Private Equity Weasels Into Your 401(k)? & Coal is Making a Comeback

0:00Neal Freyman:Score more with the college-branded Venmo Debit Card and earn up to 5 % cash back with Venmo Stash. Got paid back? With the Venmo Debit Card, you can instantly access your balance and spend on what you want, like game day snacks, gear, tickets, and more. The more you do, the more cash back you can earn. Plus, there's no monthly fee or minimum balance. Sign up now at Venmo.com slash college card. The Venmo MasterCard is issued by the Bancorp Bank N.A. Select schools available. Venmo Stash terms and exclusions apply at Venmo.me slash stashterms. Max$100 cash back per month. Good morning Brew Daily Show.

0:33I'm Neil Freiman. And I'm Toby Howell. Today, don't look now, but coal is having a renaissance.

0:39Neal Freyman:Then private equity is sneaking its way into your 401k. It's Tuesday, March 31st. Let's ride.

0:51Good morning. Remember Allbirds? How could you not? Back in 2018, those eco-friendly wool shoes adorn the feet of every tech worker in Silicon Valley and gain traction with many yuppies of the era. Well, much like the other signature products of that time, like HQ Trivia and WeWork, it's all come crashing down. Yesterday, Allbirds agreed to sell all of its assets and IP for$39 million, which is essentially pennies considering this mighty brand was once worth$4 billion. Toby, fashion is fickle, but Allbirds offers the perfect example of how to strike gold and scroll it all away.

1:25Neal Freyman:Here's the deal. If both Neil Freiman and Toby Howell, world-renowned leaders in fashion expertise, owned a pair of your shoes, that was probably the top for a brand. But I do feel for Allbirds. Their how I built this episode was awesome. I loved listening about how Merino wool was a actually new technology that they brought to the shoe market. But I think they were just a victim of overexpansion. They strayed way too far away from their comfy lifestyle sneakers. At one point, they were selling leggings. They were selling puffer jackets, and they just got a little bit of a negative stigma because of the massive amount of tech bros that ended up wearing them.

2:01Neal Freyman:But I thought it was a good product. We rocked them both. It is a little bit sad to see them so far from their peak. And now a word from our sponsor, Company Retreat. Attention fans of Jury Duty, from the creators of Jury Duty comes the next installment of this documentary-style comedy series that captivated audiences. This season takes place on an annual company retreat where all the employees at Rockin' Grandma's Hot Sauce are actors except one. At the center of it all is a new hero, Anthony, a hardworking, kind, and very patient temp employee who has no idea that the company is fake and that the entire retreat is staged around him.

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2:42Neal Freyman:Jury Duty Presents Company Retreat is streaming now on Prime Video. Catch the feel-good comedy that'll knock your sauce off. In not too long, your 401k could end up being a mix of stocks, bonds, and private equity. Yes, you soon could introduce yourself at weddings as a P.E. guy or gal after the Labor Department proposed new regulations yesterday that would open up 401ks to private investments like private equity and private credit. While still not finalized, it'd be a huge win for these fund managers that have been foaming at the mouth to snag a piece of the$14.2 trillion market for retirement plans.

3:17They've argued for years that regular folks like you or us should have access to the investments that have long been reserved for the pros, like startup companies, real estate, or infrastructure projects. But the push into your retirement accounts couldn't have come at a more awkward time for the private credit industry. These shadowy institutions, which work like banks to connect companies with capital, have seen a massive boom since the global financial crisis, a boom that recently seems on the verge of going bust. In recent months, investors in private credit have been trying to pull their funds, only to be told that those redemptions would be limited, which has caused a minor panic on Wall Street.

3:52Some of finance's biggest names, including JP Morgan CEO Jamie Dimon and former Goldman Sachs CEO Lloyd Blankfein, have compared the current private credit environment to the one that preceded the crash of 2008, which means, Toby, there's going to be plenty of scrutiny on whether these types of riskier alternative investments should be plunked into Americans' piggy banks.

4:11Neal Freyman:Let's just zoom out from the current moment of private credit and the fact that it could be a very shaky market right now. Is this something that investors actually want their portfolio even in the good times? And Josh Brown, the CEO of Ritzholtz Wealth Management, says absolutely not. He says there's absolutely no chance 401k investors would get access to the best alt managers of the best funds, basically saying that you're going to get the bottom of the barrel when it comes to these private credit deals. So you're not getting the top of it. He goes on to say, you are not the sovereign wealth fund of Norway.

4:41Neal Freyman:You will not be treated that way. So even if this was the best of times for private credit, which it isn't, then you still wouldn't be getting the best deals. Senator Elizabeth Warren is also someone who has railed against this. She says, as cracks emerge in the private credit market, private equity returns fell to 16-year lows and crypto keeps tumbling. Trump has decided now is the time to stick all of these risky assets into Americans' 401ks. That is the general consensus of people who don't want this, is that this is too risky of assets to be putting in retirement nest eggs for the majority of average investors.

5:14Neal Freyman:We don't need this. You can just easily get a good return with a diversified portfolio of stocks and bonds. And it's not just that these are riskier investments. It's the higher fees that come with that. So that's another big pushback on private equity and private credit into these retirement accounts is that for many decades, these fees have just pushed lower and lower and lower. So Americans really aren't paying these fund managers much of a fee at all. But if you introduce private credit and private equity into these fund accounts, they're going to be higher fees. Let's talk about the supporters because there are plenty of supporters of this plan.

5:48And they say, well, look at the professional investors. They have access to a suite of investments like real estate that don't fluctuate like stocks and bonds do. So they say, yeah, why won't we want to give the American people greater diversification into their retirement accounts? It could lead to better returns overall. And Scott Pesant, the Treasury Secretary, did take this into account. He was working with the Labor Department on these rules and said that they actually must meet six different criteria to take investors' considerations into account.

6:17Neal Freyman:I mean, the timing is awkward, though. I mean, you mentioned that it is a very shaky time for the private credit market in general. Just some of those cracks that I want to highlight, in addition to the ones you already did, is the fact that Moody's downgraded a private credit fund run by KKR to junk status last week. They are saying that the fund's outstanding loans are not being repaid. There's all this anxiety around the fact that a lot of these private credit funds invested heavily into software businesses and software is being disrupted by AI. So those are the bear case in addition to the fact that maybe these assets shouldn't go in at all into your 401k.

6:58Neal Freyman:The fact that right now is not the right time to do it because of just how, you know, not good the market feels to a lot of people. And what's interesting about all of this is that it's actually not illegal in the first place for plan sponsors, which are your employers, to put private credit, private equity or alternative investments into your 401k plans. They just don't do it because they could be sued to oblivion. And that's been happening over the past few years is that a bunch of shareholders are suing these plan sponsors saying that you're not actually protecting our investments. So it is completely legal, but there has been a lot of legal liability going around.

7:37And what this Labor Department proposal does is give them what they're calling a safe harbor to shield them from a ton of litigation. Moving on, the historic energy disruption caused by the war in Iran is driving many countries back into the warm sooty embrace of coal. Japan and South Korea have already lifted curbs on coal burning power plants to keep the lights on. Thailand has restarted coal units and Indonesia, the world's largest coal exporter, is now allowing miners to increase production, reversing a previous policy that aimed to dramatically shrink output. As a result, coal stocks are mooning with Australian coal producer Jan Cole jumping 40 percent and Pennsylvania's core natural resources up 30 percent since the war began, according to Bloomberg.

8:16Coal's resurgence was not on anyone's bingo card heading into this year. In fact, 2026 was supposed to be the peak of global coal demand, which was projected to start declining by the end of the decade. But then the war happened and everything changed. liquefied natural gas is now trapped in the Middle East and the world's largest gas fields in Qatar are severely damaged and will take years to rebuild. So the countries that rely on Middle Eastern gas to generate electricity to power factories to basically keep their economies functioning are faced with a choice. Either pay sky high prices for whatever remaining gas is sloshing around the world or fire up the higher polluting but dependable coal plants you already have.

8:53And when it comes to something as critical as meeting your basic energy needs, it's an easy choice.

8:57Neal Freyman:It feels like a lot of emerging economies are saying, man, we got the short end of the stick here because we were sold this promise that gas was going to be sort of this bridge fuel to take us from, you know, a emerging economy into a developed one where we can then invest more heavily in renewable fuel sources. But now that there's been this massive, you know, war second time in two years, right? And four years, they are saying like, we got the short end of this deal. Like we it's being challenged again, this promise of this being a bridge fuel. So they're going back to the other side of the bridge and saying, all right, well, we have coal.

9:30Neal Freyman:We know it's a dirtier fuel source, but at least we can rely on it. So that is why you're seeing them kind of dusting off these mothballed coal plants and saying, we just want fuel and this is the way we know we can get it. And most of the impact is going to be in Asia, which buys about 90 % of the liquefied natural gas that the Middle East produces. South Korea imports almost one fifth of its liquefied natural gas from the Middle East. Also, South Korea and Japan at the same time have huge coal bases that they can easily fire back up and offset all of the gas shortages that are coming from the Middle East.

10:04So the biggest coal renaissance is going to come from places like Taiwan, South Korea, Japan, and India, which already have large coal bases and are able to easily tap into that fuel source.

10:15Neal Freyman:Meanwhile, China is the world's largest coal consumer, but they have had a very longstanding campaign where they've been diversifying their energy supply. So they have the coal if they wanted it, but they also have a ton of renewables. The US is actually pretty insulated as well, but Trump's administration has recently given coal a pretty big boost domestically. An agency called the Terra Energy Center announced a$1 billion investment in what would be the first new coal power project in more than a decade in the US. So coal is seeing a little bit of a resurgence in the US as well. One other way you could diversify away from natural gas or oil or coal is biofuels in general.

10:54Neal Freyman:Brazil has been kind of held up as this standard of a country that invested a lot in this, making their biofuel industry pretty sophisticated. They're the second largest producer of ethanol, third largest producer of biodiesel. So they've been weathering the storm without having to turn on coal pants, without having to rely on natural gas by the fact that they can put plants into their fuel and make their gas stretch a little bit further. So they are weathering the storm a little bit better than other countries are without having to turn on these coal power plants. And quickly, a few more war updates.

11:26U.S. gasoline prices have now hit, as of today,$4 an average for the first time since 2022. They were below$3 from before the war. And last night, the Wall Street Journal also reported that President Trump has been telling aides that he's willing to end the war against Iran, even if the Strait of Hormuz remains largely closed. So they would end the bombing campaign and hopefully work diplomatic channels or rely on Europe or the Gulf to open the Strait of Hormuz. So that's something that could affect the markets today.

11:56Neal Freyman:Moving on, Harry Styles is posted up at MSG. Bruno Mars has been in Vegas for what feels like forever. Blackpink's Lisa announced yesterday she'd join them with her own Las Vegas residency. Back in the day, musicians packed up tour buses and came to your city. Now they're asking fans to come to them. This is part of a growing trend of stars choosing to play at fewer venues, essentially passing on their travel costs to fans instead. The list of sedentary stars is a who's who of music right now. Bad Bunny played 31 shows in San Juan, Puerto Rico last summer. Adele has planted herself in Vegas and Munich.

12:30Neal Freyman:Some stars are insisting they are using the additional savings to enhance the experience for fans. When Dead & Company did some shows at The Sphere, the manager of the band said, they recreated Grateful Dead's famous wall of sound and opened the exhibit up for free. Bad Bunny famously reserved his first nine shows exclusively for locals to attend, but the general way the industry is going is away from Taylor Swift's sprawling, globe-trotting heiress tour and towards a much more localized show schedule. Harry Styles defended his decision in a recent interview with Zane Lowe saying that he thinks performing a residency in one location leads to a better show than touring in multiple cities.

13:09Neal Freyman:But fans would disagree. Here he is singing We Belong Together when Styles diehard told The Wall Street Journal lyrics from his new song Aperture. But getting together feels unaffordable and unattainable to a lot of folks. Neil, there is a concentrated effort to concentrate concerts. First of all, props to Lisa. Lisa is the first K-pop artist to stage a Las Vegas residency. We got this news yesterday. She's probably the biggest individual artist to come out of the K-pop boom of the last decade, at least on Instagram she is. She has the largest following of all K-pop stars with more than 107 million followers.

13:45She was on White Lotus. She is a brand ambassador for Bulgarian Nike. She's just a larger than life personality now. She gets her own Las Vegas stage. But you're right. This speaks to the larger Vegasification of concerts. And it's not surprising when you do it in Vegas, but it is surprising when someone like Harry Styles does it at Madison Square Garden and makes everybody around the country come to Madison Square Garden. And I'm blaming Harry Styles, actually, because he actually inaugurated perhaps this more sedentary trend of making people come to him in 2022 with his tour, his global tour that barely, you know, that just went to a few cities.

14:19Neal Freyman:Yeah, he is going to Amsterdam, London, Sao Paulo, Mexico City, New York City and Melbourne. But that doesn't necessarily feel like a globe spanning tour for a lot of people, especially because he's doing 30 nights at Madison Square Garden. The issue is the demand is absolutely there. Well over 11 million people registered for tickets for his 30 shows at MSG. That is way more than the capacity of 30 Madison Square Garden. So if you are a star, you're sitting down and doing the math and saying, well, clearly people will come see me if I'm Harry Styles because I'm Harry Styles at Madison Square Garden.

14:52Neal Freyman:It's a lot easier on me. It's a lot easier on my body to not have to travel around the world constantly. Why wouldn't I just post up here? Because I'll make more money, travel less, and fans still want to come see me. That math is hard to ignore if you are an artist. Right, and it's very hard to ignore if you're also a fan because in addition to Sky High concert tickets, which have been booming over the past few years, you have to pay for additional travel and lodging as well. But it seems like we're just never going to see anything like the Eris Tour anymore. I mean, Taylor Swift went to 51 cities, 21 countries, over five continents.

15:27It seems like that particular era is over when it comes to touring.

15:30Neal Freyman:All right, we're going to take a quick break and come back with Toby's Trends right after this.

15:39Neil, feel my bicep. I should not have to say no to this every day, Toby.

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17:17Neal Freyman:One thing to know about this podcast is that Neil is a baseball fan, and I am less so. But despite my general shunning of America's pastime, my social media feeds have been taken over by baseball recently, specifically highlights of the sport's new automated ball strike system that allows players to use cameras to challenge calls from umpires. I've seen so many clips, in fact. I'm going to go ahead and declare it a Toby's trend because of the sheer amount of attention baseball is getting right now. The ABS system in particular has been the star of the young season so far. We've already seen a batter win consecutive challenges on two straight missed calls from umpire CB Buckner, leading to 40 ,000 home fans jeering in his face.

17:59Neal Freyman:We've seen the Mariners' Randy Arrozarena pull the ABS equivalent of a bat flip, walking well down the first baseline after challenging a third strike call. His confidence was ultimately rewarded after the cameras confirmed his suspicions that the pitch had been a ball. To get deep with it, so much of the current zeitgeist is reflected in the introduction of the new ABS technology into a very old game. Sam Adler-Bell, the co-host of the Know Your Enemy podcast, summed it up better than I can, so I will paraphrase his words here. The ABS system sits at the vexed crossroads of several highly charged dynamics in our collective life, he wrote on X.

18:34Neal Freyman:Successful challenges by your team feel amazing, like a long-awaited blow against authority. But the overall existence of ABS inevitably ignites anxieties about human judgment. And yet the challenge system relies on human hubris, intuition, boldness, and risk. It's a very compelling encounter between populism and the machine. Anxiety about robots replacing humans? Yep, it's there. Cathartic protests against authority figures? Baseball's got it. On a more elemental level, Bloomberg columnist Connor Sen noted, This might be the first time in the history of pro sports that players have the opportunity to humiliate the umpires slash referees with home fans getting to cheer it on.