Political Ad Spend Hits $1B & Berkshire Hathaway Out on Apple?

0:00Tuesday on NBC, Jimmy Fallon and Bozma St John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best idea win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Warren Buffett sells even more Apple stock.

0:38Did someone leave him out of the group chat? Then TGI Fridays has a case of the Mondays. The potato skin purveyor officially filed for bankruptcy. It's Monday, November 4th. Let's ride.

0:53Good morning and happy Monday. We've got a huge week in store, but our sense of time has been thrown out of whack. Daylight saving time ended early Sunday morning, giving most Americans an extra hour of sleep. more darkness in the evenings, and absolute chaos among the household appliances. My phone says one time, the oven clock says another. You know, Toby, I'm one of those people where if I don't fix the oven clock within 24 hours of the time change, I just leave it until March. The problem is that it's not just your oven anymore. All of our appliances are smart these days. So your fridge, your coffee maker, your microwave, your toilet might all be saying different things at this point.

1:29Still, no one is as confused as your pets right now. Dogs don't know about daylight savings. All they know is they're getting walked at a different time. Cats can't read a clock, so they're sitting there wondering why they're getting fed later. Kids as well have no idea what's going on, so every time you're confused, just think about how the pets and the babies are feeling. Now a word from our new sponsor, but an old friend, Yahoo Finance. Neil, our purple prince is back. Back and better than ever, too. It's still the best place on the internet to keep your finger on the pulse of the market, but with even more features for people who like to dig a little deeper.

2:04Right, if you're someone who relies on your friend from college to tip you off on new stocks to buy, maybe try out Yahoo Finance instead. They have this premium feature called Investment Ideas that does the hard work for you, giving you price targets, outlooks, and ratings backed by detailed research reports. Way better than listening to Josh from your freshman year dorm. If you want to finally lose Josh's number and become the friend who everyone goes to for advice, head to yahoofinance.com for more. The spirit of innovation is deeply ingrained in America, and Google is helping Americans innovate in ways both big and small.

2:39From improving emergency response times to protecting against cyber attacks, local, state, and federal governments are innovating with Google AI. This is a new era of American innovation. Find out more at g.co slash American Innovation. So, you know, election day tomorrow is going to decide the next president of the United States. But remember, it's not just about the White House. Americans are also going to be choosing which party controls the country's legislative chambers, the Senate and the House of Representatives. And because those chambers hold America's purse strings, there are huge consequences for economic policy next year and beyond.

3:16The battle for Congress was underscored on Saturday when GOP House Speaker Mike Johnson said that his party would probably roll back the Chips in Science Act, the bipartisan 2022 law that set aside$53 billion to companies producing semiconductors. Johnson quickly walked those comments back and said the CHIPS Act is not on the agenda for repeal. Important context, he made the remark in a New York district that is receiving a new$100 billion micron chip plant because of the CHIPS Act. But the brief dust up highlights the stakes in this election for the next president's economic policy agenda. Will Kamala Harris or Donald Trump face an oppositional Congress that blunts their ability to implement their plans or a friendly, cooperative one.

3:58And in recent decades, it's always been a friendly one. No incoming president has taken office without their party's control of the House and Senate since George H.W. Bush in 1989. And that's allowed them to enact signature legislation early into their terms. For instance, former President Trump's tax cuts in 2017 and President Biden's Inflation Reduction Act in 2022. So tomorrow's election will determine whether there's a united force in power in D.C. or a divided government. And trillions of dollars are on the line. I know, Toby. As you know from Schoolhouse Rock, only Congress can make changes to the U.S.

4:34tax code. And there will be changes coming next year. Control of Congress is going to determine the fate of trillions of dollars of tax cuts, Trump's tax cuts that you mentioned from 2017. A big chunk of them are going to expire. Trump wants to extend them and Kamala Harris wants to keep them for the middle class, raise taxes on the wealthy and corporations boost that corporate tax rate up from 21 percent to 28 percent. They can't do any of that without Congress. Congress is the only body that can change the tax code. There's a two point three trillion dollar gap between their tax plans. So it really depends on who which party controls Congress, whether there is that united force.

5:15There's all Democrats or all Republicans from the White House on down to make these particular tax code changes. Also for Kamala Harris, she has a lot of economic policy ideas that couldn't be done without Congress. I'm thinking those subsidies for first-time home buyers, that$6 ,000 tax credit for parents with newborns, those would not be able to happen. She'd have to compromise if there were a Republican senator in Congress. Interestingly enough, though, Trump's big signature economic proposal, which we've talked about a lot is higher tariffs just across the board. Coincidentally, though, you don't need congressional approval to enact tariffs like that.

5:53So maybe Trump doesn't need Congress to be as favorable or as united as potentially Kamala Harris would going in because his big thing that he's just been sprouting from the rooftops is that he wants to enact these across the board tariffs, which do not need congressional approval. So where does the race stand? Looks like the math Math is pretty tough for Democrats in the Senate. They do currently control the Senate. But just the way the math works out with how many seats they're defending and the way the tide is turning, it looks like there is a probability that they will lose the Senate. Meanwhile, the House is a complete toss-up.

6:27It's going to depend on those New York districts that are getting the Micron chips and other beneficiaries of the Chipped Act, as well as some swing districts in California. So that will be absolutely something close to watch. Let's get to some other election-related headlines from the weekend. First up, CEOs seem to be sweating this election cycle more than any other, and it's showing up on conference calls this earnings season. The word election has come up on 100 earnings calls of S &P 500 companies between September 15th and October 31st, the most mentioning the word during that time frame back to 2004.

7:02There's just so much uncertainty in boardrooms across America. Yeah, and one thing the market does not like is uncertainty, unpredictability. So you're seeing all sorts of companies maybe trying to rein in hiring a bit, maybe putting pause on some of those major infrastructure or industrial projects because you just don't know what lies ahead. I mean, we literally said there's a trillion –$2.3 trillion gap between the tax plans of the two candidates. So that is why you're seeing – I would also love to see a counter of mentions of the word uncertainty or unpredictability or just general trepidation that these CEOs are feeling right now.

7:36and we're seeing it manifest in just the amount of times that they are saying the word election and referencing election on these earnings calls. Next, for all those election investors out there, which is something I haven't said before the 2024 election, you might've noticed a change on prediction markets. Harris has narrowed Trump's lead significantly. For instance, last week on the platform Kalshi, Trump boasted 64 % odds of winning the White House. As of last night, Kalshi showed 52 % Trump and 48 % Harris. That change was fueled in part by a shock pull in Iowa on Saturday night. A highly regarded pollster named Ann Seltzer showed Harris leading Trump in Iowa, a potential outcome that no one, not even the campaigns, had thought possible.

8:16The poll is certainly an outlier. Other polls showed Trump with a big lead in the state, but it definitely has caused some investors to switch up their calculus. Right, you can point to any number of things, maybe the fallout after the Madison Square Garden rally and the Puerto Rico joke, this new Iowa poll, for the reason why the prediction markets are converging, But maybe the most simple explanation is there was this huge delta between what the prediction markets were showing and how close of an election the polls are kind of forecasting it to be. So, of course, there is maybe some potential money to be made by taking Harris at numbers that a lot of people thought were undervaluing her actual chances of winning the election.

8:54So could just be a delta, could just be maybe these polymarket whales, maybe these Kalshi whales are just trying to cash out on their positions now. But it is startling to look at just how quickly it was over a matter of hours and days that they completely converged and now are showing a tighter race than they have previously. Here's another election stat that might explain why you can't watch TV anymore. There has been nearly one billion dollars spent on political ads in the last week alone, according to Ad Impact. to put that in perspective, it took just seven days to spend one-tenth of the$10 billion in total that's been spent on ads since the start of 2023.

9:32That is mind-boggling. I was thinking, how could you possibly spend a billion dollars in seven days? But then you start thinking a little bit. I mean, Kamala Harris rented out a day on the sphere to advertise. Her campaign put a picture of her up on there. It cost$450 ,000 a day to advertise there. But also, just think about all the channels and all the different places you can spend money to advertise at this point. YouTube, Facebook, Snapchat has become a really big channel as well. Back in the day, there were like four major TV networks in the US. So you quite simply could not spend this much.

10:02Now it is much easier to spend a billion dollars. Finally, on election day, you're not only going to get democracy, you're also going to get some free stuff. Some brands are running promotions to help you vote and satisfy your sweet tooth. Krispy Kreme, for instance, is giving out one free glazed donut per person, and you don't even need to show proof that you voted. The rideshare apps are also getting in on the election game. Both Uber and Lyft are offering 50 % off rides for people heading to their voting stations, plus another$10 off if you go through their official voting platform. Meanwhile, check in with your company if you're getting PTO for voting tomorrow.

10:36According to the SHRM Employee Benefits Survey, half of employers say they've offered paid time off to vote. What is funny about these freebies that these companies are giving away is that it's technically illegal under federal election law to provide incentives to vote. The law has seemingly kind of overlooked these companies for a long time. One of the ways that you can get around it is what Krispy Kreme is doing. They're saying you don't even actually need to show proof of voting. They'll just take you at your word because as federal law states, you cannot incentivize people to go out to the polls and vote.

11:08So it's this weird legal gray area where probably you're not going to get in trouble for giving away a free donut. But technically, by letter to law, it is not legal to incentivize people to go out and vote. All right, let's move on. Warren Buffett's primary physician covered your ears because he is not following your advice that an apple a day keeps a doctor away. Berkshire Hathaway's third quarter earnings reports revealed that Buffett used this past quarter to once again trim his biggest positions, most notably in Apple. He dumped about a quarter of his stake in the world's biggest company, making it four quarters in a row that Berkshire was a seller of Apple.

11:47But what happens when you sell a stock? You get some cash, and boy, does Berkshire Hathaway have a lot of it. Like smog from Lord of the Rings, Buffett and co. are now sitting on a mind-boggling$325 billion in dry powder. That is up from$277 billion last quarter. Neil, when you see the OG value investor being a net seller this many quarters in a row, it has to make you a little nervous that he'd rather sit in cash than go deal hunting at current market valuations. It is a little perplexing. Berkshire sold$36.1 billion worth of stocks last quarter and they bought just 1.5 billion. So that's the eighth straight quarter.

12:25They've been a net seller of stock. And if you're an investor, you look to Berkshire Hathaway as your North Star. So it is a bit curious and especially what Buffett said about Apple in May at Berkshire Hathaway annual shareholder meeting. He said Apple was an even better business than Coca-Cola and American Express, which he's often praised. Those are some of his long-term holdings. So what's going on? You know, maybe a part of it is just him being a smart investor and taking some chips off of the table. Like if we're gamblers, we're just keeping going because we're just amateurs. And he's, and you know, if Apple hits a certain price and he says, all right, well, I'm, you know, Now, that is where I am comfortable with this being.

13:06I'm taking I'm selling now. And there's also some thing to be said about the tax regime that we had talked about. Buffett expects that capital gains taxes will be raised in the coming years, which tax you on your investment earnings when you sell them. So he's selling them now. He's mentioned this to try to get ahead of those tax changes. And then again, Treasury yields are also quite high still. And so he takes all this Apple stock that he sold, all this cash, plows them into T-bills. He's now the largest owner of T-bills anywhere. He has more than the Fed. And he's making a nice return on them.

13:40So he thinks it's maybe a safer bet than the equities market. Let's also dive into Berkshire's operating earnings because they did report just their third quarter earnings. They did fall from$10.7 billion a year earlier to$10.1 billion. Remember, this is kind of a nice cross-section of the American economy because Berkshire is so big. It owns things from insurance to energy companies. So its actual businesses, which include Amex, Geico, insurance companies, did decline 6%. But a lot of it was kind of chalked up to higher liabilities because if you're in the insurance business, what did we just go through?

14:13A really active hurricane season. So Hurricane Helene kind of impacted its earnings bottom line a little bit. So just an interesting time to be at Berkshire Hathaway, though, because you're sitting on so much cash. Clearly, he doesn't see any good deals out there to deploy it. Warren Buffett is famous for just saying, I'm not going to chase a good deal of a bad company. I'm going to look for good companies. But I don't even know what he could buy these days. Well, I was looking at it. He has, what,$325 billion? He could buy pretty much anything from Netflix on down. All right. Let's get Netflix folded into Berkshire's portfolio.

14:47This is feeling like the Monday-est of Mondays right now for TGI Fridays after the chain filed for Chapter 11 bankruptcy this weekend. It is a story we have been telling for months now. Casual dining chains have been feeling the heat this year as customers have increasingly opted for quicker and more cost-effective alternatives like Chipotle or Shake Shack. The chain has also found it really hard to bounce back financially from the COVID-19 pandemic. The bankruptcy actually only affects 39 restaurants controlled by TGI Friday's parent company, not the rest of its 56 independent franchisees. So if you're in need of Friday's signature whiskey glaze burger, you will still have options.

15:27Neil, TGI Friday's first rose to prominence back in 1965 as one of the first singles bars in the U.S., but now the only relationships it has to worry about are the one between itself and its creditors as it tries to regain a foothold in a restaurant market that is increasingly apathetic to its offerings. It really is. I mean, but first, let's roll the tape on TGI Friday's because TGI Friday's, I was not familiar with your game. You popularized a lot of the things that we take granted in the casual restaurant industry. They say they take credit for popularizing the Long Island iced tea, which is a huge hit at these kind of places.

16:02They say it's bartenders trained Tom Cruise to make drinks in the 1988 film Cocktail. They say they popularized the concept of happy hour, and they also influenced Office Space because there's a famous restaurant in Office Space called Tchotchkes, where everyone, Jennifer Aniston's character, wears flair, and TGI Fridays did popularize that concept as well. So it is a remarkable institution that has permeated our culture and our restaurant culture in ways that I didn't know about before looking at TGI Fridays when they filed for bankruptcy, ironically enough. Unfortunately, their story is not unique when you look at the broader restaurant industry landscape right now.

16:40I mean, Buca di Beppo is closing down 80 locations. It filed for Chapter 11 bankruptcy in August. Red Lobster, as we know, filed for bankruptcy in May and exited it in September. So it's just part of this class of restaurants that people are just increasingly shunning right now. It's both too expensive to compete with kind of maybe the Chipotles of the world, like maybe the food isn't as good as like the Shake Shacks of the world. So it is just caught in this very messy middle, except for one company we talked about last week, which was Chili's, who has just nailed it. They've threaded the needle very well.

17:11They kind of created a dish, an appetizer dish that went viral on social media. So you are struggling right now, But as Chili's shows, you are maybe one dish away, one social media trend away from regaining your foothold in the industry. So maybe TGI Friday's finds its fastball. Maybe people develop a taste for their potato skins again. And we start singing the praises of this once iconic institution. Up next, you know what time it is. Winners of the weekend time. I'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.

17:53And 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.

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18:37Let's head to our winners of the weekend, the segment where Toby and I picked two things that really took advantage of that extra hour of sleep. I won the pre-show Bop It competition, so I get to go first. And my winners are NVIDIA and Sherwin-Williams. These are two companies you don't often hear group together, but both of them were selected to enter the exclusive club of 30 stocks in the Dow Jones Industrial Average. Of course, two in means two out. So Intel and Dow Inc., you're getting the boot. The move is not expected to send shockwaves across these stocks because so few investment funds track the Dow Jones compared to the S &P 500.

19:12But it is surely symbolic, especially in the swap of Intel for NVIDIA. Intel used to be the king of the chip makers, dominating the market for semiconductors used in personal computers. The introduction of generative AI has shaken up the pecking order. NVIDIA's advanced chips used to train AI systems are flying off the shelf while Intel was caught flat-footed. NVIDIA's stock has climbed 170 % this year to become the second most valuable company in the U.S. Intel is down almost 40 % this year and is now worth just 3 % of NVIDIA. Toby, the Dow says it reshovels its index so that its 30 companies provide the most relevant picture of the U.S.

19:52economy. Do you think it did that with these moves? Yeah, it definitely did. I mean, the Dow still stinks, but it is trying to stink a little bit less. First, they added Amazon earlier this year. Now, NVIDIA is in. So, they are trying to catch up to a more tech-forward look at the current economy. That being said, I do just want to shout out Sherwin-Williams a little bit because you talked a lot about NVIDIA in that intro, but Sherwin-Williams is a$90 billion paint company. So, I was looking into kind of how they revolutionized the paint game over the years. First, they were the first to introduce a resealable paint can, which sounds like common sense, but at the time it was not.

20:28First, ready mixed paint as well. And then also they introduced the paint can shaker, which could mix up to five gallons of paint at a time. So customers could finally start purchasing more instead of just those small paint cans. So they are not just slinging paint. They have been a leader. They've been an innovator in the paint sector as well. It's got 5 ,000 stores. So much bigger company than you might've expected. Not quite as big as NVIDIA, but I did just want to give a shout out to Sherman Williams. And he threw some shade on the Dow. So we should just explain why you don't think the Dow is a good index, which I would say is very largely accepted by the broader investing community.

21:05And that's because it is weighted by share price, not market cap. So whatever company has the bigger share price for whatever reason, maybe you don't cut your, you know, don't do a stock split, then you have a higher weighting in the Dow than a much bigger company that just has a smaller share price. So case in point in this is that Sherwin-Williams will now have the sixth largest weighting in the Dow Jones, while NVIDIA will have the 22nd largest weight. And NVIDIA is a much bigger company than Sherwin-Williams. So I just wanted to explain why the Dow is second tier compared to the S &P 500 as providing a picture of stocks.

21:43What a ridiculous index. I know it's iconic, but there's just no logic to that. My winner of the weekend is actually the second place finisher in the pro women's division of the New York City Marathon, Helen O 'Beary. Despite getting edged in the final mile of the race, O 'Beary turned heads for her footwear. She is a sponsored athlete of On Running who outfitted her with a new spray-on model called the Cloud Boom Strike LS. On utilizes a robot to literally spray a high-tech material directly onto the midsoles of the shoe, relying on what the New York Times described as a single semi-translucent synthetic monofilament to create the shoe's upper.

22:23The result is this back-to-the-future-looking boot-like running shoe that is incredibly light, environmentally friendly, and fast. It is weird looking, but O 'Berry has now won Boston in a prototype, competed in them in the Olympics, and gotten second at New York. So Neil, all I am saying is that I would have run a better time yesterday if I had been rocking some CloudBroom strikes. Perhaps. It's very interesting hearing what execs at On are saying about their overall strategy and the issues in particular. You know, right now they're competing against Nike and Adidas. They are an upstart and they're growing like a weed, but they're still competing against these legacy sneaker makers.

23:01And they say, we have to innovate because Nike has the Air Jordans. Adidas has the Sambas that they can always fall back on and sell a lot and just keep reissuing them. On is a fairly new company. They don't have those traditional styles. So they say, we need to innovate, and they're doing something that is truly innovative in the sneaker industry, which could lead to massive disruption if it were to be commercially successful. And that is the huge question mark, whether this will be commercially adopted. But they have no choice but to innovate and release new styles and new methods that might catch on in order to chase the big guns.