Regional Bank Stocks in Free Fall, Hindenburg Targets Icahn & Pornhub Blocks Utah

0:01Stop waiting for customers to fall into your funnel. It's 2025, and the same old strategies are, well, just kind of old. That's where Amazon ads can make a difference. Brands using four Amazon ad solutions saw dramatically higher growth compared to limited approaches. Our latest Marketing Brew article breaks down how they can help you reach customers everywhere they are, from prime video to Alexa to shopping with consistent messaging. Read the whole thing at marketingbrew.com slash amazon dash ads. Good Morning Brew Daily Show. I am Neil Freiman. And I'm Toby Howell. Today on the podcast, why the fourth most popular website in the country has shut down in Utah.

0:41And the U.S. Surgeon General declares a new epidemic that has nothing to do with coronaviruses. Also, the hits keep coming and they don't stop coming for regional banks. We'll give you the rundown on the latest struggles there. Then we'll head to the sports world where Forbes dropped its annual richest athletes list. Spoiler alert, soccer players dominate. Neil, it's Wednesday, May 3rd. Let's ride.

1:08All right, so today, right after the show, Morning Brew is providing us with some free breakfast burritos. And I just revert back to my college self. Whenever there's free food, I feel like an animal. It's never not exciting. I don't even think that's a college thing. It's just very fun. Usually we have bagels, so today's breakfast burritos. I love office culture. We've talked about this before, but we get some free food. It's great. It's funny for me seeing all these new Gen Z people experience the office for the first time. Yeah. And they're just loving it. All of these new things. They're like in a toy store.

1:42I know. I'm ready to dig in after the show today. Okay, let's head to our first story. So remember when I asked on Monday, Neil, if the banking crisis was over after First Republic was acquired well now we can definitively say it's not yesterday shares of regional banks got hammered so i'm gonna give a quick rundown of the banks that um did not do so well pac west finished the day down 28 western alliance dropped 15 and other banks like zions commercia and key all fell between nine and twelve percent sounds like uh big east why are these banks named like college basketball conferences. I don't know.

2:22When PacWest was falling, I was like, did Gonzaga leave? I know. Like, are they collapsing? It's truly funny. So what caused this route? These banks have kind of been struggling with the same issue that plagued First Republic. All the banks I mentioned experienced net outflows in deposits in the first quarter of the year. PacWest saw the most with a 16 % drop in deposits. Western Alliance had an 11 % drop. Compare that to First Republic, though, who had a 40 % drop. And these actually start to look a little okay by comparison. But what's interesting to me is that none of these banks actually reported earnings yesterday.

2:55It was more just a broad reaction to the general state of the banking industry. And so the question that people are asking is, do regional banks have the wherewithal to survive the coming months? Maybe not. I mean, Jamie Dimon went kind of viral for saying that on Monday or Tuesday after he bought First Republic Bank is that pretty much resolves all of the banking crisis. And everyone was like, all right, well, if he said it, then maybe it's over. But he actually said something before that that no one else clued in on, which is that there may be another smaller failure on its way. So it just seems like investors are going from the weakest bank and then they're like, OK, we caused that one to fail.

3:34Let's go to the next one. Which one looks fragile? Like, let's yank all our money from that because it could be the next one to fail. Right. It does feel like people were looking for who's next in line. And so the general consensus has been that the current state of the banking industry, banks with over$500 billion in assets, the big banks, they're going to do fine. We've already seen it. JP Morgan is coming out of this stronger than ever before. Bank of America, same thing. But then you also have the banks with under$60 billion in assets who will also actually do okay. These are the really small banks who aren't subject to as stringent of regulations as like these midsize banks.

4:12But that$80 billion to$100 billion assets under management, they are the ones getting wiped out because they have the double trouble of getting regulated because, of course, there's going to be tighter laws about how they can loan their money out after their recent crisis. And they just don't have the size to compare with the big boys. It's your favorite term. Yeah, the messy middle. The messy middle. It keeps coming back to it. Can I pose a theory here? What if the U.S. has too many banks? I know. They do. I gathered some data that shows just how many banks we have. OK, the U.S. has forty seven hundred banks and savings institutions.

4:48That's one for every seventy one thousand residents. So one for like a medium sized town. Canada has fewer banks than North Dakota does. Japan has four percent the number of banks of the U.S. And this is largely the result of these laws where many states restricted banks from operating across state lines. And that was repealed in 1994. There's been some consolidation since the 80s and 90s, but, you know, we might just have too many banks. It's like it's like unbundling and bundling, like with cable streaming, we're now rebundling all the banks back up. I know people are afraid of concentration and, you know, monopoly, but we're not even close to that.

5:28And it reminded me a little bit of what JetBlue was saying when it acquired Spirit, which is that we need to compete with the big boys. There's United, you know, American and Delta. And we're just here in this messy middle. Why don't we combine together and create better, you know, it might be better for consumers if we just have, you know, six or seven mega airlines. And maybe that's kind of what we need in the banking sector. I like your theory. I always like your theory. It's not particularly my theory. You know, some economists have been pointed out. But you came with data, which I appreciate.

6:00Just looking forward real quick, there's a big Fed announcement this afternoon. Are they, will they or won't they raise rates again? This is also going to affect the outlook on these regional banks because if the Fed decides to raise interest rates again, which it looks like they will, it's going to become even tougher for these banks to hold on to their depositors. It's going to cost more. They're going to have to raise the interest rates they are offering. So today, this afternoon, we're going to see another fallout, I think, on regional banks. So obviously an ongoing situation. Okay, let's move on.

6:36I love this next story, Neil. It's very, very dear. I'm excited to hear what you have to say. I know. So I have a relatively long explanation. So our favorite short sellers, Hindenburg, are back with another report. So Hindenburg Research, they're the people who went after the electric truck company, Nikola Motors, India's Adani Group, and most recently Blox Cash App. So if you know that name, those are probably where you've seen it before. So yesterday it published a report targeting Icon Enterprises, the holding company of the famous activist investor, corporate raider Carl Icon. So I love digging into these reports and I did so over the last few days.

7:14I'll do my best to walk you all through it. So Icon Enterprises, it's this$18 billion market cap company. It's a holding company. Carl Icahn and his son actually own 85 % of the company, which is an important detail. The rest is owned by retail investors, the other 15%. So Icahn Enterprises offers this gigantic dividend. Their current dividend is 15.8%. It's the highest dividend yield of any US large cap company by far. The next closest is 10%. So this massive, massive dividend. So Hindenburg was like, how is this possible? How can they offer this massive, massive dividend. Is the underlying assets, it's a holding company after all, are these cash flowing in such a way that they can return cash to investors like that?

7:59So Hindenburg did some research. Turns out that is not the case. Icon Enterprises is trading at a 218 % premium to its net asset value. So that means it's trading, the sum of the parts is trading at 218 % more than what the individual parts are. So they're like, okay, that's not checking out. So where's this dividend coming from? They found that they're essentially running a Ponzi scheme. And so remember how I said that Icon owns 85 % of the company. The other 15 % are these retail bag holders. And basically Hindenburg said in brief, Icon has been using the money taken in from new investors to pay out dividends to old investors.

8:39That's a classic, classic Ponzi scheme. So the market reacted, fell 20%. This Hindenburg looks like they've uncovered another kind of shady business model. Yeah. Find somebody to look at you the way Toby looks at a Hindenburg short seller. It's crazy. Once they lay it all out, you're like, how did no one else see this? Maybe Hindenburg is pulling the wool over. Are they the best investigators in the business? Truly. They have a sterling reputation because they really haven't missed so far, and it looks like they're on to another one. We should bring them on the pod. I would love to hear their strategy.

9:15As you mentioned, yeah, Icahn Enterprises slumped 20%, which was the biggest fall on record. And Carl, poor Carl, he lost 41 % of his fortune. He went from 58th richest person in the world to 119th. And he lost more than$10 billion on his net worth on a single day after this report. And we saw this happen to Adani, too, after Hindenburg went after them or him. He lost more than$100 billion. Yeah, his net worth is cut in half and it's basically stayed that way. Yeah, it kind of goes to show. I really do think that once they laid this out, it does seem like Icon has been artificially inflating the book value of its investments.

9:55And then just trying to, he has a good reputation. He's very vocal, goes on TV. And he uses that kind of flywheel to bring in new retail investors. The interesting tidbit is Icon Enterprises has no institutional investors. It's literally just Carl Icon and his son. and then you and me, like retail bag holders. So he can kind of manipulate the stock price a little bit by saying, hey, invest like me, invest like the best. But it kind of, this dividend is perpetrated on the idea that you can just bring in more retail investors. The reason this story is juicy and even got a lot of publicity is that Carl Icahn himself is an activist investor.

10:37So it's kind of this one investor going after another investor who has done something similar in his career. So Carl Icahn came to prominence in the 1980s known as this corporate raider who would target companies buy up shares And then kind of oust the CEO for major changes put his own guys on the board So he was this you know big activist investors now He's getting a taste of his own medicine bill Ackman who is this other billionaire investor tweeted? There is a karmic quality to this report and that's due to this fight that Ackman and Icon had over Herbalife. Ackman took out a short against Herbalife that was worth$1 billion, betting on the stock to go down.

11:16Icon bet on the stock to go up, and they kind of, like, had a brawl on CNBC in 2014, I think. So, like, I was not at Morning Brew at the time. I was not really paying attention to business news, but that was kind of the, that was kind of like the Elon Musk of the early aughts was, or the early 2010s, was Ackman and Icon going after it. So, Icon, you know big activist investor the og corporate raider now is getting taken down i this is i mean sign up but this is why i love twitter is the fact that bill ackman can weigh in and quote treat and like subtweet uh these are billionaires like subtweeting each other so pretty fun despite all the problems twitter has you gotta love that still um all right the corporate raider has been outrated that is the first half of our show before we jump into the next story we're gonna take a quick break.

12:06This episode is brought to you by State Farm. Listening to this podcast, smart move. Being financially savvy, smart move. Another smart move, having State Farm help you create a competitive price when you choose to bundle home and auto. Bundling, just another way to save with a personal price plan. Like a good neighbor, State Farm is there. Prices are based on rating plans that vary by state. Coverage options are selected by the customer. Availability, amount of discounts and savings, and eligibility vary by state. This episode is brought to you by Indeed. You're ready to move your business forward, but first you need to find the right team.

12:43Start your search with Indeed Sponsored Jobs. It can help you reach qualified candidates fast, ensuring your listing is the first one they see. According to Indeed data, sponsored jobs are 90 % more likely to report a hire than non-sponsored jobs. See the results for yourself. Get a$75 sponsored job credit at indeed.com slash podcast. Terms and conditions apply. All right, Toby, if you look at a map of searches for VPNs across the United States, you'll see that one state stands out from the pack by a mile this week. That state is Utah. And that's because people need their Lisa Ann fix. Pornhub and other adult sites owned by this company, MindGeek, shut down this week for people with a Utah IP address.

13:31Why? And it's a protest of new age restrictions that Utah just put on porn sites. They now need to verify that users are over the age of 18 and they're worried about compliance and being held liable. So they're just shutting down and saying, it's not worth it. So if you fire up Pornhub in Utah right now without a VPN that says you're firing it up from elsewhere, then you'll be directed to a page where an adult performer issues a statement from MindGeek criticizing this law. Why does this matter big picture? Because it's part of a wave of states led by Utah, which is very conservative, that are putting tighter restrictions on kids' use of the Internet and social media to protect them from what lawmakers consider harmful effects on mental health and misinformation, all of that bad stuff.

14:16Yeah, this story has a lot of layers to unpack because, yeah, the Utah law, It's aimed at making the internet safer. But Pornhub is basically saying you're going about it in the wrong way. The mechanism that the Utah law has for verifying users, they say, is not the right way to do it. They want you to manually upload a picture of your ID, which is just kind of a clunky way of doing age verification. And so Pornhub is basically saying that if you make it so hard to access our site, what you're going to do is push these people who are trying to access this content to kind of the fringes of the internet.

14:52So they're basically saying you're actually making it more unsafe for kids because kids will find a way. They'll just go somewhere else. And so they're just saying, like, work with us. Let's get a better age verification system in place. Like Pornhub already tries a little bit of age verification, but they just say, this is not the way to do it. So like, let's find a better way because Pornhub obviously wants people to still be able to access their site so they don't want to have it shut down indefinitely so this it's gonna be weird like mind geek and utah lawmakers working together i can't i can't i can't picture it i have not seen the musical on that yeah that's the sequel to the book of mormon i think uh can we just talk about how the porn hub putting up numbers oh my god so more than 76 million people a day visit in the u.s visit porn hub it's the fourth most popular website in the country and the 13th most trafficked one overall in the world.

15:472.5 billion US visits per month. Like unbelievable numbers right there. Yeah. So let's move on to the social, like the other aspect of this, which I mentioned at the top was that states everywhere, not just red states, red states and blue states, California, New Jersey, Texas, all of them are passing and pushing through bills that limits kids' use of the internet. Utah is kind of leading the pack and they signed two first of its kind bills that will go into effect next year. This is one of them bans kids from using social media between 10.30 p.m. and 6.30 a.m. So there's this social media curfew.

16:25It requires age verification for anyone who wants to use social media, requires that parents have access to their kids' social media accounts. So I thought friending my mom on Facebook was bad now that she has to have her. this this reminds me of prohibition does it not where like again it's coming from a place of technically protecting you yeah we're protecting you but it just feels like it's gonna have these unintended consequences and like especially kids they're going to find a way like around these things right they find like life finds a way kids find a way so even though like on the surface like yeah i'm on board with banning social media like i'd love to ban myself from using social media between those hours.

17:06But I just do think that we're going to see some nasty side effects from this that we can't foresee right now. I didn't know this, but social media companies already are supposed to ban people 13 and under from accessing their platforms. TikTok has, remember, they rolled out some of those things where if you're under 13, you can only watch only. It limits your screen time. So there are some in place already. But, yeah, people can lie about their ages. Like, it's not a perfect system by any chance. You seem like the kind of guy that just skirts, who does not play by the rules. Well, I'm glad I'm not 13 right now because I probably would be being a little naughty online.

17:48I don't know. Oh, God. Oh, God. Mom, Mom. Remember that you're on a podcast, Toby. All right. So this kind of dovetails with our next story, which is that the U.S. Surgeon General Vivek Murthy released this advisory yesterday warning about an epidemic of loneliness and isolation. So about half of U.S. adults say they've experienced loneliness. And you might be wondering, why is a doctor warning about loneliness? And that's because he laid out the very serious health risks of just being by yourself all the time. So the risk of premature death from being socially disconnected, he says, is equivalent to smoking 15 cigarettes a day.

18:24Sounds like a lot. And it's higher. It's actually higher than the mortality risk from obesity and a lack of physical physical activity. So what Murthy is saying is that being alone for an extended period of time can literally kill you. And it costs the health care system billions of dollars each year. Crazy. I mean, I also love that they always frame these reports in terms of cigarettes, like 15 cigarettes a day. It is the comparison. du jour. Also, I do want to just like say that this has been met with a little bit of skepticism from the medical community because it's a correlation versus causation thing.

19:01Is loneliness actually causing these adverse health effects or are people with health issues tend to self-isolate more than healthy people? So there has been a little bit of pushback, but I mean, loneliness is definitely something that spiked during the pandemic. Like the pandemic really caused a lot of isolation. And now we were kind of discussing before the show, like, what do you do about this? Like, how do you fix loneliness? And I always go to, you need these third spaces. And third spaces are basically anything that's not your home or not your work. Those are places like parks, cafes, gyms, coffee shops.

19:37And then we have to talk about it, but the biggest third space, typically in American society, used to be like places of worship, churches. And that has obviously fallen over the last decade or so. In 2020, only 47 % of Americans said that they belong to a church, synagogue, or mosque. That's down from 70 % in 1999. So clearly those numbers are falling. Yeah. But maybe anecdotally, are you hearing people going back to church or temple and being like, I don't really know if I believe in God or whatever, but I just want to be with people. You know, it provides a community, you know, reliably every week for, I don't know about like-minded people, but it's just people.

20:16And at a time when there's not so many other things to do as a group, I mean, playing sports is a big one. For sure. Yeah. I mean, the Wall Street Journal did run this article two weeks ago saying that young people are returning to faith a little bit. But it was a little bit anecdoted. They didn't have a ton of hard evidence, but the headline news was in 2021, only a quarter of young people said that they believed in some higher power. And that went up to a third a few years later. So maybe we're seeing some of that post-pandemic stuff shake out where people are believing God a little bit more.

20:51Damn, we started this with regional bank collapse and now we're at Divinity. There we go. Get you a podcast that can do both. All right, let's move on to the sports world. Forbes' list of the highest-paid athletes in the world came out yesterday, and a lot of the usual suspects were on it. Three soccer players, Cristiano Ronaldo, Lionel Messi, and Kylian Mbappe, topped the list, bringing in$136 million,$130 million, and$100 million, respectively. Then you had LeBron and boxer Canelo Alvarez, and then we get into some live golfers, Dustin Johnson and Phil Mickelson at 6-7. Steph Curry, Roger Federer, and Kevin Durant round out the list.

21:29But I actually want to talk about the big elephant in the room when it comes to this year's list, the presence of Middle Eastern money. So there's a lot of different angles we can take into this. First of all, the two golfers on the list, Dustin Johnson and Phil Mickelson, they're part of Live Golf, which is backed by Saudi Arabia. They have no business being on this list. I know. They got a little chunk of change, though, because they got paid. And this is only half what they got paid, by the way, half of what's up front. And then Saudi Arabia also kind of bankrolls Cristiano Ronaldo's salary.

22:03He plays for Al Nassar in the Saudi League. And then Qatar owns PSG, which Messi and Mbappe play for. Messi's also a paid ambassador for Saudi Arabia. So pretty much anywhere you look on this list, you'll kind of find some sort of Middle Eastern oil money. I think five out of ten. And yeah, we've talked a lot on this program about how Gulf states are getting into sports, whether you want to call it sports watching or diversifying the economy. I mean, they hold they hold, you know, Abu Dhabi holds a lot of the UFC fights. Right. Right. And and Saudi Arabia is bringing in WWE as well. And now those two companies are the same.

22:40I know. And then you have Saudi Arabia spent 60 million dollars on a horse race just alone that has a 20 million dollar prize pool, the biggest in the world. they have a 650 million dollar 10-year deal with formula one to get a race in the city of jetta and then also qatar spent i mean this number is a little disputed but 200 billion dollars on the world cup so sports watching everywhere you look um it's kind of crazy especially when you look at this year's list and we we have to mention before we leave this story that messi was just suspended for two weeks by PSG for his role as being an ambassador to Saudi Arabia.

23:17Basically, he ditched town. He ditched practice to go do this ambassador trip to Saudi Arabia without telling anyone. But apparently, he makes $30 million a year from this ambassadorship. And PSG is in this big title race in France. And he just did not show up to practice because he was doing tourism stuff for Saudi Arabia. Come on, Messi. You're better than that. We love you, but you can't be missing practice for that. That's weird. Yeah. All right. Final story. Toby, I have to ask you a question. If Morning Brew built housing, would you rent from them? It's not totally existential. There is a new NPR report that we saw that explained how a bunch of employers, including Disney, Meta, schools, hospitals, and even Elon Musk are building houses or entire neighborhoods for their employees to live in as the cost of housing skyrockets because there's no availability or affordability.

24:07there are a number of implications here but one of them is that you'll be living next to your co-worker how do you feel about that i feel great about it i don't know like i would i would live with you you're my co-worker i do see how it's definitely a awkward and a little bit of a complicated situation because what happens if you leave the company if you get fired do you still want to live in like tesla city if you no longer work at tesla it's very interesting but honestly like these sound fun to me. Like, wouldn't it be fun to be surrounded by like-minded people? Like what if we had like a little business podcast?

24:41You work at Morning Brew where everyone is, you know, most people are young and you get along with them. If you work at another company that, you know, maybe you don't, the people you don't have a lot in common with, you probably wouldn't think of it as quote unquote fun. You're right. But I mean, I would tend to think that the companies that are building these cities are doing this because they think that their employees would want to live near each other. Like it's not something with horrible morale. Like you don't see better.com or whatever Herman Miller. You have not seen much of the world with my young lad.

25:13It's true. Hey, I enjoy, I enjoy your company. I think they're only doing this because they need workers. So say you're like the, the company they profiled was this medical company, medical manufacturer in a rural, I forgot what to say, but rural Midwest. There's not a lot of workers out there. It's not a lot of employees. So if you need to recruit workers, then you're going to say, okay, well, look, come out to the live in the middle of nowhere here. And we're actually going to subsidize housing for you. Yeah, that makes it a little more compelling to say, okay, I guess I'll move there and work here.