just a tough predicament that these these retailers find themselves in. The reason for the uptick is that it seems like it seems like this is the theory is that there's these organized gangs that go in and like swipe a lot of stuff off the shelf. And then it's and then it's very easy to sell the stuff online.

23:48So they're saying that the ability to sell it online is is really the key here. But there's a lot of skepticism towards this because you can't verify the amount of shrink. It's only on the retailers to report it. So a third party analyst can't say you can't really evaluate it. And then Walgreens, which complained a lot about theft, said earlier this year, maybe we cried too much last year and said it wasn't as big of a problem. So there is like a fair amount of skepticism towards. It's kind of like the you can always say on the earnings call, well, theft's eating into our profit margins. But you're right.

24:18It's a little bit opaque. OK, let's end the show with a very fun one today, Neil. This weekend, hundreds of Loch Ness monster enthusiasts will travel to the famous Loch Nessle in the Scottish Highlands for the biggest monster hunt in over 50 years. They are going all out. We're talking using hydrophones to detect sounds underwater, drones equipped with infrared imaging, and of course, a low-grade camera that can only take weirdly grainy pics of the alleged monster. But whether they find Nessie or not, I'm just happy that people are coming together to keep this legend alive. I have to know, though, where do you fall on the Loch Ness Monster debate, Neil?

24:55I don't really care whether it's true, but I'm just going to use the opportunity to post up on a nice little raft with a bunch of beers and just like gates out over the water. And if I see something, I see something. If I don't, I don't. But either way, it's a good time to hang out at this lake in the late summer. So I'm all for this. I don't like how they call it a hunt. That scares me. Nessie should be protected if she's found. People do love Nessie and they love the legend. It's also low-key a very big business for the Scottish economy. A 2018 study found that it generates around$54 million per year for the Scottish economy.