RIP Party City & FAA Gets a Starlink Makeover?

0:03When did making plans get this complicated? It's time to streamline with WhatsApp, the secure messaging app that brings the whole group together. Use polls to settle dinner plans. Send event invites and pin messages so no one forgets mom's 60th. And never miss a meme or milestone. All protected with end-to-end encryption. It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com. Good Morning Brew Daily Show. I'm Toby Howell. And I'm Anne Barry. Today, Ukraine and the U.S. have hashed out a deal to jointly develop the country's mineral deposits. And Party City, the party's over why all its doors are shutting down.

0:44It's Wednesday, February 26th. Let's ride.

0:53So Toby, before we start, the asteroid that was supposed to hit Earth in 2032 is absolutely not a threat anymore. Astronomers have said, do not be concerned about the, quote, city killer flying space rock that was spotted in December and previously projected to have a 3 % chance of hitting us. But after further observation, experts say we are no longer at risk, which basically means, Toby, we're going to have to sit through the release of yet another Fast and Furious movie. Are you so grateful that this has happened? I'm so grateful. On the one hand, it is great news for the planet. But on the other hand, you are right.

1:27We're probably getting another Fast and Furious sequel. We're probably getting another live action remake of, you know, The Lion King. Basically, scientists were like, if this was an impactor, we would keep seeing the probability rise. But instead, the opposite started to happen as they observed it more. The probability got lower and lower. It was fun while it lasted. I mean, it was fun to consider the idea of a city killer asteroid. I mean, I don't know, fun. Fun is not the word. It was exciting. You know, it added a little excitement to our life. But you know what? those iCloud storage payments are still going to hit next year.

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3:45The deal, which is expected to be signed Friday, will see Ukraine develop their mineral resources, including oil and gas, with the help from the U.S. This framework replaces earlier U.S. demands for a$500 billion payout, but is still seen as a way for the U.S. to get a return on its investment in Ukraine while potentially opening up access to lucrative mineral deposits. Notably, though, this draft does not include the security guarantees that Ukraine had been pushing for, though U.S. officials have said that an economic agreement like this provides a de facto security shield against Russia. More details on the agreement, notably the size of the U.S.'s stake in the joint ownership fund, are still unclear, but Zelensky is expected to travel to the White House to sign the deal in a few days' time.

4:31But Anne, by removing some of the more excessive demands, like the request that Ukraine pay back the United States twice the amount on any future American aid, it appears that a deal did get across the finish line, one that gives the U.S. a share of Ukraine's mineral wealth and boosts its reconstruction efforts. Yeah, this is an interesting one, Toby. And I thought about this. Basically, it feels as though the US is getting the Ukraine to set up what's essentially a sovereign wealth fund, except one in which the US owns, quote, the maximum financial interest allowed under American law. We don't know how much that is actually going to be.

5:05But I was listening to you and one of the key things that struck me was the line that you had in there, which is there are no security guarantees. The U.S. is not saying we're going to come to the Ukraine's rescue if something happens again. And I just wanted to flag something that happened on Monday, actually. The U.S. actually joined Russia to vote against the United Nations General Assembly resolution condemning what would have condemned Russia's war against the Ukraine. and said Russia is the aggressor. The U.S. did not join that, which was a really, really pivotal moment the day before this deal got signed.

5:38So the security situation here still, to me, remains in flux. Yeah, all this is happening too, while Russia is trying to court American companies to return to the country as well. Before the U.S. actually finalized this natural resources deal with Ukraine, Putin said on Monday that American companies could benefit from the critical minerals, mining and aluminum production projects in Russia. So they were doing a courtship as well. But one thing that we have to talk about here is does Ukraine even have any valuable deposits of these minerals? The U.S. Geological Survey doesn't actually list the country as holding any reserves of these rare earth minerals.

6:14Neither does databases commonly used by mining businesses. And also, if you just look at total rare earth production, you don't get anywhere close to that$500 billion number that Trump was originally throwing out. Rare earth production is closer to$15 billion a year, which is equal to the value of just two days of global oil output. So who knows how valuable these resources actually are? That being said, though, there is a very strategic reason why the U.S. is interested in rare earth deposits in Ukraine. Because right now, who controls the majority of that market? It is China. And obviously, that exposes us to our geopolitical rival.

6:52China is the main market for both mining them, but also refining those rare earth minerals. So you can see why there is interest from the U.S. to, you know, tap into these potential. Who knows how big these deposits actually are in Ukraine? Yeah. And let's talk about what those rare earth minerals actually are. We're talking about graphite and we're talking about lithium. Both of them really important for use in electric vehicle production. And we're also talking about titanium, which is the very lightweight metal used in the construction of things like planes and power stations. So when you bring it all together, you know, these are really highly sought after, particularly in the shift towards alternative technologies.

7:30So to your point, whether this is a play about China, whether it's a play about just meeting increasing demand, fascinating. For our next story, totally different note, Toby. Party City, the one-stop celebration shop for everything from balloons to piñatas to Halloween costumes, is shutting its doors for good. Now, the company has filed for bankruptcy twice in the last two years, once in 2023 and then again this past December. And at the end of 2024, they finally made the call to close down all 800 of their locations for good, with their last day of operations being this Friday, February 28th.

8:05Now, as the party giant closes its doors, retailers like Five Below and Dollar Tree are eyeing up their real estate looking to get major discounts. Party City isn't the only one. Joanne Fabrics is another company closing all of its doors after filing for bankruptcy again in January, the second time within a year, with the retailer citing slowing consumer demand and struggles with inventory. Now, Toby, some are calling it a retail apocalypse, a little bit like an asteroid, for example, hitting the retail sector with the losses of the storefront. But what exactly is going on here? Why is this happening?

8:39Why is it happening now? I mean, for Party City, it is just the usual suspect. Inflation persisting made it harder for their core customer base to go shop there. E-commerce obviously is the preferred shopping mechanism of the majority of people now. and just physical retail locations are expensive and it just isn't the business model that works in the modern world that well. That being said, I do wanna talk about the people who are curiously looking at all of Party City's locations right now. You mentioned them, Five Below and Dollar Tree. These are essentially scavengers who are looking at a fellow struggling retailer and going, licking their chops and saying, wait, I wanna get into your locations for cheap.

9:19And Party City is pretty desperate right now because they are telling the court they have this urgent need to close these transactions because they cannot provide and continue paying the rent on their existing locations. So they are saying like, hey, we're not getting a great deal here. I mean, Five Below deals would include giving them 44 storefronts in exchange for$2 million in upfront payments, plus an additional$70 ,000 for each lease agreement signed. So it's not like this big lucrative agreement. Those locations are probably worth more than Five Below is paying. But these other retailers are just saying, this is our opportunity to get into these locations for cheap.

9:58And that's why we're kind of scavenging over the body of Party City right now. Yeah, it's really interesting, Tabi, as you talk about that. Do you remember everyone was talking about what's going to happen with physical stores? Are they just going to go away? Is this why malls feel like they're on the decline, right? So the fact that anyone is turning up and saying, I want to take over these locations, I found that sort of interesting. Yeah, it's true. I think they're just seeing a really good deal out there for them. And then let's talk about Joann's a little bit. It's really sad. Pour one out for the craft store.

10:25Any crafters out there just have a soft spot for Joann's. And it was actually, they almost were, they suffered from their own success because during the pandemic, they had this huge boost in sales because everyone was just stuck at home, you know, knitting, crocheting. I'm sure I took up calligraphy. I was going to ask, William. Yeah, I took up calligraphy. And so it just struggled to maintain that momentum. It struggled with this inventory management, just supply chain disruptions as well, and just a shifting consumer taste. So pour one out for Party City, pour one out for Joann's. The one thing I will say is that franchisees that represent Party City are saying that they still plan to run their stores.

11:04So for the foreseeable future, you might see a few Party City locations hanging on because their franchisees are like, we can continue to operate these profitably. So it's not like Party City will be white from the face of the earth. You still might see a couple locations dotting around the country. Still need to keep looking out for this, Toby. It feels like Joanne's stores and party cities, not where it's going to end. Bloomberg reported that Forever 21 is rumored to file for bankruptcy next month. We saw the container store go under it since the merge. And we know that True Value Hardware also filed for bankruptcy.

11:35Billabong and Quicksilver stores apparently now rumored to be thinking about disappearing. So why don't we keep watching the graveyard of retail stores? Remember when everyone feared that Elon Musk might use his position in the government to enrich his own businesses? Well, those conflicts of interest are conflicting after the FAA came to an agreement to use SpaceX's Starlink internet systems to upgrade the IT network it uses to manage U.S. airspace. The FAA announced this week that it is testing out a few Starlink terminals, one in New Jersey at the FAA's Air Traffic Control Technology Lab, and two in what it called a non-safety critical location in Alaska.

12:13But the FAA's experimentation could quickly grow. According to Bloomberg, Musk approved a shipment of 4 ,000 Starlink terminals to the FAA last week for this initiative. And on the one hand, this is exactly what people are worried about when it comes to Elon's proximity to the White House. But on the other hand, Starlink could very well provide an improvement to the FAA's aging airspace network, something that has been a priority for years now. It has been. But let's talk about this conflict of interest piece of it and how that could really influence how this issue is being solved. The FAA does, in fact, have a contract, right, with Verizon that is designed to upgrade its information technology.

12:55So what's a little unclear to me at the moment is this Dalek swooping in and displacing Verizon? Is this a new contract? Unclear. But this is what everyone feared, Toby, that Elon would get under the hood, would poke around, would see perhaps what the margins, what the pricing is on these and go and usurp some of these providers. Again, unclear that's happening here, but the optics of this are, I think, quite difficult. For sure. You put it very well. I do think Verizon is a little bit nervous here because they were awarded this$2 billion contract just a few years ago in 2023 to support the FAA.

13:25A Verizon exec was asked about this and he said that he does think that their network could coexist with Starlink. Starlink could fill in some of the gaps that this deal doesn't. Who knows if that's just him posturing and saying, ah, no, I think we're fine here. Or if he's actually a lot more nervous about that. But yes, obviously this extends must reach into the FAA, which is the body that regulates SpaceX rocket launches. That's another bit of the conflict of interest here. That being said, though, I mean, I mentioned it. No one is disputing that the FAA systems need an upgrade. They've been attempting to modernize their air traffic controller network for years now.

14:05If you go back to a 2023 survey, the U.S. Government Accountability Office found 76 percent of the systems that the FAA uses were either unsustainable or potentially unsustainable. It warned back in December that the agency needed to take urgent action to update them. And then obviously the recent, you know, air incidents that have occurred this year, the one in D.C., have put an even bigger spotlight on these systems. So on the one hand, yes, conflict of interest. But on the other hand, no one is saying that the FAA shouldn't try to make steps towards updating its IT infrastructure. This news about Starlink and the FAA is coming hot off the back of news about the Delta plane flipping in Toronto, a near miss of a Southwest Airlines plane at Chicago Midway.

14:50Just this week, we had this terrible tragedy of the fatal crash of a military helicopter and a regional jet, as you mentioned, at Ronald Reagan Washington National Airport. Nobody wants conflict of interest. Nobody wants an unelected institution sort of going around and looking at what's happening in terms of government spend. But nobody wants these tragedies happening either. And this, to me, is the essence of the conundrum that is Elon Musk and what's going on right now. And it's just really difficult to talk about. Up next, we're talking Venmo. Eczema isn't always obvious, but it's real. And so is the relief from EBCLIS.

15:28After an initial dosing phase, about 4 in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintained skin that's still more clear at one year with monthly dosing. EBCLIS, LibriKizumab, LBKZ, a 250 milligram per two milliliter injection, is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema. Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies.

15:57EPCLIS can be used with or without topical corticosteroids. Don't use if you're allergic to EPCLIS. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EPCLIS. Before starting EPCLIS, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about EPCLIS and visit ePCLIS.lily.com or call 1-800-LILY-RX or 1-800-545-5979. Tuesday on NBC, Jimmy Fallon and Bozema St. John hosts the highly anticipated new competition show. I hired 10 creatives from all walks of life.

16:31They 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. Toby, something happened yesterday for the first time in four years. Can you guess what it was? I touched my toes for the first time. Did you really? Yeah. I still can't do that. I still can't do that. It's big news. That's really big news. And you've completely overshadowed what I was going to say.

17:06It was no, PayPal had an investor day, which I know was going to be your second guess. It was a pretty big deal, Toby. The company is in the midst of a turnaround with new leadership, and it shared a vision to get Venmo on track to$2 billion in revenue by 2027, which, by the way, the last time PayPal shared a rev number for Venmo was in 2021, and that was$900 million. Now, PayPal has struggled to define itself in recent years and saw their market cap dwindle by 80 % while it faced competition from the likes of Zelle, Apple Pay, and Cash App. But now the company is saying that Venmo will move forward from peer-to-peer transactions to, quote, becoming the go-to money movement app with features like gig economy pay deposited into accounts, marketing a debit card for in-store purchases, and encouraging stores to use pay with Venmo.

17:54Now, Toby, I mean, this was a lot to take in, but what were your biggest takeaways from these PayPal announcements? I think PayPal just wants Venmo to grow up a little bit. Venmo is big. Don't get me wrong. I mean, 90 million US users. It's a verb. You say, I'll Venmo you. It's has always been a challenge because most transactions that happen on Venmo generate very little revenue from the company. They do think they can get to that$2 billion number, but you're right. PayPal has been absolutely going through it recently. Its market cap has just taken a massive hit. Even though Venmo is a verb, it's not unimpeachable.

18:31You're right. Cash App, Zelle, Apple Pay, these have all been gaining ground on it through just sometimes things as simple as bank integrations, but also they have maybe a wider range of financial services than Venmo has. So yesterday, PayPal was trying to outline its strategies to position Venmo as not just a default app for these peer-to-peer transactions, not just sending your buddy$5 after, you know, split a pizza together, but for spending, for saving, for becoming what the company described as the go-to money movement app. It's actually really interesting that there was a much bigger strategy that extended beyond Venmo.

19:07I actually went and I downloaded the 224 page investor presentation last night and I went through it. And the thing that was so captivating to me was the sheer size of opportunity that PayPal has completely failed to tap until now. So let me give you some of these numbers. I'm a data nerd. The offline payments market still, right, is apparently a$200 billion opportunity of which PayPal in total has less than 1 % share. The ads and commerce and credit revenue market is an$800 billion opportunity, of which it has less than 1 % share. So this investor presentation talked a huge amount about, for example, I got both a PayPal account and a Venmo account.

19:48I don't know if you've got both, Toby. I got both. They want you to be able to see both in the same place. And then you can customize and personalize and they'll push a bunch of ads to you and they'll tell you what subscriptions you've got. So this vision for a one-stop shop was bigger. And I actually thought pretty interesting. Yeah. And I do think one critical element too is getting more merchants to sign up for the platform as well, because how many places you go to and you see pay with Venmo, it's not like the first option that a lot of people choose, but they get greater business by having more merchants on their platform because higher transaction volume means more profit.

20:24And then also they want to increase the likelihood that people will carry a balance in their Venmo account because the company does earn interest on users account balances. So these are all things that they just want to grow the transaction pie here beyond again, just sending money back and forth between your friend group. They want you to show up to a store and you know, buy something with Venmo. They want you to use your Venmo debit card. They want you to use this product in ways beyond the way that most people are currently using it. Including by the way, going into deeper into buy now pay later if you think about it and to your point the business opportunities big they're in about 20 million small and medium uh size businesses uh right now a total of 430 million consumer and merchant accounts number one the amount of data can you imagine the amount of data that these guys have had they've been around for a long time i mean you say you're a data nerd as well you're absolutely right on that front even more so well Just one last note on that.

21:21Interestingly, the share price ticked down a little bit after it popped up and then came back down. So we're not sure if the market's buying it. We'll have to keep watching that share price. Now, let's sprint to the finish with some final headlines you may have missed. Up first, President Trump announced a new gold card program yesterday offering wealthy foreigners a path to citizenship for the low price of$5 million. This initiative is set to replace the existing EB-5 visa program. and aims to attract high net worth individuals from around the world who could provide a boost to the U.S. economy.

21:52Trump also speculated about how much revenue the sales themselves could generate. If 1 million people decided they wanted a gold card, that is$5 trillion in revenue right there. 10 million people, and suddenly the national debt is gone. Obviously, those numbers are speculation at this point, but the idea is to attract job creators and high-level global talent while generating revenue for the United States in the process. You know, the thing that sprung to mind as you were speaking, Toby, was taxes, which seems a bit of a non sequitur, but I'll explain why I mean by that. The kinds of people who can afford to drop five million bucks on a visa are typically the kinds of people who want to go live in Monaco and not pay any taxes.

22:32So I do wonder a little bit about what this means for the overall package to try and attract these folks. I'm not completely sold that the national debt is going to be wiped out. I mean, I guess the idea is, one, you generate revenue from people buying a$5 million path to citizenship. But then also those people are taxpayers when they come in and come live in the United States. This also is just kind of a continuation or just like a reformulation of this EB-5 program that I spoke about. That program was founded all the way back in 1992. It grants green cards to immigrants in the United States who make a minimum investment of a million dollars or$800 ,000 if they're in these economically distressed zones.

23:12So this is kind of like a rebranding of that program. It's just like this direct cash payment instead of, you know, that million dollar investment jacks up the dollar amount a little bit. But it is semi a continuation of that EB-5 or replacement of that program. Moving on, Toby, let's talk about Home Depot, which is back on the winning side as it snaps its losing streak of eight straight quarters of declines with a 0.8%, just a little bit of growth last quarter. Now, many look at Home Depot as an indicator of how consumers feel about spending on housing more broadly and on financing big ticket purchases.

23:47High interest rates, of course, have dampened folks' ability to buy new homes, and homeowners are reluctant to move when they've got a nice low mortgage that they locked in during the height of the pandemic. But this is a welcome positive sign for the home improvement industry. So, Toby, given how upbeat Home Depot was in its forecast for 2025, are we going to see you now running on out there doing a little bit of a birthday purchase of a new apartment for yourself? I mean, I don't know if I have the DIY ability to upgrade in an apartment purchase like that. I do think that this is an interesting indicator for the economy because if you just go back to last week, Walmart actually warned that 2025 would be this pretty rocky year ahead.