Record Travel Can't Save Airline Earnings & TX Town Sick From Bitcoin?

0:00I'm NFL linebacker TJ Watt and this is my personal best. YPB by Abercrombie is the activewear I'm always wearing. That's why I reached out to co-design their latest drop. I worked with designers to create high-performance activewear that holds up to my toughest workouts. Shop YPB by Abercrombie in-store, online, and in the app. Because your personal best is greater than anything.

0:29Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, what happens when a Bitcoin mine comes to your town? Hint, it is not good. Then a Las Vegas casino has to get rid of$1.6 million in prize money before closing next week. So Vegas, anyone? It's Friday, July 12th. Let's ride.

0:54So the talk of the Morning Brew office this week has been about a project the New York Times is putting out called the 100 best books of the 21st century. They've been releasing the list slowly in batches and they finally dropped the top 20 this morning. And Neil, I'm not going to lie. You've had this snobby air to you all week because it's clear you've read the most books from the list. So I'll give you a chance to vamp here. Give us your recommendations. I don't know. Well, if you just put a book by your bedside every night, you can crush 10 pages and then slowly, But surely you can work your way through some books.

1:27The top book on their list for the 21st century was My Brilliant Friend by Elena Ferrante. And I can't argue with that. It is an excellent book, part of a series that has become an HBO show. Some other books on the list that I can recommend, The Corrections by Jonathan Franzen. It's probably one of my favorite books of all time. Pachinko by Min Jin Lee, also a TV show. The Known World by Edward P. Jones. It's about a black slave owner, and I remember reading it in college and just being extremely moved for months and just constantly thinking about it. So I can definitely recommend that. Never Let Me Go by Ishiguro, The Last Samurai by Helen DeWitt I just read.

2:04And then currently I'm reading The Savage Detectives by Roberto Bolaño, which was like 16 or 18 on their list. So TBD on that one. What are you reading right now, Toby? Well, I just read A Court of Rose and Thorns, which is part of the romanticity trend that we've been talking about. and I think it's going to make the next list. Actually, you know what? Why wait? I'm going to make my own list because every single one of those books, I've heard of some of them, but I haven't read any of those. So I'm glad that at least one of us is well-read in this podcast. Now let's hear a word from our sponsor, Meta AI.

2:38So as many of you know, I've been training for marathons left and right, and I think I've rubbed off on Neil because he is now joining me for some runs in the morning. I am. I am catching the running bug. But one thing that I've been dealing with is that just training gets repetitive. I know. Almost by accident, I discovered recently that Meta AI can help with this. I was searching for running content on Reels, but then decided to ask Meta AI for training recommendations. I was shocked to see it list out a few workouts that were honestly pretty great, and I immediately looped one into my training.

3:10So, Neil, today we're doing 6x1 mile at 5K pace thanks to Meta AI. I don't know if I'm ready for that. I'm going to ask Meta AI for an easier one. But you can expand your world with Meta AI now on Instagram, WhatsApp, Facebook, and Messenger. Raise the rudders. Raise the sails. Raise the sails. Captain, an unidentified ship is approaching. Over. Roger. Wait. Is that an enterprise sails solution? Reach sails professionals, not professional sailors. With LinkedIn ads, you can target the right people by industry, job title, and more. Start converting your B2B audience today. Spend$250 on your first campaign and get a free$250 credit for the next one.

3:51Get started today at LinkedIn.com slash campaign. Terms and conditions apply. Well, I haven't said this in a minute, so I might be a little rusty, but here goes nothing. Inflation went down. Yes, according to yesterday's consumer index report, prices declined on a monthly basis in June. and year over year, they only grew 3%, which was way below expectations and the lowest pace since June 2023. Don't want to jinx it, but it might be time to hang the mission accomplished banner because this report indicates we have seemingly beaten inflation, the economic boogeyman that has eaten away at Americans' pocketbooks for years.

4:30Prices declining is obviously a relief, and maybe even better, they throw the door wide open for the Fed to cut interest rates in September. High interest rates have frozen over the housing market and have generally put a damper on economic growth. So lowering rates could add some lighter fluid to the economy's smoldering fire. Toby, unequivocally great news for consumers, businesses, the Fed, everyone. Seems like the only thing cool these days is inflation. Yeah, I do think that there's a little bit of psychological healing that has to be done, though, because if you think about the cumulative inflation that has piled up over the last few years.

5:06Consumers are walking down the grocery aisle right now, and they're seeing things that they can still remember lower prices. So I don't think it's going to be some instantaneous thing where you're going to the grocery store, and suddenly everything feels cheap again, because prices have gone up. Even though prices fell 0.1%, we just have had this cumulative load of inflation. So definitely still some scarring from the last few years and it's not going to be an instantaneous fix. Absolutely not. So what was the MVP of this last report? Really, it was shelter prices, what you pay for housing. They only climbed 0.2%, which is the smallest gain since August 2021.

5:42They are the largest category within the services basket in the consumer price index. We've been waiting for years for shelter prices to go down. Obviously, housing prices have skyrocketed. So that was probably the biggest sigh of relief for economists and everyone watching this to look at shelter prices and say, oh my God, they only increased 0.2 % over the entire year. That is huge news. And that's going a long way to bringing broader inflation down. Another place though that we're potentially seeing alarm bells is from the snack industry. PepsiCo just reported its earnings and reported a drop in US sales because their interpretation of it was that inflation-wary shoppers are finally cutting back the price increases in stuff like Cheetos, potato chips, have finally caught up to them and they're just not buying those affordable treats that they used to.

6:29Remember, those actually weathered these last three years of inflationary environment pretty well because people pulled back from restaurants or bigger ticket spending instead, but kept going to the snack aisles and getting their Doritos and Lay's fix. But now prices for a 16-ounce bag of chips are up 30.6 % since the end of 2020. That's outpacing the 20 % cumulative price increases from the broader consumer price index. So I think we're seeing some cracks forming in other parts of kind of consumer spending, especially like the lower end of the snack industry. Yeah, and that's why Pepsi was like, well, we're probably gonna have to stop price hikes because we've been jacking up prices for the last three years.

7:09So that is good news for inflation because they're gonna stop hiking prices. But yeah, those cracks formings go back to something that Jerome Powell said earlier this week, which was in front of Congress. He said, elevated inflation is not the only risk we face. So he's taking his one eye. He had two eyes on inflation. Now, I think he has one eye on inflation and then one eye on the job market where unemployment has increased for the past three months, which is why he's going to potentially likely cut rates in September. This, you know, we should talk about why cutting interest rates is so important.

7:42I mean, yes, it has frozen over the housing market. It's made it's made buying everything more expensive because the U.S. economy runs on credit and credit has gotten so much more expensive as the Fed has hiked interest rates. So if those start to go down, then when I borrow from you, it'll be a little bit cheaper and everything will just be a little more stimulated in the economy. So that's why investors have been waiting for more than a year for these interest rate cuts, which look like they could happen in just three months from now. I'm still trying to figure out which way Jerome Powell's eyes are facing right now.

8:13Does he have a third eye too facing somewhere else? Good for you, Jerome. Let's move on. Airlines are caught in a paradox right now. Record-breaking amounts of people are traveling. Last Sunday, TSA screened its most passengers ever in a 24-hour period, and yet it's not showing up in their profits. Sky-high fuel prices, increased labor expenses, and an oversupply of seats and flights are eating into their bottom lines like it's a delicious Biscoff cookie. Delta is the canary in the coal mine for the reclined chair in a hard place the industry finds itself in right now. It was the first airline to report its second quarter earnings yesterday, but just days after those record TSA numbers, its profits came in down 29 % from the previous year.

8:55Neil, Delta was supposed to be faring better than its counterparts given its focus on international routes and premium seating. So if it underperforms, we could be in for a very ugly earnings season for airlines. And that's why a bunch of other airline stocks fell yesterday. The supply and demand situation in the airplane market is just out of whack. Coming out of the pandemic, everyone started traveling again. So airlines jacked up routes. They added more planes. They added more routes. They added 6 % more seats this summer than last summer. And so while there is record demand, they just added a little too much capacity, which means that they needed to start discounting flights.

9:34So that's why you're seeing a lot of cheaper airfares if you go on Google Flights or Kayak or whatever. So that is what's happening is there's an oversupply of seeds. So maybe you have the middle seed open, which is great news for consumers. It's not good for airlines, which are seeing their profits drop a ton. And Delta was supposed to be pretty insulated from this. Over half of Delta's revenue comes from sources like its loyalty program, its premium ticket sales. Their sales of premium tickets grew a lot more quickly than those in just the normal economy main cabin. in. Other airlines don't have that great premium offering, though.

10:08I mean, if you're a Spirit, if you're a budget airline like Spirit or Southwest, you don't have those upgrades available to kind of pad your profits. So if Delta saw a 29 % fall in its profits, like other airlines are sitting here going, they've already cut their outlooks. They've tried to prepare the market for what is going to be a pretty ugly earnings season. But yeah, if Delta is showing these cracks, then think about what others are going to show. One of the most fascinating tidbits from Delta's earnings report was about the impact of the Paris Olympics. Now, Delta is very exposed between U.S., France flights because they have a partnership with Air France.

10:45And together, those two carriers own approximately 70 percent of the market. And you're like, oh, this is going to be amazing for Delta. A lot of people are traveling to Paris for the Olympics. But instead, he said, the CEO, Ed Bastian, said that the Olympics are going to result in a $100 million hit to the airline because people who aren't going to the Olympics in France are just not going to go to Paris at all. So you're basically going to see a huge drying up in demand over the course of the summer. It's either you're going to the Olympics in Paris or you're not going to Paris at all. And so Delta is going to lose$100 million because of the Olympics.

11:22Up next, the residents of a small town in Texas are getting fed up with their new noisy neighbor. No, it's not out-of-town New Yorkers or even frat bros. It's far worse. A new Bitcoin mining facility that they say is making them sick. In a major investigation, Time magazine spoke with more than 40 people in the Granbury area who reported a medical ailment they believe is connected to the opening of the Bitcoin mine two years ago. At least 10 people went to urgent care or the emergency room with symptoms such as hypertension, heart palpitations, chest pain, vertigo, migraines, and panic attacks.

11:59The big problem with the Bitcoin mine is that it's extremely loud. It's as if a lawnmower was constantly running even while you're trying to sleep. Like AI data centers, Bitcoin mines use up a ton of energy for heavy computing, and those computers, more than 30 ,000 of them, need to be cooled. Enter thousands of fans which emit a vicious buzz that terrorizes the town. Toby, this seems like an absolute nightmare, but it shows how the growth of data centers and Bitcoin mines across the country are running up against communities where actual people live. One local doctor compared it to imagine if you had a Vuvuzela playing in your ear at all times, which are that really annoying horn from the South African World Cup a few years ago.

12:44And it's true, sonic damage, there's an increasing body of scientific work that's showing that sonic damage, just having a constant loud noise assaulting your ears leads to very real health outcomes. A lot of cardiovascular outcomes are associated with sonic damage as well. So it's just something that you don't really think about until you have this massive decibel producing mine right in your backyard. Let's talk about what are those decibels. So these people literally go out into the front porch with a recorder and figure out how loud it is coming from the Bitcoin mine. And they've recorded between 70 and 90 decibels, which is like a chainsaw lawnmower washing machine.

13:26Just a constant buzz in your ear. It's insane. What about regulations? Are there any regulations regarding noise? And they're not really. It's up to the local or state level to regulate it. New York City has a noise code, which caps restaurant music and air conditioning at 42 decibels. Meanwhile, the Bitcoin mine is emitting 70 to 90. Texas has a law that limits noise to 85 decibels. It's the loudest state limit in the nation. And that is sort of a sign why all these Bitcoin mines and data centers and other things like that are going to Texas because they just generally have lax regulations. There's not many legal avenues for these residents to pursue, even though, and we should say, there's no exact evidence that the mine is leading to their illnesses, they just accuse it of coming because they weren't sick two years ago and now they are.

14:19Yeah. And then usually what you hear about Bitcoin mines is just the energy that they suck up. I mean, the entire Bitcoin mining industry uses about the same amount of power as Switzerland does in a year. There's been a large increase in commercial scale Bitcoin mining operations coming to the U.S. There's now at least 137 of these. So expect to see more of these clashes between local communities and these buzzing behemoths that are these Bitcoin mines. Up next, let's head to our Stock of the Week, Dog of the Week. Eczema isn't always obvious, but it's real. And so is the relief from EBCLIS. After an initial dosing phase, about 4 in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks.

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15:33Eye 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. Tuesday on NBC, Jimmy Fallon and Bozema St. John host a 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.

16:09This 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.

16:23Costco's getting pricier. Tesla is breaking promises again. And we have a heck of a stock of the week, dog of the week segment coming your way today where Neil and I bring you one perfectly medium rare stock and one that resembles more of a hockey puck. Neil, you won the pre-show sommelier quiz, so you and your delicate, sophisticated taste palette are up first. Who is our dog of the week? I mean, that was obviously a Chianti. My dog of the week is Tesla. Tesla, Tesla, Tesla. You were this close to getting stock of the week. Your shares had gained for 11 straight days, adding nearly$260 billion to your market cap and putting you in the green for the year.

17:01It was a breathtaking rally. But just like Toby's blonde hair, it was cut short. Yesterday, Tesla stock tanked more than 8 % after Bloomberg reported the company is pushing back its big robo taxi reveal from August until October. None of you are shocked to learn that Elon Musk is delaying a product rollout. It happens all the time. But this one is a particularly big deal. Tesla is betting the farm on the robo taxi, prioritizing its development over a low cost electric vehicle that could juice car sales. And those car sales could really use some juice. Earlier this week, a report found that Tesla's U.S.

17:38market share in electric vehicles fell below 50 % for the first time ever, declining from 59.3 % last year to just 49.7 % now. Toby, investors clearly thought this delay was a big deal. Is it a sign of trouble or just a bump in the road to self-driving? I mean, let's talk about the bump in the road that came to our Stock of the Week, Dog of the Week segment, because Tesla, you're right. We had it fully locked in like 11 straight days. Finally, we get to talk about it rallying. And then you just had to go and delay this announcement. Just add it to the robo-taxi delay counter. I mean, Elon Musk has been promising shareholders a robo-taxi since literally 2015, he said.

18:18Back then, he said Tesla cars would achieve full autonomy within three years. 2016, he said he was going to push it back to 2017. And then in 2019, he said on a call that Tesla would have 1 million robo-taxis on the road by 2020. So again, we have been hurt before. We've been hurt time and time again, but it does seem to be a little bit more existential this time because a lot of the valuation is tied to this RoboTaxi unit getting off the ground. You can only be scorned and lied to or disappointed so many times before you start to get a little bit anxious. And I think we saw that in the market's reaction yesterday.

18:53Right. And the shares had an incredible run up for the past 11 days. That was due to that deliveries report that exceeded expectations. Tesla's battery business is growing fast. And there was hype around the robo taxi because Elon has two possible avenues to go with. He can pursue the robo taxi or this low cost electric vehicle, which investors really want to see because their car sales, as I mentioned, are flagging compared to competitors. So he's going with a robo taxi, but that's getting delayed. So it's just a matter of whether this It's like when you're at an airport and you see the first delay, you're like, uh-oh, are we going to be in here for like four to five hours?

19:30Or they just have to clean up a little more and we'll get off in a half hour after our flight delay. And I think that's what investors are weighing right now. Here is why we're all so concerned about it is because Elon told us to be concerned. He said on an earnings call last quarter, if someone doesn't believe Tesla is going to solve autonomy, I think they should not be an investor in the company. So investors are literally just listening to Elon right now. Let's go to the stock of the week. And my stock of the week is Costco, because for the first time in seven years, it is raising its membership prices.

20:02Basic membership will now cost you$65 a year, up from$60, while its premium offer is getting bumped to$10 to$130 a year. But if you pull up the stock chart, after a brief jump on the announcement on Wednesday, you'll see that Costco actually gave back most of its gains the next day. But that's pretty normal if you look at the historical data for the company. Analysts who cover the stock noted that the last three times Costco announced a fee increase, the stock fell the next day while generally outpacing the market in the weeks leading up to the change, a.k.a. it's a classic case of buying the rumor and selling the news.

20:37So don't get your free samples in a twist over the dip. The stock is still up nearly 30 percent so far this year and is now pulling in more money through its memberships. You know what? They're following the Netflix playbook, or should I say the Netflix is following the Costco playbook for the past few decades, which is just you jack up your subscription prices. You hope you don't lose too many people as members. And then in the end, you make more profits. And that's exactly what investors are hoping Costco's fee increase does. Costco has just been a huge winner during the pandemic, during inflation, because they have managed to keep prices low, most notably with that $1.50 hot dog soda combo that isn't going anywhere.

21:17It's going to stay at$1.50. And they use these subscription these membership fees to subsidize their products and keep it low so when you go in you walk out with like a huge tub of pretzels it's three dollars yeah i would argue it's actually even a different playbook than netflix because it is actively contributing to subsidizing the product that their consumers are buying and you're right you mentioned the hot dog deal they have the best get out of jail free card they could announce the most disappointing earnings ever they could announce their hiking membership fees double and as long as you lead with the fact that you're keeping the hot dog deal the same, everyone go, ah, good old Costco.

21:53Like they, they get us. They understand that we don't, we want to be an affordable company. The wedding of the century has arrived today. Anant Ambani, son of Asia's richest man is tying the knot with Radhika merchant, also the daughter of a billionaire and a wedding that will top any wedding you've ever been to or ever will. Former prime ministers, tech moguls and celebrities are all in Mumbai for a colossal event that is expected to cost the family more than$150 million. It is the culmination of four months of pre-wedding parties kicking off in March with a bash that included Bill Gates and Mark Zuckerberg and a performance by Rihanna.

22:30Then the couple celebrated with a luxury cruise on the Mediterranean, featuring performances by the Backstreet Boys, Katy Perry, and Pitbull. But all of that is in the past, and the wedding weekend has arrived. Wondering whether to pick chicken or salmon? You don't need to. dozens of chefs are serving up 2 ,000 dishes from around the world. Not sure what to wear? Don't sweat it. The family has provided a 10-page dress code manual for all the events, which includes a jungle fever theme and Moulin Rouge-inspired house party. If this all seems way over the top, it is. And regular people in India have been grumbling at the spectacle for months for snarling traffic and flaunting their wealth in a country where economic inequality is extreme.

23:10Still, what this family wants, this family gets. And this weekend's festivities are going to be the stuff of paparazzi legend. Justin Bieber already was in for a private show. Would love to hear his rendition of Shout. Me too, honestly. In India's domestic media, this is being approached as their royal wedding, India's royal wedding. They have obsessed over every single detail of this. And I mean, if we're being honest, we have as well, because it's just crazy that this wedding hasn't happened yet. I feel like we've been seeing a new crazy free for a new Singer to come in and there was that the Mediterranean cruise.

23:47So it's just truly a spectacle in every sense of it. I was digging into a little bit about what is the reaction, because of course there's going to be, you said grumblings, because it is a extravagant show of wealth. But Mukesh Ambani, the patriarch of the family, is looked at as more of a self-made man in India. And so they view him as aspirational rather than a less well-liked billionaire. So he does have a little bit of leeway but i i do think the one thing that really gets people mad is just the traffic that everything is going to create and the actual wedding is going to create a traffic night and this is sort of just a crystallization of indian weddings in general india spends more on weddings than any other country besides the united states so i think we're in for my big fat indian wedding instead of a greek one because they truly are the goats of weddings they go all out and i think the ambani family which owns reliance industries just this massive conglomerate that brings in over$100 billion in revenue a year is just really the, you know, the capstone of what we've been seeing over the past few decades of Indian weddings, just going all out.